Macquarie Bank
Macquarie Bank (Au:MBL) shares have been hammered after the group warned investors that its Fortress Notes made losses in the United States and their value had fallen by as much as 25 per cent. This is because of a decline in value in the US
senior corporate debt that Fortress invests in. Macquarie is a huge and diverse operation which is unlikely to be terribly hurt by a bad performance in one of its products. But problems with the notes could signal worse to come for the investment bank in other areas. In general, the areas in which Macquarie excels, which have been money machines in a bull market, could all suffer in a financial downturn. These activities cover investment banking, wholesale structuring, stockbroking, underwriting, trading in commodities, banking and property. MBL is a well-managed company with a diverse income stream but its shares can be volatile as it is vulnerable to a cooling of the economy or markets.
NZ Refining
The steep fall in the price of NZ Refining has no obvious trigger. Most of the factors that drive it remain quite positive. Last month the refinery reported continuing strong margins, which are set in US dollars on international markets. Moreover, the oil price is hitting record levels having touched over US$78 per barrel. Returns from NZR have been extraordinary in recent years as high oil prices combined with limited refinery capacity to send refining margins up. This, of course, comes with risk as it won't last forever. But NZR remains in a very strong position in the medium term. This is one share, however, where timing will be very important in maintaining your profits because falls could be sharp. The shares are mainly bought for their high dividends and the ability to keep paying them is of paramount importance.
* Views expressed in this article are those of IRG, not the Weekend Herald
