Implementing A Synthetic Dividend Growth Portfolio [View article]
Tom an interesting and great article and thank you for publishing it, a synthetic dividend portfolio is something I have considered myself and I have seen similar portfolios constructed in my funds management days.
Ramos' views on the Brazilian economy nicely sum up where it is on the back of poorly executed policies, increasing government intervention and a slow but steady decline in the country's industrial sector. Many of the factors affecting Brazil's economy come from deep-seated structural issues that the current government refuses to deal with, leaving it further vulnerable to a slowing China and falling demand for commodities. I don't believe that either the FIFA World Cup or the Olympics will provide any long-term relief and even forecasts of 3% GDP growth in 2013 and 2014 are overly optimistic.
Jim great article thank you. I believe that there is tremendous opportunity in Colombia for retailers if they have the right pricing model and are aware of the demographic and economic issues.
Westpac Is Overvalued By Around 30% Making It A Solid Short Candidate [View article]
Prescient thank you for the kind words and additional information including the link. At times it is difficult to predict the direction of the Australian economy, its banking sector and the property market. Despite the many problems that are apparent they always have an uncanny knack to bounce back or avoid those problems. Much of this can be attributed to both deft macro-economic management by the Australian govt, the policies of the RBA and a floating currency.
The key drivers will be WBK's significant leverage, low liquidity and over-reliance on a housing market that exhibits all the signs of being over-heated combined with a decline in demand for resources. I am going to monitor the situation carefully and provide a follow-up article when new financial and economic data is available.
Making The Case For Which BHP Billiton To Own [View article]
April 'fully franked' dividends i.e. where the company has paid corporations tax on their profits are withholding tax free for foreign investors. BHP pays 'fully franked' dividends and should be Australian withholding tax free, so you should discuss this with your broker. Where an Australian company pays dividends from untaxed profits they are subject to 30% withholding tax for foreign investors, but these can be offset by virtue of the U.S. Australian tax treaty which was established to prevent double taxation.
Buy, Sell Or Hold For These 5 Intermediate Oilfield Services Companies? [View article]
Value digger, thank you for the response, I agree with your views on both PMG and PRE and the peace talks are looking increasingly positive which bodes well for further petro investment and exploration.
Buy, Sell Or Hold For These 5 Intermediate Oilfield Services Companies? [View article]
Value Digger nice article and once again an inspiration for me to do some more digging into what is happening in the petro industry in Latam. If at any point you would like to look at some co-operative articles let me know. I would also be quite keen to get your take on the oil industry in Colombia at the moment and specifically Pacific Rubiales and Petrominerals.
Westpac Is Overvalued By Around 30% Making It A Solid Short Candidate [View article]
Igor great article thank you for posting the thread. I certainly don't expect to see Westpac collapse, but the bank is dangerously over-leveraged with a poor loan to deposit ratio creating further liquidity issues. All of which will place further downward pressure on its share price.
It seems that Westpac's current management team has failed to appreciate the risks that being over-leveraged in the current economic environment in a relatively illiquid market with an over dependence on residential mortgages creates.
I would hope to see the bank's debt to equity ratio fall to around 2 times and the loan to deposit ratio fall to around 100%. It is this high leverage which has allowed Westpac to book record profits, but now leaves it dangerously exposed to an Australian recession and housing market correct. Thus making it s good short candidate.
Westpac Is Overvalued By Around 30% Making It A Solid Short Candidate [View article]
Bob thank you for the reply and no need to apologize I respect your comments and the input that you bring to the table. I am also an avid reader of your articles and find them to be well researched and reasoned. It is always refreshing to get the other side of the story presented and this benefits readers immensely particularly when it is from such an experienced contributor such as yourself.
As for St George while its collapse would not have had a significant impact on the banking system that Westpac or the other big four would it still was a worrying precedent. While it was acquired the ACCC essentially waived the rules that would have prevented its acquisition by Westpac so that it could go ahead before it collapsed because it couldn't roll over its debt.
Interestingly NAB found itself in a similar situation at the time of the GFC and was initially unable to place a round of debt, which is what led to the Aust government essentially lending its AAA status to the banks so that NAB could place that debt. Although, unlike St George NAB wouldn't have been insolvent just facing some serious funding issues had the debt offer not been placed the second time.
Another interesting event during the GFC was the Australian government putting a short selling ban in place essentially to prevent the collapse of Macquarie Bank which saw its share price plunge due to hedge funds shorting the bank to that its share price fell to a point where debt covenants were triggered and would see its lenders calling in the debt. This had already happened with Babcock and Brown but the collapse of Macquarie would have caused far more serious issues in the Aust banking system.
But I guess what I am trying to point out here is that your correct in saying that a bailout is highly unlikely, but the Aust government has a history of using other more subtle policy based means (including regulation as a means of spreading risk) to ensure the stability of the banking system and prevent institutions from collapsing.
But again thank you for the comments and looking forward to more in the future. So whose round is it? A schooner of VB and another shrimp on the barbie?
Westpac Is Overvalued By Around 30% Making It A Solid Short Candidate [View article]
123 There has not been a 30% correction in Australian property prices since the GFC and as I pointed out in the article current prices are 29% over the long-term historical average. Much of the movements in prices in local property markets in Australia are affected by a range of drivers, but we are yet to see a broad based correction.
Westpac Is Overvalued By Around 30% Making It A Solid Short Candidate [View article]
PSalerno I feel that there is more bottom side to be seen and already there are analysts calling a recession in Australia as early as 2014. But the real concern will come with the end of mining and mining infrastructure investment which is predicted to end in late 2014/early 2015. The key problems though are the bank's tremendous amount of short-term foreign debt combined with a particularly bad loan to deposit ratio, which not only sees high costs for loans but leaves the bank's solvency vulnerable.
Westpac Is Overvalued By Around 30% Making It A Solid Short Candidate [View article]
Lloydie I agree, should we see a major correction in China the AUD will fall precipitously and the economy will slow with the country dropping into recession. The over-reliance upon mining and trade with China has left the Australian economy particularly vulnerable to the performance of China's economy.
Westpac Is Overvalued By Around 30% Making It A Solid Short Candidate [View article]
Villi thank you for adding that information to the debate. I would also point out for the benefit of readers that a key driver of the share prices for banks in Australia, also like BHP is the favorable taxation treatment of franked dividends that allow investors to reduce their marginal income tax rate along with superannuation funds buying large amounts of bank stock along with BHP and Rio because they form such a large part of All Ords / S&P 200 indices.
Westpac Is Overvalued By Around 30% Making It A Solid Short Candidate [View article]
Bob some very good points. I agree that it is highly unlikely that Westpac would require a bailout, but don't forget that St George Bank found itself in that very same position at the time of the GFC because it was over leveraged and was unable to roll-over it short-term debt, essentially leaving the bank insolvent.
This is the reason that the ACCC allowed the acquisition of St George by Westpac in 2008, thereby avoiding a government funded bailout or the collapse of St George. Since that time when Gail Kelly took the helm the bank has increasingly found its degree of debt increasing to what are now dangerous levels. This also increases costs and leaves the bank exposed to the vagaries of international credit markets.
While BHP is expanding its operations it is clear that commodities demand is significantly down and that this is already having a direct impact on the Australian economy. I also believe that demand will continue to decline and Australia's over-reliance on mining to drive economic growth and having China as its primary export partner leaves it over-exposed to the direction of the Chinese economy and the demand for basic materials.
I am certain that as a seasoned writer you would know that assumptions and suppositions form the basis of any forward looking analysis and without them it would be impossible to predict future outcomes. The key is to make sure they are based on fact, can be back tested and are credible being extrapolated from historical data, where possible. In this article I have clearly stated what my assumptions are and set those out for the benefit of readers, they are also based on fact and I have erred on the conservative side in the assumptions that I have used. I have also fact checked them against what other analysts and experts on the Australian property market and economy are saying to make sure that they are credible.
I would also point out that I have not claimed that the Australian housing market will collapse like the U.S. and Spanish property markets, but rather will see a correction. It is more than likely that this correction will bring housing prices back to the long-term average. So this will make it a sharp correction but not a calamitous collapse. Any correction in the property market combined with a drop-off in demand will have a significant impact on Westpac because 72% of its LUM is for residential mortgages.
I would also point out that no one in Australia drinks Fosters, with the most popular beer being VB followed by Tooheys New. So while I am sipping on my next icey cold schooner of VB I will be keeping a close eye on the performance of Westpac on the ASX.
Implementing A Synthetic Dividend Growth Portfolio [View article]
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PriceSmart: Counting On Colombia [View article]
Westpac Is Overvalued By Around 30% Making It A Solid Short Candidate [View article]
The key drivers will be WBK's significant leverage, low liquidity and over-reliance on a housing market that exhibits all the signs of being over-heated combined with a decline in demand for resources. I am going to monitor the situation carefully and provide a follow-up article when new financial and economic data is available.
Making The Case For Which BHP Billiton To Own [View article]
Buy, Sell Or Hold For These 5 Intermediate Oilfield Services Companies? [View article]
Buy, Sell Or Hold For These 5 Intermediate Oilfield Services Companies? [View article]
Kind regards,
CV
Westpac Is Overvalued By Around 30% Making It A Solid Short Candidate [View article]
It seems that Westpac's current management team has failed to appreciate the risks that being over-leveraged in the current economic environment in a relatively illiquid market with an over dependence on residential mortgages creates.
I would hope to see the bank's debt to equity ratio fall to around 2 times and the loan to deposit ratio fall to around 100%. It is this high leverage which has allowed Westpac to book record profits, but now leaves it dangerously exposed to an Australian recession and housing market correct. Thus making it s good short candidate.
Westpac Is Overvalued By Around 30% Making It A Solid Short Candidate [View article]
As for St George while its collapse would not have had a significant impact on the banking system that Westpac or the other big four would it still was a worrying precedent. While it was acquired the ACCC essentially waived the rules that would have prevented its acquisition by Westpac so that it could go ahead before it collapsed because it couldn't roll over its debt.
Interestingly NAB found itself in a similar situation at the time of the GFC and was initially unable to place a round of debt, which is what led to the Aust government essentially lending its AAA status to the banks so that NAB could place that debt. Although, unlike St George NAB wouldn't have been insolvent just facing some serious funding issues had the debt offer not been placed the second time.
Another interesting event during the GFC was the Australian government putting a short selling ban in place essentially to prevent the collapse of Macquarie Bank which saw its share price plunge due to hedge funds shorting the bank to that its share price fell to a point where debt covenants were triggered and would see its lenders calling in the debt. This had already happened with Babcock and Brown but the collapse of Macquarie would have caused far more serious issues in the Aust banking system.
But I guess what I am trying to point out here is that your correct in saying that a bailout is highly unlikely, but the Aust government has a history of using other more subtle policy based means (including regulation as a means of spreading risk) to ensure the stability of the banking system and prevent institutions from collapsing.
But again thank you for the comments and looking forward to more in the future. So whose round is it? A schooner of VB and another shrimp on the barbie?
Kind regards,
CV
Westpac Is Overvalued By Around 30% Making It A Solid Short Candidate [View article]
Westpac Is Overvalued By Around 30% Making It A Solid Short Candidate [View article]
Westpac Is Overvalued By Around 30% Making It A Solid Short Candidate [View article]
Westpac Is Overvalued By Around 30% Making It A Solid Short Candidate [View article]
Westpac Is Overvalued By Around 30% Making It A Solid Short Candidate [View article]
Westpac Is Overvalued By Around 30% Making It A Solid Short Candidate [View article]
This is the reason that the ACCC allowed the acquisition of St George by Westpac in 2008, thereby avoiding a government funded bailout or the collapse of St George. Since that time when Gail Kelly took the helm the bank has increasingly found its degree of debt increasing to what are now dangerous levels. This also increases costs and leaves the bank exposed to the vagaries of international credit markets.
While BHP is expanding its operations it is clear that commodities demand is significantly down and that this is already having a direct impact on the Australian economy. I also believe that demand will continue to decline and Australia's over-reliance on mining to drive economic growth and having China as its primary export partner leaves it over-exposed to the direction of the Chinese economy and the demand for basic materials.
I am certain that as a seasoned writer you would know that assumptions and suppositions form the basis of any forward looking analysis and without them it would be impossible to predict future outcomes. The key is to make sure they are based on fact, can be back tested and are credible being extrapolated from historical data, where possible. In this article I have clearly stated what my assumptions are and set those out for the benefit of readers, they are also based on fact and I have erred on the conservative side in the assumptions that I have used. I have also fact checked them against what other analysts and experts on the Australian property market and economy are saying to make sure that they are credible.
I would also point out that I have not claimed that the Australian housing market will collapse like the U.S. and Spanish property markets, but rather will see a correction. It is more than likely that this correction will bring housing prices back to the long-term average. So this will make it a sharp correction but not a calamitous collapse. Any correction in the property market combined with a drop-off in demand will have a significant impact on Westpac because 72% of its LUM is for residential mortgages.
I would also point out that no one in Australia drinks Fosters, with the most popular beer being VB followed by Tooheys New. So while I am sipping on my next icey cold schooner of VB I will be keeping a close eye on the performance of Westpac on the ASX.