Australia on Edge of Cliff

 Australia is in a bad position at the onset of the oil crisis.

Millionaire Migration

Who is attracting the most millionaires to their shores? Looking at the data, New Zealand seems to be doing fairly well, with a small net migration inflow. Millionaires are a good migrant because they tend to make good investment decisions and they invest in businesses that employ more people.

The country doing the worst is the United Kingdom. The UK is really plumbing the depths with its idiotic government.

Anyway, study the graph which shows the net position:

Millionaire Migration

Investment Specialist: The Bodies are Piling Up

Watch this, Edward Dowd is the guy who predicted the crash of Moderna stock. He has a new claim, widespread fraud in the clinical trial data.

Also, funeral homes are a growth stock right now. Their upward trajectory tracks the rollout of the vaccines. Macabre, but if you're an investor, critical to know.

https://thephaser.com/2022/02/blackrock-insider-holy-sht-info-the-bodies-are-piling-up/

Navinder Singh Sarao - Flash Crash

Somehow, the story of Navinder Singh Sarao fascinates me. He is said to have caused the Flash Crash of 2010. But then, having made so much money he was then a sucker for wide boy scammers who took his money off him.

He's banned from financial trading now, but here's an idea, why don't the authorities put him under close supervision and have him go to work to earn the money back? Then anything left over gets split 50/50 charity and Sarao, so he does get rewarded for his efforts beyond serving time for his crime and pays to repair society. Just an idea, having him sit in his parents house and unable to pay the money back seems like a waste of time if you ask me.

Here's an article on Sarao https://www.livemint.com/Money/TYUUtwYOj0VIPhFFyLICQM/How-flash-crash-trader-Navinder-Singh-Sarao-went-from-genius.html

Portfolio Performance

The following portfolio provides ample evidence of the robustness of my investment approach. Sadly, I don't think many have checked it out. Why do people chase rainbows and the latest bitcoin nonsense yet ignore solid stocks like these?

Check out the portfolio here...https://www.siliconinvestor.com/portfolio.aspx?fid=521

Companies included in this portfolio:

American Railcar
Caterpillar
Emerson Electric
Federal Signal
Oshkosh Truck
Paccar
Freightcar America
Trinity Industries and note the Arcosa spin-off distribution to stock holders https://www.businesswire.com/news/home/20180515006540/en/Trinity-Industries-Introduces-Spin-off-Company-Arcosa-Announces and check this analysis which sounds balanced https://seekingalpha.com/article/4180716-trinity-industries-inc-spin-entity-look-overly-promising

Crash 2018

Only a month ago I said that I was negative for 2018 and I told you why.

>> See Here <<

Now we have a crash across all stock markets. It was to be expected. Too much uncertainty exists in the global arena, and too much wealth concentrated in a few hands. Plus we have not had structurally meaningful reforms to economies. All that happened post the GFC was bail outs and doubling down. Inefficiency and incompetence was rewarded.

For the value investor, right now is a golden opportunity. Have you been a frugal investor and kept your cash in the bank? Yes? The next few weeks is the time to venture out and begin looking for bargains. Study my portfolio from the following site;

http://www.siliconinvestor.com/portfolio.aspx?fid=521

My suggestion is to look for companies that everyone else thinks are too boring for words. If your neighbours have never heard of them, then maybe that's a good thing and you should check them out - the company that is, not your neighbours.

[Update @ 03/04/2019 - this portfolio is still ahead 28% despite the 2020 COVID-19 Crisis. That's testament to conservative investment strategy. The real crash wasn't 2018, but 2020, but with my strategy it doesn't matter ]

DIY Investing

Back in June I picked PACCAR Inc., here: http://kenhorlor.blogspot.com/2017/06/paccar-inc.html

Had my readers taken heed and invested, their investment would be up 16%. Check out my portfolio: http://www.siliconinvestor.com/portfolio.aspx?fid=521

What I say is this: take your own counsel and buy shares directly through a broker. Do not buy into funds, or funds of funds, and eschew financial advice from so-called professionals. All that happens when following investment advisers and funds is they'll take away most of the gains in fees. Do It Yourself, be conservative and look for value.

New Zealanders - Investing and Buying a House

This post is directed at New Zealanders and permanent residents of New Zealand. You're bombarded daily with what amounts to rubbish about what you should do with your money. My advice, ignore them and do what you're already doing. Whatever it is it's likely to be better than the advice you're receiving, that's how bad most advice is.

But if wondering how to structure your thinking, then read on. I'm assuming you make all your decisions yourself and make all your investments directly where possible. You do this right? If not then you're likely to come up short of expectations as an entire industry in New Zealand is devoted to fleecing you and everyone else.

So let's get started. Consider the young family, two children of school age with one parent working fulltime on less than $50,000 a year. Can you get ahead and buy a house? The answer is yes and here's how:

1. Live within your income at all times. Do not borrow, never use the credit card. Do not take expensive holidays and if you do go on holiday make it the neighbouring beach town and its cheapest motel (not camping, that's expensive). Only buy real food and only eat just enough. Do not buy so much you throw stuff out. Use water to clean (warm water is the world's best solvent, proven so by Chemists), do not buy cleaning chemicals. If you garden, go to auction rooms and such and buy secondhand tools, secondhand furniture, use Trade Me to buy stuff others are throwing out (it's often quite good).

For clothing visit the thrift stores such as the Salvation Army. They often sell new clothing for $1 or $2 an item. How this works is tourists throw away items that won't fit in their suitcase, the 'Sallies' collect the clothing up and then distribute them around their stores. We're talking name brands here, but you have to be patient and visit the stores regularly. In electronics for that all-important laptop computer, look for ex-lease sales or get the latest cheap deal from Warehouse Stationery online. The latter deliver very promptly and can be much cheaper than in store. Never get carried away with electronics, do not buy Sky TV, better still buy a cheap DVD player and buy cheap DVD's in the bargain bins once a month. This is entertainment, and use Trade Me to buy a cheap TV. Another source of electronics, bicycles and stuff is the local Pawn shop. They're always looking to unload their unredeemed items.

A family which lives like this can exist and even save if they follow my advice. Own only one car and make sure it's a small Toyota or Subaru. They never break down.

Furthermore, live in a small regional town, get out of Auckland.

2. Kiwisaver, that's the compulsory retirement saving taken from your income each week, just pay the minimum. Have it paid into a conservative fund, or possibly a balanced growth fund if you're under 40. For older savers just stay conservative as you will be aware markets do melt down and you want to collect this money when you're 65.

3. Register and collect Working for Families. For a family as described above the sum you receive is about $9,000 each year. This is what you save. Remember you are living within your income - right?

Think about how you will receive this money. You have two choices, either take the money in advance weekly based on an estimate of what you will earn, or in a lump sum based on the year gone past. The second option is prudent as you know how much you'll be getting and it comes as a lump sum. With the weekly in advance approach you can end up owing the Inland Revenue money if you get it wrong.

4. Invest in Bonus Bonds. That's because Bonus Bonds do not impact your Working for Families entitlement. Just about everything else does; for instance any income from bank interest or dividends from companies reduce the amount your receive. Even sizeable gifts from family reduce Working for Families. But not Bonus Bonds. And you may win a large prize, and if you do you still receive Working for Families. Let this pool of money compound, that means have your prizes from Bonus Bonds be reinvested in more bonds, and then let prizes you win win more prizes.

5. Take a proportion of the $9,000 (suggest $5,000 Bonus Bonds, $4,000 shares) and invest in companies through the New Zealand and Australian stock exchanges. In doing this, look for companies that are solid but have been on the receiving end of bad news recently. The market disproportionately penalises bad news and then gets drunk on good news. These companies won't pay too much in dividends and thus you'll still maximise your Working for Families. Hold these investments for a long time and take any capital returns (that's where the company returns money to you over and above regular dividends) and invest that in more shares. Any company that is taken over, take the money and invest in more shares. Over time your investments grow and they can grow a lot.

The capital gain from the above activity is completely tax free in New Zealand. You bought these companies because they were cheap at the time and you bought to realise income from them over time. You did not speculate and trade in buying and selling shares.

[Example: Steel and Tube It is in trouble over mislabelling of its steel but its earnings are always satisfactory.]

Remember to own these shares directly in your own name. Do not invest in managed funds. Why? With funds you have no control over how they operate and they charge fees which soak up your potential returns.

6. Now you have the stake to buy a house. This came about because you lived within your income at all times, you did not spend unnecessarily, and you claimed what you were entitled to. Then when you did invest you did so largely tax free.

When you do buy a house, up and coming areas are always good, or run down areas of large cities that are gentrifying. For instance, Tauranga or Nelson not Wanganui or Blenheim (sorry Blenheim). In Auckland, think West Auckland; in Wellington think Newtown.

Keep doing 1 through 5 above but take any gains you make and pay off the mortgage. To this end a variable rate floating type of mortgage is best. If you do fix the mortgage rate make sure you can make capital repayments up to a certain sum without penalty. Paying off the mortgage quickly is the best thing you can do, it trumps everything else. A home with an income, such as a small flat attached to the house is also good if you can find such a property (your income rises and Working for Families reduces but you take the rent and pay off the mortgage sooner with higher repayments over a shorter time period).

As the equity in your first home increases, you're now in a position to buy a rental property. You can do this by putting both your own house and the rental acquisition together and borrowing against the combined value. Timed right you can borrow the whole price paid for the rental property you're buying.

Now you're on the path to being wealthy. Your income from employment may have risen with inflation but the wealth you've created was from wise investment and not chasing your tail.

Investing in a Container

Sensible or a scam? I've received an email from someone wanting to know, does it make sense to invest in a shipping container, managed offshore by some company with a dubious reputation.

The short answer is, it makes no sense at all. But not for the reason you may be thinking, that it's all a scam and whoever is selling you the idea is going to run off with your money (but they might, you have to be careful). Container transportation has been around for a while and these containers do have numbers and they can be insured. Large companies do own fleets of them and they do manage containers as well. If you buy one or many, this container will disappear into the fleet and become just another number, being hired out to house cargo travelling the world.

But what happens to that container when no longer needed or the management company goes bust? At worst you'll lose the container all together, but the best that may happen is you'll have to pay for it to be delivered to you and then what will you do with it? It gets worse if you own several.

There are many angles, claiming depreciation on the container, whether the container is leased long term to a shipping company, what condition it is maintained in, how it is handled and what kind of container exactly; high cube, flat rack, 20 foot, 40 foot, open sided, open topped, all these have a demand and risk factor attached and differing returns.

Why do this to yourself when you can simply invest in a container company? For the purpose of illustration, consider Royal Wolf who are listed on the Australian Securities Exchange:

https://www.google.com/finance?cid=8109809

Currently they sit on a dividend yield of 3.70%, with a market capitalisation of AUS$135 million. They're active selling and hiring out containers and with a P/E of 18.33 are not expensive by any means. I'd suggest that investing in this company would be safer and provide returns that are better than directly owning the container itself. Think capital gains. But heh, I'm not pumping this stock, just pointing out there are safer ways to go that would be more financially rewarding.

Ethical Fund or Not?

What is an ethical fund and does anyone really care? An ethical fund is a pool of money taken from many individual investors, the fund then invests in so-called ethical companies. According to this model, tobacco is out but alcohol may be okay because it can be consumed safely if done so within limits.

Then weapons manufacturers are off limits too, because they make products that can kill. Also off-limits is the gaming industry. It's a vice don't you know.

But hang on, does such a fund do any good? What about all those liquor and off-licence vendors being robbed and killed, shouldn't alcohol be on the banned list? For some funds it is, but not others. Strange I'd say, alcohol should be off the list if the fund manager is being consistent.

Tobacco has become the evil of the modern age. But if we ban tobacco and its cultivation, what happens to African countries relying on income from that one crop? Malawi is an example.

And weapons, does anyone really think for one second that because you don't invest in companies that manufacture weapons,  that your neighbour who hates you, wants to kill you or take your property won't use those same weapons you eschewed against you? You're not paranoid if the gun is pointing at your head.

Gaming, it's a vice, but what about people who eat meat? They kill animals and consume them, is that any more excusable considering that to live healthy and fruitful lives (see what I did there?) we don't need any meat? And what about pest eradication businesses, don't all living things have a right to live peacefully (channelling Over The Hedge and weapons of mass destruction illegal in every state except Texas).

The point I'm making is that any business model that invents a moral compass based on poor logic, will ultimately fail. It must. I say, invest in good, legal businesses, that are boring, old-fashioned, dominant in their market, deliver quality not too expensively; and if they make nuclear weapons then it's all good, nuclear deterrent works fine by me. Get off your high horse.

According to the Ken Horlor Law of Investment Choices (patent pending), if everyone was right then they'd all be rich but they aren't so they must mostly be wrong most of the time. And given they're nearly always wrong, not doing what they do must be a good idea. So according to this logic, tobacco, hard liquor, nuclear weapons, handguns, casinos and brothels must be the way to go. I'm just pointing out you won't find many bankrupt casino owning nuclear weapons manufacturers. But you'll find a lot of investors tapped out by the latest whizz-bang fund management scheme.

Portfolio Performance

It's been a year since I posted my portfolio on this blog. As a whole the portfolio is up 54%, with Oshkosh up 107%. Two other favourites of mine, Trinity Industries and Caterpillar are also up more than 70%.  If you want more picks like these then I suggest my readers subscribe to the Stock Tip Hotline.

Check out the portfolio here http://www.siliconinvestor.com/portfolio.aspx?fid=521

Stock Tip Hotline explained here http://kenhorlor.blogspot.com/p/stock-tip-hotline_18.html

We are investing now as well, so if you've got a good business to sell, let me know. Even if it doesn't meet our strict requirements, we may offer the business on our blog to our very wide readership.

Investing now explained here http://kenhorlor.blogspot.com/p/investment.html

Snap Inc

We've seen the hype, Snap has listed on the NYSE and the company now has a market capitalization of around 28 billion dollars. It's not a profitable business, so why the backing from investors? The only answer must be that investors are taking a punt, or gambling in other words.

By market cap, Snap is now worth more than Terex (3.51), Genesee & Wyoming (4.60), Martin Marietta Materials (14.22), Navistar (2.38) and Winnebago (1.14): they all add up to 25.89 billion. Call me old fashioned but I just ran off a list of companies that actually do something. Snap lets you do silly things with photo's and you share them. Fun yes, but is this a real thing with real value?

So by my measure Snap is not something to invest in.

Three or more Essential Reads for Investors

If you read nothing else in relation to investing then these are my picks, in order of importance, read them in numerical order:-

1. The Intelligent Investor by Benjamin Graham.

Get the edition with a forward by Warren Buffet and annotated by Jason Zweig. It is a timeless classic full of practical advice. You may have heard of it and discounted simply because it isn't trendy, or some such, well don't, the book is as good as people say. Follow the advice and you'll rarely go wrong.

2. Common Stocks and Uncommon Profits by Philip A Fisher.

The 'father' of growth investing, Fisher follows the 'scuttlebutt' approach. Find a good business and learn about it, check it out in the flesh, how is it run, is this a good business is it? Of course you don't believe rumour and all that crap, but there are things to take notice of and Fisher tells you how. Ben Graham references Fisher and points out how talented he is, and so the readers of both should take note; follow Graham for soundness and when your skill improves or you're very talented, then you may graduate to Fisher.The truth lies somewhere in the middle, be a Ben Graham type with room for some of Fisher in there somewhere.

Special note here for Peter Lynch's Beating the Street; it is a very valuable book too and could be read in conjunction with 'Common Stocks', it shows how keeping it simple can be a real winner. I only add it as a mention as you don't have to read it if you've got 'Common Stocks' on hand.

3. Freakanomics by Steven Levitt and Stephen Dubner

This will make you think about everything. Basically, if you provide the incentives, you will get it, even if you didn't intend to.

Special note: for the real estate fanatics an often overlooked book that is the first and last word on investing in real estate: Jones on Property by Bob Jones. The short message is; there is glamour in industrial. This book covers everything any real estate investor needs to know. It was published in 1977 in New Zealand and covers that market and Sydney Australia. The author is a successful investor, now Sir Robert Jones.

Head over to the forum to discuss the best investment reads.

My 3 Rules for Stock Market Investment

Boiled down I have three broad rules related to stock market investment.

1. Boring is best

If the industry is out of date, no-one wants to know about it any more, isn't sexy, isn't highly technological, people laugh if you mention it or better still, have never heard of it and have no idea what it does exactly, then I'm interested in it.

2. Don't pay too much

That great company may be the bees knees, have great management, reasonable debt levels and has been making solid profits for a hundred years; but if it's over-priced it's still a no go.

3. It must be solid

The company must be respected, well managed, have a dominant position within its market, have brands that resonate, and been around quite a while.

My advice: take your own advice and use these three rules, then you'll likely do better than any investment adviser. Want a snapshot of how good returns can be? Check this out >>Do Not Click Here<< Nah, go on you can click it, what it shows is that by applying my three rules you can achieve better than a 40% return in less than a year.

To discuss please visit the forum. Your ideas are valued.

Advantages of Investing in Stocks

New Zealanders are obsessed with real estate. Apart from a few savings in the bank, that's about all they invest in, be it their own home or home plus other property as an investment. Residential rental makes up a large proportion of the latter.

With the just announced bank restrictions on financing available to investors, it's possible they may look to the share market. If they do, there are several advantages over direct personal investment in real estate:-

1. It's a relatively passive form of investment (this is not to say you turn your brain off and don't let the company know what you think). With real estate you need to be concerned about maintenance, paying rates, insurance, making mortgage payments, finding tenants - the list goes on. 

2. Gains can be outstanding and so long as you don't buy with the intent to sell, then like real estate investment the capital gains are tax free. With real estate, over time, the gains are definitely there, but do those gains all occur within a year? You can do that in stocks. But like deciding which property to buy you need to do your research and be satisfied that the company you're investing in, and becoming part-owner of along with all those other shareholders, is well managed and has prospects. 

3. You can adjust your portfolio and do it easily. By that I mean, if you own the shares, you can sell as many of them as you like if you choose to (any marketable parcel). Can you sell half of that house you rent out? Or sell doors and windows? And if you can you need to get your hands dirty, and if selling the building you need a lawyer and likely an agent. Then if subdividing the property there are tax implications.

4. Income from dividends, return of capital, bonus issues and dividend reinvestment schemes make the returns often better than real estate.

Think about it, but beware, I think the most important thing is to be disciplined. The share market is a roller coaster and you need to think for yourself and be prepared to go in the opposite direction to the herd. That is, buy when everyone is selling and sell when everyone is buying.

An example of what is possible:-

ASX Bradken (BRK)

Jan 21 - they were at Aus$0.38 

Jun 9 - they closed at Aus$1.22

You'd find it hard to triple your money in months in real estate. Some bright spark will point out, no doubt, that the above company is losing money and having to restructure. And they'd be right. But think about this, the company is not going to disappear overnight and if it fails will be gobbled up by someone else. It's a pretty solid company, not fly-by-night stuff.

Our bright spark will rightly reply that with investment real estate, you get the advantage of mortgage gearing and the tenant pays off the mortgage.  How does mortgage gearing work? Well, the lender is not participating in the asset, they're just lending the investor money and charging for it while keeping the real estate as security. If you buy a $450,000 house and put in the minimum amount of equity, say, $135,000 and the property rises 10% in value during the first year, you book a $45,000 profit (at least on paper). Rounded down that's a 33% return on that $135,000. All the capital gains are yours.

This all sounds good and it looks like real estate is by far the better bet. But think about this - while things are going great, real estate is a sure-fire winner, but as an investor it is you with everything on the line. If the market tanks, you still have that mortgage to pay back. If you can't find tenants, tough, you still have to pay the mortgage. Everyone thinks of the times when things are going great and they never think about what may happen if things go wrong.

I think this is where investing in the companies listed on the share market comes into its own. If things go bad, you have no ongoing obligation to anyone so long as you haven't borrowed to buy those shares. You may have to forgo a dividend, or wait for the company to recover, or even sell at a loss, but that's where your obligations end. The company may ask for a further contribution, a rights issue, but you're never compelled to invest in those (they're often a very good idea by the way).

If we go back to our $135,000 equity example above, it's hard to get that 33% return on the share market across the whole portfolio. But get this, you also have far less risk than with real estate. If you apply the time honoured principle of compounding your investment, by reinvesting capital gains when realised, participating in dividend reinvestment schemes, buying shares offered in a rights issues, and taking your dividend income and reinvesting part of that (I'm assuming at least some of the dividend income is used to pay expenses, such as brokerage when due), then I'm sure returns can be better than real estate investment.

Whatever you do, my own experience of using advisers is they're often useless. My advice is use your own research, like you would when buying a house, know the market and what you want. What company do you like and why?

Portfolio Tracker Update

Making a small adjustment, I've sold half of my under performing Freight Car America and bought Federal Signal. The loss on Freight Car I've reflected in the share cost for that stock holding (put the share cost up). 

Apple Inc

Is Apple Inc down and out? If you only read the responses to their latest earnings report then you'd be excused for thinking they were.

Check this out - the stock price for Apple Inc at the close of business Friday May 4, 2001 was $1.84. The price on May 4 2016 was $94.19. 

10,000 shares bought at 1.84 = $18,400

10,000 shares sold at 94.19 = $941,900

That's a capital gain of $923,500. I think you'll agree, a pretty nice return.

Naysayers can be found everywhere. They're often wrong. Apple was thought to have peaked in 2012. Their price then was $80.75.

Now I'm not guaranteeing staggering returns like these. But pick a good company and by sticking with it, you can do a lot better than with real estate or any other form of investment for that matter.

Check This Out

Check out this portfolio (see new adjustments), it may just impress. Not even a year has past and this portfolio is up more than 50%. The trick is to think old fashioned. Do you jump on all the latest bandwagons? Well don't, they almost always lose money. Are you excited by dirty metal bashing industries? Great, think like that. 

Here it is...http://www.siliconinvestor.com/portfolio.aspx?fid=521

Look at Trinity Industries, up over 70%. Caterpillar up 55%. Oshkosh up over 100%. You never hear people banging on about how great these companies are do you. Think margin of safety, I believe Trinity offers margin of safety based on its relatively cheap price compared to its peers. 

Update (@27/06/2017): I have adjusted the portfolio and decided to take most of my Caterpillar gains and invest those in Paccar which appears cheap for such a great company right now. My thinking here is that Caterpillar's restructuring will take some time while Paccar represents quality truck brands, and Paccar is still making money. I'm selling half of my Caterpillar shares, those that remain represent the bulk of what the 1,000 original shares cost in the first place. Think about that for a minute.....18 months after purchase, they've just about paid themselves off and I can go after another great company. Note that the performance of the whole portfolio now drops after this new position is taken, but the whole has grown by the gain made on sale from the Caterpillar sale. And think, where I'm based this capital gain is tax free.

Update (@13/08/2018): Note this portfolio is doing very well. If you check in from time to time you will see that each stock fluctuates, but over time they all do well. That's because they're conservative picks, run cautiously and adroitly. They're not the next big thing, which usually crashes soon enough.

Update (@2/09/2019): I have one bad performer, FreightCar America Inc., but we don't go along with selling in a panic, we're sticking with it.

Update (@20/03/2020): The markets have been severely impacted by the COVID-19 crisis, but this portfolio is still ahead, up 12.7% since inception. The lesson; hold conservative value stock like these. Caterpillar is still up 59%, Federal Signal by 102%.

(Note: These opinions are information only and do not constitute investment advice. If you need investment advice on these stocks or anything else for that matter, talk to your recognised and professional investment adviser. Better still, do your own research and act on it confident in your own ability.)

New Zealand Investors

I've been thinking long and hard about the Auckland house price inflation. The banks have a role to play, they're willing to lend on real estate almost exclusively. But the way the New Zealand investment landscape is structured also has a major part to play.

Broadly speaking a New Zealand investor has three options:-

1. Buy investment real estate,
2. Start or buy a business, and;
3. Invest in shares, bonds, bank deposits or government stock - passive investment in other words.

Before any of the three are implemented, paying off debt must be a priority. Assuming that is achieved (at least substantially), and the investor maintains a sensible retirement superannuation account, then the three options present themselves this way:-

1. The investor buys houses or residential flats and apartments. The ideal is to invest in industrial and possibly commercial real estate, but the reality is residential purchases are easy to achieve. It's easier for a small investor to get their foot in the door with residential property. For starters, they needn't be registered for Goods and Services Tax (GST).

2. Buying or starting up a business is limited by the experience of the investor and the size of the market. Some people can't run a business or they don't have skills in the right areas to do so. It's a risky option for most.

3. Then lastly, they can access the New Zealand and Australian stock exchange listed companies very cheaply and easily. They only pay tax on those gains that are realised (if long-term investment then only the dividends are taxed). Outside of that however, if the investor buys shares in companies listed on the NYSE, Nasdaq, LSE, Borse Frankfurt or elsewhere, then over a certain threshold they'll pay tax on gains when they occur, not only when realised.

Conclusion:

Investors are strongly encouraged to invest in real estate, which has to impact Auckland house prices, given the size of that market. Investors cannot start or buy a business as the opportunities are scarce, given the relatively small scale of commerce in New Zealand. Allied to that, investors are discouraged from spreading their net wider, effectively limiting their share investments to the local scene. No wonder then that investor money pours into Auckland housing and real estate in general.

Recommendation:

Allow investors to invest in shares outside of New Zealand, on the same basis as they invest in shares listed in Australia, that is, invest in any company listed on recognised exchanges in the USA, Canada, Japan, the U.K., and Germany (elsewhere by approval). By doing this, money would be diverted from the overheated Auckland housing market. The effect would be to lessen demand for Auckland houses, and prices would stabilise.

(The change to NZ's tax regime regarding investment in foreign shares has had a knock-on effect to the Auckland housing market. This is the law of unintended consequences)

Edit to add (off the topic but looking at investment as a NZer investing overseas)...

The following NZ Herald article traverses many of the issues a NZ investor faces when investing overseas...http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10738730

The article mentions hedging, and what I've done in the past is not very sophisticated but effective, I've maintained a US Dollar account with a NZ bank. You're not dealing with a foreign desk, but the money is effectively offshore. Many people do not realise they can have a US Dollar account with a NZ bank. The good part of this is you get higher level people within the bank with better advice attached (the down side is that over a certain amount your name gets on lists in New York and you'll be bugged by investment houses on Wall Street. This is a freedom of information thing, I recall an outfit by the name of Whale Securities was one such calling all the time - look them up they were on Wall Street - you have to develop a thick skin and know how to say no).

Most 'experts' recommend using funds, such as unit trusts. My experience is they don't do that well. I'd guess my returns over a 20 or more year period would be about 1% annually going down that road. Don't be sold unit trusts.

Business Ideas

Hey, this an ideas thread. Ideas I've had for some time and done nothing about myself. I've taken note though, as time has gone by, that no-one has done them, or anything similar. Maybe there are good reasons for this. Hmm.

1. Baby Boomers Retiring:-

New Zealand this, not talking in the USA etc., where private equity is well established....

No, I'm not talking about retirement homes, or farming oldies. I'm thinking all those baby boomers are retiring and what happens to their businesses? Like Auckland house prices, the amount of capital needed to buy these businesses has gone beyond the reach of younger investors.

Baby boomers also inherit their parents business and want the cash out. Or the baby boomers don't have children capable of taking over, or the children are not interested, or the children have taken over and want to cash out. Whatever, you get the idea.

Simple idea really, a private fund buys these good businesses and runs them under management. They're either directly governed or brought together into industry groups which can be floated off onto a stock exchange, or sold to management later, maybe being split up before doing so.

I'm not aware of any consultant or investment banker in NZ operating in the space where the businesses are smaller, but not the corner shop either - let's not get carried away here; I'm thinking 20-50 employees and under $50 million worth.

It could even be handled like a reverse mortgage, the retiring owner stays in place in a senior governance role and is paid out over time. Nothing really new in that angle I guess though, but where I think I'm different is that the group buying these businesses packages or bundles them up.

I can think of literally dozens of businesses where the owner is older, nearing retirement and carrying on regardless. Some I personally know and they say they have to carry on as no-one can buy their business.

So that's an opportunity for an enterprising investor.

2. Search by thought and eyes:-

The next Google is a search engine that processes your thinking. Reads your mind. Maybe through your webcam it reads your eye movement. Touch screens yes, but if you can touch the screen why can't the screen touch you?

3. HorlorVision:-

This is an implant, far beyond Google glasses. It's in your brain and you can see any movie or TV show ever made, right inside your head.

Or driving along you can see Google street view in part of your brain.

Or the military application - you can implant all the necessary steps for being an excellent soldier. Correctly configured, the soldier can work with satellites and drones, seeing behind targets ( who's hiding behind the wall?).

4. Basketball Jumping Shoes

Intelligent clothing. The rules of basketball say you're not allowed to get an advantage by jumping off or being held by someone else (technical foul). So no riding on someone's shoulders or jumping off something (such as jumping off a body crouching like a stool, or a hand off or climbing onto the backboard). But shoes have some leeway, and have improved over the years. I think Adidas put out a shoe they said allowed a higher jump, and the sole looked good.

But I'm talking a sole that applies leverage but never changes shape. This avoids the charge that the shoes are like someone standing on stilts. The interior of the shoe would use leverage to propel the player higher (the foot inside the shoe would need room).

In the next development the sole itself would have a memory that equates to a spring like a lever spring, but no actual large spring. The sole is flat but when activated by toe reflex, springs the player upward. Look at these Rosta bearings, the unit on the far right is what I'm talking about miniaturising, get the idea? This could be inside the sole and would provide massive lift...
These elements pictured work in industrial applications, inside a shoe they'd provide maybe two and a half feet of lift for the average size person - BOOM - every competent player is a dunker.

5. Water Driven Car

People go on about electric vs petrol vs fuel cell.

Well woop de doo. I'd get excited if one day you can get the garden hose and fill your tank with water and drive along using that.

Two ways this could be possible, c'mon engineers do it...

(a) the first is you have a uranium using nuclear plant in your car and it turns the water to steam, which then drives your car. The advantage of this is that when at home the same plant can power your house with electricity and feed the national grid, or;

(b) The water is fed through a cracker which splits the water into hydrogen and oxygen. Most talk about hydrogen, but the oxygen is useful here I think, bring the elements back together and boom, ignition. The nuclear unit would crack the water.

The idea is that you fit the nuclear unit to the car and it goes for the life of the car without replacement uranium, the car being disposed of when dead after 20 years or so. I haven't costed the uranium and the quantity available on planet earth. The idea falls over if there isn't enough uranium to go around.