Global Credit Squeeze: There is no Free Lunch

The current news about what is being called the "global credit squeeze" has got me thinking.

Like every other man and his dog I have a few things to say about the subject. The implications for share markets, lending between banks and institutions involved directly with dodgy loans and those invested in companies holding those loans have been crystal clear over the last two weeks.

Market participants have reacted in a highly negative way which has spread fear and some loathing amongst the investing community. As I commented a few days ago, I and nobody else is entirely sure about how bad the squeeze is, but we will find out soon enough. What is clear though is that we are talking multi billions of dollars of losses.

Banks and other lenders have been lending money to people who cant afford it and surprise surprise they cant pay it back.

In New Zealand we have already had a local taste already of what is currently happening globally, with several finance companies exposed to risky loans going belly up and investors in those finance companies being out of pocket.

Globally though, with the exception of countries like New Zealand and Australia, State financed backing has been pumped into the banking sector to "increase liquidity" and stem the flow of losses on financial markets.

Now I do understand how this happened but what I cant begin to fathom are the details and what this means in detail: how these taxpayer funded "loans" get paid back, how much if any interest is charged and what happens if the banks and institutions getting these state funds cant pay the loans back because the losses they are exposed to are greater than they have let on?

So many questions I have huh?

I feel uneasy about the billions being "lent" to institutions in the first place to prop up their liquidity problems. Surely they should just take the hit for writing bad loans to begin with and then either fold or move on the wiser and not expose themselves again. After all the guy living next door to you ain't going to bail you out if you cant meet the mortgage payment.

In my humble opinion ,I think the interventions by the likes of the US, European and Asian States have merely postponed the inevitable and the interventions overwhelm the problem it was originally trying to ameliorate. These over extended banks with cash flow problems will take big hits anyway and interventions by governments meddling in money markets are just going to end the way most government intervention does.

Badly.

One thing is very clear though. Regardless of whether banks pay back taxpayer money or not. Giving away your equity like this does have a material effect somewhere. There is always a downside when money is "lent" without it being worked for.

We are talking large sums here and we probably haven't seen the end it it.

Hang on.


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c Share Investor 2007

Burger Fuel: Beefing up store numbers

Your favourite search topic on the Share Investor Blog is "Burger Fuel" and far be if from me to care about being labeled a populist, but never mind I will wear that label with pride as long as the readers keep coming.

Here is a BFW update in week 3 of the companies listing on the NZAX.

Sellers are queuing up now at way below the NZ$ 1 IPO price with sellers at .80c and the first buyer at 60c , although 60c clearly values the company too high. No trades as yet today.

Getting closer to my entry price of below 30c but still no cigar.

News out today also that BFW have opened their 22nd store in Tauranga. Good on them for doing so and I hope the surfies down there get the munchies as often as they can, so as to frequent their local burger bar and boost the BFW share price.

It could definitely use the help.


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c Share Investor 2007

Take an Investment tip from New Zealand's NZX

The favourite topic for us investor hounds and writers of the moment is the weakening global share markets.

New Zealand is always first to react on Monday after the previous Fridays close on Wall Street.

React it did today by falling almost 40 points or 1%. Already down sharply on Friday 10 August New Zealand time our market takes the lead and has no other influence until Australia's ASX opens 12 Noon NZ time.

Today the ASX lead its own way up, Asian Markets followed somewhat and it will be interesting to see what Wall Street does New York time Monday morning 13 August.

The thrust of this piece is really that if you look to the New Zealand market, the NZX, we really have an advantage because when world markets close during our morning hours we have a chance to digest the figures from other regions , make a decision and act upon it when our share market gets going at 10.00am. Perhaps then making more rational and considered decisions instead of the spur of the moment stuff that international bourses tend to respond to.

Of course very few international investors know that New Zealand even has a share market but if they did they would find it an advantage to follow what is going on down here in the respect of investor sentiment in a region that is first to open.

Clearly the NZX doesn't have economic impact but international market watchers need all the information and advantage they can when looking at the impact their own portfolios could have and behave when their markets open the following day.


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c Share Investor 2007

Fully Aware of Muslims: Jihad & Understanding

My eyes would glaze over if the subject wasn't so serious because I have heard it many times before.

Its Muslim Awareness Week( MAW) again in New Zealand and this kicks off a week of hand wringing Liberal guilt likely to rival what members of the Catholic faith feel over Catholic Priests and their penchant for little boys.

A press release by Labour today encapsulates the misunderstanding that the loony Left would have the public believe that the majority of Muslims love the West, have nothing against "us" are purely emigrating to Western nations like New Zealand because they want to spread love, joy, happiness, peace and want to envelope us all in a group hug. It is all in the interests of that wonderful word that you cant disagree with because if you do you are labeled either a racist, sexist, homophobic or any other label that the left want to stick you with because they don't have a valid argument to counter the common sense view that the opposite is true. That word is "diversity". Arrcchhh!!

In the interests of my readers I will try not to use the D word again here least it make you violently sick. It is a word that has largely lost its meaning because of the corruption of it by the left.

Anyway back to the press release.

This week in New Zealand is "Muslim Awareness Week" a week of State funded hand wringing over the guilt brought on by the Wests involvement in liberating Iraq and the subsequent outpouring of vitriol against our Muslim brothers by the least sensitive of us heathens in the West. Carter and his comrades from Iraq were also involved in a march through Auckland's North Shore this last weekend to raise funds for Iraqi refugees, who doubtless, we will find some entering our shores and willing to spread the good word. Can you sense my sarcasm dear readers?

This week, sponsored by yours truly and 2 million other working Kiwis MAW will help us understand our Muslim comrades, bring us closer together and "normalise" our dual relationships:

“Nevertheless, world events have shown us here in New Zealand that it is important to promote greater communication and understanding between people of different faiths and backgrounds".


The underlying message that MAW wants to spread and being championed strangely by the openly gay Labour Minister Chris Carter is that we all just need to "understand" each other and accept other cultures:

"Ethnic Affairs Minister Chris Carter is welcoming moves by the local Muslim community to demystify their religion and customs.

Promoting greater unity among the diverse peoples who call New Zealand home is the theme of Islam Awareness Week 2007 which began yesterday. The annual event is organised by the Federation of Islamic Associations of New Zealand (FIANZ) and supported by the Office of Ethnic Affairs and the Human Rights Commission".

Bizarre that New Zealands Muslim community would use a gay minister to promote their cause because as we all know the Muslim "faith" allows that queer folk must be silenced in the most final and gruesome of ways. Of course the left and misunderstood groups do often make strange bedfellows, pun intended, to get political points across to the unwashed masses like us.

The New Zealand Labour Party and their attempt to buy Muslim votes has started and it is still over a year away from an election.

Okay you say what is the point of this column you ask yourself?

Ill stop the bullshit then.

What is clear , as opposed to the diatribe and invective postulated by Chris Carter is that Muslims as a whole do not fit well into Western society, their "culture/religion" doesn't allow it, and Muslims and their proponents have a propensity to rail against us when a few probing questions are asked say on their views of the ultimate western culture, America.

There is also the small question of the Jihad that Muslims have out on the West.

Once again the Liberal lefty media In New Zealand have lapped this up unquestioning of the thrust of this MAW week. Pathetic!

I am looking forward to a State sponsored Catholic awareness week so we can understand a priests love for young children and taxpayer funds spent so we can understand a whole group of other religions that tithe families to "help their congregation".

The message of MAW is accepted without dissent and opinion to the contrary will be labeled intolerant.

I have an adjective for my readers.

Vigilant.

c Darren Rickard