Risk and return

When the Finance Minister postpones an overseas trip to deal with a finance company investors it will not be to deliver good news.

High returns in investments are almost always matched by high risks.

People investing in South Canterbury Finance, Hubbard Management Funds and Aorangi Securities have had very good returns, now they’re being faced with the realisation that their investments were also high risk.

Apropos of this, Scott at Imperator Fish writes:

… I predict that many of Alan Hubbard’s supporters will turn on him, like sharks who’ve scented the blood of one of their own. He may be a well-meaning old gentleman, but nothing is quite as educational as the pain of losing one’s life-savings.

… we must remember to blame the Government. They acted too slowly. Or did they act too fast in putting Hubbard into statutory management? Does it matter? All this market stuff is confusificating me. . .

It will be more than confusificating for the the people who are concerned about losing money.

 Depositers are covered by the deposit guarantee scheme but they are not the only ones with something to lose if SCF falls over.

The uncertainty over SCF, HMF and AS has shown just how the threads of the various Hubbard entities are woven through rural and provincial South Island. There are valid concerns that if one thread is pulled a lot more will unravel.

6 Responses to Risk and return

  1. Adolf Fiinkensein says:

    More fool rural and provincial South Island for putting so many eggs in one very worn old basket.

    Amongst all the rhetoric and hyperbole I’m yet to see any serious evidence backing all the aforesaid ‘concerns.’

    It would be nice to know if Hubard and co account for any more than one percent of total SI rural and provincial debt.

    Further, I’m struggling to comprehend how so many dairy farmers are allegedly facing ruin and can’t pay their interest bills when they are enjoying a seven dollar pay out.

    Something does not compute here and it ain’t Adolf.

  2. JC says:

    Adolf,

    Just plucking some figures here..

    MAF has all NZ agricultural loans at $3.2 billion, which might indicate a total indebtedness of over $20 billion. Say 30% are in the Sth Island..

    The questions then are how much does SCF hold of the Sth Island $6-7 billion, and how many loans are distressed, ie, unable to refinance?

    Optimistically SCF may hold 2.5% of SI agricultural debt, and pessimistically 10%?

    JC

  3. JC says:

    Oops, that first sentence should read that the $3.2 billion is total interest.

    JC

  4. bobux says:

    New Zealanders like their financial dramas to have a cartoonish quality to them. Big-spending millionaires with flash cars – boo hiss. Humble hard-working gent – yay hurrah.

    In reality, most of the finance companies that have fallen over have been because the owners weren’t as smart as they thought they were, or they gambled on the property boom continuing longer than it did. The salaries and drawings of the owners/managers are, in most cases, a side issue.

    It is going to be very hard for many people to accept the fact that a businessman widely regarded as honest and hardworking can still find himself a long way up S**t Creek.

    I predict they will do what all kiwis do when faced with a problem they don’t like to confront. They will blame the goivernment.

  5. bobux says:

    ‘goivernment’

    Aaargh. You know what I meant.

  6. JC says:

    “Aaargh. You know what I meant.”

    Yep.. you’re from the Bronx.

    JC

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: