Foreign stocks are becoming increasingly popular among retail investors, for
good reason, as the dollar continues to weaken. After all, if the US dollar
slumps against the Australian dollar, say, then a stock which goes nowhere in
Aussie-dollar terms can still do very well from the point of view of a US investor.
But it’s worth remembering, as the
case of Centro exemplifies this morning, that the key question is not where
a company is located, or what currency its stock is denominated in: the key
question is rather where a company does business. Centro is an Australian company,
but its shares fell 76% today as a result of its US shopping-center liabilities.
Harrison in the WSJ:
Centro Properties — which after an aggressive acquisition spree is the fifth-largest
mall owner in the U.S., where about 65% of its assets are located — said
it will curb its growth plans there and may sell some U.S. assets…
"The conditions being experienced around the world in credit and debt
markets have made it difficult to refinance," Chief Executive Andrew
Scott told reporters in a conference call. The US$80 billion-a-month commercial
mortgage-backed securities market has "effectively closed," Mr.
Mish pulls no punches this morning: "kiss this company goodbye,"
If the CMBS market remains closed, it’s certainly hard to see how Centro can
continue as a going concern: it’s managed to push
off the day of reckoning until February 15 by tapping the expensive bank-debt
market, but after that things look grim. As Jesse
Eisinger says in the latest issue of Portfolio, the CMBS market looks as
though it’s going to get much worse before it gets any better.
(HT: Joel David Parsons)