The phone rang this week. It was Mary from the Australian Shareholder Centre. She was very bubbly and made us the attractive offer, entirely unsolicited, of an exclusive session with a sharemarket specialist.
Who was this humble and lowly essayist to stare such a gift horse in the mouth? It is not every day that one is rung out of the blue with such an amiable invitation to get filthy rich.
We soon realised how we had been so fortuitously selected for this unique opportunity. Only a few hours earlier we had googled ”Australian shareholders” to find out what the Australian Shareholders’ Association had to say about Westfield’s latest highfalutin paper shuffle.
Incidentally, transaction costs on the big merger-demerger tote up to $1.47 billion. There is a spend of $150 million on lawyers, merchant bankers and soi-disant ”independent experts”; an outlay that has effectively bought the opinions of UBS, JPMorgan, Rothschild, Merrill, Credit Suisse, Deutsche, Citi and Morgan Stanley. Their views on the deal can be squarely written off – as can those of E&Y, KPMG and Grant Samuel too. Macquarie is the only major broking house to have been left off this rollicking gravy train and, fancy that, the Macquarie analyst says the deal is unfair to Westfield Retail Trust.
Another $1.32 billion is to be sunk in refinancing costs. In fairness to Westfield, most of this should come back via lower cost borrowings over the long run. Still, the deal ought to be knocked on the head but, thanks to tenacious proxy solicitation by Team Westfield, it is thought likely to proceed, albeit in a close-run affair. The vote is on Thursday and the big wrap platforms will have cast their votes by the time you read this.
BUT we digress. Upon googling ”Australian Shareholders”, your scribe had inadvertently clicked on Australian Shareholder Centre rather than Australian Shareholders’ Association.
It did seem a little strange, come to think of it, having to sign up with a username and mobile phone number to enter the site. There was good reason for this though. We soon realised that we were in the wrong website.
A little later the phone rang. It was Mary. We told Mary that we would be very pleased to speak with one of the Australian Shareholder Centre’s stockmarket specialists and soon we were connected with Steve.
Steve said the centre focused on active trading. ”We help out by doing the research and analysis,” he said.
Oh yes, and what is your number one recommendation at the moment?
”We are shorting Crown at the moment.”
Why is that? ”We are pretty sure that they are going to go down,” Steve said.
And do you do fundamental or technical analysis?
”We do both,” said Steve. He then said the centre was not very active in the Australian sharemarket at the moment.
Why was that?
There is not enough liquidity, he said. This seemed odd. Was not the Australian sharemarket one of the most liquid markets in the world?
As it turned out, the Australian Shareholder Centre was not really much into shares at all. It was more into high-risk synthetics such as CFDs (contracts for difference) and foreign exchange derivatives. It took a while to ascertain this though, as Steve had figured out that yours truly, this potential client on the other end of the phone, was in fact a card-carrying member of the Fourth Estate.
He thereupon managed to avoid our calls for a couple of days until relenting and providing the promised tour of the centre’s website.
In the end Steve gave a pretty good account of himself. He denied the Australian Shareholder Centre was a boiler room. ”Boiler room is not correct in any way,” he said. CFDs were high risk, he said. ”We explain the risk. We don’t sugar-coat it.” The centre was not like Fat Prophets, Motley Fool or the Australian Stock Report, publications that sprayed about their stock recommendations with little or no accountability. He was right about that.
Indeed, all the centre’s trades were listed on its website. And Steve showed us where to find the bit about 48.8 per cent of trades not being winning trades.
These details were not quite as easy to find as the chart showing the Australian Shareholder Centre’s spectacular returns of 422 per cent and 241 per cent over seven years. The only problem with these impressive returns was they were ”hypothetical”. Ahem. Anyway, the internet is full of these sorts of offerings and we are prepared to take Steve at his word, that the risks are squarely disclosed that is.
Indeed, if potential customers for these sorts of trading set-ups are availed of the risks, they are free to toast their savings on CFDs and other leveraged derivatives. No problem there. Indeed, many of the more reputable investment houses regularly blew up their clients anyway, as the expose of Commonwealth Financial Services and others had proved.
Successful investment, in the washup, comes down to the adviser rather than the firm. The Australian Shareholder Centre might not really be a shareholder centre but it did seem to carry all the necessary disclaimers.
”The Australian Shareholder Centre does not provide you with personal financial advice,” was one of these.
And as for fees, ”You will not need to pay any fees if (among other things) .. we receive notification of your death.” Now that is good to know.