Just a thought

Hi,

Hopefully we can overcome our procrastination and get more posts on this site. Firstly, let me ask you all to play the ASX Stock Market game. It is time to register and the link has been provided in the previous post.

Anyway, as I am completing my Masters of Applied Finance, I have learnt that there is a private equity investment hypothesis called 'roll up'. Essentially this means that private equity firms buy up a whole lot of one type of business and effectively creates a chain/franchise. I am not going to say that it will definitely happen, but I think that it is foreseeable for this to occur with retail pharmacies.

A roll up is already occurring with a chain of pharmacies under the 'Chemist Warehouse' and 'My Chemist' banners. At the same time, the supermarket giant Woolworths has already set its sights on eventually bringing retail pharmacy into supermarkets. Woolworths and Coles have successfully integrated the liquor business into grocery retailing and are likely to do the same with pharmacies. That is the way of the future. However, it is quite possible that a large private equity player can come in and roll up many pharmacies and create a large chain. The advantages of this would be the buying power attained from a large retailer, standardising of processes to improve efficiency and the synergies which could be attained from sales and target marketing. An exit strategy could be to float a company on the ASX or even transfer ownership of the company to a grocery retailer such as Woolworths.

Anyway, that's my thought for the week. I hope to get some feedback on what some people think. I'm sure people have something to say about how the stock market has been performing and the likes, which is why I elected to try something else.

Enjoy the week.

Man-D

ASX Sharemarket Game

Hi all,

Apologies for the infrequent posting - We have both been extremely busy with work and extracurricular activities.

As promised, we are writing to notify you that the ASX Sharemarket game is now open for registration. To register, please click on the link below:

http://investoreducation.optin.com.au/a?1911636246-44178878.04m.005&serviceCode=SMG1

For those of you who are new to investing, want to test trading strategies, or just want a little fun, we'd implore you to try your hand at the game. It's free, easy to use, and hypothetical - ie, you wont lose any real money.

Given what the market has done in the past few weeks (crappola!), we think the Share Market game is a good stepping stone in becoming a confident and competent investor.

For those of you who do register, please let us know by emailing to mokmand@gmail.com. It would be great to get a Savvy Finance leaderboard going.

Till next time (after we've figured out what to do with the sub prime mortgage market),

BFM

ASX Sharemarket Game Update ... Nearly open

Hi All,

We have just been notified that registration for the ASX Sharemarket game will open on August 14th, 2007, and will close on or before September 14th. Be quick, as places are strictly limited. We will post a reminder email closer to the day.

BFM

Water shortages ...

Hi all,

As most of you know, the eastern states of Australia are undergoing a water crisis. Each and everyone of us have been affected in an adverse way. State Governments have put their stamp on the situation, with elaborate advertising and education campaigns. To me, it's a little bit of a knee jerk reaction. Why wait till a crisis to implement sensible measures to conserve water? (I think Man-D may disagree, but he's too busy studying to take notice). Anyway, no longer are we allowed to use a hose to wash our cars, or leave sprinklers on during the middle of the day. What next? 30 second showers? Now that would definitely be a negative externality. If Bill didn't smell enough, think about what he'd smell like without showers!

The water crisis situation is not bad. It's bloody bad. As of today, the catchment levels for each of the Eastern States is as follows:

• NSW - 37.6% (http://www.sca.nsw.gov.au/)
• QLD - 18.87% (http://www.qwc.qld.gov.au/) (fark!)
• VIC - 29.2% (http://www.melbournewater.com.au/content/water/water_storages/water_storages.asp?bhcp=1)

Ok, so basically if we don't curb our water usage, we're all stuffed. True. But, is there an opportunity here? How can we turn this situation into an advantageous one?

Well, I was having a conversation with a friend, who said that as a result of this water shortage situation, there are numerous investment opportunities. My instant reaction, was "no way", but on deeper thought, there is indeed a number of advantageous opportunities, which I will try to coerce from our reader's brains.

A while back, I subscribed to the snowy hydro power plant IPO. Anyway, thanks to the NSW Government, for some reason or another (I think it was something like keeping it Aussie), the float did not proceed and I did not depart with my hard earned big ones. Phew! Snowy Hydro depends on water to generate a large proportion of its output, but it does not account for a large proportion of NSW's electricity grid. It just takes the strain off during peak periods - think Summer when everyone has their air conditioners on. A With water becoming more and more scarce, Snowy's water supply may be cut, placing larger strains on the power grid.

Snowy Hydro is not the only power station that is dependent upon water for its livelihood. Coal power stations (and nuclear) consume exorbitant amounts of water during the electricity generation process, of which water is mainly used to cool.

We've established that water supplies are short (supply and demand!), hydro power stations may be in trouble, and other power stations depend on water. So what? If you haven't figured it out yet, I'm not going to tell you. But here is a hint - think about the electricity value chain (yes, I am a consultant), and think about what the opportunities are from end to end. To help, the value chain is something like so:

• Obtain Energy Source - think coal, gas, the Sun, water, uranium etc
• Convert Energy Source to Electricity - ie power stations (think "The Simpsons")
• Distribute Energy - think those power lines over your head - who owns them? Distribution companies!
• Use Energy - Tom, Dick and Harry playing Wii or PS3
  

Given this information, what opportunities can people identify and why? Hopefully, we'll get some meaningful discussion - I think the topic is quite relevant!

BFM

ASX Sharemarket Game - Update

Hi all,

We do hope you're all enjoying the Easter break. A time to celebrate, relax and indulge in a little chocolate! As some of you are well aware, the ASX Sharemarket Game will not be in operation till the second half of this year. I guess the IT firm (or department) made some silly promises it could not keep! Again, once further details have been released, we will keep you posted.

On another note, what a move by Wesfarmers! Who would have thought? Effectively, Wesfarmers have put a floor on the Coles price, which, I'm suspecting the international team are most displeased about!

But more on this next time ...

BFM

On pause ...

The ASX share market game (ASX SMG) that is - NOT the market itself (it stops for nothing, except public holidays, terrorist attacks, and major disasters). Just to let all our readers out there know (if you don't already), the ASX SMG was meant to commence this Thursday, 29th March. However, due to inadequate testing (dunno which IT firm they got in to implement the game) the starting date of the game has been postponed. Thanks to all our readers who have registered with us for our mini league. Once we know when the game begins, we will write another post. Till then, happy valuations ...

BFM

Market Shits Itself: Everyone Invited to Play

Hello everyone,

I must apologise that the last post on this site toook so long to come out. It was in the works for a while, but was just never published. Nevertheless, the first thing I'm going to post here is the following link:

https://www.asxsmg.com.au/join.public.php

This is the link to the ASX sharemarket game. Essentially, the way the game works is that you are given a hypothetical $50,000 and you have to invest it in the Australian stock market any way you see fit. The game runs from 29th March til 5th July, 2007. Registration is open now and I'd like as many of our readers to play as possible and just have a bit of fun. Every week I'll get our players to submit their portfolio values (not their composition) and then we'll have a little chart just to see our progress. After you register, please drop us an e-mail to mokmand@gmail.com so that we can add you to the spreasheet. Please use a psuedonym if you are not too comfortable with using your real name (please also provide us with the username you use to register into the game).

Now, onto a bit of news. Last week on Wednesday the market took a huge dive and wiped off many dollars of many of our portfolios. Today, the market has done the same thing and there are those of us who are hundreds, thousands, tens of thousands or more poorer. I must admit it has bit a little upsetting to people like myself who have seen some of the wonderful gains over the years just disappear. My only consolation is that in the long-run I'm still to benefit. Nevertheless, my belief is that the market will start to fall - of which i could certainly be wrong. My next Savvyfinance post will discuss this statement deeper and look for some alternative strategies.

In any case, I would like as many people as possible to particpate in the ASX share market game. If I am right and the market to continues to fall, we can see a real test of skill - trying to pick stocks which rise when everything seems to be falling. It is a little more fun than just trying to pick stocks which rise more than others when all stocks are rising in the first place. Anyway, I hope that you guys register and drop us an e-mail.

The link once again is:

https://www.asxsmg.com.au/join.public.php

Man-D


Tip: Unless you know something that no one else knows, you can't guarantee a win in any game - it is the same with the stock market.