Thanks for your reply. I need to think about the strategy itself a bit. I have a couple of ideas that I will work through and see if they make sense. I like puts because of their properties, especially the limited risk, and leverage. I am aware of some other shorting mechanisms. There are inverse ETFs on the ASX which are funds holding cash and futures against the ASX200 index. There are two that I know of inverse leveraged at 0.9-1.1 and 2-2.75. Another way would be gold to short the AUD. Short selling but this is too risky for my tiny amount of capital. Holding cash and just waiting.
I really like your thought process, you want to replicate "The Great Short"? Instead of thinking about the strategy, I suggest you should analyze your conclusions more thoroughly: Are there indeed a structural issue in Australian housing? Are the banks indeed over stretch? Are there any real risks in those mortgages (e.g., US subprime and reckless MBS).... Make sure you are indeed correct. Also, like the other poster said, timing is critical, too early or too late will not work since you have limited resources whereas the market can stay irrational a lot longer than you may think. Regards,
No time or interest to read the whole prospectus.... So not sure, but if they are... then it would be upon the company to do it... They are callable, again CBA has that right, not the holder. They are in effect worse than stock, since they have no voting rights.. are subordinated, do pay out a decent interest (or dividend if you will) but I'm sure there's a line somewhere in the prospectus that will state that in certain scenarios CBA can opt to not pay interest/dividend. So again... not amazing, maybe when they trade way way down... but not current IMO. They are probably called PEARLS since it's nice and catchy... they could've named them CBA-DOGSHIT... but I doubt that would sell very well...
I'll chime in on this... - structural issues, yes... but too much? Compared with London/NYC/HK/etcetc... no, it's similar... big cities everyone wants to live in are expensive... and they will always be expensive. - overstretched banks, yes... as always the case when there are only a few major ones that do most mortgages... all banks are overstretched when there's a bankrun combined with big drop in housing and defaults - risk in those mortgages, yes... IMO there are lots of investors that shouldn't hold massive property portfolios. There are always stories about how a plumber and teacher hubby/wife, under 30 years old, have a 5-8 mln portfolio... so yes... that's fucked... But, it's not like you can just leave your house keys and walk away debt free in case of default. Also, most housing in Australia is very focussed on the big cities... there just isn't that much sprawl compared to US IMO. And cities usually do fine, especially the ones like Sydney/Melbourne. So in short, there are issues... but I doubt it's going to really hurt. If the market "crashes" 10 or 15%, that's covered by equity (most if not all mortgages have 10-25% equity demanded)... and that's just the gain in the last 2 years...
Actually, read it right before the drive back. Interesting product (AKA, a nice way to f*ck your investors)
Yep... but I'm almost certain every bank world wide has those to sell in some form or another... and other large companies. They've been around.... "One of the oldest examples of a perpetual bond was issued in 1648 by the Dutch water board of Lekdijk Bovendams" (from wiki)