Vocation the flop by the numbers: It’s the biggest flop we’ve seen for years: Vocation, the education services company once chaired by former federal education minister John Dawkins, himself a great believer in private involvement in education and market forces. He quit the company late last November as the news flow was turning very negative and shares were sinking. That went on for two more months until the company called a halt in January and a review of the company became a clean-out by a new chairman and CEO. This morning Vocation revealed up to $245 million in write-downs, with signs suggesting many of the problems occurred while Dawkins was chair from the time of the float in late 2013. It raised $253 million in that float in late 2013 at $1.89 a share. It raised a further $74 million in a placement in September of last year — that’s $325 million in cash raised from investors, now gone. The shares peaked at $3.40 in September of 2014, making the company worth $782 million. This morning the shares were worth just 16.5 cents (they had been at 15 cents for weeks while the company’s accounts were gone through and new valuations prepared). The shares fell 34% after they were re-listed when the latest news was released to the ASX. At 16.5 cents each, the company is worth just on $38 million. That’s more than $700 million of value gone in the space of four months. Dawkins and former CEO Mark Hutchinson owe shareholders a good explanation. — Glenn Dyer

Can you hear that can, Spiro? What was that thin, tinny sound rattling across the cobbled streets of Athens at the weekend? Why, it was the sound of the Greek debt bailout fears being once again kicked down the road for another four months to allow time for everyone to have a deep swallow and think about a third bailout for the embattled country. Friday night’s extension was a defeat for the left-wing government in Athens, which now has to provide a list of new reform ideas by tonight. So why the quick settlement and not the financial armageddon some analysts claimed would happen? Many commentators use the old adage: if you owe $1000 to a bank, you have a problem. But if you owe millions to the bank, it has a problem. Commentators extrapolated that sentiment to Greece and saw its 174 billion euros of debt as giving it the whip hand in talks with the rest of the eurozone, especially Germany and the European Central Bank. But buried in some of the reports at the weekend was the real answer for the deal: fears of a country-crippling run on the country’s banks by mistrustful Greeks tomorrow (once the long weekend is over) drove the Greek government to the interim settlement. That would have quickly brought the country to its knees and forced the Syriza government to capitulate and do a deal extending the bailout for another four months, which is better than having it all end next Saturday, when the money from the ECB was due back — 68 billion euros after the 3 billion lent last week. Reports suggest a billion euros flowed out of Greek banks on Friday alone to safe havens such as Luxembourg, adding to the 20 billion already moved out of the country in the past month or so in fear of a deal not being done and the government being forced to introduce capital controls and a new currency via a “bank holiday”. — Glenn Dyer

Statistics, damn statistics and … data. There’s quite a bit of important local economic data for our interest rate panic merchants to get their teeth into this week — and more next week with December quarter GDP figures and the Reserve Bank board meeting for March (rate cut, anyone?). This Wednesday the wage price data for the June quarter and 2014 will be released. Match that to the CPI rise of 0.2% for the quarter and 1.7% annual, and the estimated rise of around 0.5% and 2.4% will probably show the strongest real wage growth for over a year. But that will be highly misleading and again illustrate the dangers of placing too much store on taking statistics at face value. If real wage growth is stronger than it has been, it will be because of the fall in inflation, not a rise in wages. Data on the value of construction work done will show the impact of the downturn in resource investment, as well the latest estimates of private investment for the December quarter and the latest estimate for investment in the crucial 2015-16 financial year. — Glenn Dyer

Sometimes the Sage of Omaha misses one. Warren Buffett’s reputation as a legendary investor will be tested on Saturday morning our time when his Berkshire Hathaway company releases its fourth-quarter and 2014 results, plus his annual investment letter — with an extra from him and co-founder Charlie Munger. Last week we saw how Buffett had flicked his holding in oil giant Exxon Mobil and moved into the Murdoch clan’s 21st Century Fox, which caused the family’s media cheer squads to almost wet themselves with glee. His investment choices are closely watched, and Buffett has a reputation for picking winners. Well, here’s one that got away. To make it worse, it’s a company that was one of his oldest holdings — the old Washington Post Co, now called Graham Holdings. Its share price has soared since selling The Washington Post to Amazon’s Jeff Bezos in 2013, and doing a deal with Buffett a year ago to buy back the 24% of the company Berkshire held. When this deal was done in March 2014, the price of Post/Graham shares was around US$650. On Friday, shares in Graham topped the US$1000 mark and closed at US$1016.10. So Warren Buffett left a fair bit of profit on the table — 40% or more than US$400 million. The other message from the recent history of Graham is how well it has done once it was shorn of the Washington Post newspaper. Its assets are the Kaplan education business, TV and digital publishing operations like Slate, Foreign Policy, The Root (which more than doubled to US$73.8 million from US$30.7 million. Buffett though has gone deeper into newspapers, buying papers in the midwest and southeast of the US to go with his long-time ownership of the Omaha World-Herald in his home town and the Buffalo News. — Glenn Dyer

And speaking of Buffett … On the weekend Berkshire picked up a German company called Detlev Louis Motorradvertriebs, based in Hamburg, which makes products for motorbike riders. Berkshire paid 400 million euros for a business selling around 270 million euros worth of motor bike jackets, etc. This is the first big move into Europe for Buffett and Berkshire. More to come, I think. — Glenn Dyer

Medibank Private’s first strike? The shares fell more than 7% on Friday at one stage after Medibank surprised in its first interim profit report by revealing that many of its customers were more price sensitive than investors had been led by believe. Revenue from premiums increased 5.2 to $2.9 billion in the months to December, well below the 6.2% growth the insurer has forecast for the full year. Managing director George Savvides told analysts he expected growth to be weighted towards the second half (as more people take up private insurance before tax time), but he stopped short of confirming the forecast revenue target would be hit. Revenue growth was also dragged lower by an 8.2% drop in revenue from the company’s complementary services business. Premium revenue fell short of expectations as customers worried about the affordability of full insurance premiums and downgraded to cheaper policies. Investors accepted the explanations in the conference call, and the shares (which listed at $2.15) closed down 3.5% on $2.47. On a statutory basis, net profit climbed 102.5% to $143.8 million in the six months to December 31. The pro-forma result removes the costs of Medibank’s November float and other one-off costs, such as the $80 million write-down of the group’s tele-health business in the previous half. A big imponderable for the company is an expected big rise in health insurance premium costs in the next few weeks. — Glenn Dyer

Decaffeinating coffee prices. Coffee prices are still falling, nicely offsetting the decline in the value of the Aussie dollar. Prices of the premium arabica beans fell more than 8% last week as heavy rain in the southeast of Brazil eased fears of a second poor crop. On top of that Colombia, which produces a lot of high-quality arabica beans, seems to be over a rust problem and is forecasting higher production. Prices of arabica beans closed at US$1.5255 a pound in New York on Saturday morning our time in a 12-month low — a big difference from the US$2.2910 a pound hit last October. The Swiss coffee trader Volcafe last week said its previous estimate for the 2015 crop in Brazil of 49.5 million 60-kilo bags was unchanged. At one stage estimates for the Brazil crop were around 42 million bags. Higher crops are now expected from Colombia, Peru, Central America and Mexico as well as Brazil. The rise in coffee prices doesn’t seem to be having an impact in the bars, cafes and other eateries in Australia, though. In the US, it’s a different story. Smucker, the big US food group, said last week that its US coffee sales volume had fallen 8% in the December third quarter and by 1% in value after it raised its prices. The company is one of the largest coffee retailers in the US, with its Folgers and Dunkin’ Donuts brands. It lifted prices when coffee prices jumped sharply on those fears about the Brazil crop, heading towards the US$2.29 level hit last October. US consumers reacted by turning to cheaper (lower-quality) private label brands. Golden Roast, anyone? — Glenn Dyer

Peter Fray

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