by Scott Pape - December 29th 2006
Good evening ladies and gentlemen, welcome to the Fogey awards for 2006, the second annual ceremony which celebrates the characters who have added spice to the often all too serious business of investing.
The idea behind the Fogies was, in part, born out of television’s night of nights, the Logies, and the old-fogey legislation for compulsory superannuation, which underpins our industry to the tune of $70 million a day.
Firstly, I’d like to thank those people who have travelled large distances to be here tonight. Especially those who came on a soon to be privately-owned Qantas plane – with the hope you parked your car at Macquarie Bank’s Sydney Airport, then used a Macquarie airport trolley to ferry your luggage to the check-in counter.
Regardless, almost everyone in attendance arrived via one of our splendid private-public partnership toll roads, and it’s those innocent sounding “beep beeps” that have paid for the Moet on your table tonight.
As you entered the ballroom you will have noticed our hard-working investment bankers enthusiastically clipping your tickets. They’re a competitive bunch, but after much deliberation it was decided the lead ticket-clipping consortium would be Macquarie Bank, which this year was forced to divvy up a mere $1.8 billion in salaries – despite the fact that it now controls more Australian assets than Jamie Packer.
Rumours have circulated that at the annual international investment banking dinner dance, several US corporate banks – reportedly poised to dish out $36 billion just in bonuses this year – passed around the hat as a sign of solidarity for their struggling Macquarie mates.
It’s been another wonderful year for the industry, with the market poised to hit new highs – the tea leaves tell us that the magical 6000 mark of the ASX 200 could be broken early next year. Analysts are devilishly predicting the next resistance range is 6666. With superannuation funds on track to deliver a third consecutive year of double-digit returns few people are asking questions – which is partly why we have mustered so much talent for this year’s Fogey awards.
BEST ACTOR
The Fogey for the best actor in 2006 goes to the former chairman of AWB, Trevor Flugge, for his role as the hired gun for wheat growers in Iraq.
He entertained us all with tales of daring adventure, playing to a tee the lead man with a devil-may-care attitude, seemingly content to break all the rules to get the job done.
While Flugge showed he’s an old pro at promotion (the publicity shots of him shirtless, pointing a pistol at the camera were a big hit), less impressive was the acting of senior politicians who were hauled before the Cole inquiry. One critic suggested that Foreign Minister Alexander Downer had only two lines for his whole performance – “I don’t know” and “I can’t recall”.
MOST UNCONVINCING ACTOR
The Fogey for the most unconvincing actor in a (drawn out) drama series goes to former funnyman Steve Vizard.
This act had all the hallmarks of a gripping yarn: wealth, ego, celebrity, theft, incrimination and multiple attempts at suicide. Unfortunately, the chief critic, Justice Hartley Hanson found that Vizard’s acting was seriously flawed.
Justice Hanson likened the seasoned celebrity’s performance of perverting the truth to drawing teeth – “he went from the firm and certain to being defensive and forgetful and even engaged in false denial when it did not suit the case”.
COMEBACK OF THE YEAR
Comeback of the year goes to Telstra. Critics suggested that the plot bore resemblances to a Rocky movie – an immigrant underdog who took on the big boys and won.
The first instalment was a smash hit. The second was a box office disaster, while the third redeemed our faith. Market watchers have suggested that much like Rocky, there will be many more fights, and many instalments offered to the public in the coming years.
BEST NEW TALENT
There was a dead heat for the Fogey for best new talent – shared equally by new Reserve Bank chairman Glenn Stevens and his US counterpart Ben Bernanke.
Both men were heavily scrutinised for their performance – their every line dissected for hidden meaning. Given the pressure of the position, both stamped their authority on the economic stage by lifting interest rates, causing an inevitable backlash from indebted consumers, who in Australia now owe more than a trillion dollars (give or take a few million).
BEST COMEDY
The best comedy Fogey goes to Norm Carey of Westpoint. The developer ran a property Ponzi scheme with the help of some fee-hungry financial planners. To encourage investors to part with their hard-earned and get their 12 per cent kickbacks, the financial planners pulled out all stops.
Statements such as “you can’t go wrong with bricks and mortar” together with the promises of high returns did the trick. Well, along with calling the investment “mezzanine financing”, which is another word for “unsecured” – although obviously a lot less palatable to a retiree putting in his life savings.
While there is nothing funny about 4000 people losing a combined $320 million, it was the ironies of Carey’s situation that produced some of the biggest laughs this year. Case in point, throughout the saga he lived in what has been described as “Perth’s finest apartment” while many of his investors lost their more humble abodes.
Despite instigating one of the largest corporate collapses this year, Carey still rates himself as a smart businessman, so much so that he started another company, Ferntree Financial Services, to ensure that those people who missed out on losing their money with him still had an opportunity to do so, by cold calling victims a la Westpoint. An illustration of his loose grasp of reality was his claim that it was the corporate regulator ASIC, whose job it is to protect consumers, that was to blame for Westpoint’s collapse.
CREATIVE DIRECTION
The Fogey for “I wish I hadn’t paid 12 bucks to watch this when I could have seen it on TV for free” goes to the financial planning industry, which continued to toe the line of trailing commissions through 2006.
Increased disclosure obligations, and even a slap on the wrist from ASIC didn’t deter salesmen from slithering off a slice from the compulsory savings of their clients (which in any other industry would be referred to as kickbacks).
GOLD FOGEY
Last year’s Gold Fogey went to China, which consumes our resources with the same zeal that Imelda Marcos does shoes.
China won the Fogey when the Shanghai composite index was languishing, taking out the title for the world’s worst performing share market. Now it’s in the running for the best performing stock market with the index climbing more than 80 per cent in the past year.
However, that wasn’t enough to take out the top prize two years running. While the transfer of wealth from West to East is an ongoing story, a bigger story this year is the transfer of shareholders’ (future) wealth to private equity partners’ balance sheets.
So, without further ado, it gives me great pleasure to announce the winner of the 2006 Gold Fogey, which goes to the growing phenomenon of private equity, or as the author of The Bull Hunter, Dan Denning calls these raiders of public companies, pirate equity.
Shiver me timbers it’s been a good year to be sailing the high seas of the stock market, hunting for companies to take over.
No company is sacred or too expensive for these pirates – whether it is the flying kangaroo, media assets, taking a tilt at our biggest retailer, or circling our famous amber ale.
The method was formerly known as a leveraged buy-out (LBO), although that all went a little pear shaped late in the ’80s. Yet despite the different names, the purpose – enabling a small group to make telephone-number sized profits in the quickest amount of time – and the weapon of choice, debt, remain the same.
The idea is that investment banks borrow heaps of dough, make a takeover offer for the company that gears it to the eyeballs, delist it, extract value (a politically correct term for slicing the company into little bits and/or outsourcing staff to India), and then selling the company back to the punting public in a few years time, minus a few billion or so in fees for the privilege.
The good thing about equity markets is that they move in cycles from boom to bust. It’s always much more exciting in the boom period, and this year’s Fogies has been helped along by the fact that we are in a boom that’s lasted 15 years.
It’s been a hell of a ride, and while there are doomsayers who question the amount of debt that’s being accumulated in consumer and corporate Australia, we here on the awards panel see it simply as more fodder for next year’s Fogey awards.
Until then we bid you goodbye, and hope that next year you all tread your own path.
Photo: www.flickr.com/photos/funky64/2759767012/
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