IFocus
You are arguing with a Galah
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Carol given the rising costs / liquidity of finance wouldn't this effect BNB's bottom line?
Short Selling Debate
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Carol given the rising costs / liquidity of finance wouldn't this effect BNB's bottom line?
Reply to IFocus
No company is immune from down turns in the economy it just depends how well their risk is managed. That is something you need to research yourself.
I have a very low risk profile when it comes to trading and even when the technical signals point to a trade, I alway check out the company's fundamentals before proceeding. As I limit my trading to only a few stocks, I do get to know these quite well so it's not too time consuming updating my knowledge.
No company is immune from down turns in the economy it just depends how well their risk is managed. That is something you need to research yourself.
I have a very low risk profile when it comes to trading and even when the technical signals point to a trade, I alway check out the company's fundamentals before proceeding. As I limit my trading to only a few stocks, I do get to know these quite well so it's not too time consuming updating my knowledge.
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Care to elaborate on exactly how we know this?
On the contrary, I'd say these guys are geared to the teeth
From the latest BNB balance Sheet
Interest Bearing Liabilities 11,357,567
Shareholders Equity 2,513,604
That's a debt to Equity ratio of over 450%! Add in cash 2,551,158 and Net Debt to Equity is still at 224%
A lot of the debt is secured against various assets but considering some $3.5 billion of is is secured against residential real estate, that hardly instills confidence, obviously the market is dubious. Below is another extract from the latest annual report.
WTF? Let me get this straight, they bought into US residential real estate in March 2007 and the portfolio is performing well?
Jaysus, these guys have got some bad timing, buying up malls across the US when retailers are shutting down stores left, right and center.
These guys have been playing the same leverage up, ponzi scheme that half the US financial sector has been playing, which is all well and good when prices are going in one direction but look out when they go the opposite way.
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Dhukka
If you read the details about the malls, they are no longer shelved on BNB's balance sheet, they reside with with GPT JV (which GPT invests in and BNB provides management skill to) and another investor holds the rest. All they do is assist with the management (i.e. earn a nice management fee for advising).
The US residential assets they hold on balance sheet have been discussed in the BNB thread directly. Whilst I'm not really impressed with the revaluation, the yields seem resonable and the rentals are in decent areas in America. I'm not saying they are not going to experience a downturn in capital values, but BNB do quote that a section of the portfolio was sold post the credit crunch at a capitalised lease rate of 5.46% and their valuation is at 5.75%, so once again it adds credibility. I'm by no means saying everything is rosy here, but it seems like BNB had half a brain in acquiring the portfolio in sensible areas at a sensible valuation.
As for their debt, yes they are geared up, but isn't every investment bank and even every bank? Unlike AFG, there is no cross collateral and a lot of it is non recourse tied to assets at very favourable interest rates and long maturity dates. I am a little concerned about the 2.5 Bil that is to be refinanced shortly, but per their teleconference a week ago, sounds like Phil Green is confident of being able to re-negotiate their facilties going forward.
I'm not saying that BNB isn't being hit in the credit crunch - clearly it is and has. I only trade the entity on bounces at present. However, I don't think they are in the same league as say AFG for instance, they have real infrastrcture and leasing expertise. When everything blows over, I suspect they will be left standing and will make a killing come 3- 5 years time...
Just my opnion though and I am normally very conservative with these things..... But BNB looks to have the quality to get through IMO.
Cheers
Reece
Reece,
Point taken on GPT JV. I wouldn't lump these guys in with AFG either, I'd say they're more akin to MQG. Still, US residential prices continue to tumble, according to the Case-Shiller index, prices fell 5% in the 4th quarter of 2007 alone (post credit crunch). By conservative estimates prices have at least 10% more to fall but I suspect probably more.
Kind of like saying in US a few years ago, "yes prices are going up but isn't everybody buying a house? Afterall prices only go up don't they?"
Anyway, should probably take this over to the BNB thread.
Point taken on GPT JV. I wouldn't lump these guys in with AFG either, I'd say they're more akin to MQG. Still, US residential prices continue to tumble, according to the Case-Shiller index, prices fell 5% in the 4th quarter of 2007 alone (post credit crunch). By conservative estimates prices have at least 10% more to fall but I suspect probably more.
Kind of like saying in US a few years ago, "yes prices are going up but isn't everybody buying a house? Afterall prices only go up don't they?"
Anyway, should probably take this over to the BNB thread.
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Because both the short seller and the original long holder can sell the same shares at the same time, selling pressures can be artificially magnified during such times, causing larger price drops than would be normally justified by the negative news.
I don't know much about short selling but the above has made me wonder about the following:
if a person borrows some shares and sells them and at the same time the institution who has lent him the shares wants to sell them too..what happens? Doesn't this mean that two parcels of the same shares ( just for simplicity) are being sold on the market when in actuality half of them don't exist.
It was previously mentioned that people borrow money to do things with however as opposed to borrowing shares, that money is no longer available to the lender....only the fee that he gets paid for lending the money is at his disposal...
Someone correct me if I am wrong but surely shorting must imbalance the market unfairly in favour of those who short.....
waiting for many hot and firey responses
wayneL
VIVA LA LIBERTAD, CARAJO!
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Because both the short seller and the original long holder can sell the same shares at the same time, selling pressures can be artificially magnified during such times, causing larger price drops than would be normally justified by the negative news.
I don't know much about short selling but the above has made me wonder about the following:
if a person borrows some shares and sells them and at the same time the institution who has lent him the shares wants to sell them too..what happens? Doesn't this mean that two parcels of the same shares ( just for simplicity) are being sold on the market when in actuality half of them don't exist.
It was previously mentioned that people borrow money to do things with however as opposed to borrowing shares, that money is no longer available to the lender....only the fee that he gets paid for lending the money is at his disposal...
Someone correct me if I am wrong but surely shorting must imbalance the market unfairly in favour of those who short.....
waiting for many hot and firey responses
The statement in red is a nonsense. If the share are lent out to a short seller. they cannot be sold. The institution would have to claim them back from the shorter in order to sell them.
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wouldn't it be possible for a trader to buy a small parcel of shares at the last lowest price and then offer them back into the market at a lower price in an effort to drive the market down lower to close out his short position which was above the price he purchased his small parcel of shares at. Hope that makes sense....
I am sure I saw that happen today when I was watching the afg market activity...
From my limited understanding and fro what I have read in this thread there is a need for more transparency. It seems to be an unfair playing field...
Kauri
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What is wrong with short selling.... I can't follow any of the reasons put up... forget the ethics of super funds et al loaning out shares for shorting, that is another subject...
If you want to buy... surely someone must want to sell to enable a transaction???
Why can't I back a company to go down??
If I, in my blissfull ignorance, back Collingwood to beat the Dockers, am I not shorting the Dockers??
If I work out a dutch book and back several runners to take out the favourite in a neddy race, am I not shorting the favourite??..
If I go long the skippy am I not shorting the greenback??
If I buy IVC am I not shorting peoples lives??..
Selling today at todays price what you think will be worth less tomorrow is good astute business, it happens everyday in many different forms... why should the financial markets be special????
or is it just a convenient monkey valve to let off steam when you were caught ... umm.. long...
Confused
................Kauri :alcohol:
PS... home made Baileys does it for me...
If you want to buy... surely someone must want to sell to enable a transaction???
Why can't I back a company to go down??
If I, in my blissfull ignorance, back Collingwood to beat the Dockers, am I not shorting the Dockers??
If I work out a dutch book and back several runners to take out the favourite in a neddy race, am I not shorting the favourite??..
If I go long the skippy am I not shorting the greenback??
If I buy IVC am I not shorting peoples lives??..
Selling today at todays price what you think will be worth less tomorrow is good astute business, it happens everyday in many different forms... why should the financial markets be special????
or is it just a convenient monkey valve to let off steam when you were caught ... umm.. long...
Confused
................Kauri :alcohol:
PS... home made Baileys does it for me...
Trembling Hand
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Oh my good
. No wonder its so easy to whip up a **** storm about shorts when thats the logic of the punters out there.Have read some of your other posts and they have all been interesting and well-informed, so I hope this one is simply due to too much time spent reading bad journalism recently. WayneL is correct in mentioning the word "nonsense". Doesn't happen.
Trades are made on the ASX via brokers. If a broker failed to deliver at settlement time then the broker would no longer be permitted to trade on the ASX. End of life for broker, so brokers make darn sure it doesn't happen. May have nearly happened to Tricom recently.
In theory a counterparty could fail to settle for quite a variety of reasons, most of which have nothing to do with shortselling.
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Oh my good
Actually as I stated earlier I know little if next to nothing about shorting a stock...I am trying to understand the "logic" behind it..condescending responses such as yours fortunately don't deter an inquiring mind such as mine
and I am assuming you meant to say "oh my god" not "oh my good"BTW the text in red in my previous post I cut from an earlier post in this thread....
Trembling Hand
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How can you be sure. Did a share transaction come through on the ticker saying I just bought theses 2 cents higher??
If your example works next time you want to get long buy a "small parcel of shares at the last lowest price and then offer them back into the market at a lower price in an effort to drive the market down lower" so you can open a new long position. (They are you words!!)
That is the same thing. How successful is that going to be for you?
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If you read my post again you will see that it wasn't a statement it was a query...maybe I should have said "is it possible"
I am not sure that's what happened I am just pondering a situation..I am no expert which I am happy to admit.....
It makes it very difficult for people (such as myself) who are trying to understand something when they get responses like yours...I bet there are a lot of lurkers out there wanting to post something but are too afraid to in case they will look stupid...
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Anyone read the Australian today.......
Every page of our financial press seems to talking about this topic, but I think it is Terry McCrann who has summed it up best (extract per below...)
"Properly understood, short selling is unambiguously a plus for the market. And, in a fundamental sense, unstoppable..."
He takes a subtle swing at the uninformed articles so far written on the topic. I must admit, the more I read the Australian, the more respect i have for their financial writers..... The AFR these days is just complete junk - I prefer quality not quantity.....
Cheers
Every page of our financial press seems to talking about this topic, but I think it is Terry McCrann who has summed it up best (extract per below...)
"Properly understood, short selling is unambiguously a plus for the market. And, in a fundamental sense, unstoppable..."
He takes a subtle swing at the uninformed articles so far written on the topic. I must admit, the more I read the Australian, the more respect i have for their financial writers..... The AFR these days is just complete junk - I prefer quality not quantity.....
Cheers
IFocus
You are arguing with a Galah
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Hi Reece
The Australian has been trotting out some shocker articles on short selling over the last few weeks (haven't seen the TMc article yet) the only Jurno thats really summed it up well IMHO is Andrew West from SMH following article gets to the bottom of some of the real issues.
http://business.smh.com.au/crossing-off-the-rubicons/20080303-1wek.html
The Australian has been trotting out some shocker articles on short selling over the last few weeks (haven't seen the TMc article yet) the only Jurno thats really summed it up well IMHO is Andrew West from SMH following article gets to the bottom of some of the real issues.
http://business.smh.com.au/crossing-off-the-rubicons/20080303-1wek.html
Trembling Hand
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Yeah I would have to agree with you IFocus, Andrew West stuff on dodgy companies recently has been a welcome bit of journalism in a sea of bull market rubbish.
Kauri
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one of the possibly important facts that most "experts" in the Press seem to miss in the shorting debate is that the companies involved were basket cases in the current credit situation...
Cheers
.........Kauri
Cheers
.........Kauri
Contrary to what some influential players are preaching, shortselling does not negatively impact on the value of good quality stocks in the long term. On a weekend TV program it was questioned why large funds would lend their shareholdings to be shortsold, which might reduce the value of the holdings.
Firstly, super funds and other large funds tend to select stocks with good prospects with the intention of holding for the long term. The market prices of such quality stocks are not affected by shortselling in the long term because any fall below reasonable perceived value does not persist for very long. The funds always collect fees for lending their shares to shortsellers, and hence lending their shares for shortselling actually adds to their revenue.
Another reason may sometimes come into play. If a fund wishes to accumulate a stock that it likes then lending its shares to shortsellers is a good way to temporarily depress the SP of the stock, thus allowing the fund to buy at a price that is more favourable. Of course, when a fund eventually wishes to dispose of its holding of a stock it obviously must cease to lend its shares in the stock, which will tend to put upward pressure on the SP thus creating a temporary favourable selling opportunity.
Firstly, super funds and other large funds tend to select stocks with good prospects with the intention of holding for the long term. The market prices of such quality stocks are not affected by shortselling in the long term because any fall below reasonable perceived value does not persist for very long. The funds always collect fees for lending their shares to shortsellers, and hence lending their shares for shortselling actually adds to their revenue.
Another reason may sometimes come into play. If a fund wishes to accumulate a stock that it likes then lending its shares to shortsellers is a good way to temporarily depress the SP of the stock, thus allowing the fund to buy at a price that is more favourable. Of course, when a fund eventually wishes to dispose of its holding of a stock it obviously must cease to lend its shares in the stock, which will tend to put upward pressure on the SP thus creating a temporary favourable selling opportunity.
