Posted by: graemebird | May 25, 2009

The Effect Of Our New Share Purchase Plan Regulation In General.

IMPORTANT UPDATE PROVING MY POINT. LOOK TO THE BOTTOM.
Brought to the front again because of further stunning news. Perhaps undermining the point I was making. See again below. I’m telling you straight. Minemakers is a great company and will be way too cheap anytime soon.

CALIPH BARRY I (THE USURPER) GUARANTEES THIS VALUE INVESTMENT.

CALIPH BARRY I (THE USURPER) GUARANTEES THIS VALUE INVESTMENT.

I don’t know when this regulation came in. But there are some things we can say about the general effect of this regulation on the shares of small, cash-poor companies.

It is supposed to be a way of treating the long-term shareholder well. And in an egalitarian way. Since it gives you discounted shares in parcels of 5000AUD or 10 000AUD. That is to say that an existing shareholder who has maybe 1 million dollars in shares already, does not get to have greater access to discounted shares.

The net effect is that a buy and hold strategy cannot work for this type of share. Because the share purchase plan, under this scenario, will not favour the long-term true believers in the share. Rather it will redistribute ownership to those who have previously owned few shares and instead who buy just enough to take full advantage of the share purchase plan.

The reason for this is two-fold. As in normal new share issues the equity is diluted. But previously it may often have been diluted in such a way that current large-shareholders could maintain their current share if they wanted to. The other thing about this share purchase plan is it creates a MASSIVE OVERSOLD POSITION FOR THE SHARES.

The phrases OVERSOLD and OVERBOUGHT are words used not so much by the value investors. But rather by the trends analysts and chartists. The shares are massively overbought thanks to these regulations. Because putting a 5000 AUD or a 10000 AUD cap on the amount of discounted shares you can buy throws the share issue open to the widest possible public. Everyone who had ever thought of buying the shares and can afford to buy them will buy them at this point. Thereafter there will be heaps of people wanting to sell at not too much above the discounted price. But there will be no-one willing to buy. From a value point of view the shares are now worth less than before as well. Since the equity has been diluted.

So we have a clear view of what ought to happen next. The market will turn bearish for these shares all at once. The market price will fall very close to the discounted price. Or even below it.

But from that ultimate of oversold positions, if it is indeed a good company, with a good future, then we can expect a very quick runup in the price on good news, once a few months have passed, enough for this overbought situation to be cleared.

Remember that here we talk only of good undervalued cash-poor companies that are selling on a massive discount. This is what happened with Galaxy. Galaxy had massive deposits of Lithium-precursor. And its price/book value was ridiculously low. So if you had faith in both the Lithium batteries future and in Galaxies management you would have to know that it was a good undervalued company.

So after their share-issue, despite the company presumably being underpriced, the shares were diluted and oversold. Hence the market price had to drift slowly down near the discounted price. And then stay there for awhile. But then a few months later, when Ignatius Tan announced that they’d sussed out a plan for a Chinese site to process all their gear the shares suddenly bounced up to almost a double of what they were. I sold mine about half the way up because I was sick of all my small company shares being IN-THE-FREEZER as it were. I knew I wasn’t going to actually lose money on any of them. But they were dead.

Well anyhow part of the reason why they were dead I think is these share purchase regulations. Not that they are bad regulations as regulations go by the way. But it does mean you cannot really emulate Warren Buffet with this type of shares.

Instead you want to have done your homework but not necessarily have bought many shares. Then when they announce their share purchase plan thats when you really want in, in a more substantial way.

And you ought to take advantage of that plan, or better still if I’m right about the logic of the effects of this, wait a couple of months after the SPP and buy in then, when you think the market has absorbed the overbought situation. Thats probably the better plan if you get nervous thinking you’ve put your cash in cold storage.

Probably if you are in a dreadful hurry to get rich and you want to trade in a pretty active way, you would buy in a couple of months after the share purchase plan was over.

Now I’m not recommending you take advantage of the Metal Storm plan on a VALUE INVESTING BASIS. I’m saying you ought to do so on a self-preservation and patriotic basis. Because there is no question whatsoever that this is stunning military technology and keeping this company in Brisbane ought to make you sleep better at nights.

But its not a value investing buy. Since while this technology is a fundamental leap ahead for the military (at least once its further developed) this does not guarantee that the company itself will be a success. Only that the technology will be a success.

But if there is a good time to buy then what I’ve told you about this share purchase situation, the best time would be to buy into the share purchase plan itself. Or to buy the shares a couple of months later.

If the company is indeed fated to survive and prosper you ought to see the cheapest prices during the SPP or as the market price drifts down during the following month or two. The faster money would probably go for the later buy. Thats not what I’m recommending for MST simply because this is no share tip but rather a plea for people to think patriotically about matters.

If the company is to survive and get major clients thereafter then you ought to see a rally in the shares, on good news, within a few months of NEXT MONTHS (ie June 2009) SPP. So buy in now. Or buy in July or August. There is a good chance you will do pretty well from it.

But this is no stock tip as such. Its too hard to value this company. So I have no way of telling you whether its under-priced or not.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

WELL WHAT WOULD BE A GOOD VALUE INVESTMENT TO BUY RIGHT NOW?

You want a company that is already making a small profit but that is on the way to making a large one. That way they won’t have to have an SPP and dilute their stock in the above way.

You want a company that mines preferably gold and silver. Since Barry Hussein Adolph Barrak Soetoro Che Obama is determined to destroy the USD, so that even if you make a mistake this idiot traitor will bail your ass out.

You want a company that can pull out ounces of gold and silver more cheaply then the other companies. So that when there is rampant inflation they can still pull the gold out at a massive markup.

Now I could give you a few companies that fit that description. But I’m not allowed to. However these people here can help you out for an absolute certain payback if you can wait until the USD is truly wrecked (less than three years for sure) And you should do well out of them. Because that fake-ass usurper President is guaranteeing your investment.

http://goldnerds.com.au/
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

I’m more sure then ever that I have found the reason why the ethical-shares I had chosen were “IN THE FREEZER” as it were. Its not to be ruled out that broker-share-pyramiding isn’t playing a part in this. But the thing is that these are cash-hungry small companies, even though I’ve gone out of my way to choose undervalued cash-hungry small companies.

And as if to prove my point one of the investments I would suggest is the most ethical of all just announced a share-purchase plan. Its now Thursday May 28th at about a quarter past noontime.

About 23 hours ago Minemakers ….. ASX:MAK announced a share purchase plan. Their shares immediately tanked.

http://www.google.com/finance?q=ASX:MAK

So we can be sure that the effect of these regulations (not wholly bad regulations as far as these things go) has transferred the wealth from the stay-and-hold crowd to those who get in on the discounted shares in the share purchase plan AND THE FAST MONEY FOR THIS TYPE OF SHARE WILL GO TO THOSE GUYS WHO BUY IN AT A LOW A LITTLE BIT AFTER THAT.

No doubt when people get wind of this the response will evolve. But like all regulations that are not specifically clarifying property titles, they wind up handing a bit of a racket to the already with-it and wealthy.

Minemakers is a particularly ethical investment but I don’t want anyone to get burned on the basis of my recommendation so thats why I’m telling you what I’ve sussed out about how this small-cap situation has evolved since I last lashed out to solve a few problems.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

Well other factors seem to have gone into overide status unless the general truth of this thread is wrong or only partly right. Minemakers was a fantastic company. Which is why I bought into it in the first place. And it quickly recovered the news of the share purchase plan and soared up above 70cents in early June. Of course its worth much much more than that or I wouldn’t have bought it in the first place.

This will be the case with all the shares I buy other than perhaps metal storm. The fellow I sell to is likely to make more money then me out of the shares. Since it is my intention to find them super-cheap and sell them still very very cheap. And try and make up in the humblest of ways, for the debauch our horrid fiat fractional-reserve monetary system does to our capital markets.

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Responses

  1. On another topic… I have great faith in this fellows views on intelligence matters:

    http://www.booktv.org/watch.aspx?ProgramId=ID-10074

  2. Look at this idiot Regulator-Reynolds. He STILL cannot get his head around bank-cash-pyramiding. Either that or he is willing to lie about it.

    “Terje,
    Correct – but I would express it not as “deposit money” but as “a financial liability called a deposit” to overcome the confusion that normally arises when you use the term “money”.
    To rephrase: a bank can create a financial liability called a deposit without anybody saving a thing by simple book entry, while recognising an asset called a “loan”. However, they cannot actually make good on any calls on that deposit except by having the cash on hand – i.e. because someone has either deposited or invested the funds. That means that a bank cannot affect the actual transactions occurring in the community in any way until someone has chosen to save or invest in the bank.
    I could agree to lend a mate $1bn at any time I want if he agrees to lend me $1bn similtaneously. That does not make me (or him) any richer at all – nor did either of us create “money”.”

    Reynolds you are not in a position to rewrite modern monetary theory. You are a dumb shit and intellectually dishonest with it.

    Imagine SOON so unfamiliar with the material that he would defer to Reynolds, who is a dummy and knows nothing.

    Reynolds in denial of the banking systems ability to pyramid on top of any given amount of cash.

  3. You have cash-money. And then you have bank-ponzi-money. It ought not be so hard to understand this. And the dumb cunt actually reckons the existence of all this bank-ponzi money has no effect. Which is idiotic since this is the very money that we spend daily.

  4. “p.p.s. I have next to no support for the idea that we needed fiscal stimulus via spending beyond the automatic stabilisers.”

    Come on Terje. Get your shit together. There is no such thing as an automatic stabiliser since fiscal measures don’t affect aggregate demand. They only shift it around.

    So its a monetary theory fail for Terje as well as a fiscal policy theory fail for Terje.

  5. the deltoid dwarf

    http://web.overland.org.au/?p=1315

  6. Look at the audience. What a bunch of nutcases. Any conservative would have stood out like a sore thumb. Did you sneak in there? It would have been just a shitrain of lies and defamation.

  7. Nah, didn’t have time to waste

  8. 3 leftists. No scientists. Some debate. What a bunch of idiots.

  9. Graeme, have you ever considered supporting the National Party? I am just reading a speech by Barnaby Joyce and it seems to me the closest thing in the current political spectrum to your views. Of course he is very forthright in opposing all forms of a carbon price. But he also manages to combine respect for small business, economic liberty, and the national interest.

  10. Great comments. Don’t be afraid to hang out Mitchell. But first the nasty stuff:
    >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
    MITCHELL BETRAYING AUSTRALIA ON OTHER SITES.

    Mitchell you fuckwit. Don’t be humouring those evil bastards on Prodeo talking as if we have a CO2-problem. I don’t care what sort of hunch or liver-quiver you have going inside you, but you have no right to be putting about a problem for which you have no evidence in support of. Since any warming or cooling that CO2 may produce is so feeble as to sail under the data-radar then any effect, if warming must be GOOD and obviously so.

    Don’t think I’m not watching you you prick because I fucking am.
    >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

    Very Insightful comments about the nationals Mitchell. Do come back since your comments are usually intelligent. My best match is with LDP members 50 and above. The quality of the older guys in the LDP is really quite astonishing. They are some of the best people around. If only they could collar and discipline some of these younger blokes.

    But when talking of parties as a whole I would probably sit better with the Nationals or perhaps even family first. Ones own former youthful libertine attitudes to the contrary notwithstanding these are not attitudes that ought to be pushed when it comes to public policy. Which is serious grown-up stuff.

    And the nationals likely have a lower POST-MODERNIST quotient then pretty much every other party around.

    Plus my agenda would be right up their alley. Since they would mostly escape the sort of high infrastructure-profiteering I’d impose on the big city. Since primary production is a strategic industry and therefore would be near the front of the queue to qualify for total tax exemptions (but an end to any subsidies and eventually any bailouts).

    Plus my tax policy and even land tax reform policy stresses the primacy registered dependents and tax-free threshold. So any family farm not worth mega-millions would find themselves not paying a cent until all the kids decided they wanted to advantage their own thresholds.

    And plus I represent the sort of values of the family farm and the sole trader. The small business with a band of brothers really putting together something glorious, no matter its middling size. The guys who would go out to the Pedirka basin and put together a 10 million dollar coal gassification/synthetic diesel/electtricity generation/Ammonia plant.

    Maybe it would be just five families staking a claim and paying off Central petroleum, and maybe they would practice farming as a sideline.

    So I’m for all that frontier stuff. I’m for licensing almost any law-abiding person for high fire-power weapons with less-then lethal ordnance. But yet making it not impossible to get hold of the lethal stuff too. Although a bit more care might be involved in the latter case.

    I’m for all that stuff that would appeal to the country people who want to build rather than merely grasp real wealth.

  11. Turnbull suppresses the Ergas report

    http://www.smh.com.au/national/libs-sit-on-plan-for-flat-rate-20090601-bszo.html

  12. Turbull. The Humphreys of Canberra politics. A full-blown dummy.

  13. BAHNISCH. MY GOODNESS YOU ARE A DUMMY. YOU REALLY THINK CHERYL KERNOT HAS COME UP WITH SOMETHING SPECIAL HEY? YOU REALLY THINK SHE’S COME UP WITH SOMETHING GOOD.

    I REMEMBER DEFENDING SOCIOLOGY AFTER READING TOM SOWELL. I WAS DEFENDING THE STUDY TO A COUZIE-BRO. HE WAS CALLING IT SILLYOLOGY. BUT I SAID THAT THESE GUYS WERE INDEED IDIOTS NONETHELESS IT IS A VALID AREA OF STUDY AND IT CAN BE DONE RIGHT. SINCE THAT TIME I HAVE NOT BEEN IN A POSITION TO COME OUT ON THE WINNING SIDE OF THAT ARGUMENT. I’M NOT SEEING A GREAT MANY TOM SOWELL TYPES AROUND THE TRAPS.

    YOU ARE A SORT OF ANTI-TOM-SOWELL BAHHNISCH. HE MAY BE ONE OF THE WISEST MEN IN THE WORLD AND YOU ARE AN IDIOT.

  14. Now hang on a minute. If this is you showing up to have a powow, smoke the peace pipe, get me to insult you less, even perhaps wipe the last comment, and perhaps even this one, then I’m listening. But the price is open access to your blog.

    birdsnewworld@mac.com

    You have to distance yourself from this global warming treason after all. And giving me open access may count as an alibi when the backlash comes.

    I’m listening.

    Think about it. Its better than getting horsewhipped in the streets. Posts can be removed. One can bite ones lip. One can pick on other people most of the time.

  15. THE USEFULNESS OF THE VISION IF NOT THE REALITY OF ANARCHO-CAPITALISM:

    To get to a libertarian society in my view would take about 40 years and a lot of hard work. And anarcho-capitalist society would take even more hard work but would be even better if you could get there. But there are a lot of problems to sort out. A lot of problems to do with infrastructural property rights which cannot be freehold. A lot of problems to do with the nature of the pty ltd. Which in my view, in return for having ltd liability, ought to revoke its ability to raise debt.

    As well a corporation must be more fully an expression of freedom of association and the founders intention. And what we have now doesn’t necessarily represent this and if we tried to go in for anarcho-capitalism with the corporate situation we have now its likely to come unstuck.

    I think from a law enforcement point of view the main thing that would make anarcho-capitalism possible would be an agreement that law-enforcement had to be conducted with non-lethal weaponry. In my view anything less than that is going to deteriorate into the blood feud and war-lordism.

    The next thing to get to anarcho-capitalism is that you would have to go there via ubiquitous micro-states. Its very hard to see how we can go with multiple secession in Australia, in the next 50 years whilst China and even Indonesia looms above us. We ought least have a federation with the air and naval power to keep people we don’t want here off the continent. So my view is that we need to give more power to the States and start setting up more areas with effective states rights. Make it very easy for any contiguous area to get States rights and also to perhaps require such people to have a serious ground force happening. To have the power to defend themselves pretty righteously from the ground.

    Even if anarcho-capitalism goes into the too-hard-basket it ought to be a reference point to judge legislation and regulation in my view. We ask is this or that law in conformity with JUSTICE? With NATURAL LAW? With the better and more clearer versions of property rights? And sometimes we have to ask whether this or that practice is in conformity with the idea of profit-making enforcement agencies.

    The concept of freedom of contract is somewhat overrated in some circles. Since under anarcho-capitalism these contracts would have to be enforced at a profit.

    The most important fellow in such an enforcement agency is the fellow who reviewed various contracts, agreeing to enforce them, and indemnify the losing party if the contract is broken.

    Now his job is to make it that the contract just looks after itself. Because if they have to spend money siezing property, fighting off appeals with other enforcement agencies, compensating the loser in a broken contract, and all that gear…. well then such a company cannot run at a profit.

    It is obvious that no such enforcement agency could ever endorse a fractional reserve contract between a bank and a customer. Since such contracts are entirely unenforceable.

    We see here how the VISION of anarcho-capitalism helps us sort out how legislation ought to be even if we never achieve the worthy goal of having a purely voluntary society.

    Chodorov
    2 Jun 09 at 3:25 pm

  16. Your comment is awaiting moderation.
    “This will send the environmentalists crazy:

    Chinese company is thought to have purchased Hummer from GM.

    Let’s all hope the firm does well with that brand.”

    But you still want a carbon tax hey TRIANGULATOR?
    >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

    Its pretty clear that the US government is going to reneg. on its debts to the Chinese Communists. What is the excuse going to be?

    I think that they ought to reneg openly and say that the excuse is that the Chinese communists betrayed Nixon. And now they are getting payback.

    Its clear that the Americans will reneg on the debts they owe Japan. What will the excuse be? Perhaps they ought to continue guaranteeing Japan from a military point of view to cover that one.

    The Russians? Well of course the Americans saved them from utter extinction.

    You can go down the line in this way.

  17. dude
    give Bahnisch a break.

    the guy’s decided to retire from political blogging.

  18. Mr Bird

    That vile picture of the mass murderer FDR has no place on your blog.

  19. Yeah its pretty bad having that FDR, enemy of all humanity on my blog alright. But I await to see what Bahnisch is up to. I don’t think he’s about to fold that hate site Prodeo do you?
    >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

    This is getting embarrassing over at your site Jason when you guys simply won’t listen. Now Sinclair is expressing surprise and people are mindlessly accepting that Rudds economic vandalism saved us from recession.

    Here is my post still on moderation:

    Your comment is awaiting moderation.
    For goodness sakes people. If you rob business-to-business spending and pump up government and consumer spending of course you can artificially avoid a recession. Since a recession is DEFINED according to GDP. It doesn’t mean you haven’t vandalised the economy.

    Rudd vandalised the economy alright. But thats got nothing to do with rigging GDP so that it wouldn’t go negative.

  20. This is going to be so depressing watching the Catallaxians bugger everything up and start wondering if wasting money in debt spending isn’t on the up and up.

    >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

    Your comment is awaiting moderation.
    “Gross fixed capital formation is down, esp private, export and imports are up. To what extent was the GDP number affected by the cash splashes, given that little else had been spent yet? What happens next quarter?”

    Rudd has robbed funds from those areas that would have helped the economy stop to tank. Gross Domestic Product is not the correct metric in this case. How can it be thought that force-feeding consumer spending and government spending represents a good way of having a developing economy?

    Thats ludicrous!!! It ought to be obvious to even the dimmest economist that this ought not be the metric. After all that would mean that taking holidays from production at Christmas and splurging on consumer goods (like we do at Christmas) meant that our production had gone up. Actually business spending and production must collapse in the last few days before Christmas. But GDP must soar. All this says is that economists are stupid for using the wrong metrics.

    It is true that Rudd has maintained consumer spending. That is Rudd vandalising the economy. And artificially avoiding a recession by artificially stopping GDP from falling.

    I don’t suppose any of you are going to actually learn what I’m telling you right?

  21. Your comment is awaiting moderation.
    Net exports would have been affected by Rudds policies. They would have been affected negatively. Rudds policies did increase GDP. Because they increased government spending and consumer spending.

    You ought to conclude that GDP isn’t the right metric for the purpose. But it seems you guys never got that far in school and aren’t likely to let anyone else do so either.
    >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

    Note that Sinclair will be unlikely to pass any of my posts that could actually lead to him learning any economics.

  22. My favourite blues singer, player, songwriter


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