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Shorters Paradise - RIP the 'Highly Geared'

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Bushman

Bushman

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The casualties in the 'Great Gearing Correction' of 2007/2008 are starting too mount. A list of those who have not made it home reads as follows:

1. CNP
2. CER
3. MFS
4. AFG
5. ABS

All have had a few things in common - former 'market darlings', opaque structures and afflicted by the dreaded 'HIGH GEARING RATIO'. The shorters, and their followers the *shock horror lets jump off a cliff* brigade, have sold these puppies into oblivion. In all cases (except for ABS - yet), the shorters have got it right as if there wasn't a struggling beast behind the vulture pack, a white knight would have seen value and bought up the oversold shares, causing the shorters to scramble back into their inner city dens.

So who is next?

http://business.theage.com.au/whos-next-for-financial-judgment-day/20080227-1v3x.html

This article in today's Age has a list of the shares that might not be prudent to be 'long' in in today's market. To paraphrase, these are the companies the nefarious hedgys are stalking today:
1. Transpacific Industries - net debt to equity 160%.
2. Iluka - 'gearing too high'. What 'too high' means, I do not know but 'too high' the 2008 is what 'too low' was to the bull pack of, er, 6 months ago.
3. Challenger - 'opaque structure'. What has happened to 'trust us'?
4. Crown - 'load of debt'. Repeat after me - debt is bad, debt is bad.
5. Asciano - not showing it's internal pain.
6. Mac Communications - 350% gearing. Fruit cake!

There is also some umming and ahhing about the King & Queen of financial engineering, fat fees and asset revaluations, MQC & BNB.

Any others that the shorters see as fair game? Given it is a bit an episode of Underbelly out there at the moment, we can be rest assured that some other former high flyer will be on the verge of coping it very soon.
 
Bushman said:
The casualties in the 'Great Gearing Correction' of 2007/2008 are starting too mount. A list of those who have not made it home reads as follows:

1. CNP
2. CER
3. MFS
4. AFG
5. ABS

All have had a few things in common - former 'market darlings', opaque structures and afflicted by the dreaded 'HIGH GEARING RATIO'. The shorters, and their followers the *shock horror lets jump off a cliff* brigade, have sold these puppies into oblivion. In all cases (except for ABS - yet), the shorters have got it right as if there wasn't a struggling beast behind the vulture pack, a white knight would have seen value and bought up the oversold shares, causing the shorters to scramble back into their inner city dens.

So who is next?

http://business.theage.com.au/whos-next-for-financial-judgment-day/20080227-1v3x.html

This article in today's Age has a list of the shares that might not be prudent to be 'long' in in today's market. To paraphrase, these are the companies the nefarious hedgys are stalking today:
1. Transpacific Industries - net debt to equity 160%.
2. Iluka - 'gearing too high'. What 'too high' means, I do not know but 'too high' the 2008 is what 'too low' was to the bull pack of, er, 6 months ago.
3. Challenger - 'opaque structure'. What has happened to 'trust us'?
4. Crown - 'load of debt'. Repeat after me - debt is bad, debt is bad.
5. Asciano - not showing it's internal pain.
6. Mac Communications - 350% gearing. Fruit cake!

There is also some umming and ahhing about the King & Queen of financial engineering, fat fees and asset revaluations, MQC & BNB.

Any others that the shorters see as fair game? Given it is a bit an episode of Underbelly out there at the moment, we can be rest assured that some other former high flyer will be on the verge of coping it very soon.
Click to expand...

So it was BNB that was next to fall to the wolf pack! Classic. Why did they reveal the 2.5b market cap review to the market? Craziness. It means you just keep shorting until they hit $7.50, or near $7.50, and the panicking 'mum's and dad's' will do the rest.

So here we can add 'do not have random market cap reviews' to our older mantra of 'we will not have directors with margin loans against our stock'.
 
tech/a said:
I take it your not short then?
Click to expand...

Wish I had been on BNB. You would have made a killing and it was forseeable. I work full-time so no time for anything but 'buy & hold'.

Next share market crunch perhaps?

Good learning experience this credit cruch for everyone from CEO's down...
 
I guess the shorters are doing their research in the same way that FA folk assess and enter into an undervalued stock in the expectation of the market to eventually move to fair value. Shorters are just scoping out the overvalued and precarious balance sheets vulnerable to today's volatility.

What's a reasonable time frame for someone to adopt a "Buy & Hold" strategy do people think?

Cheers,

Kenny
 
kenny said:
What's a reasonable time frame for someone to adopt a "Buy & Hold" strategy do people think?

Cheers,

Kenny
Click to expand...

I'm a recent convert to the "buy, hold, sell (leave profit in) repeat" strategy.
that way u still take a long term interest in the stock but lower your down
side risk and defer CGT....while u build your position over time.
 
So_Cynical said:
I'm a recent convert to the "buy, hold, sell (leave profit in) repeat" strategy.
that way u still take a long term interest in the stock but lower your down
side risk and defer CGT....while u build your position over time.
Click to expand...

Hi So_Cynical,

Does that make you both an investor and trader in a particular stock? I guess it's no different to how a few posters here sometimes have a core holding of a stock they have a positive long term view on and still have a "trade" holding to profit from the inevitable volatility?

In this case then, how do you calculate a catastrophic stop loss level where you would sell out of your core holding?

regards,

Kenny
 
Asciano is now really starting to show it's internal pain!

From the price query: 'Asciano is aware of recent media speculation regarding the potential for Asciano to raise additional equity. No decision has been made in regard to the preferred funding option'.

LOL. Hey an ambiguous statement about a dilutive cap raising in the midst of a 'fully fledged' bear market. Mmmmm...down she goes 25%.

Shorters, instos, mums & dads - it don't matter anymore. :eek:

I quite liked the bit about coal infrastructure in the announcement though. A

Also can you guys believe the smashing GPT has received! I have it on reasonable authority that the NTA of just the Aussie portfolio is around $2.90 per share mark. Aussie premium commercial is not going to lose 30% in value as rents have never been stronger in office & industrial. Waddafaarrkk?
 
There goes ABC.

Next to go - CNP?

Who gets the feeling the banks have fully written off their exposure or have provided for a fire sale and thus have bought themselves time to take a more aggressive stance? Anyway there are three cash cow Australian businesses (airport fleet leasing, shipping fleet leasing and childcare operation) on sale for a very reasonable price. Watch the cashed up private 'families' pick the bottom and gain a bargain. That is why they are rich after all!

CMJ certainly is not looking good. Packer jumping ship is significant IMO. He cannot have another insolvency on his record after that mobile phone company (what was it called again - damn mental blanks?).
 
Bushman said:
There goes ABC.


He cannot have another insolvency on his record after that mobile phone company (what was it called again - damn mental blanks?).
Click to expand...



One Tel....the receiver kept sending me bills...I kept binning them until they eventually stopped
 
awg said:
One Tel....the receiver kept sending me bills...I kept binning them until they eventually stopped
Click to expand...

Hehe nice work..

What i like to do if i get unwanted mail like pre approved credit card applications that i didnt ask for is gather my pile of junk mail and send it to them in their reply paid envelope. (NOTE make sure you dont send anything:) back that has your name or address on it :)

This is very empowering and if it costs them enough money they might eventually realise not to send me stuff i didnt ask for ;-)
 
AIO looks to be in a death spiral.

And BNB looks similar over the last 2 days now...

Wish I could have shorted. :(
 
rnr said:
Given the price of AIO now I wonder if the Directors regret not allowing due dilligence to proceed back in August?

http://www.asciano.com.au/articles/080804_Acquisition_of_AIO.pdf

http://www.asciano.com.au/articles/080804_Response_Acquisition_of_AIO.pdf
Click to expand...

I would say the answer is a big YES! Problem when corporate egos become involved.

I wonder when people starting asking about the debt load of Rio or does this remain a sacred cow in Australia? There directors might well be regretting their chest beating in a few months.
 
The morbid countdown is slowly drawing to a close as life support might finally be withdrawn for BNB.

It is interesting that CNP, along with MQG, will probably be one of the only entities of the initial list of shame that escapes administration. But, then again, they did hold the most defensive property class (retail property) amongst the high flyers. The equity-holders, off course, have been scorched.
 
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