It is getting expensive, but I’m chasing this market lower, spending $35,000 stacking another 58 stocks into the portfolio so far this year, including eight more this morning.

That said, the debt crisis is becoming pretty scary with the US economy now headed quickly into recession due to the confidence-sapping shocks of the past few months.

The Australian sharemarket has now lost more than 13% from its November 1 peak, although the All Ords has retraced much of its early 80 point decline this morning to be only 20 points weaker at midday – a strong performance given Wall Street shed 2% on Friday night.

There’s still no news out of Centro, despite newspaper reports this morning that an update was possible today, including a mooted mega-rights issue which would obviously require a new cornerstone investor and underwriter.

We saw the heavily geared financial engineering stocks as Allco Finance Group, ABC Learning and MFS cop a shellacking on Friday and today we’ve had what looks like a shot gun marriage proposal involving the two Gold Coast financial planning/property groups, MFS and City Pacific.

Some Liberal Party alumni feature on both sides of this one as Andrew Peacock has been grappling with the complexity of MFS since becoming chairman last April and former Liberal Party President and Northern Territory chief minister Shane Stone is on the board of City Pacific.

It was only on Friday that MFS was proposing taking over responsibility of 35 Centro property syndicates, so this latest paper shuffling concept looks a bit like the desperate Telstra-sponsored merger proposal involving Solution 6 and Sausage Software shortly after the 2000 dotcom crash. It came to nothing.

MFS is being advised by UBS which, lo and behold, just happens to have been pole-axed by the global credit crunch and is saddled with an $800 million debt exposure to its Stellar hotel business, Australia’s second biggest after Accor with 15,000 beds.

City Pacific is only capitalised at $565 million but is proposing buying MFS, minus the Stellar business, by issuing 225 million new shares, valuing the acquisition at $1.3 billion based on Friday’s City Pacific close of $3.70 and the $500 of MFS debt it will assume.

City Pacific shares have lost 5c to $3.65 this morning, well off the $5 peak it reached last February, but MFS has recovered 30c to $3.85, still well shy of the recent peak of more than $6.

Check out the one-pager from each of City Pacific (http://imagesignal.comsec.com.au/asxdata/20080114/pdf/00802592.pdf ) and MFS. (http://imagesignal.comsec.com.au/asxdata/20080114/pdf/00802595.pdf ) You’d expect a bit more if this wasn’t cooked up in such a hurry. MFS has also revealed (http://imagesignal.comsec.com.au/asxdata/20080114/pdf/00802596.pdf ) one of its directors was forced to sell some shares by a margin call on January 11. Oh dear.

Check out the Crikey account of last year’s colourful November 6 MFS AGM from the Mayne Report AGM archive.

Peter Fray

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