Stock takes: Solving the world's economic woes is easier online

Just suppose the internet existed in 1929. "How might the Great Depression have been different?" ask the creators of new website EconomicTurningPoint.com.

"The internet is a tool of global communication. If it had been available in the 1930s, the downturn and subsequent restructuring that became the Great Depression could have occurred faster and more efficiently, yielding less suffering."

The website is "a non-partisan global think-tank dedicated to utilising the resources available to us to address the current economic crisis and avoid a decade of poverty and warfare" - and they're recruiting.

Think-tanks are all very well, but Stock Takes has noticed the tendency for discussions of economic matters online, where the lack of physical proximity encourages participants toward discourteousness, to quickly become septic rather than thoughtful.

Site administrator Edward Thompson is not unaware of this.

"All ideas are welcome on our website; partisan politicking and finger-pointing are not. We are, first and foremost, solution-oriented."

Mind you, with New Zealand's woeful broadband services, our contribution will be constrained. If only we had faster internet, we'd be over this recession in no time.

BYE BYE BROOK

The New Zealand Superannuation, or "Cullen" Fund has been in the news lately for reasons it probably doesn't appreciate.

Defending the fund's structure and recent performance in a piece that appeared in the Herald yesterday, chief executive Adrian Orr pointed out it was "in a position where we can move quickly when opportunities arise".

It did just that last week, taking the opportunity to dump Brook Asset Management which held one of the fund's New Zealand equities mandates, worth somewhere around $260 million - late last year anyway. It wouldn't say why, and its spokeswoman couldn't even say why it wouldn't say why.

Brook's Mark Brighouse was also pretty circumspect when asked about it but he stood by Brook's record of returns. Sure its absolute return has been in negative territory lately but it has outperformed the market by a healthy margin.

Asking around, a couple of theories were bandied about as to why the sudden parting of the ways, both to do with Macquarie's move to 100 per cent of Brook a year ago.

No disrespect to Brighouse and the rest of his team, but there is a feeling that Brook's appeal was very much about its principals Simon Botherway and Paul Glass, both highly regarded operators.

While their departure at the end of last year was outwardly amicable, one source suggested that the pair left after it became clear the aspirations they hoped to fulfil in conjunction with Macquarie were never going to happen.

With them gone, perhaps the Super Fund was always going to cut Brook free.

The other theory is that the Super Fund wanted to put some daylight between itself and Macquarie, whose Australian head office is having a torrid time at present.

What's more, Stock Takes understands Macquarie recently got rid of its two equity operators, which means NZX trades on behalf of Macquarie clients will now be executed out of Sydney.

Sounds like the kind of loss of local capital market expertise many have been fearing as a result of our incredible shrinking market.

MAC-WORRY

Meanwhile, the folks at Macquarie Group's Sydney head office were undoubtedly heaving a sigh of relief yesterday when the Australian Securities and Investment Commission extended its ban on short-selling of financial stocks for a further three months.

Australian media have reported that Macquarie had been lobbying for an extension, but despite that ban its shares have been pounded, reaching 10-year lows this week before recovering on news of the extension.

It's been suggested that some traders have bypassed the ban by short-selling Macquarie shares using derivatives.

The big Australian trading banks are likely to be pleased with the extension too. It was reported they were being stalked by a group of offshore hedge funds which were readying a concerted attack when the ban was to expire today.

Once again, though it has been pointed out that savvy traders have been able to sidestep the ban by short-selling stock in those banks that are dual-listed in New Zealand, where there is no ban.

The ban extension represents a shred of good news for Macquarie, which has had a tough week. The company was dubbed the millionaires' factory for the way it rewarded key executives who aided its debt-fuelled rise during the halcyon bull market days.

However the sky-high gearing applied to the numerous satellite infrastructure funds it set up, and extracted various lucrative fees from, now threatens to sink them.

It was revealed yesterday that Sydney Airport, majority owned by Macquarie Airports, had seen its debt rise from A$1.2 billion when it was sold to a Macquarie-led consortium six years ago to over A$8 billion today.

CUTTING ITS CLOTH

Stock Takes has been following Guinness Peat Group's problems with big investment Coats.

Macquarie analyst Lyall Taylor this week also referred to "a growing risk" that Coats will breach banking covenants. Coats has US$359 million ($714 million) in net debt, as part of a US$625 million facility it negotiated in May last year.

Stock Takes went to GPG director and Coats chairman Gary Weiss with queries about the banking covenants and other concerns raised by local investors.

Coats' financial position was sound, Weiss said. It had complied with its banking covenants to date and beyond that: "Coats' plan for 2009 shows compliance and January trading is in line with plan." Weiss said Coats was "cutting its cloth to meet the subdued trading environment".

"We're not sitting still. We've taken considerable steps to reduce our operating costs, improve working capital, and we believe we are gaining market share at the expense of some of our weaker competitors."

He said Coats' industrial threads division had performed well under the conditions and the biggest issue facing the company was its European crafts division. If you took out the loss there, "Coats would have had a good result".

While the market has shown some signs of becoming fed up with GPG, selling it down to an all-time low of 54c, it has recovered somewhat in recent days, yesterday closing 6c higher at 63c.

But even by Macquarie's revised reckoning it is still trading well below its net asset value of 89c.

HERE TO STAY

UBS is not about to join other battered international investment banks in the departure lounge at Auckland Airport, it says.

Usually reliable market sources suggested the report this week that the Swiss investment bank was about to change the way it does business in New Zealand was not far from the mark.

They said a rejig where local management took over much of UBS' existing local business under a new brand while acting as local representative for UBS was likely. It's a similar arrangement to that which First NZ Capital has with Credit Suisse First Boston.

Local managing director Campbell Stuart, however, flatly denied there were any changes afoot, as did a spokeswoman for UBS in Sydney.

OLE RAZZAMATAZZ

The market seems reasonably happy with SkyCity boss Neil Morrison's plans to rebrand the Auckland Casino and ramp up its bar and restaurant business. Its shares eased 1c to $2.63 after Morrison announced his plans for the casino on Wednesday and expressed his wish "to see some Las Vegas dancing girls".

Another part of the rebranding is a plan to have monthly social events at the casino linked to charities. The Problem Gambling Foundation perhaps?

Ethical or not, SkyCity has been a good performer under the current circumstances, say Morningstar analysts.

They say the company's performance "is likely to remain soft given macroeconomic uncertainty and rising unemployment levels", and they have reduced their full-year 2009 and 2010 net profit forecasts by 10 per cent to $103 million and $110 million respectively.

That said, the stock remains comfortably within their "buy" category.