Letters of the Week

Eureka Report's joint venture with Clime, gold out of favour, and ANZ hybrid concerns.

Clime Asset Management

Thank you for the good news regarding a joint venture between Eureka Report and Clime Asset Management. I was on the cusp of subscribing to Clime because I generally need more specific guidance on investing than the journalistic nature Eureka Report offers.

Now I will be happy to wait for Clime to become part of the Eureka Report picture. Will your members have access to the full service offered by Clime? It looks to be an excellent tool to help with stock choices.

Helen Seward

Editor’s response: Thank you for the positive feedback. We are very excited to be entering into a joint venture with Clime Asset Management to offer stock valuation and research solutions. We will be able to provide more information on the finer details in the coming weeks.

Gold out of favour

Beadell Resources’ share price has plummeted recently from around $1.05 to $0.80. I believe other gold producers have shown similar declines. Last week Eureka Report published a couple of articles about gold (Gold meltdown comes with a currency chaser, February 25 and Price fall a golden opportunity, February 25), but they didn't really explain the underlying problems facing the gold sector.

John Clark

Editor’s response: Tim Treadgold recently wrote on the headwinds facing gold and goldmining companies and why investors are starting to turn away from the yellow metal. (Gold warning bells chime, December 10.)

ANZ hybrids

Regarding Philip Bayley’s article, ANZ sets worrying hybrids precedent, February 25, I believe that Australia and New Zealand Bank originally marketed this issue as a 10-year issue with no intention to call after five years.

The article continues to suggest that holders of CWNHA should be concerned the issue's step-up only kicks in after 25 years. But the existing coupon before any step-up is already at 5.00% over the 90 day bank bill, providing a pretty good return of just under 8%. I think many people would be pleased with an 8% yield versus cash at 4% or less.

Name withheld

Philip’s response:

The article is about investors’ expectations, which are shaped by the way in which these note issues are sold. In the case of the ANZ hybrids in New Zealand, the article acknowledges ANZ’s statement that it did not intend to call the bonds on the first call date, but some investors clearly had different expectations and so were disappointed.

The same point is made in the case of the CWNHA notes and others mentioned. While all of these notes have early call dates, there is no economic incentive for the issuers to call the bonds before a coupon step-up becomes effective. Investors who are expecting the notes to be called on the first call date – and may have been told that this would happen – could be disappointed, just like the holders of the ANZ hybrid notes in New Zealand.

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