Sell, sell, sell
Wed, Oct 08, 2008
The New Paper
WHAT the bull market giveth, the bear market taketh away.
High-flying executives in Sydney, Australia, who made fortunes by sinking borrowed money into what they thought was a long-term bull run, are now being forced to liquidated their assets because of the current crisis on Wall Street.
The Sydney Morning Herald (SMH) reported that car dealerships are seeing a rising number of clients who come to unload their Ferraris, Bentleys, Porsches or Aston Martins for quick cash to repay their margin loans.
Margin loans are loans given by brokers to clients for use in buying stocks.
The latest figures from the Australian Reserve bank show that 206,000 clients have taken out A$31.8 billion ($35.7b) in margin loans.
SMH reported that lenders are making 360 margin calls a day on average, demanding their money back after the share values have fallen past a certain point.
At least one Sydney car dealer is seeing more margin-call clients, usually young men, coming to them to sell their luxury cars to cover their loans.
Brothers Nasser and Steven Elkordi, from Modena Prestige Cars in east Sydney, said at least four 'casualties' a week had visited their showrooms over the past two months.
Just last month, an investment bank director had sold three cars to meet his margin loan debts, they said.
It has become so bad that the brothers say they no longer take certain makes of vehicles because they cannot shift the stock through retail or wholesale channels.
'They come in, dive out - always for a loss,' Mr Nasser Elkordi, the director of Modena, told SMH.
'I feel sympathy (for the sellers). They haggle, which is normal. But that only lasts five minutes before I hand over the cheque. At the end of the day they know they have to offload. They only have days to pay back the loan.'
Brokerage CommSec's chief economist Craig James said the bulk of those affected are younger investors in their 20s and 30s, who were highly geared and had never experienced tough times in the financial markets before, he said.
'This fallout is quite concentrated to Sydney,' he said.
'It tends to be those who were late into the market, about 12 to 18 months ago. They have no experience of what happened in 1987, 2000/2001 and 1997.'
Another sign that investors were hurting was the 13.6 per cent fall in visitor numbers recorded at this year's Sydney Boating Show.
Boating Industry Association of NSW president Roy Privett said the show, which catered for trailer boat and luxury vessel markets, was a good economic barometer.
The economic fallout has also seen hordes of overseas Australians returning home from London, New York and Tokyo following mass job cuts in financial services and banking.
Recruitment agencies said they have also been inundated with calls from expats looking for work in the Australian market, which has been relatively unscathed by the fall of global markets.
Link Recruitment client services general manager Jason Cartwright said: 'In March we noticed a trickle of Australians coming back home. By June and July there was quite a flow and now it's a tsunami.'
This article was first published in The New Paper on October 6, 2008.
Wed, Oct 08, 2008
The New Paper
WHAT the bull market giveth, the bear market taketh away.
High-flying executives in Sydney, Australia, who made fortunes by sinking borrowed money into what they thought was a long-term bull run, are now being forced to liquidated their assets because of the current crisis on Wall Street.
The Sydney Morning Herald (SMH) reported that car dealerships are seeing a rising number of clients who come to unload their Ferraris, Bentleys, Porsches or Aston Martins for quick cash to repay their margin loans.
Margin loans are loans given by brokers to clients for use in buying stocks.
The latest figures from the Australian Reserve bank show that 206,000 clients have taken out A$31.8 billion ($35.7b) in margin loans.
SMH reported that lenders are making 360 margin calls a day on average, demanding their money back after the share values have fallen past a certain point.
At least one Sydney car dealer is seeing more margin-call clients, usually young men, coming to them to sell their luxury cars to cover their loans.
Brothers Nasser and Steven Elkordi, from Modena Prestige Cars in east Sydney, said at least four 'casualties' a week had visited their showrooms over the past two months.
Just last month, an investment bank director had sold three cars to meet his margin loan debts, they said.
It has become so bad that the brothers say they no longer take certain makes of vehicles because they cannot shift the stock through retail or wholesale channels.
'They come in, dive out - always for a loss,' Mr Nasser Elkordi, the director of Modena, told SMH.
'I feel sympathy (for the sellers). They haggle, which is normal. But that only lasts five minutes before I hand over the cheque. At the end of the day they know they have to offload. They only have days to pay back the loan.'
Brokerage CommSec's chief economist Craig James said the bulk of those affected are younger investors in their 20s and 30s, who were highly geared and had never experienced tough times in the financial markets before, he said.
'This fallout is quite concentrated to Sydney,' he said.
'It tends to be those who were late into the market, about 12 to 18 months ago. They have no experience of what happened in 1987, 2000/2001 and 1997.'
Another sign that investors were hurting was the 13.6 per cent fall in visitor numbers recorded at this year's Sydney Boating Show.
Boating Industry Association of NSW president Roy Privett said the show, which catered for trailer boat and luxury vessel markets, was a good economic barometer.
The economic fallout has also seen hordes of overseas Australians returning home from London, New York and Tokyo following mass job cuts in financial services and banking.
Recruitment agencies said they have also been inundated with calls from expats looking for work in the Australian market, which has been relatively unscathed by the fall of global markets.
Link Recruitment client services general manager Jason Cartwright said: 'In March we noticed a trickle of Australians coming back home. By June and July there was quite a flow and now it's a tsunami.'
This article was first published in The New Paper on October 6, 2008.
