“Marubeni Corp., a Japanese trader that with a partner bought Canada’s Grande Cache Coal Corp. for about $1-billion (U.S.) three years ago, said it would dispose of the asset for a nominal $1 to a Hong Kong mining investor. “
This article was quick to grasp my attention because I was able to create an instant connection. As previously discussed in class 9, costs under uncertainty can ultimately lead to fatal losses for investors. Three years ago when coal reached new highs, Marubeni Corp. over paid significantly for stakes in Grande Cache Coal Corp. As a result of optimism surrounding Chinese steel makers growing demand for coal, Marubeni Corp. over paid 70% for stakes in a company which many believed had great potential for economic growth in the future. However, as demand slowed and coal prices began to plummet, Grande Cache Coal Corp lost a great deal of traction and appears to not be recovering anytime soon. Like so many business ventures, almost all investments come with some form of risk. With direct reference to the article“A 120-Year Lease on Life Outlasts Apartment Heir” even though financial returns sometimes seem inevitable, in business you must always expect the unexpected. Whether it be the case of a woman living till the age of 120, or a company with great potential that completely falls apart, there is always uncertainty when it comes to financial transactions. Personally, this article humored me a little. Despite being an established trader, you would presume that Marubeni Corp. would know better than to simply jump on board a company when commodity prices are at all-time highs. I am no expert, however in my limited investing experiences it seems as though the general rule of thumb is to buy low and sell high. Although this general rule may seem quite obvious, time and time again we see investors pouring money into stocks as they reach all time highs, with hopes of reeking substantial returns on their investment. In the end, Marubeni Corp. sold their stakes in the comapny for significantly less than what they originally paid.
Source of Article/image: http://www.bnn.ca/News/2014/10/1/Japanese-trader-offloads-1-billion-Canadian-coal-mine-for-1.aspx
