MH: The stock market no longer primarily provides money for capital investment. It has become a vehicle for bondholders and corporate raiders to borrow from banks and private funds to buy corporate stockholders, make the companies private, downsize them, break them up or strip their assets, and borrow more to buy back their stocks to create asset-price gains without increasing the economy’s tangible real asset base. So the financial sector, except for a brief period in the late 19th century, especially in Germany, has rarely financed productive growth. Financial engineering has replaced industrial engineering, just as in Antiquity creditors were asset strippers.
Monday, 8 April 2019
Financial Engineering
Michael Hudson gives an insight into how modern financial markets work. It perhaps explains why wind farms in Ireland are being continuously bought and sold on.
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Has the constant buying and selling in some cases got more to do with purchasers 'initially' rushing in, being perhaps part financially illiterate, failing to carry out due diligence and then realising soon afterwards that it might be a good idea to quickly offload their recent purchase and if they can offload it without a loss or at a profit then all the better?! Has anyone tabulated the rate at which wind farms are being constantly 'flipped'/bought and sold in Ireland and which ones have remained in the one ownership from the outset from the seeking of planning permission onwards or have remained in the one ownership for relatively long periods of time? Has anyone been tracking the purchase price of all the permitted/installed wind farms in Ireland?
ReplyDeleteState companies, excluding Coillte, tend to not to sell on their wind farms.The state wind farm we have most info. on is Gort Wind Farm.In 2017 is lost over €10m .Most of its operational life to date it is loss making.The wind turbines it uses last as little as 5 years in Denmark. On average they last about 10 years.Given that Gort / Derrybrien has been operating 14+ years. You would expect it to be decommissioned by now . Given the Danish experience. In 2017 it still had €19+m in asset valuations. Having written down asset valuations by €9+m.The wind turbines have probably got a residual/current value close to scrap value.All wind farms accounts show similar traits as to shown in the Gort/ Derrybrien accounts.Very little trading profits with retained high asset valuations. Which are going to have to be written down leading to significant losses.The trick in the wind business is to sell on before the discrepancy between paper asset valuations and the real in the field asset valuations are noticed.Otherwise you loose your shirt by having to write down paper asset valuations to represent reality.Hopefully your buyer can have that pleasure.
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