QR National Share Offer worth AUD 5 Billion dollars?

This share offer worth AUD 5 billion dollars is complete ‘junk’. It is hardly different to those ‘junk’ derivatives that led to the global financial crisis of 2007. Like those worthless securitised property derivatives this Corporation has been grossly over valued. Only more heinous this QR National offer is marketed directly to ‘Mum and Dad’ retail investors rather than faceless corporate professional investors.

After reading through the QR Nat share offer prospectus and crunching some numbers the over valuation of this Corporation becomes acutely obvious to any layperson.

For example in the hypothetical that you invested AUD$1.00 in the financial year of 2010 in a five billion dollar share offer you would have earned a total of 4.0cents in profits. In the hypothetical that you invested your AUD$1.00 in QR Nat in the financial years of 2008 and 2009 your return on investment would have been 1.98cents and 2.8cents respectively. In the years between 2008 and 2010 the RBA calculates inflation at 4.4%, 1.8% and 3.1% respectively. So, had you invested money in any of these hypothetical share offers your miniscule profits would have lost out to inflation.

The RBA’s cash rate for this same period has fluctuated between 7% and 4.75%. So, comparatively if you had invested your money in a term deposit at least you would have made money.

The front page of today’s SMH Business Day quotes Deutsche Banks and Macquarie Banks valuations of QR at $2.53 and $2.75 respectively. Many smaller institutions such as Roger Montgomery give a much more realistic evaluation of anywhere between $1.09 and $1.48 per share. Yet the official share offer stands at about $2.80 per share.

The advocates for QR Nat argue that these miniscule returns are sidetracked into irrelevancy because of the potential for immense future profits and significant capital gains. Well in that case an analysis of the QR Nationals financials reveal a finding of total assets equating to 8.574 billion and total liabilities equating to 5.89 billion leaving net assets worth a total of 2.684 billion. Yet the Queensland State Government says that 2.684 billion is worth 5 Billion dollars in shares. In that case I would prefer my AUD$1.00 to remain in the Bank anytime.

Our Excessive Population Growth

The World's population is booming and its not because we are having more babies. It is because less of us are dying, when we should. We currently have 6.7 Billion people and the United Nations predicts that by 2025 we will exceed 8 Billion and by 2050 we will exceed 9 Billion. This excessive growth will be detrimental to mankind as the demand surpasses the supply for the worlds resources. In effect by 2050 there simply won't be enough h2o, food and fresh air to go around.

Goldman Sachs

The US Senate and various customers are running inquiries into Goldman Sachs conduct, with regard to their design and sale of certain securitised asset products. In 2007, Goldman Sachs designed mortgage backed securities that they knew would fail and then they bet on their collapse by purchasing credit default swaps, which pay out upon a default. In Australia this type of conduct may contravene the insider trading provisions of the Corporations Act and those responsible would invariably be held liable for hefty penalties including Gaol.

Hu Stern to be Gaoled for 10 years

The Shanghai Court has sentenced Hu Stern to 10 years imprisonment for allegedly stealing trade secrets and accepting bribes.

The Global Financial Housing Crisis

The next big financial crisis to cause havoc with the Australian Economy could be sparked by a Domestic Housing Crisis. The Australian Property Market has been unfaltering since the early 1980's increasing by more than 250% and all growth with no pitfalls is unsustainable in any market. The normal market principles here are flawed because property ownership demands huge prices, which limits new buyers from entering the market, which will inevitably result in an oversupply, unless there is a serious price correction.

Please refer to the graph below to see what happened to the property market in the US, it is reasonably foreseeable that a similar market correction might occur in Australia.

Australia's Property Market is geared to fail because the current demand, is sustained by debt and the willingness of purchasers to borrow more and more debt to pay for property. This market does not correspond with increased returns on rent or even substantially increased incomes, this market has been stimulated by fear tactics, misrepresentations and deceptions represented by real estate Agents to venders and purchasers. The only reason that this market misrepresentation is tolerated to the detriment of consumers, is because Australia's State Governments earn far too much of their revenue from Capital Gains Tax to risk any price correction to the property market.

Stern Hu v The Peoples Republic of China

Sterm Hu, the Rio Tinto Executive and Australian citizen who was arrested by Chinese Police, last year and has been detained for 9 months, is facing his first day of Trial this morning. The Chinese authorities charged Stern Hu, just after the Chinese Government failed in their takeover attempt for Rio Tinto. The Chinese Authorites allege that Stern Hu has "stollen business secrets" and has been a "recipient to bribes". He is facing up to 12 years imprisonment. Stern Hu's trial began this morning and is proving to be a most untransparent process. Due to the fact that the media has already been warned by Chinese authorities not to cover the trial, and Australian consular officials have been barred from taking part. The only upside to this great injustice is that China's unsavoury approach to the Judicial Process will be put up on a pedistoll for all of the World to see and it shall prove to the world once and foreall that no company is big enough and no Western National is shrewed enough to avoid the Great Tenticles of China.

The GFC proves nothing more than a bump in the road over the last 36 years

The Dow Jones - Monthly Bar Chart from 1974 to 2010.