It’s been hosing shareholders with money when APRA should be raising its counter-cyclical buffers:
Why? Because its delinquencies are currently at bottom of the cycle lows:
But it has insurance in force of $320 billion:
And a regulatory capital position of just $3.6 billion if we allow all of the fiddles:
Disgorging a monstrous leverage ratio of 89x and 133x on a more pure capital basis.
Even though this is juicy duopoly it is still a ponzi business. If property does correct sharply it will be wiped out and although in theory should be able raise more capital from markets, they’re not going to be very keen if the brown stuff really takes flight. Thus it trades on an implicit government guarantee. Indeed it used to be a government body. And if push comes to shove, taxpayers will end up owning it again.
If you’re going to let it float then pump up its capital ratios and make it trade like a utility.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
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THE Short of 2017?
Timing will be tricky on this one – the market will cotton on quickly.
Its been fun shorting it over the last six months, one of my favourites, but just as I was looking at getting back into it, silly shareholders get all excited and push the share price up 4%. They are playing the US game – borrowing $200m and using it to pay dividends and fund share buy backs. Hopefully the HY credit freeze will put a stop to those shenanigans, and another good shorting opportunity will present itself in the near future.
What are you using to short it? I had trouble finding a broker to short it, otherwise I would have piled in. Looking to get in again if it pushes up towards $2.80.
Everybody asks me this 🙂 I use Interactive Brokers. But they only offer about 90 ASX stocks to short, so if you want anything outside the ASX200 you will need a CFD account.
While we’re (vaguely) on the subject, MEA is doing as well as expected. IPOed at $2.10 and now trading in the $1.60s. Can’t wait to see what will happen to it if/when property prices go south this year.
Please lets have some concrete comments on how to short them. We can then discuss the timing while getting dividends along the way?
IG Markets are good (www.ig.com) but Genworth (GMA) is now unborrowable.
Mini Warrants – It has puts and calls.