Eureka Correspondence

Business doing it tough, ETF education, and seeking out IPO opportunities.

Business doing it tough

I read Adam Carr’s story, Recession Proofing your stock portfolio, with interest, but I disagree with the opening statement that the Australian economy is holding its ground.

I am in the manufacturing and industrial hardware business in Newcastle and network extensively with the business community and I would say most businesses have never seen it so bad.

I spoke to some people today who are in the national rental car industry. When business is busy, confident, and buoyant the economy needs a certain number of rental cars. But when the tide turns the economy needs less rental cars. One major company has hundreds of 4WD dual cab Utes parked up in Perth, and others must be experiencing similar conditions. Around the country there are thousands of parked up rental cars. The industry has never seen it so bad and there is little light on the horizon. And the real crunch comes when the leases run out on all these vehicles and they hit the used vehicle market. Already the market for second hand vehicles has crashed and the light truck rental market is already dumping vehicles but getting nothing for them.

If there is to be a soft landing I don't think it will be in the minerals, manufacturing or industrial sectors.

My assessment is (from my view in the forward trenches) that there is a slow motion economic and financial Armageddon happening in my areas of business.

Name withheld

ETF education

Does Eureka Report have any recent research / recommendations on Australian exchange-traded funds? Are Australian ETF's allowed to naked short sell, and if so what are the risks? I am thinking of simplifying my portfolio by getting into a small spread of ETF's, but am still fearful of the bad publicity they received a few years ago.

Bob Jones

Editor’s response: David Gilmour recently wrote an article on short-selling that you may find of interest (see: Four short-selling strategies in a volatile market). Dr Doug Turek also wrote a very informative piece on ETFs in the Australian market late last year (see: An all-ETFs pie to fill your portfolio). Naked short-selling is generally banned in Australia, including for Australian-domiciled ETFs. For more information, ASIC has a regulatory guide on short selling, available here.

Seeking out IPO opportunities

I was interested to read Brendon's article on IPOs, Making money from small cap IPOs. It is hard to know about (and sometimes participate in) IPOs and was wondering if it is possible for Eureka Report to have a contributor talk about current IPOs, their details and commentary, or at the very least a table featured somewhere (like the takeover action table in Collected Wisdom) containing key information on IPOs would be beneficial.

Name withheld

Editor’s response: Thanks for your letter. We endeavour to keep our members up to date on market developments, including IPOs. The addition of our Eureka Live Markets section to the site means members can get market updates on IPOs as they happen, alongside our relevant commentaries.

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