South Canterbury Finance Limited

[minimoke]

I am deeply outraged by the injustice that Allan Hubbard has had to endure. This sorry saga is not over yet, for him.

What about some outrage for the locals who put their money into Aorangi and HWM only to find the fund manager making up cash and investment's that don't exist and putting their hard earned money into high risk areas. They didn't know where the money was going - AH didn't issue a prospectus. They just trusted AH. And on the basis of the two Stat Man reports that trust was misplaced. Whether than amounts to fraud on the part of AH remains to be seen - but we'll hear from the SFO in due course. The sorry sage isn't over for the locals who may now have some hope off getting some of their cash back. Without the Stat man it appears their cash was being used to prop up AH's own personal interests in unsecured depreciating investments in illiquid markets. Tahts a sorry state!

[Arbitrage]

Like all cultisits, the followers of AH seem to be blind to what has happened. As a taxpayer I am looking down the barrel of carrying $250 million of toxic debt. Not happy. If AH investment is rational then perhaps we need a new definition of the word.

[minimoke]

I
I am happy to be known as a "Hubbard cultist". I believe this "cult" does exist. It is the "cult" of making money through rational investment.

I wouldn't have had you pegged as an H cultist - I thought you were more interested in making money out of the SCFHA's - and good luck to you if you do. But I don't see teh "cultists" as those wanting to make money through rational investment.

They appear to actually be irrational. Rather than relying on prospectus they rely on personality. Rather than being prepared to operate in the "real world" where if you want to borrow money you pay for the privilege, they live in a world where a philanthropic chap gives you other peoples money for free. Rational investment surely means taking an interest in where your money is going and what it is doing and what the associated risks are relative to the return - I don't see any of that amongst the "Cultists".

[Arbitrage]

Yes MM you are right and I think as everything comes out in the wash up over the next few weeks the "rationality" is going to get worse. I hope you paid some tax this year to help me pay for the "investments" made by/to AH and his mates.

[minimoke]

I hope you paid some tax this year to help me pay for the "investments" made by/to AH and his mates.

Its why I'm working this weekend. I'd have preferred my tax money to go to some solo mum breeding her 7th child or some meth cooker on a Sickness benefit - at least they put some thought and effort into their enterprise.

[Enumerate]

I wouldn't have had you pegged as an H cultist - I thought you were more interested in making money out of the SCFHA's - and good luck to you if you do. But I don't see teh "cultists" as those wanting to make money through rational investment.

The term "Hubbard Cultist" was not mine. People on the thread imagined that it was appropriate - I simply provided a coherent definition - someone pursuing a rational investment strategy.

It seems that you have some other definition in mind. By this definition - I am not a "Hubbard Cultist". You will have to take this up with Roger and Balance (et al) - they seem convinced of the opposite view.

Balance does seem to have some further meteorological and astronomical "insights". I am not sure what it all means but I have a feeling that sometime tomorrow all further speculation will be unnecessary - we have have the facts of the situation to consider.

[minimoke]

I am not sure what it all means but I have a feeling that sometime tomorrow all further speculation will be unnecessary - we have have the facts of the situation to consider.

I suspect you are right. Remember we were also promised YE accounts by the end of August so it should all become crystal clear in the next day or so.

[Enumerate]

If the government does decide to put in a few hundred million to save SCF, consider the following:

1) They made close to a $billion out of fees to the Wholesale and Retail guarantee schemes. Most of this came from the Aussie Banks. If the government spends part of this windfall to cover off much greater potential liabilities, to SCF debenture holders in the event of SCF default, this would seem to be a rational financial decision.

2) Introducing new capital to SCF effectively underwrites the government's retail guarantee risk. It is rational, financially, to pay something to have your risk exposure eliminated.

3) It is possible that a SCF deal (ensuring SCF survival) could be a significant boost to South Island economic development. An effective "Hubbard succession" for a newly focused SCF, Dairy, Helicopters and Scales - would be the seed of development for major industry sectors in the South Island. New money and new skills could see a step change upwards in South Island business activity.

4) The Aussie Banks create demand for NZ$ (through the carry trade) and yet have no focus on boosting the NZ productive export sector. SCF, on the other hand, boosts the NZ productive export sector and provides domestic NZ investors with better returns than the Aussie Banks - without generating an upward bias on the exchange rate. A bigger SCF contributes to more productive export companies and a lower/stable exchange rate. More Aussie Banks - more property inflation and higher/unstable exchange rates.

On the other hand, failure of SCF would be a devastating blow to the South Island economy:

1) The Aussie Banks have no interest in NZ economic development - much less the rural and 2nd tier commercial sectors that SCF serves. The Aussie Banks "sponsor" the residential real estate bubble and make safe profits which they promptly export. A failure of SCF will be a major blow to the engine room of the NZ economy and this void will not be filled by the Aussie Banks. Expect South Island rural and commercial economic development to be set back 20 years if SCF fails - with no short or medium term prospect of recovery.

2) Aggressive liquidation of SCF would see forced sales of South Island farms and commercial assets with no prospect for South Island investors to raise capital to purchase. The South Island would likely become a kind of "economic colony" of Australia and Asia - who have the capital, now, to buy the cheap assets.

3) There would be a step change down for economic activity in the South Island. Hubbard's paternalism has been criticised as non-commercial; stop this activity, there will be suffering; remove this capital on even a commercial basis and there will be devastation.

4) Economic development turned the Amercian South from staunch Democrat to staunch Republican. Economic disintegration in the South Island will turn the South Island red. This will decide the next government.

[fungus pudding]

2) Aggressive liquidation of SCF would see forced sales of South Island farms and commercial assets with no prospect for South Island investors to raise capital to purchase.

Since when has geographic location been the criterion for borrowing?

[Balance]

Since when has geographic location been the criterion for borrowing?

Precisely. It's the rampant speculation and ramping up of land and dairy land prices in particular by the likes of AH, and SCF funding the speculative activity.

Now that comes to an end and it will be good for NZ in the long term.