Monday, December 3, 2007

Current credit crunch a blessing in disguise

The current credit crunch could turn out to be a blessing in disguise.

With the private equity boom earlier this year we saw cheap money being used to buy public companies at hugely over inflated values and it looked like it was going to escalate to the point of explosion and huge economic destruction looked certain.

This fallout was gazumped by the sub prime blowout where lunatic lending institutions lent money to private individuals for houses, cars and other goods and surprise surprise they couldn't pay their loans back.



The effect of the latter scenario though is the same outcome that would have happened had the private equity boys been allowed to continue to borrow money from the drunken sailors that were lending it to them- the credit market is very tight and bankers don't trust anyone all of a sudden.

Credit is tight right now, it has slowed down US M and A activity, the housing sector and investment in business expansion and will have further downstream effects as time wears on.

In New Zealand we have seen questions over our own finance companies going bust, 13 in the last 24 months or so and with more to come. They lent money to questionable property developments and car and chattel purchases and have cost a collective NZ$1.5 billion so far.

A major takeover of a large New Zealand company, Sky City Entertainment, is in peril because a couple of the interested private equity partners are having trouble raising cheap credit to purchase the casino and entertainment company.

What is the blessing?

Well, all this recklessness, which the financial world seems to like to go through with monotonous regularity, has put a brake on stupidity and seems to have focused the minds of lenders and borrowers.

Unfortunately the lenders have pulled back way too far and don't want to get their wallets out at all but the overreaction seems a mirror reaction to the gay abandon that they handed out dollars to anyone in a suit in the first instance.

These overreactions always happen and lenders will start to loosen again when trust is back in the market.

The focus from the beginning then, one would hope, that the reasons for lending money in the first case would pass the basic questions from the lender when one asks for credit.

Can he pay it back?

Is his credit history good?

In the case of a business, much the same but with the addition of whether the business makes money and are you paying too much for it.

Simple huh?

Then how come lenders got themselves and as a consequence, us, in this mess in the first place.

Until the next credit cycle of madness!


Disclosure: I own Sky City Shares


C Share Investor 2007

Sunday, December 2, 2007

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C Share Investor 2007

Saturday, December 1, 2007

NZ Herald Report: Auckland EFB protest lures 5000

More than twice as many protesters than the November 17 march, this level of interest indicates public opposition to the Electoral Finance Bill runs very high in all sectors of our community.

This fascist, communist type bill may be passed as soon as next week and it means from January 1, Blogs like this one wont be able to criticise the government or influence others to vote alternatively.

As this Blog has its servers outside of New Zealand it maybe hard for authorities to shut me or others down though!! I wont stop the backchat either way, its my bloody right.

NZ Herald Report: Auckland EFB protest lures 5000

Several thousand people have marched in Auckland this afternoon in protest at the government's Electoral Finance Bill.

Police estimates put the crowd at close on 5,000.

The first Auckland march against the bill, a fortnight ago, drew about 2,000.

Marchers then stayed in QEII Square listening to speeches telling them the bill threatens democracy in New Zealand. Organisers are delighted with the turnout, saying it indicates people are realising what the bill will mean for them when it becomes law.

Among the marchers were ACT leader Rodney Hide and high profile opponent of the bill Christine Rankin.

Marches were also held last month in Wellington and Christchurch.

Newstalk ZB & Political Animal 2007

Auckland Electoral Finance Bill Protest, Dec 1, 2.00pm, Aotea Square

Just a reminder that the 2nd Auckland Electoral Finance Bill protest is on today, 1 Dec 2007. Assemble at Aotea Square at 2.00pm, when the protest will kick off at 2.30pm, march up Queen St down to Britomart where John Boscowen and others will be giving speeches.

I wont be there because I'm sick with the flu but I will be there in spirit.

Beat these fascist dictators, Helen Clark and the Sisterhood, Winston Peters' and his fellow lapdogs, the Greens and their nasty grasp for power and all the other power hungry persons who want to take your democratic rights away.

C Political Animal 2007