Financial Planning

Edward Mazzoni | Tuesday, June 19, 2012
Comments ((Disabled)) | Trackbacks (0) | Permalink

The details of the Arena Office Fund Capital Raise have been finalised and it looks like a great opportunity to claw back some value in regards to these investments due to a very attractive discount of 36% on our purchase price.

Please review the details on our website.

Should you wish you can contact us directly on 1300 132 214.

Cheers

Rob Coyte

Edward Mazzoni | Thursday, June 14, 2012
Comments (0) | Trackbacks (0) | Permalink

Four Corners had a very interesting episode on last night dealing with banking practices during the GFC in particular BankWest which was formerly owned by HBOS (Bank of Scotland) click here to view

 

The behaviour of the banks collectively has directly impacted thousands of people around Australia. These people vary from small to medium size businesses, some of whose stories can be seen here, to investors in any property fund (such as Orchard) that was forced to sell assets at ridiculous prices at the height of the panic. Interestingly, these people are the same taxpayers who through Kevin Rudd provided the banks a life line and competitive position to be able to ride out the GFC storm.

 

There is currently a senate inquiry into the banking industry and its behaviour click here to view. I would suggest that those that have been effected ensure that your views and concerns are shared.

 

If you don’t do anything it is unlikely to wield any change.

Edward Mazzoni | Thursday, April 12, 2012
Comments (0) | Trackbacks (0) | Permalink

It is ultimately the dividends from our shares that give us an income stream to be able to fund our lifestyle. This income needs to grow over time as the cost of the goods and services we require rise with inflation.

Edward Mazzoni | Monday, March 19, 2012
Comments (0) | Trackbacks (0) | Permalink

Following up from last week's blog on what the smart money is doing...

Edward Mazzoni | Thursday, March 01, 2012
Comments (0) | Trackbacks (0) | Permalink

Investors have been dealing with a lot of “big picture” issues. They have been following the Greece and European debt saga for nearly 2 years, we are also working through the inevitable hangover of the GFC and the fact the world economic growth has slowed. This has seen a reluctance for investors to be buyers in asset markets which when people invariably need to get out leads to softer and weakening prices.

This means that the underlying assets or business become cheaper.

As with all investing the decision to invest needs to reconcile what the value of the asset is “worth” to what it is actually trading at.

Invariably over its lifetime a business will have periods where it is struggling with certain factors or indeed dealing with undesirable issues the question invariably becomes when investors start selling the company when has it gone too far? The value as measured by the share market (price we can buy for) has gone beyond a “reasonable price” for that business notwithstanding the matters it may be faced with. This means opportunity.

At the moment a real life scenario is playing out with Billabong who has been looking at options for its balance sheet amid a collapse in earnings caused by stalling consumer spending in Europe and Australia and a surge in the Australian dollar.

Billabong reported a 72 percent slump in earnings, with net profit dropping to $16.1 million in the six months ended Dec. 31. Billabong have announced a wave of store closures for its global network which plans to cut $30 million from costs. This has seen Billabongs share price fall off a cliff from over $11 some 2 years ago to just below $2 at its low and dividends cut over this period. Just 2 years ago the business was valued at over $2.3 Billion and now about $500 million.

TPG Capital, the buyout company run by David Bonderman, offered to buy Billabong International Ltd. for $765 million or $3 per share on 17th Feb. This offer was some 68% premium to the previous day’s closing price. Naturally, after hearing the news the share price for BBG jumped quite quickly. “The TPG offer at $3 is quite opportunistic when you consider the value of the business and the value of its brands,” said Tim Montague-Jones, an analyst at Morningstar Inc. in Sydney speaking with Bloomberg. “I don’t think they would sell at $3 and it would have to be a lot higher than that.”

Edward Mazzoni | Monday, February 20, 2012
Comments (0) | Trackbacks (0) | Permalink

Well it appears that the financial markets are here to test us again. No doubt the very recent memory of the GFC is contributing to the fear that has overcome markets in the last few weeks.
 
According to Bloomberg around US $75 Billion worth of mutual funds were sold in the past 4 months a similar amount to that sold in the period of Lehman Brothers collapse.
 
So where is the market and what are investors doing?
 
Bruce McCain, manages US $22 billion told Bloomberg recently “When we’re getting close to a market bottom, the phone starts ringing off the hook and our clients want us to sell everything. Market bottoms are less about an improvement in the fundamental situation, whether the economy or outlook for earnings, and a lot more about getting rid of all the anxious investors.”
 
“The five months after Lehman were an epic buying opportunity, yet investors liquidated en masse,” Barish an investment professional who mnaages US $8 Billion told said. “Retail unfortunately tends to time things poorly. I don’t expect the current situation to be all that different.”
 
Where are the underlying fundamentals of the businesses?
 
Data compiled by Bloomberg show US corporations have been hoarding cash and paying down borrowings. The S&P 500’s net debt to earnings before interest, tax, depreciation and amortization ratio is down to 2.5 from 5 in the second quarter of 2008. Furthermore this year’s earnings will increase 18 percent to a record US$99.57 a share and break $100 next year. This means we have companies at their most profitable and with a strong financial structure (less debt) meaning we are getting an absolute bargain if you are a long term investor.
 
What is The World's Greatest Investor Doing?
 
Warren Buffet is not concerned about European debt as he believes it will have fallout but nothing like the GFC. He doesn't believe the US is going into a double dip recession and that a recovery is underway.

His company Berkshire Hathaway is buying back its own shares because "they’re undervalued", Buffett said. He was quick to point out this won't preclude them purchasing shares of other firms or entire companies, who told shareholders in his annual letter that his “elephant gun” is loaded. “If the stock is cheap we will buy it in. If it isn’t cheap we won’t buy it.” said the Oracle.

Edward Mazzoni | Thursday, October 06, 2011
Comments (0) | Trackbacks (0) | Permalink

An investor in the US,  Southeastern Pennsylvania Transportation Authority, is looking to sue Goldman Sachs over their employee compensation schemes which rewards employees at shareholders expense. Goldman Sachs, the fifth-biggest US bank by assets, has lost US$50 billion in market value since 1999 while the company has paid out billions in compensation to the firm’s 31,000 employees. The lawyers remarked how “Goldman officials received billions in pay and bonuses last year while the firm settled claims by the U.S. Securities and Exchange Commission that executives misled investors in collateralized debt obligations linked to subprime mortgages”.

According to Bloomberg, Goldman’s set a Wall Street pay record in 2007, and was subsequently “pilloried by politicians and labor unions for its compensation practices after getting taxpayer aid during the financial crisis”.

It is hard to imagine how employees of banks who have lost billions in capital for their owners and sent the world to the brink of disaster forcing governments to bail out these banks for their misdeeds have been eligible for “bonus” payments. I can’t see how they keep their job yet alone the former.

However, is this a sign that maybe people are starting to have enough?

I have long believed that fund managers or mutual funds in the US have taken a way to passive role in the governance of senior management. They effectively let them get away with whatever they want surely part of the fund managers duty is to scrutinise the reasonableness of staff remuneration the same way they would if THEY owned the business. Clients in fund managers are paying fees and the fund managers should be earning those fees on the governance side by holding senior management to account if actions are not in share holders interests.

Edward Mazzoni | Tuesday, September 13, 2011
Comments (0) | Trackbacks (0) | Permalink

I watched this film last night and it was a good overall package describing what happened during the Global Financial Crisis (GFC). Whilst there were no new discoveries the film does provide a good overview for the lay man to explain what went wrong.

 

It really focuses on the fact that the whole finance food chain is broken and is in desperate need of reform. It also makes the statement that Obama will not be able to deliver the needed reform as he has engaged “current players” to be important members of his staff.

 

The ineffectiveness of regulators and politicians is a focus of the film. You could even draw a longer bow and say they knew what they were doing and profited themselves. The same can also be said about the academic’s who offer “unbiased” advice and the absolute ineffectiveness of the credit ratings agency’s who got it so wrong. By the time you finish listening to their disclosure and what they are assessing you can see that it is an absolute waste of time paying any attention to anything they say.

 

The world continues on.

 

Do you realise that the people that caused the heartache of the GFC have all got away with the money they have stolen? Not one has been jailed or told to give back the money. It has been such a huge transfer of wealth to the rich that effectively figured a way to steal from the poor.

Edward Mazzoni | Friday, July 29, 2011
Comments (0) | Trackbacks (0) | Permalink

The old saying you make your money when you buy not when you sell is absolutely true. Guess what we are right now in a very exciting time for long term investors.

 

Last week I read a Bloomberg article discussing the fact that US equity valuations “were stuck at near credit crisis levels”. The article also went onto say that companies were going to increase their profit by 19% in 2011. The article goes onto say that the earnings growth is back in line with long term averages however the index is trading at 13.5 times earnings which is roughly 8% discount to the long term average.

 

What does this mean...quite simply? The operational performance of the companies is back to “average” however from a valuation perspective investors can acquire these businesses for less than they could on average in the past.

 

I believe that nothing short of “new” economic dangers surfacing that ceteris paribus this valuation effect could lead to a rise in markets.

Edward Mazzoni | Friday, July 22, 2011
Comments (0) | Trackbacks (0) | Permalink