Selling structural capital

Can these fallen stars resume their former glory?  November 28, 2011 – 04:35 pm
between structural capital

The Global Financial Crisis that began in 2008 and extended into early 2009, or some would say, is still going now, claimed many companies ‘ scalps that had pushed too far too hard, including the likes of ABC Learning, Centro Property Group, Babcock & Brown, MFS Limited, Timbercorp, Great Southern Plantations and the list goes on.

Several stocks have survived, but are shadows of their former selves just 5 years ago, and have seen their share prices fall to all-time lows. Can these stocks resume their former glory? Let’s take a look at four that fit into this category.

Macquarie Group

As an investment bank, Macquarie Group Limited (ASX: MQG) is heavily dependent on the state of financial markets, mergers and capital raisings, securities and currency trading, corporate finance amongst many other activities. The company has transformed itself away from a packager and seller of infrastructure assets, into a ‘true’ investment bank, and hence is much more reliant on the health of financial markets.

Thanks to consistently weak markets, returns on equity and capital, profits and earnings have all fallen and the company has had to raise issue more shares. Prior to the GFC it was trading at over $76 (adjusted for rights issues) and is currently trading around $25.35.

Source: Fool Australia

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The seminal historic event always affects the language. Already we can see that Enron is of this shattering magnitude. A stick-up artist goes into the Jiffy Mart to pull a heist. He whips his heater and says to the clerk, 'Put 'em up, this is an aggressive accounting practice.'
Or, you take your car to Ralph's Rip-Off Garage to get a 50-buck problem fixed and, sure enough, he bills you $6... and therefore more stability. What I see in these mega-banks in not diversification but more concentration of risk, which puts the taxpayers on the hook. It also creates a financial sector less responsive to the real needs of the economy.'
When you hear people say Enron represents a 'systemic' or 'structural' failure, this is what they're talking about. And that's what needs to be fixed.

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