Macquarie Bank strategy questioned

At this stage the economy does seem to be cruising along in a goldilocks mode.

Historically speaking , if we do have a more significant downturn there needs to be a trigger . Obviously China is a potential trigger , but one wonders , given the prominence of Macquarie in Australia at the moment , and their almost perfect track record over the last few years and aura of invulnrability , what impact there would be on the economy if there was significant trouble at Macquarie.

Cliff.
 
The recent, high profile, failed bid has been a trigger for the red flags; investigations and assessments are ongoing. Words like 'paper castles' have been raised. Of course this could all be a furphy, as I know nothing. All may be OK, but as with any investment, caution is always advisable. Yes, I have a few dollars parked there.
MC
 
We model the whole bank - got the whole bank, every risk in the bank - in a big model, run it every single day, we run it on the assumption that today the equity market will open gap-down 10 per cent, 20 per cent, 30 per cent, 40 per cent, with corresponding changes in bonds, currency, commodities. It could be a really bad day.

That's a quote from the ABC's ,but then again when JimChanos starts to speak and he is not the only about the Bank, then it may something to keep a close eye on,I too control a holding in the mcbank have done for several years now they were below $30 when i bought in back then and everybody said back then they were overvalued,but we did not have the China India
OIL Syndrome back then,interesting times..good luck willair..
 
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Risk management is only effective if the top bosses actually care about it. Senior management can ignore whatever they want, especially in a culture where the front office traders / bankers are dominant. And in an investment bank, the front office people are ALWAYS dominant. You need a very strong boss to rein in the cowboys, which isn't always easy especially when they can just run off to a hedge fund.

Chanos' basic idea is that Macquarie is buying assets high but managing to sell them even higher only because of the cheap money available. I read a letter from the chairman of the Carlyle Group stating that eventually this easy money will kill the market.

When you look at past bubbles and busts, it's usually caused by people overpaying when they believe they are invincible. Even if you assume Macquarie isn't commiting outright fraud like Enron did, overpaying for assets will hurt them during a market downturn. In that sense, Macquarie may well just be the Australian version of what's happening in the US.
Alex
 
see_change said:
Suprised no one has mentioned this story from last week. Jim Chanos who was the first to raise concerns about Enron has raised concerns about the big M.

http://www.abc.net.au/pm/content/2007/s1935708.htm

and Alan Moss replied

http://www.abc.net.au/pm/content/2007/s1936975.htm

Cliff
Click to expand...
Yes very interesting for me to read that.

I have chosen the Donut as my black swan pick since mid 05 for a company in the ASX50 that could do something weird and not in a nice way. Just an argument between me and a friend that there is no certainty in stocks and buying them on the way down even if they are considered 'blue chip' is no smart thing to be doing.

This was on the basis of two things 1) Investment banking is at the cutting edge of credit benevolence and the industry is subject to severe tail risk much like the insurance industry 2) More than once I have heard their derivatives dealings described as too complex to decipher.

Now that's just anecdotal and pure uninvolved opinion with no supporting homework on my part and I certainly have no money invested either way. Perhaps there is the opportunity for those who study history and are investors to get a cheap lesson though.

Enron didn't blow up.. It faded away.. It was only the woodchucks who were buying it all the way down, the price was telling stories long before many other people were. I'm not aware of a major public company that has been any different, maybe they have existed though. Don't get married to a company, especially one in the investment banking field. I suspect if you have a stop loss (can always buy back higher) that you honour then there will be little that you should be concerned about regardless of what company you are invested in.
 
Firstly, I hold some MBL shares, but none of the specialist funds.

A few points -
  • I don't know much about Chanos - he called Enron right - does anyone know how many has he called wrong? or we're still waiting for the event?
  • He will be right eventually - cheap money & the Goldilocks economy will end - the first question is When ?.... the 2nd Q is - Is MBL smart enough to have a healthy balance sheet to take advantage ?
  • The private equity players are still loading up with deals - they seem to think they'll be able to offload them in 2-3 yrs time.
  • MBL say they expect only 1 in every 3 deals to come off - so the QAN debacle isn't especially noteworthy.
  • Some commentators pointed out that the MBL strategy needed cheap money & asset inflation back in 2002 when it was $30......
  • MBL has proved(?) it won't overpay for assets, by letting the QAN deal fail.
  • MBL is diversified - it's unlikely to 'do an Enron'.
....and on the other hand.....

  • The current 'goldilocks' economy will stop eventually.
  • There's getting to be more competition for assets and some will overpay
  • If interest rates rise before they can offload assets then they may be hamstrung
  • When sentiment towards equities turns they will struggle to offload assets
  • The '$$$ big boys' (which is most of them) may see the end of the cycle looming & decide to retire with a fantastic 10yr record... and thanks v. much shareholders.
Is BNB as risky - is Chanos shorting them ?
And it's easy to think of risks & downsides to anything.
 
hi all
the big m gets its money not from banking as most banks do
but from the fees and from turning unlisted into listed trusts and 51% of businesses turning them around and selling them off and they are very good at it plus commercial business.
for me the mac system is very stable
and you do make money on the up or the down of a business
but mac are never over exposed they are using other peoples funds to generate income.
yes they have huge fees but the funds that they setup pay these fees and if any hit the wall they are only up for 51% or less and they always have a secure position.
when you see the incomes of the mac guys remember they are not silly people that work there
they are the top of the tree and of all the funds that they have done
that I have looked at their position is secure the deal maybe shakey buts mac position is secure.
you can over expose yourself but if 49% is not your money and the asset is cover do you worry.
mac don't.
I can't see a correction that will affect mac bank, the system is pure profit.
they setup, list, sell,and get management fees all internal and then sell off shares at a price they have set( not bad going)
and if the ar-e falls out of the fund they own 51% of any money in the fund.
and they only ever put in 20% at 5 to 1 list in the first place.
so they lost nothing.
agreed they lose the income from the fund but they get the fund managers to find another fund
it does not bring down the bank.
my little bit on mac
 
I also hold MBL, MBLHB and I am looking at their Prime product.

MBL just like BNB buys assets and spins them off into managed investments which they profit from every step of the way. Both need cheapish easy money and rising asset values to grow.

MBL also has a range of property/share funds with hard to follow fees BNB doesn't have them.

MBL has a range of even more complicated funds with higher fees and gearing that BNB don't do.

MBL resells others funds with complicated gearing arangements and more fees, BNB don't do that either.

MBL does margin loans and CFD's, if you guessed BNB didn't do that either you would be right.

If I was going to short one if the cheap cash and rising prices stopped I would pick BNB as the first to fall. I do hold BBI as well so a foot in both camps.
 
I loked at MacBank and some of thier funds, in doing so many people made the comment that Macbank is the "Fee Factory", with that in mind I decided to pick up a piece of the bank as well as a few other stocks including ASX and some resource minors :D

Dont follow me though......I sold ZFX Zinifex at around $3.60 amongst some other stocks to pick up another IP before I learnt how to utilise my equity and be able to have both, as well as have a *safety buffer* AND look at ZFX now ->

PS: Check out Yahoo Widgets to put up a Stock Ticker on your dektop, Yahoo charts (Beta) are also quiet good
 

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He probably was.

A lot of investment gurus are standing out from the crowd once again. Warren Buffet and Kerr Neilson a couple of others I can think of.

See ya's.
 
McBANK has made a "mint" selling stocks to the public during the boom, Macquarie Bank’s MD has said they have "no significant exposure to the subprime problems" and the company’s half-year results should improve on last year’s$720 million figure

I'm still holding..
 
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