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  1. #11
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    Fair comment, Roger.

    It only makes sense once a decision is made in favour of investing in ANZ over, say, HNZ. A Kiwi investor is unlikely to get much benefit from imputation/franking from ANZ; the ANZ shareprice is pretty much at an all-time high; current dividend yield is around 4.5% and likely capital requirement constraints will limit future dividend increases for a few years at least.

    I hope your contact is investing in the context of his/her $2m-$3m diversified portfolio!
    Last edited by macduffy; 13-03-2015 at 12:17 PM.

  2. #12
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    I looked into these while taking an interest in perpetual hybrids recently...

    I was reading up on these notes and the outlier risks to purchaser were horrible. I've read that these are referred to as loss absorbing instruments i.e. the investors absorb the loss for the issuer if things go wrong. This is one of the reasons it can be counted as Tier 1 capital these days, because ANZ don't have to pay the money back in almost any situation (non-cumulative, optional payment, share conversion whenever they want etc etc).

    But the good thing I found is on page 18 and 19 of the investment statement. It has a table which compares the notes to the ANZ Perpetual Notes which is what I was originally interested in. The Perpetual notes rank properly, and their list of features is excellent. The table makes it quite obvious how much better they are. This made me more convinced that the perpetuals are the way to go.

    I still think there is a place for these notes, and I doubt ANZ will go south any day soon, but not a giant allocation in the portfolio.

    GS

  3. #13
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    I've applied for a few. I understand the risks of Tier 1 & 2 capital-part of the fall-out of the GFC. If ANZ gets into enough trouble that I won't be repaid then I doubt if many of my other investments will be looking too healthy anyway....
    I have bonds/shares/property, so just a bit of diversification.

  4. #14
    Advanced Member BIRMANBOY's Avatar
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    I have placed an order too..feeling optimistic about ANZ and after 30 years of dealings they have never let me down yet. However just a few implements out of the family silver drawer as too much in one place just makes issuers complacent.
    www.dividendyield.co.nz
    Conservative Investing and dividend producers...get rich slowly!
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  5. #15
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    Ive got some as well, Its getting harder to find good rates of interest.

    Been told BNZ have a tier 2 offering soon.

  6. #16
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    Quote Originally Posted by mcdongle View Post
    Been told BNZ have a tier 2 offering soon.
    Yes, I'll be looking at that when it comes out too.

  7. #17
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    I've have been thinking about this one. Talked to ANZ and they offered me a 5 year fixed mortgage at 4.99% so am thinking of taking a couple of hundie to invest in this. Small risk and easy money in my view !

    Quote Originally Posted by BIRMANBOY View Post
    I have placed an order too..feeling optimistic about ANZ and after 30 years of dealings they have never let me down yet. However just a few implements out of the family silver drawer as too much in one place just makes issuers complacent.

  8. #18
    Advanced Member BIRMANBOY's Avatar
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    Personally I would never borrow to invest but I'm an old fuddy duddy and may well be an idiot.....a lot of differing views on this idea in thread on "investment strategies...folly or fortitude. Bottom line is we are all responsible for our own decisions. I am investing in these because I had sold down some of my other bonds since I thought interest rates may have been going up. I guess as long as you are not sinking all of your trust in one product its fine but a wide spread of investments always seemed like a good idea to me.
    Quote Originally Posted by iceman View Post
    I've have been thinking about this one. Talked to ANZ and they offered me a 5 year fixed mortgage at 4.99% so am thinking of taking a couple of hundie to invest in this. Small risk and easy money in my view !
    www.dividendyield.co.nz
    Conservative Investing and dividend producers...get rich slowly!
    https://www.facebook.com/dividendyieldnz

  9. #19
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    I am like you BB, have never borrowed to invest other than in rental properties. Probably won't do it this time either but just thought it was interesting that ANZ offered to lend me money at 4.99% to invest with them at 7.20%

    Quote Originally Posted by BIRMANBOY View Post
    Personally I would never borrow to invest but I'm an old fuddy duddy and may well be an idiot.....a lot of differing views on this idea in thread on "investment strategies...folly or fortitude. Bottom line is we are all responsible for our own decisions. I am investing in these because I had sold down some of my other bonds since I thought interest rates may have been going up. I guess as long as you are not sinking all of your trust in one product its fine but a wide spread of investments always seemed like a good idea to me.

  10. #20
    ShareTrader Legend Beagle's Avatar
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    Quote Originally Posted by iceman View Post
    I am like you BB, have never borrowed to invest other than in rental properties. Probably won't do it this time either but just thought it was interesting that ANZ offered to lend me money at 4.99% to invest with them at 7.20%
    I can see why this would be a perplexing situation for many and for others it would seem like easy money, which on the face of it, it is.
    Let's ramp it up to illustrate my points better. Suppose you're debt free and have a lovely home in Nelson worth say $700,000 and the bank offered to lend you $500,000 to invest in these Basil 3 capital compliant loss absorbing deeply subordinated unsecured financial instruments. Suppose also you're in a good paying job and / or business and all is well for the average Joe Bloggs. Joe and his Mrs think this is the easiest 2.2% return they'll ever make and will earn $11,000 before tax for nothing right ? WRONG.

    1. You are trading the security of your debt free family home for "a risk" to make that $11,000 per annum before tax, $7,370 per annum after 33% tax.
    2. You are moving from a completely risk free, (assuming you're living in a part of Nelson that doesn't flood) totally secure position in your home which provides long term security for you, your wife and your children to a psotion where you're exposing them to risk.

    So what's the risks ?

    1. Debt servicing Risk. Well ANZ in certain circumstances don't have to pay interest on these and its non cumulating and they wouldn't if there was a serious "event". You however would still be required to pay your interest at $25,000 per annum and while this probably wouldn't greatly affect you it would smash many families budget to bits.

    2. Capital Risk. They're loss absorbing so in the event of a crisis at any time over the entire life of this financial instrument, (read GFC Mk2), if in the Reserve bank of Australia's opinion it was necessary for the bank to give its shareholders "a haircut" you could see a substantial portion of your investment obliterated but of course you'd still be left holding the baby on your full $500,000 mortgage. If you got a 40% haircut, ($200k of your $500K gone, it would make the circa $7.5K per annum after tax return, look a bit silly wouldn't it !!

    Now I know you're a bright and likeable guy and have your head screwed on well and truly and have a range of other quality investments and wouldn't be so silly as to do this to a level of half a mil so the above is purely for illustrative purposes for others to understand the risks, fully.

    There's no free lunches in the investment world even when it appears there are !!

    Now on the other hand if one were to say, yes there's risk here (as in any capital investment), but lets borrow that $200K and invest in more HNZ shares which will give better dividends and in all likelyhood dividend growth each yearand capital appreciation I think there's a far better case to be made for that sort of investment being better on a risk / reward basis, e.g. your investment could easily double (as you know it does with that company), in value in 5 years and you're being pretty well compensated for the risk involved.

    Disc This poster thought he was clever and decided to partake of what appeared to be a free lunch and did what you're proposing to do on a fixed interest product prior to the GFC and got his fingers burned...once bitten twice shy !! My hair is greyer than yours mate so I just thought I'd share some of that hard learned wisdom.
    Last edited by Beagle; 21-03-2015 at 11:30 AM.

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