Hi
@tuts, thanks for your apology
I have been an active HC member since 2010 and have held AGO since 2013. I got caught out holding a parcel bought at $1.10 which, as
@sleekbeak points out, has become a handy (unrealised) tax deduction. I bought back into AGO at about 1.2 cents in October 2016 and traded it many times in its rise to 5 cents in February 2017, wiping out my original loss and making some sweet profits all the way up. I then got caught with a significant parcel bought too soon on its way back down to 1 cent. I traded a few times last year, for pip profits, and more recently sold one parcel bought at 3 cents when Gina's bid made it possible and it was too tempting not to take. What happens to the significant parcel I still hold is of course of vital importance to me, which is why I value the detail the various documents produced by AGO BOD and Redstone have in them (though more about that in a moment).
First, let's separate out regulation from BOD activities, then consider the status of today's 'mum and dad investors'.
Australia's Regulatory Environment
My point about Australia's regulatory environment was to try to get some balance into the conversation of 'document overload' versus corporate 'compliance obligation'. On the whole, we are lucky indeed to be able to trade so safely because we do live in a well-regulated society (hey, in that oil-rich country of Venezuela they can't even buy toilet paper
). However, while government regulation provides us with a corporate compliance safety net of sorts, this is the problem:
for the government,
regulatory law plays a perpetual game of catchup.
Medical research and reproductive biology provides a good example. In the 1980s, when artificially induced reproduction and animal cloning became possible, there were no laws regulating human cloning in Australia and parliament had to scramble to make some before research turned it into a reality. As scientists continually push the frontiers of what is medically possible, government has to, post facto, create laws. The same is very much true in the world of banking and finance, compounded significantly by the fact that the banking/finance sector is very wealthy and can afford an army of lawyers to constantly keep ahead of government regulation, or at least to test regulations by finding and pursuing loopholes until finally a court makes a determination one way or other on the matter. Tracking and pursuing the legal antics of big business is very expensive for agencies like ASIC and APRA, and they can't be expected to anticipate
all of the ways in which banking/finance could potentially push the regulatory envelope, which is why they are always on the back foot, and yes, they too can make mistakes, just like any of us.
You make a good point about investigative journalism, no better evidenced by Michael Lewis's books (e.g.
Liar's Poker [1]).
On the whole, though, IMHO market regulations work well enough to
generally protect all investors, mums and dads included (more about that in a moment), and in the case of true corporate negligence, class action is always a possibility.[2]
AGO BOD activities
If you were able to go back far enough, you would find posts by me written in early 2017 defending the AGO board, while other punters were critical. Over the last 20 years I have owned and managed 4 companies, 2 trusts and numerous businesses. I also have a friend who established an Australian mining company and took it from IPO at 1 cent to a TO buyout at $7 decades later. I saw what it did to his family life, and how he had to cope when his business partner and co-director died of a heart attack. So I have some empathy for board directors and CEOs in their endeavours to build businesses that we can invest in and profit from.
However, you will not find me defending the AGO board these days. Personally, I have been disappointed in their actions this year. I agree that the entanglement with MIN was less than optimal (to put it politely), especially the opt-out provision that cost AGO millions when the MIN offer was withdrawn (HTF did that work?). However, I am wary of being too critical for several reasons (in addition to legal liability through defamation
).
1. I do not have information about what
obligation a BOD has to recommend a TO offer in the absence of a better offer, and a wallowing SP. If they do have an obligation, then we cannot criticise the AGO BOD for their sequential recommendations of MIN's, then Redstone's offer (both of which were above current SP). Perhaps someone can enlighten me on that front. But I do agree that it appeared anomalous (again, to put it politely) that the recommendation to accept MIN's offer came out before the IE's report was published.
2. I have found the various estimates of
value of AGO difficult to fully comprehend, partly because as a shareholder it would appear logical to include things like 'potential' (in known but unproven mineral holdings) and 'synergies' (for a potential purchaser) in the value equation, when common accounting practices exclude them. What I do know is that the fortunes of AGO were, until quite recently, tied heavily to the price of IO, as the chart below demonstrates. With the rising price of IO in 2016, the BOD and bail-out financiers had reason to be optimistic; then, with its subsequent decline, and especially the relatively stronger decline of low-value IO, the board must have become more and more pessimistic about AGO's ability to go it alone (perhaps more pessimistic than they ever let on, with their need to 'talk-up' the company in presentations). A life-line was offered, and a weary (compromised?) board grabbed it (and, yes, there was probably a dose of self-interest in their actions).
Mum and Dad Investors
I am 65. My mother is 97. All through my childhood she would listen to the nightly stock market report on ABC radio. As a child in the 1930s, she had been taken to the Sydney Exchange by her grandfather and had become an investor/trader herself in the 1960s, continuing to trade profitably up until about 2 years ago when dementia set in and I took over her portfolio. Until I bought her a second-hand computer about 20 years ago (a 486, remember them!), set her up with a CommSec account and taught her how to trade electronically,
she was at the total mercy of the brokerage houses, subject to their (questionable) recommendations, and not able to buy and sell at short notice. From this point of view alone, M&D investors are way better off now than in the dark ages of telephone broking.
I've traded for over 20 years and while computerised, high frequency (bot) trading has completely changed the market landscape, IMHO the capacity of
anyone to open an account and trade
any market instrument around the world,
long or short, is an extraordinary advance, one that has encouraged people to take an
active part in their investments, rather than just being passive 'investors' in some fund. I know many M&D investors who got caught badly in the GFC when their externally managed portfolios crashed, and they had no chance personally of selling before losses wiped more than 50% off their investments.
The ability to trade directly through internet sites such as Nabtrade and CommSec means that M&D punters are now way more likely to be
directly involved in their investments. So I agree with you when you say
Sadly the "mums and dads" shifted their trust to finance managers but I disagree with your statement
the stock market is NO LONGER a "mums and dads" investment place because trust in corporate world has been lost quite likely because of lack of effective regulation. I don't believe everyone distrusts the corporate world, nor that it is so distrustful that anyone can't make a profit trading/investing (with the right system and money-management strategies), and anyway, who really cares what the corporate world does? Markets go up, markets go down, for a multitude of reasons, some of which are directly related to the company (e.g. Facebook on Thursday) and some of which are related to the vicissitudes of the global financial outlook (e.g. XAO drop on 5Feb18). But most of all, I disagree because I don't believe there are many true M&D investors left anymore, other than old ladies with blue-chip portfolios that (mostly) their now deceased husbands accumulated, and they hold long term for dividends, not particularly caring what the SP is.
These days, people who put money in the markets come in 2 broad types: (1) medium to long-term investors who mostly use fundamental analysis (FA) to make buy/sell decisions; and (2) very short (i.e. intra-day) to short-term traders who mostly use technical analysis (TA) to make buy/sell decisions, though some people, like me, do both. The advent of charting software has pushed many previous M&D investors further and further into the trader category, plus events such as the Telstra fiasco [3] have made M&D investors rethink their 'investment' strategies. All up, not many M&D's left me thinks!
And finally, I am a strong believer in
caveat emptor (buyer beware). As the oft-used acronym DYOR implores, putting money into the financial markets is a high-risk activity, one that necessitates a reasonable understanding of, at the least, what one is getting into. Another way of putting it is this: you only have yourself to blame if the market turns pear-shaped, with the exception of (previously mentioned) corporate negligence, which has its own redress through class action.
Cheers, GW
Sorry, a bit of a rant, but you did ask for my thoughts!
[1]
https://www.amazon.com.au/s/ref=nb_sb_ss_c_2_13?url=search-alias=digital-text&field-keywords=michael lewis&sprefix=Michael Lewis,aps,362&crid=35WK64XFA8XNP
[2] For example,
disallowed/business/companies/newcr...olders-over-class-action-20160222-gmzwbz.html
[3] How many 'mums and dads' got totally sucked in by the two (or was it three?) Telstra tranches. It launched in 2001 at about $6, then immediately plummeted, getting as low as $2.50 in 2010, and took another
13 years to get back to IPO level. It currently sits at $2.76. How many original M&D investors are still in I wonder?
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