Update on short selling

Update on short selling

Source: www.asic.gov.au

AD08-65 ASIC lifts ban on covered short selling for non-financial securitiesThursday 13 November 2008ASIC today said it would, as expected, lift the current ban on short selling of non-financial securities from opening of trading on 19 November 2008 but would continue the ban on covered short sales in financial securities.ASIC put a 30-day ban on covered short selling of securities on 21 September and extended this ban on 21 October as market conditions remained difficult.The ban on short selling of financial securities will remain in place until at least 27 January next year, consistent with many other jurisdictions, while ASX will maintain the ban on naked short selling indefinitely. ASIC confirmed that financial securities would be those comprising the S&P/ASX 200 Financials (including property funds) plus five other APRA regulated businesses. Key detailsASIC announces the following effective from Wednesday 19 November:
Covered short sales of non-financial securities will be permitted;
The ban on covered short selling of financial securities will continue until 27 January 2009. Financial securities are those comprising the S&P/ASX 200 Financials and five additional securities (being those with APRA regulated businesses).
Existing exemptions for covered short selling, for example those relating to hedging and arbitrage transactions, will continue in relation to financials; and
The facilitation of the sale of securities being recalled from a stock-lending program (whether or not they are financials) will also continue.Reporting and DisclosureA key aspect of the disclosure and reporting framework for short sales is the requirement for a broker to ask a client whether a sale is a long sale or short sale. Clients are obliged to inform their broker if a sale is a short sale. On Wednesday 12 November ASIC provided further information to assist brokers and their clients to meet disclosure requirements that will apply from 19 November 2008.The following measures have been agreed with ASX:
Trading participants will report to ASX each day all short sales including exempt covered short sales in financial securities. This will be a daily report to be submitted by 9.00am of short sales executed up to 7.00pm the previous trading day.
ASX trading participants should advise ASX that they have advised their clients to disclose short sales at the time the sale is requested and will take reasonable steps to reinforce this obligation.The reporting to ASX will be coupled with reporting to the market as follows:
ASX will report short sales to the market after 9.00am the next trading day. The report will show, by security, the total volume of short sales executed on the previous trading day; and
The daily report will include exempt covered short sales in financial securities.For information, the following are the five additional securities (being those with APRA regulated businesses):
Entity Name
ACN
Wesfarmers Limited
008 984 049
The Rock Building Society Limited
067 765 717
Wide Bay Australia Ltd
087 652 060
Futuris Corporation Limited
004 336 636
Calliden Group Limited
061 215 601

KKR going to an IPO

This week KKR confirmed they have filed with the New York Stock Exchange that they will be going to IPO.

Kohlberg Kravis Roberts & Co.'s Henry Kravis made personal visits to the securities sales forces of Morgan Stanley, Goldman Sachs Group Inc. and Citigroup Inc this week, drumming up interest in their upcomming IPO.

So who is KKR? KKR are the Private Equity company which engineered some of the largest Leveraged Buy Outs (LBO's) in history, throughout a spree of buys in 2006 and early 2007.

So what makes this interesting?

1) The IPO market currently is DEAD... in both the US and Australia. Unless you are in the mining or mining services industry... it is not the most ideal time. In 2007 there were 350 IPO's in Australia and this year... there has been 52.

2) They rely on debt funding to orchestrate this massive buy outs. Given that the credit markets are taking beat after beating as each quarter rolls buy. This does not makes sense

So now the question... Does legendary deal maker Henry Kravis know something that everyone else has missed? Is he timing his 4th quarter float to early... or will he be on the money.

Blackstone, the last Private Equity company to list is sitting at about 60% of their original float price.

So Henry... cheers to you for either what is going to be seen as genius or insanity! Either way... markets throughout the world will be watching!

China... After the Olympics?

2 weeks away from the start of the Beijing Olympic games.

For the last 8 years China has been gearing up for this event, with massive investments into the Nations Infrastructure. The building of Hotels, Apartments, Roads, Dams, Bridges, Stadiums, Public Transport, Retail precincts etc... has all received strong investment.

This focus is to ensure that in the 2weeks in which the greatest athletes on the planet, go head to head and toe to toe... that the phenomenon which is China, is powerfully showcased to the world!

My question is... what will happen to China after the Olympics? This expanding nation, which is behind the massive demand for Australian commodities... will have hosted it.

What are your thoughts on the direction of China after the Olympics? Will growth slow or will it accelerate?

Fannie Mae and Freddie Mac and the interesting week ahead

Between these two companies they own or guarantee more than $5 Trillion worth of loans with American home owners.

Right now they are reported to be on the brink of collapse, with President Bush and Henry Paulson (US Treasury Secretary) meeting over the weekend to discuss the 2 companies fate.

The challenge for the US economy is that Fannie and Freddie guarantee some 40 per cent of all mortgages in the US, but the value of the homes used to underwrite those mortgages has in many cases fallen well below the value of the loans.

Fannie Mae has seen their share price go from just over $70 down to $10.
Freddie Mac has seen their share price from $67 to just under $8.

Add to this, Merryl Lynch is expected to announce a further write down of $5Billion and the markets should be in for an interesting week.

The deal of the century!!!

Well... not really.

From time to time I get an email from a lovely gentleman in Nigeria, seeking my help with his delicate situation. In this email, they put forward to me the deal of the century, simply for assisting them in their pursuits.

Yes, they are also known as the Nigerian scammer.

I decided to post this today, as the markets have provide interesting times for traders... a mental break was in order, and I will throw in some humour for free.

419 Eaters, are people that turn the tide on the people creating the Nigerian email scams. They are absolutely brilliant at their craft and they highlight the amazing things these guys will do to get money.

A 419 eater, sees it as their job to... "enter into a dialogue with scammers, simply to waste their time and resources." It is also called scam baiting.

To see a whole list of these and entertain yourself for a period of time, go to http://www.419eater.com/html/letters.htm

The two funniest one I have read are...

http://www.419eater.com/html/joyce_ozioma.htm

http://www.419eater.com/html/martins_jide.htm

This blog post will guarantee that the next time you receive one of these emails, you will have a wry smile on your face.

Enjoy your week

The Weather Business...

If there is a special event coming up. or we are looking to plan an outing with family friends... often we look to the 'weather man' or girl, to give us their best prediction on the weather.

I used to joke that I would love to be a weather man in Melbourne, as it would be an easy job "cloudy, overcast, windy with potential for light rain" would be my frequent call.

Over the weekend NBC, Private Equity Group Blackstone and Bain Capital all got together to purchase the Weather Channel, which was previously privately held.

The pricetag... US$3.5 Billion!!! Who knew the weather business was so valuable. What is interesting is... they wanted $5 Billion.

The reasons they gave were simple "The Weather Channel is the third most distributed cable network and is viewable in more than 97 percent of cable television homes in the United States. Its website, www.weather.com, has nearly 40 million unique visitors per month."

40 million unique visitors is an astonishing amount of web traffic.

Did you any idea that the weather business was so profitable?

Would you pay $2.1 mill for lunch?

When you first look at that question, you think... NO WAY!

What if it was with the Oracle of Omaha himself Warren Buffett? That I can understand!

Well every year, Warren auctions off the opportunity to have lunch with and squeeze whatever information you possibly out of his billion dollar brain.

So who would pay that sort of money you may ask? An amount that was 3 times higher than last year.

The winning bidder was Zhao Danyang, who runs Hong Kong-based Pureheart China Growth Investment Fund. "Of course!" You may say!

The proceeds of the auction go to benefit Glide, a nonprofit foundation in San Francisco that offers programs for the poor, hungry and homeless.

How much would you pay to tap into the mind of Warren Buffett?

B and B...

And I am not talking about Bed and Breakfast.

Babcock and Brown have been in the spotlight for all the wrong reasons.

Rewind the clock 12 months and Australia's 2nd largest Investment Bank was trading at close to $35 a share, had a share price which had increased by 75% in the previous 12 months and looked unstoppable. The CEO was being hailed as a genius and the markets looked at the company with Envy.

They were classified as "Financial Engineering Specialists."
The strategy of securing debt to fund boring infrastructure projects throughout the world, then packaging it and listing it... seemed to be winning formula. One that was pushing the companies success to greater heights.

Now, June 2008 the Directors are bunkered down in discussions on how to bring the company back above market capitalisation of over $2.5 billion, so it wont be handed over to it's 25 financiers from around the world.

The share price hit a low of $4.70. The $46 Billion of debt throughout it's funds has had investors fleeing the stock and hedge funds driving it sharply lower.

Babcock and Brown have all eyes on them and it will be interesting to see how the company will get itself back on track. More importantly... what will happen to big brother Macquarie Bank.

What are your thoughts??

Fuel and The Impact On Travel

With Oil peaking at around $135 from the previously unthinkable benchmark of $100 per barrel, we are now seeing a major shift in business trends.

General Motors has just announced the rollback of their planned new SUV vehicles and gas guzzler brands such as Hummer. Qantas have cancelled 6 routes completely from their schedule to mitigate risk and Virgin Blue has stated that unless their fares substantially increase there is only 6 months of cash in the kitty before the company could potentially go bust.

BMW are pushing Hydrogen as fuel with their smooth travelling 7 Series concept car and Toyota are looking to go fully electrical in the next 3 years.

Clearly, oil is a substance that citizens are dependent on and companies are now struggling with. Oil affects food prices and changing trends in movement and spending. What can you do to reduce your risk, your bills and still be a traveller?

Rich Statistics

Though the main headlines have been reserved for Alan Bond and his re-entry to the list, 19 years after being declared bankrupt, there are other stories when inspecting the BRW Rich 200.

Wealth is on the rise with Billionnaires increasing from 30 to 38 and the total wealth of the Rich List being the highest ever with $139.6bn.

A member of the Packer family no longer holds the top spot for the first time in 20 years. This is not because Media and Gaming have gone backwards in the last year. The most telling sign is that the Miners have surged. Andrew Forrest of Fortescue Metals (FMG.AX) tops the list with a personal wealth of $9.41bn, the largest sum recorded in history of the Rich List. All the more incredible that Forrest was 5th last year with a shade under $4bn.

James Packer falls to 3rd on the list behind Frank Lowy of Westfield (WDC.AX)

Following the Miners still, the youngest person to make the Rich List is Nathan Tinkler, who at just 32 years old has amassed $426m when selling a portion of his interest in Macarthur Coal (MCC.AX). The wealthiest list debutants, at $991m each Travers Duncan and Brian Flannery from Queensland-based coal miner Felix Resources (FLX.AX).

Will the trends for Resources continue? With the urbanisation of 150m Chinese residents planned over the next 15 years it will be hard to dislodge the miners from the list.