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Colin Lea
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The author is Australian with a long term interest and personal stake in financial planning and management. He works within the Financial Services Industry, is a member of the FPA Australia, and is a Certified Gold Seeking Alpha Contributor. Prior professional background of 20 years in military... More
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Carey Group of Companies
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  • Standard & Poors Worthless AAA Rating

    From the Sydney Morning Herald's Michael West:

    The Federal Court's Justice Jayne Jagot has accepted the evidence from 12 NSW councils - who claimed they had been duped into buying a toxic financial product - that the ratings agency Standard & Poor's was little more than a lap dog for slick merchant bankers.

    Investors are entitled to and indeed do rely on credit ratings and can expect them to be based on reasonable grounds.

    The ruling means the councils will recover about $30 million in losses following failed investments in complex synthetic derivatives known as constant proportion debt obligations, or CPDOs, that were arranged by ABN Amro, rated AAA by S&P and sold by LGFS in 2006.

    Read more:

    Nov 04 9:11 PM | Link | Comment!
  • Mystery Trades Hit ANZ And CBA Stocks

    From this morning's Sydney Morning Herald:

    Traders suspect that the share prices of a number of major ASX200 stocks - including ANZ Bank - were manipulated when trade opened this morning.

    Mystery trades in ANZ pushed the share price of ANZ up $1.67, or 6.5 per cent, when trading began at 10am.

    ANZ, which closed at $25.79 yesterday, soared to $27.63 per share on the opening bell, before the stock collapsed to $26.16.

    In the first few minutes of trading about a third of the average daily number shares in ANZ changed hands. Large fluctuations hit the share prices of Ansell, Aristocrat and AGL, while Commonwealth Bank and Bank of Queensland also spiked when the ASX opened.

    "I've had five of my brokers contact the ASX and they are clueless as to what has gone on," said one of Australia's leading stockbrokers.

    "They are saying the trades fall within a reasonable range, but if a broker pushed a stock up five per cent we'd cop a $25,000 fine. Right now, I'd say this is in the 'too hard' basket for market control at the ASX."

    Watchdogs alerted

    A spokesman for the body in charge of monitoring real-time trading - the Australian Securities Investment Commission - said it was ''aware of a surge in ANZ share prices and was looking into the matter.''

    ''This is not a formal investigation,'' he said.

    ASX spokesman Matthew Gibbs said the price jumps were a result of buying orders, and nothing to do with the trading system itself.

    ''There were a number of large buying orders at the market's open, and the price of a number of stocks went up,'' he said.

    ''Most of them appear to have come down now and are trading at a normal price band. Naturally ASX is monitoring the situation.''

    Mr Gibbs said the ASX was so far aware of a price jump in AMP, ANZ, AGL, Aristocrat and Brambles stocks.

    ''It's certainly nothing to do with trading system,'' he said.

    Options affected

    The trades were large enough to affect the price of options traded on the S&P/ASX 200 Index - commonly referred to in the investment world as XJO Index Options. The index tracks shares that form the S&P/ASX 200. The XJO Index rose to 4606 on the back of the moves, before settling back to 4575.

    A number of brokers noted that those options expire at the close of trade today. The settlement price for those options will be calculated using today's 4606 opening price of the XJO index.

    "I hope ASIC and the ASX investigate the ANZ open at $27.63 this morning," posted one reader on the BusinessDay markets blog. "It might just be a coincidence that index options expire today."

    Brokers have called for the trades to be investigated immediately because they caused volatility on markets and could cause substantial losses.

    "Someone has made big money on the Index trades this morning," said one major broker.

    "Either that or an algorithm has gone haywire, a mistake has been made, or these trades are deliberate.' Either way, do we have an orderly market?"

    Brokers have complained that the shift in responsibility for control of the market from the ASX to ASIC meant that nothing was done when trades of this nature caused alarm bells to ring.

    "We rang the ASX, they said 'Ring ASIC'. We rang ASIC, they said 'Ring the ASX'," said one Melbourne-based broker.

    With Georgia Wilkins

    Read more:

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Oct 18 8:23 AM | Link | 1 Comment
  • Indians Answering The Call To Rebuild Their Economy

    The following article is shared from the Sydney Morning Herald:


    October 13, 2012 by William Pesek

    A surprise Finance Ministry appointment suggests India is serious about reform and investment.

    THE first time I met Raghuram Rajan, the Indian economist couldn't sit still.

    It was over coffee in Bangkok in November 2008, less than two months after Lehman Brothers imploded and almost took the global financial system down with it. Rajan had become a big draw by then, having warned as early as 2005 that a crash was coming. On that day in Thailand, he had a crisis on his hands: The hotel's WiFi was out.

    "I'll be back - I need to make a call and make sure the world economy is still there before I begin my speech," he deadpanned. "You never know."

    That last sentiment could also apply to an extraordinary bit of recruitment on the part of Indian Prime Minister Manmohan Singh. Rajan, 49, is one of his most pointed critics, never one to shy away from slamming India for trying the same failed policies over and again. Rather than castigate Rajan, Singh offered him a job: top adviser to the Finance Ministry.

    Rajan's arrival might shake up India at just the right moment and accelerate moves to open retailing, aviation and insurance to foreign investment. Palaniappan Chidambaram's return as finance minister in July might have seemed enough of a jolt. He wasted no time in announcing policies that amounted to shock therapy for an economy that has lost its way. If those were a sign India is again open to business, hiring Rajan suggests it won't stop there. There are three things about Rajan that are noteworthy:

    One, his focus. He's looking in the right places - modernising the financial sector, making it easier for companies and entrepreneurs to do business and tackling the labyrinthine distribution system in areas such as agriculture;

    Two, Rajan is a University of Chicago guy. To some extent he's about increasing economic efficiency as a means of raising living standards. Supply-side solutions can go too far, as we saw when the US went off the rails due to lax regulations and oversight. Yet if there is anything India needs, it is a burst of deregulation fever.

    Among the most common phrases you hear in India is "licence raj," shorthand for the baffling and elaborate system of issuing permits to do anything. This snarl of red tape throttles business and breeds corruption. It is the single biggest barrier standing between India's 5.5 per cent growth and shantytown dwellers in Mumbai or Kolkata. New strategies are desperately needed to remove it;

    Three, Rajan is an intellectual re-import. It is often said that India's best export is its chief executives - Indra Nooyi, of PepsiCo, Lakshmi Mittal, of ArcelorMittal, Anshu Jain, of Deutsche Bank, to name a few. Its academics, too, remind us that developed nations don't have a monopoly on economic wisdom.

    Rajan is part of a growing pattern of talent returning home. Take Rana Kapoor, who left Wall Street to start Mumbai-based Yes Bank. Or former Citigroup executive Jaithirth Rao who founded software maker MphasiS in the US before moving the group's headquarters to India, where he started an affordable-housing finance company. Rajan's experience as chief economist of the International Monetary Fund from 2003 to 2006 and as a celebrity academic is now to India's benefit.

    There's still plenty of flow in the opposite direction, including Kaushik Basu. He recently left India's Finance Ministry to become chief economist of the World Bank, which along with the International Monetary Fund is holding its annual meeting this week in Tokyo.

    Basu is the rare iconoclast in a position to make a difference. An adherent of his own brand of Freakonomics, his interest lies not with the politically correct or expedient but common-sense solutions to the biggest quandaries of our day. One is what to do about corruption. He argues that it be legalised, thereby adding transparency and having the effect of naming and shaming graft seekers.

    Like Basu, Rajan is an example of an Indian in the right job at the right time in ways that could benefit humanity. Jump-starting India's economy would offer the world another engine at the perfect moment. It would also arrest the policy decay in Asia's third-biggest economy.

    A day after Chidambaram met the US Treasury Secretary, Timothy Geithner, in New Delhi this week, Standard & Poor's reminded India it may become the first BRIC economy - Brazil, Russia, India and China - to lose its investment-grade rating. Junk status would be a terrible blow to a nation S&P predicts will see its budget shortfall widen to about 6 per cent of GDP in the year to March 2013. Borrowing costs would surge, investors would flee and reducing poverty would become harder.

    The good news is that Rajan is on the case to help Singh's team get back in touch with its reformist roots. You can bet he won't be sitting still on the job.

    Read more:

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Oct 12 3:48 PM | Link | 3 Comments
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