Carbon Trading: A good reason to exit the Stockmarket

When your taxi driver, next door neighbour and friends at barbecues start talking about how much money they have made buying carbon credits on the NZX, which start trading in New Zealand in July 2010, you will know it is time to exit the New Zealand Stockmarket, and other global stockmarkets as well.

Whether you think the theory behind climate change, which carbon trading is supposed to help ameliorate, is true or not - and it has been proven it isn't - carbon trading is going to be the buzz phrase of 2010 and beyond. As the price for these carbon credits increases, and it will, it is going to take stockmarkets on a ride with it not seen since the Internet boom on the late 90s.

Like that boom though, Carbon Credits have no real assets behind them to back them up, they are simply "made up" and the revenue that flows from these credits is based on political maneuvers and manipulation rather than real economics, so the ride isn't going to last forever.

As I picked almost 2 years ago I expect a bull run for the NZX in 2011, for different reasons back then but the carbon trading market is going to be part of the resurgence.

This isn't about knocking global warming or carbon trading though, because others do it better and quite frankly it is easy to do because of the sheer kookiness of it all. This is about my strategy to get out of the stockmarket before the carbon trading market inevitably collapses and takes everything else down with it.

I prefer my own exit strategy, I don't like being pushed. but I reckon i will have little choice once this pile of bullshit gains momentum.

How bad it will be nobody knows but the carbon trading market is likely to get intertwined in every facet of our lives as well as our financial markets so any fallout from its collapse will be significant.

I just have to wait for those first signs to come and for every Al (oh hang on HE already is and is already making moola out of it), Dick and Harriet to start blabbing constantly about it and I know the market will be near its peak.

Keep that in mind if you are going to get into carbon trading directly or the stockmarket in general and head for the exits if you dont want to lose your carbon neutral shirt.

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c Share Investor 2009

Hugh Fletcher: Silver spoon no recipe for success

In an interview with Kim Hill on National Radio a few weeks back Fletcher Building Ltd [FBU.NZ] former CEO Hugh Fletcher gives his views on the history of the business and his time there.

Fletcher followed in the footsteps of his father and grandfather at what was then Fletcher Challenge. He remains a director of Fletcher Building to this day.

He is currently on the board of the Reserve Bank of New Zealand in 2002 and chairs the board of directors of IAG New Zealand and is a director at Vector Ltd [VCT.NZ], and a board member of Insurance Australia Group.

The interesting part of the interview is the glossing over by Hugh of his failure as CEO in the 1980s-1990s. Under his reign the company limped towards oblivion in the 1990s as failed expansion attempts led to the breakup of the company into 3 different divisions in 2000.

He made many enemies along the way, notably Sir Ron Trotter, Sir Ron Brierly and Dr Rod Deanne, a former director at Fletcher Challenge and failed former CEO of Telecom NZ [TEL.NZ].

A very interesting view from Mr Fletcher on the history of what is now Fletcher Building and it is ironic that the company went back to its roots in the building industry after its failure under the grandson of the founder.

It just goes to show, leaders and business are not born but made from hard work and ability and often separated from parentage.


Disc: I own a small FBU holding in the Share Investor Portfolio


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The story of his family and their company is told in Fletchers: a Centennial History of Fletcher Building by Paul Goldsmith




c Share Investor 2009

Hanover, Allied Farmers deal more of the same

So the Hanover Finance "rescue" package proposed by Allied Farmers has been given the big tick in an "independent report" by Grant Samuels . Well GS does reports on a number of companies and favour in its reports usually falls on the side of the party paying the cheque, so we can largely discount the GS report.

This is what it basically said though:

The Allied Farmers proposal is superior to the status quo and a high risk of receivership for Hanover Finance investors, according to Grant Samuel. NZ Herald

I happen to have an alternative view.

As I said back in November 2009 when Hanover proposed their moratorium, the best thing to do would have been to vote to wind the company up and get what you could get.

Hanover investors instead voted to give Eric Watson and his fellow fraudsters another chance and of course we now know that has blown up in investors faces just one year latter.

Investors in Hanover and United Finance, who Allied are also interested in buying, have the choice again to this time give directors at Allied a chance to get some money back on assets that are not likely to improve in value any time soon, in a property market that is uncertain at best or to simply bury their pride and vote to wind up the companies and get the best they can get at today's market rate.

I bet you Mark Hotchin's $35 million house in Paratei Drive that taking the money now rather than crossing your fingers for a recovery under future management will be the best bet.

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Warehouse strike opportunity to buy

News earlier this week that less than a third of The Warehouse Group [WHS.NZ] workers will go on strike because they see the company as the big bad Christmas Grinch is bad short term for the company because it comes at a time of year when the bulk of their sales and profit is made but it is nonetheless another opportunity for people like myself to load up on the Christmas bargain that Warehouse shares could become if the industrial dispute drags on.

"Project Invigorate" the Warehouse' initiative to streamline and save costs includes the ability for management to direct workers into more flexible hours and conditions. Approximately 7500 staff work at the big red sheds and the bulk of the staff, who are not unionised, agree with management and so don't have a problem.

As I said above the short term prognosis if a strike is called and it drags on means that sales and profit for the next reporting period will be down but in the long term savings from increased labour flexibility along with logistics changes and inventory tweaks will mean bigger profits and more dividends for owners like myself and clearly that aint a bad thing.

The company is getting bad press in the mainstream media and they are largely behind the union from what I have been reading but below is typical of some of the coverage:

"All the staff were happy in their job. The managers used to be more flexible with the hours, they understood our personal circumstances, they used to work around our lives instead of us trying to work around the company's life. NZ Herald

I mean hang on a sec, don't you realise your boss is employing you ! at a time when economic circumstances are tough.

While I am for treating workers well, one has to realise that the company is there to make money and while you are an important part of that the company deserves the right to do what it sees fit to run their business.

The majority of Warehouse employees agree with management and only a handful of workers whipped up by a socialist union are pissing in the wind.

Time for them to go elsewhere get another job and let us run the company how we see fit.

With every cloud though there is a silver lining. I will be poised to buy if the share price drops.

Thanks to the Union for that.

Warehouse shares dropped 10c yesterday on the news and my interest will be piqued at around the $3.75 mark.




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c Share Investor 2009