Stewart bids adieu, leaving his own “legacy issues” . A couple of weeks ago, this column opined that NAB boss, John Stewart, had one of the cushiest jobs in corporate Australia. As it turns out, the Scot’s gravy train was derailed last Friday when NAB would write down its interest in US mortgages by $830 million. In explaining the loss, Stewart told Sky News that:

At the time we decided to invest, all the investments were rated AAA… so there is no fault in the initial investment. What actually happened is that no one believed that the US housing/mortgage market would melt down in the way that it has. We have to accept that credit agencies could not have predicted what happened… it is unprecedented.

“No fault in the initial investment”? That’s a bit like standing over a body, holding a smoking gun and telling police, “I didn’t do it.” John Stewart, the man who took home more than $8 million of the folding stuff from NAB shareholders last year, effectively outsourced his job to a couple of conflicted ratings agencies (“we’ll invest in anything — so long as it’s rated AAA”). Leaving aside the issue of why NAB was investing in US mortgages in the first place, this isn’t the first time S&P and Moody’s have been wrong.

Trusting ratings agencies (like NAB did) is akin to buying a used car, and then getting that car checked out by a mechanic paid for by the bloke selling the car. Ratings agencies were paid by those packaging securitized debt — if the ratings agencies clamped down and rated the bonds how they should have been rated, business would dry up. Sadly, no one explained this to Stewart, or his band of executives who collected more than $30 million last year. — Adam Schwab

What a difference a year makes. In July 2007, departing ANZ boss, John McFarlane was on top of the world. Leaving the job after a successful decade, the Scot received praise from many across the business sphere, like The Age’s, Ruth Williams: “The board’s selection of John McFarlane to replace Don Mercer [in 1997] has been proved unequivocally successful. Pushing Mercer aside paid off; it is hard to imagine that an incumbent could have stimulated and transformed the bank so completely as McFarlane has.”

McFarlane transformed the bank alright. McFarlane’s successor, poor old Mike Smith, has taken over a lemon. In the past year, the follies of McFarlane’s regime have come to light. Opes Prime, Primebroker, Countrywide, Bill Express, Centro — the list is embarrassing — and certainly not yet complete, as Smith reluctantly noted on Monday.

When McFarlane took over, ANZ was trading at around $9 — eleven years later and the price is around $16 — an increase of less than 8% annually. What’s worse, the pedestrian increase has come during a period when all banks, including the ANZ, have continued to gouge billions from customers in questionable penalty fees, as well as coasted off an economic boom of Romanesque proportions. McFarlane collected $14.4 million for his last three years on the job. If you ever are appointed CEO again John, we recommend less time arranging the furniture and more time avoiding lending to blokes like Laurie Emini. — Adam Schwab

The looming property correction. Anyone who remembers back to 1991 will know all too well that you can lose money on real estate. A lot of money. While investors are not “margin called” out of their real estate holdings (as long as you can pay the interest, a bank won’t foreclose on you), serious money can be lost. Just ask the Russian investor who forked out $3.4 million in 2005 to purchase a 72nd floor apartment in Gold Coast’s 80 storey Q1 skyscraper. As The Australian reported, the investor sold the property in January 2008 for only $2.75 million — a loss of 22%, before holding and transaction costs are even considered.

Losses are usually worst when properties are bought off the plan. Developers like Central Equity, Grocon, Mirvac or Sunland will often peddle over-priced, low-yielding apartments to foolish overseas investors (or naïve locals hoping to save on stamp duty) — the vast majority of which will not see any capital gain for at least five years. With unemployment virtually guaranteed to increase in the coming years, property investments (especially those located far from city centers) will be in for a significant correction. — Adam Schwab Gerry

Harvey Gets another bad set of numbers. When Harvey Norman released its less than impressive sales numbers this week, Gerry was quick to point out that they were doing better than their rivals. Maybe so, but the stock market has savaged Harvey Norman, making it one of the worst performers among the retailers this year. In a market that has fallen 20%, retailers are down around 30%. HVN is down from $6.80 in January to a little over $3.

Harvey Norman sales rose 8.7% for the full year, down from +16.5% last year. The telling number is the lift in store sales rising only 4.4%, a number barely in line with the CPI. When times get tough, the new sofa and big telly can wait, even you have an interest free offer that means no repayments until 2011. As desperation rises, we await the no interest for three Popes offer.

But Gerry is not alone, retailers believe they are bleeding. The ABS data on retail sales for May showed a lift of 0.7%. The pundits were confounded. Should we have asked whether retailers are whinging worry-wart hypochondriacs? Anecdotal evidence had suggested falling sales. Hidden within the numbers were rising food sales, while discretionary spending on household goods and hospitality had fallen.

The ABS data released this morning is much more in line with the anecdotal. Today’s numbers show a seasonally adjusted fall of 1% with department stores (-5.2%) and the rag trade (-5%) suffering most while household and recreational goods are flat and hospitality continues its six month decline. There is also continuing evidence of the split economy. The biggies, NSW and VIC, are in decline with growth in the mining states. Over to you Reserve Bank. — Rob Lake, where optimism abounds. Judging by this graphic used on the business pages, News Ltd either knows something about the future trajectory of the share market and the US economy, our banking sector and perhaps even Starbucks, or they are just optimistic types trying to spread some economic cheer among their readership.