Sub Prime Aussie stylee
Despite all the commentators saying that the sub prime debacle was an American issue and our financial institutions were far more conservative that that has turned out to be a load of tosh as one would expect from financial commentators.
Not sure if the news of Opes Prime has filtered through to your side of the pond yet but it is sure rattling things over here.
Opes Prime was a broker to the moneyed set and now it has imploded which just shows that rich people are no more skilled in making money from the financial markets than your average homeless person, they just have more money to lose.
Opes Prime had huge margin positions in tiny speculative stocks. Many company directors had bought their own stock on margin from Opes, and as the market fell they had to stump up more $$ or get sold out.
The only problem was that the liquidity of these speculative stocks was thin and so as the selling began the price plunged and caused more selling.
One client of the firm had a margin position of 140 million dollars and was day trading would you believe. The company hid the margin problems by transferring stock from other peoples accounts to this clients account.
Now the bank that funded Opes, ANZ Bank wanted to get their money back so seized all the stock in the accounts and is now in the process of selling it.
So, if you were a client of Opes, your stock has been taken and sold as the bank had first call on the collapsed company.
They reckon that about 2 billion has gone up in smoke.
Its now coming out that the banks have made many dodgy loans both to companies and mortgage holders, so much for risk management, more like vacant management.
Regards
Neil
