I told you so

I commented last week:
New Zealanders generally lack enthusiasm [for investing], so much so that they saw finance companies as a safer bet than shares. This ignorance of risk and investing is wide spread - now they head over to bonds and I can bet they won't read the prospectus this time either.

So it was with a good dose of "I told you so" that I read Brian Gaynor's article on the recent Fonterra bond issue. He opens with:
There are a number of disturbing features regarding the gigantic Fonterra bond issue.

In particular the overwhelming response from investors, and their advisers, before offer documents were widely available clearly indicates that we have learned little from the finance company debacles.

Exactly!

According to the Securities Commission: "If an investment is recommended by a financial adviser he or she should have read the prospectus." How many advisers had read the Fonterra prospectus before they registered their firm allocations?

My question: even if they did read the prospectus in it's entirety, how many understood the contents?

Another concern is the Fonterra Bond Issue was to raise $300m, but to date they have raised $800m. They appear to be willing to take on the extra $500m of debt - what for? Surely if the needed more than $300m they would have asked for it. This make me very nervous.

One other fact that Gaynor raises that should concern all is the lack of disclosure:
Neither the investment statement nor the prospectus contains any specific information on Fonterra's performance for the first half of its 2009 financial year, which ended on January 31.

This omission is unsatisfactory because the company probably had a poor six months and its debt levels may now be materially higher than they were at the end of its 2008 financial year.

Untrustworthy management - take care.

Why do we continue to make these mistakes?
Whenever I bring up money matters with Kiwis they tend to just shut down. They don't want to even discuss in on a general level, let alone on a personal level - especially if they are in financial trouble. Surely this is the best time to talk openly, the time you need the most help.

I've been lucky in my money education, I've had one smart mentor plus five other investors that I speak to whenever I have a question. Add to this membership to two investment clubs and you get the idea that money education requires some effort, a reasonable amount of natural inquiry and is a lifetime pursuit.

I'm not saying I've never made a mistake with my investing or trading, I most certainly have and will continue to - I'm after all not the smartest cookie in the jar. The difference between me and most Kiwi investors is that I learn from my mistakes and I don't whine that I was 'ripped off' or try to blame others. But the main difference is I talk to people who are wealthier than me - even if I look stupid or don't particularly understand everything they say - eventually it sinks in.

So get into it, it has boring moments, but it isn't hard, and eventually becomes very exciting, as your wealth and security grows.

The Markets

Loving this market correction - have been waiting for it to happen for over two-years now. For you non-shareholders, you should be starting to read up on companies and markets and look at putting some money in - these corrections only come round every 20 or so years and provides a perfect opportunity to get in. No rush though I'm sure there will be more pain to be had, but some sectors will bounce back quicker than others. First step is to open that brokerage account.

My advice is make the investments directly into the markets yourself - none of these investment funds/unit trusts - they rarely beat the indexes and charge you large fees for the privilege. If you not sure which individual share to buy then look at Exchange Traded Funds (ETFs). The management fee is low and allows you to invest in industries or countries that are otherwise too difficult to access.

I'm totally jealous that I won't be around to ride this one.

Hell, I'd sell my soul

Damn why didn't I think of this? Selling ones soul for $5,001 - I'd sell it for $5,000, which would be a excellent deal for Hell's Pizza, they'd get my soul well before they'd get Walter Scott's.

And haven't TradeMe turned into boring old farts - guys get a sense of humour.

Update: Well what do I know about all this heaven & hell palaver - apparently when you sell your soul the transaction takes place when you are alive. So I have no advantage over Walter at all, he would be much more useful in the promotion of Hell than me, him being a healthy 24 year old and all that.

NZX + ASX = OZNZX

The first question people ask me when they find out I trade for a living is "Do you trade NZ shares". I usually answer no, adding that the liquidity in the NZ market just isn't high enough for the kind of trading I do. However, this week we made a NZ trade in an IPO with the idea that it would go up - it didn't - and yes the liquidity was crap.

But the negative trade and liquidity isn't what I'm concerned about (all in a days work after all). But having only ever really invested in NZ shares and not traded them, I wasn't really up on the play about how each trade was actioned. I knew that we couldn't as traders/investors gain direct access to the NZX trading platform like we do in nearly every other market, but I didn't realise that nor do the NZ brokers!

What happens (so I've been told), is that the brokers put their orders into NZX via the phone or some electronic system which just amounts to a glorified email. Then the NZX operators put the orders into the system in the order that they arrive (best bet is to phone NZX and you'll probably get to the top of the queue quicker). Apologies if I've got this wrong - feel free to enlighten me if it's better than this. But whatever it is, it isn't good enough.

Chief Executive Mark Weldon is the great white champion for the NZ stock market, but my god he needs to spend some serious time and money on bringing the system up to world standards if he has got any chance of growing this market. If I had a company to IPO, the last market I would choose would be the NZX - it may be cheaper to list here, but with no market makers and no liquidity your share price just isn't going to be well treated at NZX.

The NZX needs to move into the 21st century and provide a platform that all market participants (not just the brokers) can get direct and fair access to. We don't even have to look far for the worlds best example - the ASX - which would have to be the most transparent, fair and easy exchange I've ever traded on.

Or here's an even better idea - NZX merge with ASX - OZNZX sounds great! And with all those extra traders and investors in the market it can only be good for New Zealand companies.