MARKETS, REAL ESTATE & SME

Hello dear readers and welcome to another edition of Markets, Real Estate and SME. Being a short week and month end, I can tell you I am glad it's officially long weekend!
But back to what's important...

MARKETS

Respect the Market Trend, but Don’t Expect it to Last - View the original article here...

By +Murray Dawes  via +Money Morning Australia 

We saw some fairly serious selling pressure in Europe last night with attention turning to Italy, where it looks like they’ll have trouble forming a government. An Italian bond auction also fell short of expectations and so interest rates there headed sharply higher.

The banks of Europe have been hit over the last few days since the announcement of the Cyprus deal and the bumbling honesty of the Dutch Finance Minister Dijsselbloem (say that three times quickly).

The banks that are attached to the teat of the ECB via the LTRO (Long Term Refinancing Operation) are the main ones coming under fire, as you would expect.

But once again we were saved from the gates of hell by the US market, which opened down but then steadily rallied all day long to close pretty much flat on the day on very low volume and the lowest average trade size of the year.

Credit markets in the US are not being dragged along for the ride to the upside, and whenever a divergence opens up between credit and equities you can be sure it is equities that are living in dream land…

How to Trade the Market

But the fact is the old saying about the market is right. ‘Where the market goes that’s where it is.’ It sounds like a silly statement when you first read it, but when you think about it there is some good advice to be gleaned.

Our perception of the market is not the market. Whether or not the market is a completely fraudulent, manipulated farce (which it is) doesn’t matter. What matters is the price and only the price. We have to play by the rules we are given and there is very little point in jumping up and down when the price action doesn’t agree with our expectations.

Fighting the market is a losing game ultimately. Who is your opponent when you are fighting the market? It doesn’t take too long to work out that you are fighting yourself. The market is always neutral.

It doesn’t really care if you make a million dollars or lose your shirt. The battle is always internal. Every skip of the heart as prices move is caused not by the market but by our reaction to it.

As Marcus Aurelius, an Emperor of Rome and one of the great Stoic philosophers, put it, ‘Stop perceiving the pain you imagine and you’ll remain completely unaffected. External things are not the problem. It’s your assessment of them. Which you can erase right now. If the problem is something in your own character, who’s stopping you from setting your mind straight?’

And just to force the point home he also said, ‘I can control my thoughts as necessary; then how can I be troubled? What is outside my mind means nothing to it. Absorb that lesson and your feet stand firm.’

Marcus Aurelius fought battles with the rampaging Germanic hordes in the last decade of his life while he wrote the aphorisms above in an amazing book called The Meditations. If anyone has the right to give us advice on how to cope with the vagaries of life it is him.

I think we all know that it would take a super human effort to remain unaffected by everything that occurs externally from us. We are emotional beings filled with ego. It sounds great in theory to stand aloof from the market and make decisions without an ounce of internal disturbance.

I think the best we can hope for is to understand how irrational we can be in the face of a gyrating market and create as many rules as necessary to place a straightjacket around our impulses.

That is really the basis of technical analysis for me. It is not a crystal ball. It is just a windsock that gives you a hint of the underlying forces driving the market.

It helps to create lines in the sand where I can accept that I am wrong quickly rather than relying on hope, which we all know ‘springs eternal’. If you are interested, have a look at a presentation I have done about my trading approach and why I think there are some great trading opportunities coming up. You can view it here.

What I find intriguing about the current rally is that my trending indicators all turned up late last year but I chose to ignore them because I am fundamentally bearish. The feeling that, ‘I am right and the market is wrong,’ is a hard one to shake. The market, of course, is always right.

This then throws up the challenge to let go of all ‘views’ about the market and to rely purely on your technical indicators for all trading decisions. There is no doubt that whatever your view on the market happens to be there will always be a period where the market will make a fool of you.

The bulls get killed in bear markets and the bears are skewered in bull markets, like now. I don’t know of anyone who is bullish in bull markets and bearish in bear markets and constantly gets the shift in trends right. No one.

There’s a Difference Between Trading and Opinion

Most market commentators aren’t traders. They just wax lyrical about the markets and their views but they never say when they are proven right and when they are proven wrong. No targets and no stop losses, just sweeping views that make it impossible to pin them down later for being wrong.

Actually trading the markets is a completely different kettle of fish. Volatility is so intense that you can be completely right about your big picture view, but if your timing is out you lose money. You can get stopped out of a stock and then watch in horror as it turns around almost immediately and heads in the direction you expected.

When that happens should you jump back in? It’s moments like these that no one tells you about before you start trading. The learning curve when entering the markets is immense and really it’s never ending because the market itself is always changing.

The rise of High Frequency Trading (HFT) has changed the structure of price action, perhaps forever if the regulators aren’t willing to step in and level the playing field.

Another factor affecting asset markets is of course the worldwide money printing and ZIRP (zero interest rate policy) of the major central banks.

This is a new world that we live in. How long this game lasts is really anyone’s guess. I think there are many people that know it can’t go on forever but as always it all comes down to timing.

My ‘view’ is that we are close to a major market top, but as I said above ‘views’ aren’t worth all that much. While the trend remains up in the US markets I will just have to accept the fact, and wait until my charts tell me that the trend has changed.

So get prepared for the headlines screaming that all is well and new all-time highs have been reached in the S+P 500. But don’t believe for a minute that the price of the market is a true reflection of the state of the real world.

Murray Dawes
Editor, Slipstream Trader

REAL ESTATE

Australia taking lion's share of Asia Pacific commercial property investment: Report

Nearly half (45%) all real estate investment into the Asia Pacific region is flowing into Australian commercial property markets.

This is double the next biggest markets of Japan (19% of investment) and China (18%), according to Jones Lang LaSalle, with investors attracted to Australia by its transparent markets, efficient regulatory regimes supported by solid economic fundamentals and relatively high yields.

Offshore buyers of Australian commercial property are now around...continue reading

Easter property bounce shows sellers are no bunnies

Hold on to your hats: it looks as if Australia's property markets are about to take off and the Easter sales will show just how far and how fast the ride will be.

Housing Industry Association chief economist Harley Dale says this will be one of the most important Easter sales in a long time.

"Sales are...continue reading

Investors Enjoy ‘Perfect Storm’

Conditions for investing in property are becoming increasingly attractive as lower mortgage interest rates and high rental yields multiply Australia’s positive cash flow opportunities.

This is according to Smartline executive director Joe Sirianni who points to record low interest rates and some of the best...continue reading

SME

2013 MYOB Business Monitor: SMEs reveal top initiatives that would turn their vote this election

Dissatisfaction with Federal Government drops from record high, but rises among start-ups

MYOB released new research in the wake of the Federal Government’s appointment of the fifth Minister for Small Business since 2010. The study reveals more than half of Australia’s small to medium business operators (SMEs) are dissatisfied with the government’s support for helping businesses like theirs succeed.

Dissatisfaction has dropped from the record-high found in the previous study, completed in May 2012. However...continue reading

Govt pledges $100m for tech start-ups

The Australian government’s Innovation Investment Fund has pledged at least $100 million to local venture capital funds, climate change, industry and innovation minister Greg Combet has announced.

The government funding will be matched dollar-for-dollar by private sector investors such as superannuation funds and high net worth individuals. It will see MH Carnegie & Co.’s Carnegie Venture Capital receive a combined $80 million, while GBS Venture Partners and Innovation Capital Associates will each receive $60 million.

“Successful start-ups are essential to...continue reading

Franchisees making the cut

The franchise sector in Australia recovered from the global financial crisis in a stronger position than small business, with a net growth of 4.4 per cent for new franchise businesses during the past two years.

Australian small businesses grew only 3.6 per cent in 2010 and 0.4 per cent in 2011, according to data from the Australian Bureau of Statistics.

The resilience of these businesses during difficult economic times can be attributed to the...continue reading

That's it from us for this week. Have a fantastic, safe and blessed Easter long weekend! Until the next time...

How Should We Divide Equity Among Co-Founders?

A great question that I think many a first time entrepreneur has pondered on...

“I understand that one's share of equity should be contribution-based. However, when you are making arrangements with co-founders, is there a generic rule of thumb that you must follow? If you want to control future decisions of the startup as originator of the concept, how do you make sure to retain the full control?”

Question answered by RYAN HIMMEL (+Ryan Himmel)  ON MARCH 22, 2013 via +Entrepreneur 

There are many different ways to approach equity compensation for the founding team. There is not necessarily a one-size fits all answer to this question. However, I have some specific recommendations based on my experiences starting a company as well as advising many startups.

First, discuss compensation upfront with your co-founder(s) before you get to work and put it in writing. One of the biggest mistakes you can make when starting a company is casually discussing equity ownership with your co-founder(s) and deferring the formal agreement until after you get the business started. You should be very clear as to the equity ownership percentages from the very beginning.

Try not to be emotional and selfish when discussing equity ownership with your co-founder(s). Ideally, you should share a common vision with your co-founder(s) and acknowledge that the success of the company is more important than your personal interests. Specifically, the amount of equity you and your co-founder(s) receive in the company should be dictated by a methodology that awards the highest-valued contribution and those bearing the largest risks. Factors that you may consider in reaching an appropriate equity percentage for each founder are: idea generation, capital contribution, ability to raise capital, business planning, domain expertise, operational management, total responsibilities and legal responsibilities. My point here is that you shouldn't just split the company 50/50 if there are two founders. Rather, you should construct a list of the most important elements of the business and how much each founder is able to contribute to that part of the business. In addition, you aren't supposed to necessarily reach a final equity percentage with your co-founder(s) quickly. It's supposed to be a discussion and a negotiation.

If you'd like to control the decision-making part of the business, you should be the majority owner of the company and have the majority of the board votes or greater than 50 percent. Typically, the chief executive and chairman of the board will be the majority owner of an early-stage company, but it can vary by business.

View the original post here...

MARKETS, REAL ESTATE AND SME

Hello dear readers! We were fortunate enough to attend the Young Entrepreneurs Unconvention in Sydney yesterday. The event had a turnout of approximately 1200 entrepreneurs and others looking to learn from some of Australia's most accomplished entrepreneurs and business people. Speakers included:

Katherine Sampson - Founder of "Healthy Habits"
Jack Delosa - Founder of "The Entourage"
Petar Lakovic - CEO of MBE Education and The Entourage, an absolute sales genius!
+Dorry Kordahi - Founder of DKM Blue

The entrepreneurs told about their successes and failures and how they were able to climb to such heights, as well as passing on valuable knowledge and strategies to use for inexperienced entrepreneurs .
The event was full of energy and served as an inspiration to many, as well as presenting an incredible opportunity to network with like minded people, and maybe even finding that Technical Co-Founder you have been searching for... All in all, the best free event I have ever been to with no mass marketing for their exceptional business education program.

But now back to other news... :)

MARKETS

The Global Property Obsession Continues...

By +Nick Hubble  • March 23rd, 2013 via +Daily Reckoning Australia (View article here)

You won't be surprised to hear that Cyprus' banks passed a stress test in 2011. They were tested to see if they could survive a bit of economic turmoil, and they passed. Now they're failing anyway. Clearly, bank stress tests are about as reliable as Lululemon's quality testing.

You see, Lululemon makes tights. The kind you would wear to a yoga or flying trapeze class. Unless you're a 12-14 year old girl, in which case wearing tights is fashionable generally.

Apparently, wearing slightly sheer tights is also fashionable. But Lululemon's quality testing and design team made an error. Their tights are just a bit too sheer, triggering a product recall. 'The truth of the matter is the only way you can actually test for the issue is to put the pants on and bend over,' Chief Executive Officer Christine Day said in a conference call. The mistake is set to cost the company up to 27 cents per share.

Now, given the whole point of wearing these tights (yoga), you'd think that people might want to test them by...bending over. That's what people do when they do yoga. It's also why we don't do yoga.

It's the same story with the banks' stress tests. So if Cyprus' banks passed stress tests, but find themselves in need of a bailout, what did the stress testers miss? You guessed it, a sovereign debt crisis - the kind that Europe is going through.

Just like Lululemon's quality testing team, the stress testers didn't test for the one thing that really matters: What happens when your biggest and best asset is at its most vulnerable.

All this should sound familiar. In America, houses and mortgages were the biggest and best asset of the financial system.

When Ben Bernanke was asked what would happen to the financial system if house prices on a nationwide basis fell, he replied 'I guess I don't buy your premise'. He wasn't even willing to consider it. Australians are suffering from the same delusion. But before we get to Australia, let's take a global property tour to see what's going on.

Double Double Toil and Trouble, Let's Reflate the Housing Bubble

The whole world is going on another property binge. Politicians and central bankers are adding 'eye of newt and toe of frog' to try and pump their economies the way they know how. Yes, governments are struggling financially because of the last housing bubble they inflated, so they've decided to inflate another one.

Are they really that dumb? You betcha!

In America, government backed mortgage behemoths like Freddie Mac and Fannie Mae are buying up the overwhelming majority of new mortgages. Without them, who would be willing to lend the money?

Percentage of all new mortgages backed by the US government

Source: Inside Mortgage Finance

The other source of property buyers are hedge funds, also supported by government in the form of the central bank. Spurred on by stupidly low interest rates from the Federal Reserve, they buy vast bundles of houses and rent them out, pocketing the difference.

'Last year, institutional investors made up 19% of all sales in Las Vegas, 21% in Charlotte, 23% in Phoenix, and 30% in Miami,' writes ZeroHedge. The problem is, they're flooding the rental market, which is pushing down rents.

There's a crisis in the making here. If interest rates rise and rents stay low because of oversupply, the hedge funds will be in trouble. Michael Krieger of Liberty Blitzkrieg calls this 'one of the biggest disasters waiting to happen in the US economy.' If the hedge funds try to escape en masse, house prices could fall just as interest rates rise.

The story would be the same as sub-prime, but with hedge funds on the receiving end instead of poor borrowers. Of course, a fall in house prices ends up affecting anyone who own as house, which is why the sub-prime mess went viral.

In the UK, the government has come up with a plan to engineer a 'housing boom' by subsidising the mortgages of people who buy a new construction. To be clear, taxpayers will be explicitly guaranteeing loans. The Telegraph explains the details:

'...the Government would offer five-year interest-free loans worth up to 20 per cent of the value of new-build homes costing less than £600,000. From January, another scheme will see taxpayers underwrite mortgages to those with small deposits, including more than a million people trapped with so-called "zombie" loans, where the fall in the value of their homes has left them unable to move.
'The Government will offer £12?billion of guarantees covering mortgages worth more than £120?billion. They are intended to help 644,000 people over the next three years.'

This is known as an 'epic facepalm'. That's when you slap your hand over your face in a display of dismay and incredulousness. We know how this ends - in a housing bubble and crash. But hey, the election cycle is only so long. Some other politician will have to deal with the aftermath.

Here in Australia, the story only gets more absurd. The TV show The Block is back spruiking the benefits of property investing. And it's just the most beautiful little microcosm of Australia's housing obsession.

According to News.com.au, the Blocksters made a combined profit of $815,000. That's impressive until you realise what's meant by 'profit'. You see, the Block calculates 'profit' based on the difference between the sale price and the auction reserve price.

In case you missed it, the difference between the sale price and the RESERVE PRICE. Never mind the prices the houses were actually purchased at before the teams were let loose with sledge hammers.

As the article explains, there was 'no real world profit'. But it gets worse. Take out the costs of renovation and even their fake profit disappears.

According to one 'Block Head' (fan of the show), after the 2011 campaign exposed the under performing property market the producers changed the rules. Now they don't keep track of the purchase price and just under-quote a reserve price to make the whole effort look profitable.

At some point, Australians will realise that property just isn't affordable in Australia. The only thing making it affordable for now is rising house prices - once you own a house you become more wealthy.

But they can only keep rising for as long as people are willing to go into debt. And signs of stress are already emerging. Banks have had to target people who can't afford loans to keep the lending machine going. That's what caused all the problems in America.

Fortunately, all this has presented an incredible opportunity for Australians. Because of some bankers' dodgy practices, all sorts of mortgages could be extinguished. Could yours? There's one way to find out. Click here.

But the biggest and best property bubble award goes to China. All sorts of cracks are appearing in that country's property boom. And without construction in China, who will buy Australian resources?

We'll leave that for another day.

Much more interesting is a new study showing that German median net wealth is less than a third of Spanish and Italian median net worth! And less than half the French equivalent. The Germans are being asked to support countries that are wealthier than them. That's not going to go down well.

By the way, if you'd like to see your editor in non-sheer tights, come on down to the Flying Trapeze Centre Melbourne's show 'Fall'. (That's 'Fall' as in 'Autumn', not 'fall' as in house prices.) You can find all the details here.

Nickolai Hubble.
The Daily Reckoning Weekend Edition


REAL ESTATE

All roads lead to inner-city living say real estate industry experts

HOMEOWNERS are giving up on the great Australian dream of a big back yard and turning to inner-city apartments.

Industry experts said traffic congestion and busy work schedules meant an increasing number of West Australians saw city apartments as more convenient.

Professionals WA chief executive David Hobbs said if he had $500,000 to invest in the next 12 months he would be looking for a unit within...continue reading

Homeowners are not moving as often as they did a decade ago

Perhaps it's due to the stamp duty fees, maybe it's the renovation revolution, or it might just be because moving house is stressful. But Australian homeowners are remaining in their houses longer.

Our grandparents might have spent the greater part of their adult lives at one address but a recent study undertaken by RP Data's research analyst, Cameron Kusher, showed the average length of home-ownership for both houses and units was...continue reading

Top time to buy investment property... but not here

Is property investment simply for the wealthy? According to recent research from RPData, there's hope for us all.

Aussie executive chairman John Symond says right now property investment is well and truly within reach for everyday Australians.

Gladstone, however...continue reading

SME

Small business deserves better, oppn says

Federal opposition front bencher Bruce Billson says small business deserves better than a revolving door of ministers supposed to be looking after the sector...continue reading

Government slow to embrace young innovators

Young innovative thinkers are yet to be fully embraced in Australia, according to the head of a not-for-profit entrepreneur network.

Australia will host the G20 Young Entrepreneurs Alliance (YEA) and G20 Leaders Summits in 2014, but...continue reading

University of Sydney start-ups set to Incubate with $1 million funding

Student start-ups accepted into the University of Sydney’s Incubate program have raised more than $1 million in funding, as well as struck up a partnership with BlackBerry.

Incubate, which launched in September last year, is the first student union-backed start-up incubation program in...continue reading

We trust you will enjoy what is left of the weekend and thank you  for your continued support :)

Until the next time dear readers...

Asylum seekers are more important than Australians...

Hello dear readers. I would like to share with you all this anonymous email I received today and let you make your own assumptions about its content...

You do the math Australia...  

February 5 2013: Gillard contributes $1 million the Queensland Flood Appeal.

So here’s what Julia Gillard and Bob Carr have given away, of your money, since the Australia Day long weekend, the weekend when tropical storm Oswald smashed Bundaberg.

February 11 2013: Gillard contributes $15 million to rehabilitate 40 kilometres of main road in South Tarawa, Kiribati, which has been undermined by rising sea levels and coastal erosion. Note: There has been no sea level rise along the Kiribati coast. 

February 4 2013: Gillard contributes $5 million to the UN Refugee Agency (UNHCR) South Sudan. 

February 4 2013: Gillard contributes an additional $3 million in humanitarian assistance for people are still reeling from the impact of Typhoon Bopha in the southern Philippines. 

31 January 2013: Bob Carr today pledged a further $10 million in humanitarian assistance for people affected by the worsening conflict in Syria. 

30 January 2013: Bob Carr today pledged $15 million to provide better access to education for the boys and girls of Myanmar. 

30 January 2013: Bob Carr has pledged $5 million in humanitarian assistance for Mali and the surrounding region to assist hundreds of thousands of people affected by conflict and food insecurity. 

25 January 2013: Gillard provides a further $2 million to the United Nations World Food Program (WFP). 

25 January 2013: Gillard announced a further $2 million to help (Fijian) children get back to school in the first term of the school year following the devastation of Tropical Cyclone Evan late last year. 

So between the Australia Day long weekend and 11th February 2013, Gillard & Co has given away $57 million to various foreign aid beneficiaries. I’m sure the Queensland flood victims could have used the $57 million to help them out? 

In all about 4224 properties were damaged with 2302 deemed uninhabitable. More than half of those uninhabitable properties, about 1321, are in Bundaberg. 

And to really rub salt in the wound, on 8th February 2013, Gillard re-prioritised up to$375.1 million in Official Development Assistance (ODA) in the 2012–13 financial year to support asylum seekers waiting to have their claims heard in Australia. The support will cover food, shelter and other essential items.

The re-prioritisation represents a small portion (around 7 per cent) of Australia’s total aid program, which is still expected to reach around $5.2 billion in the 2012–13 financial year and is consistent with the Organisation for Economic Cooperation and Development (OECD) Development Assistance Committee’s (DAC) Reporting Directives.

MARKETS, REAL ESTATE AND SME - "Cancel your mortgage!"

Welcome to another edition of Markets, Real Estate and SME. In today's edition we look at how you retirement funds could disappear, how you may be able to cancel you mortgage while keeping your home or where to look for start-up capital. Enjoy...

MARKETS

Just Like Cyprus: How the Australian Government Turned on its Citizens via +Money Morning Australia 

Yes, this is getting old, but this week a new Mediterranean country became the centre of the financial world’s attention.

It’s not even big enough to be one of the PIIGS, which used to make all the headlines.

But Cyprus is important for a whole new reason.

This time around, bank depositors will take a hit in the effort to bail out the banks.

And that’s causing panic across Europe…

What you need to know about this isn’t in the details. They’re a complete mess and keep changing from one hour to the next. One moment all depositors will lose a few percent of their deposits, the next only some will.

What’s really important is the signal this sends. We’re entering into the next stage of the financial crisis. The stage where governments turn on their citizens.

This is exactly in keeping with Kris’ theme in Money Morning. He’s written about this for over four years, including the Australian government’s attempts to take your wealth, like they’re going to do in Cyprus. It’s not just Cyprus, by the way.

In Japan, the government hopes to stimulate the economy by creating inflation. That will have a similar effect on the country’s savers as confiscating a proportion of their deposits would. In Italy, the German bank Commerzbank is expecting a wealth tax to be brought in. France’s ill fated 75% tax may not last, but it shows what’s making popular politics these days.

In Australia, the miners, polluters and ‘super profiteers’ are the target…for now. And on May 31st, the government will raid small superannuation accounts and unused bank accounts.

All around the world, governments are beginning to see their citizens as ATMs to pay for political promises. Whether its entitlements, bank bailouts, wars or insulation schemes. Sure, simply taking people’s deposits is particularly audacious. But you don’t even know if we’re referring to Australia or Cyprus in that sentence. Both are up to the same sort of confiscation.

By the way, if you’re thinking this is just a question of finding the right kind of politicians to solve the problem, you’re going to be disappointed. Remember the ‘there will be no Carbon Tax’ promise? Well, the President of Cyprus was only elected three weeks ago, and promised deposit taxes wouldn’t be part of any plan to bail out the banks. You never know what you’ll get from a politician.

Reuters reports that Cyprus’ President initially stormed out of negotiations with the IMF, EU and ECB when they demanded a tax on depositors’ funds. But he quickly changed his tune when faced with the bankruptcy of Cyprus’ two largest banks by Tuesday, after Monday’s bank holiday.

Now the bank holiday has been extended to Thursday, which really means indefinitely, because the bailout plan wasn’t passed by Cyprus’ parliament.

If we wrote to you about deposit confiscation, bank holidays, bank runs, and all the rest of it a few years ago, would you have laughed it off? Would it have seemed absurd?

Well, suddenly stuffing cash under your mattress seems a whole lot less eccentric. Suddenly, owning physical gold outside the banking system looks smart.

Nickolai Hubble aka +Nick Hubble
The Daily Reckoning Weekend Edition - +Daily Reckoning Australia 

REAL ESTATE

New Developments on whether you can get your Mortgage Cancelled

Our recent articles about this opportunity have really thrown the cat amongst the pigeons. People affected by the crisis have sent in their thanks, feedback, criticism and remarkable stories.

One couple that emailed were a victim of the kind of manipulation the video exposes not once, but twice. Both when they got their initial loan and when they refinanced. They only found out because the banks sent them the proof by mistake.

But we’re just getting started. Soon, anyone in Australia will be able to find out if they can get their mortgage cancelled too. Read more...

Should you manage your own investment property?

One of the most important decisions to make when you buy an investment property is whether to appoint a professional property manager or manage the property yourself.

More than three quarters (77%) of landlords have their properties professionally managed by an agent, or have done so in the past, according to The Australian Landlords Panel 2012.

Both options needed to be carefully considered before making a final decision that is right for you.

Do-it-yourself property management can appeal to some investors, who may see it as an easy way to save money.

However continue reading...

Western Australian Seniors in Housing Crisis!

Advocacy groups say Western Australia's seniors are suffering the worst of the rental crisis.

With our ageing population and a population influx, they say more affordable housing is needed now.

WA is facing a seniors housing crisis continue reading...

SME

Local investors backing Australian start-ups

Australian start-ups looking for funding no longer have to head overseas to find investors, with a new program to raise $5 million for local start-ups being launched recently.

Online start-up creator Pollenizer has launched an Information Memorandum, aimed at raising dollars from continue reading...

Small Business Commissioner turns up heat on government departments to pay small businesses promptly

Australia's Small Business Commissioner is putting pressure on government departments and agencies to settle accounts with small business suppliers promptly.

In a speech to the NSW Business Chamber, Commissioner Mark Brennan identified cashflow problems as one of small businesses' main gripes. Read more...

Australia’s Business Tablet Market Set To Explode In 2013

The use of tablet computers among Australian businesses is set to increase by at least 50 percent in the next 12 months, according to a new survey from market research group Roy Morgan. However continue reading...

We hope this edition has been helpful and that you will be "richer" for it! :)

Until next time dear readers...

MARKETS, REAL ESTATE AND SME

Welcome to another edition of Markets, Real Estate and SME. We trust you have had a good weekend. Many of you may have been fortunate enough to spend time at the Melbourne and Brisbane Young Entrepreneur "Unconventions", held by The Entourage and MBE Education. I will be attending the Sydney Unconvention this coming Saturday, for those of you who have not yet registered for free tickets, time is running out! 

Check out the trailer for the Unconvention and get some insight from Jack Delosa, Andrew Morello and +Ruslan Kogan about starting and growing a business!



MARKETS

Kris Sayce’s Money Weekend Digest: 16 March 2013

Written on 16 March 2013 by Kris Sayce

Energy: Dance Dance Revolution

This one’s a little left field compared to how we usually cover energy stories. Nonetheless it makes a fascinating case for alternative ways of creating energy.

First, let’s get a basic understanding of Piezoelectricity. If you’re wondering what the heck that is, in short, it’s the energy created by stress applied to certain solid materials…it’s electricity from pressure (vibrations).

But if we (Sam) may now digress ever so slightly. The Dutch love a good nightclub (can vouch for this as our family heritage is Dutch). And what does one do when typically at a nightclub? Dance.

Believe it or not, some creative Dutch designers from Studio Roosegaarde have pieced together dancing at a nightclub and piezoelectricity! They call it the sustainable dance floor.

The idea behind it is the dance floor vibrates from the dancing, which in turn creates energy to power the lighting and stage equipment. We think harnessing the power of ‘the boogie’ and the ‘Gangnam Style’ would be the best ways to really get the power pumping.

What this really means though is that everywhere we move we create vibrations and energy. Vibrations and energy when harnessed in the right way can lead to a vast array of power gains and efficiencies. This type of experimental work also shows us that there are people from all different aspects of industry looking at ways of solving some of the world’s big problems.

Maybe the future isn’t about just one way of solving our energy and power problems. But hundreds if not thousands of different ways being used together to be more sustainable and energy efficient.

Gold: Will Gold or Shares Do Best in 2013?

What has gold done since we wrote to you in last week’s Money Weekend? Er, not much.

And quite frankly we’re not convinced it will do much in the near future. Whether that’s days, weeks or months we can’t say. But what we can say is that it’s surely testing the patience of ‘fair weather’ gold investors, i.e. those investors who only bought gold because they expected to make quick gains.

The fate of the gold price has even sparked some discussion around the office. As you’ve probably read over the past couple of weeks, your editor is concerned that gold is behaving just like any other electronically traded asset.

What we mean by that is the vast majority of people who buy and sell the gold exchange traded funds (ETF’s) have no interest in ever taking physical delivery of the gold that underlies the ETF.

Heck, most of them probably aren’t even sound money advocates. Just in the same way that many investors buy and sell shares without really caring about what the company does.

But my old pal, Greg Canavan (editor of Sound Money.Sound Investments) isn’t so sure. He says there are still plenty of people buying gold for wealth preservation…a kind of insurance. In his latest weekly update he showed two charts comparing the performance of the US S&P 500 and the gold price. We’ve reproduced them below:

S&P 500

Source: StockCharts.com

US Dollar Gold Price

Source: StockCharts.com

Greg says about these charts:

‘The world’s largest stock market index has gone nowhere over the past 13 years. And everyone’s talking about a new bull market?‘In contrast…[the 20 year chart of gold]…looks much more like a bull market (in progress) to me. Yet the perception is that the gold bull market is over and a new one is beginning in equities. That’s market logic and crowd think for you!’

We like Greg’s point. But we also think that markets behave irrationally at times (some would argue they’re always irrational). It’s for that reason we believe stocks will do better than gold this year, next year, and possibly into 2015.

Of course, we could be wrong. And we’re not about to sell any of our gold in order to buy stocks. But we are using new cash flows in order to increase our share exposure – something we’ve advised investors do for more than a year.

That said, we’re keeping a close eye on the market for signs of a sell-off. Our in-house technical trader, Murray Dawes, says the market is approaching a key technical level right now that could have a big impact on the market’s direction for the rest of this year.

Technology: Science, Technology and Innovation at 345kph

We thought that as we hear the sound of 22, 2.4 Litre V8′s humming around near the office at an astonishing 18,000RPM we should give credit to the technical innovation that Formula OneTM (F1) has given us over the years.

Ron Dennis, Executive Chairman of the McLaren Group sums it up well:

‘Intrinsically, at its heart, it (Formula OneTM) is about technology and scientific innovation carried out under the extreme of time pressures, with a relentless fortnightly assessment of progress and performance.’

No matter where you look it’s pretty hard to find industry that brings together aerodynamicists, quantum mechanics, computer scientists, engineers, fluid dynamicists, fabricators, sports scientists and race car drivers.

So it’s no surprise that in an environment like this (‘an Intersection’ as Frans Johansson describes inThe Medici Effect) innovative and cutting edge technologies are born.

To outline a couple of the F1 breakthroughs you may have heard of:

Carbon fibre. In its early days companies such as Rolls-Royce used carbon fibre to create parts and components for their engines. But the first carbon fibre monocoque (structural skin) was raced in 1981 by John Watson in the McLaren MP4/1. This was the first time a monocoque had been constructed from carbon fibre. To see the level of safety this gave drivers, have a look at John’s demonstration at Monza. Because of F1′s advances in the use of carbon fibre we now find it in everyday items like cars, bikes, prosthetics, planes, golf clubs and furniture.

‘Green’ Technologies. Surprisingly to some, more recent breakthroughs have been in engine and fuel efficiency. Next year the 2014 season will require all F1 engines be 1.6 litre (less capacity than a Toyota Corolla) V6′s. This is a far cry from 3 litre V10′s in 2005. Not only that, but the Federation Internationale de l’Automobile (FIA) has said along with the Kinetic Energy Recovery Systems(introduced in 2008) teams may now use pioneering Heat Energy Recovery Systems. These together will be a major factor in how the engine produces its total power. Without these ‘green’ systems, team effectively are running with their feet tied together.

So next time someone brings up the subject of how horrible F1 is for the world (these conversations usually pop up around Melbourne Grand Prix time) use those two simple examples. You might find yourself in the midst of a healthy debate on the benefit that F1 technology brings to us.

Further to this if you happen to switch over the TV to watch the race on the weekend, or are trackside enjoying it all first hand, have a look at the pit lane activity. Like a swarm of bees, all those scientist and engineers buzzing about are the true innovators of some of the modern technologies we often take for granted.

Health: Why Something So Bad Could Be Something So Good

There’s no doubt that cigarettes are bad for your health. Even pack a day smokers should agree on that. So what if we told you that there’s actually something good about a cigarette? (We aren’t condoning smoking cigarettes, and neither does the rest of this article provide sufficient reason to keep puffing away, or start. We hope you get that distinction.)

Over the last few years a number of studies (‘Smoking, nicotine and Parkinson’s disease’, by Maryka Quick at the Parkinson’s Institute is one example) have repeatedly found that smoking over a period of time significantly lowers the risk of developing Parkinson’s disease (PD). Compared with those who have never smoked, or smoked for shorter periods of time, the results are conclusive.

So is there something in a cigarette that provides the answer to slowing down, or even reducing the effect of PD in those diagnosed?

Scientists don’t know the answer to that yet. But thanks to the Michael J. Fox Foundation (MJFF), researchers at The Philipps University and University of Rochester Medical Center are having a really good crack at finding out. The suspicion is nicotine is the key to the PD problem. So with the backing of the MJFF a new clinical trial has been set up in the US and Germany. You can check out the podcast about it here.

What the trial is planning to do is test the impact of a simple nicotine patch on those in the early stages of PD. We won’t know the results of the trial for 12 months, but seeing as there is no current drug to hinder or decrease the impact of PD this is one to keep an eye on.

Mining: Welcome the New Breed of Tech Entrepreneurs

[Ed note: The following is adapted from the latest weekly update sent to Australian Small-Cap Investigator subscribers.]

Today we find ourselves at the beginning of another Space Race. But this time round it’s not governments, it’s private industry. It’s the commercialisation of space.

The real financial opportunities they see are chasing the abundance of resources and mineral deposits contained in the asteroids flying around the planet.

To give you an idea of exactly how big a resource is out there, in 1997 there were 33,000 known asteroids orbiting the sun within reach of earth. Today it’s over 610,000, as astronomers find more of these flying rocks.

Why does this matter? For a start, the team from Planetary Resources, where John S. Lewis, Professor of Planetary Science at the University of Arizona, has been consulting, claim one asteroid (only a few hundred metres wide) could contain more than 1.5 times the known world-reserves of the platinum group of metals.

Still it’s seen as the realms of science fiction. Some doubters say it’s crazy to think we could mine an asteroid for its resources. The doubters don’t see an economically viable reason to do it at all and they say the cost outweighs the benefit.

For instance, if a solid gold asteroid the size of the Melbourne Cricket Ground passed by the earth, even the possibility of someone ‘mining’ this gold would have a drastic impact on the gold price. This could make the prospect of mining the Asteroid’s gold a marginal business and therefore not worthwhile.

Now, this may still sound a bit ‘Star Trek’, but history confirms the speed with which crazy ideas become reality. The dedication is there and there are a number of competing firms. They all want to be the first to make space a commercial reality.

And it’s not just space. The idea of deep-sea mining is starting to gain traction too, and will probably happen before ‘asteroid mining’.

But anyway, what this means is you can expect the new Space Race to move just as quickly as the last. In the years ahead you’ll likely see space tourism lead to hotels in space (one company is already working on this) and from mining asteroids to mining and populating Mars.

Sound crazy? Maybe. But as we said above, sometimes the craziest ideas become the most successful.

By  +Kris Sayce and Sam Volkering via +Money Morning Australia 

REAL ESTATE

More houses getting sold in 2013 (Please note your editor would not buy an investment property in Victoria or South Australia for that matter during the current market cycle)

MELBOURNE real estate has turned over more than $6 billion since January 1.

According to the Real Estate Institute of Victoria, total sales from January 1 to March 13 have been valued at $6.1 billion - $900 million higher than the $5.2 billion sold in the same period last year.

This equates to an extra continue reading...

South Australia's top 30 property bargains revealed

THE state's top 30 property bargains have been revealed and your future dream home might just be going for a song.

Real estate analyst SQM Research has identified the top 30 most heavily reduced South Australian metropolitan and hills properties now on the market.

The research shows that continue reading...

Cash flows into global property market

The amount of money moving into the higher-yielding global property market could reach $1 trillion for the first time since early 2007, before the financial crisis engulfed the world.

The global property investment market experienced a modest 6 per cent rise in activity during 2012 with volumes reaching continue reading...

SME

Support to young entrepreneurs is out of touch (Though not an Australian article, this is relevant to all young entrepreneurs)

Outdated perceptions that entrepreneurs are ‘isolated, highly driven, risk taking mavericks’ are putting off some young people from starting up their own businesses, according to a report published today by the RSA.

Pointing to figures released by the Global Entrepreneurship Monitor, Disrupt Inc found that whilst 9.5 per cent of 18-24 year olds say they intend to start a business, only 3.6 per cent are actually doing so.

The report, supported by the Royal Bank of Scotland Group, concluded that whilst ‘valiant steps’ have been taken to support young people (via schemes such as StartUp Britain and Business in You), the language used by the enterprise support industry alienates some young people and puts them off starting a business. Read more...

Gillard's penalty rate promise a "kick in the guts" to SMEs: Industry leaders

Irate business groups across Australia have slammed Prime Minister Julia Gillard's announcement yesterday confirming penalty rates are here to stay.

Gillard said the Labor Party will legislate to protect penalty rates for weekend, overtime and public holiday work. The push comes as her public support has begun to slip ahead of September's election.

Penalty rates are a big issue for small business, with Fair Work holding reviews into penalty rates in the retail and hospitality industries. Read more...

Australian SMEs not using the cloud, or are they?

Australian small business owners who say they are not currently using cloud computing may, in fact, be doing just that, according to a new study which indicates that SMEs might just be lacking a real understanding of cloud technology.

The study, conducted by small business financial management solutions provider and publisher of QuickBooks, Intuit, reveals that continue reading...

MARKETS, REAL ESTATE AND SME

Hello dear readers and welcome to another edition of what's important in Australia here on Generation Y Investor. The week has been filled with interesting news, political polls, pathetic sports scandals and disgusting media. I refer specifically at the 7 News ads which keep showing the last moments of a pursued and murdered woman from Melbourne, "7 News brings it to Australians first!". Have they no tact? The poor victim's family doesn't need to see that every half hour while watching the television. 

But lets get back on track. I hope you find the following 'stimulating'.


MARKETS

Once again some eye opening reading from the team at +Daily Reckoning Australia via +Greg Canavan 

A Crazy Warning Sign for BHP and CBA Shareholders

As far as we're concerned, the most interesting thing to happen this week is the fact that the Commonwealth Bank (CBA) now has a market capitalisation equal to that of BHP. Or at least we thought it did after glancing at this article. Which just goes to show you shouldn't believe everything you read.

Because BHP is dual listed (in London and Sydney) it has two separate market caps that combine to produce a total capitalisation of around $190 billion (around $115 billion in Sydney and $75 billion in London). CBA on the other hand has a market capitalisation of around $113 billion.

Although we can't find the article now, we did read a few weeks ago thatCBA's market cap is larger than the combined capitalisation of all the banks in Germany. If it's true it's another warning sign to go with Murray's far more scientific signal.

We like crazy warning signs like this. It's the sort of thing you can look back on in years and laugh about. Like, 'Yeah, can you believe the Commonwealth Bank was once worth more than all of Germany's listed banks combined?'

Even though the market values the two companies only slightly differently now (see below), it values CBA much higher, and BHP much lower, than it did a few years ago.

That's interesting in itself. Both companies benefitted from China's growth, although BHP received the benefit first and CBA later as the proceeds from Australia's raw materials sales flowed through into higher national incomes and a continuing demand for debt.

At the heart of this 'benefit' is iron ore...a bubble which popped in 2011/12, reinflated in late 2012, and is currently giving off ominous hissing sounds. The market knows this, which is why it has marked down the value of BHP and other iron ore miners recently.

But it doesn't see any link to the banks. While BHP trades around $36, well below its high of $50 reached in 2008 and 2011, CBA is at record highs around $70.

Is it justified? Let's do some comparing...

BHP mines raw materials from around the globe. It focuses on mining very large, low cost deposits of iron ore, coal, oil, gas, copper, and to a lesser extent nickel and aluminium. It's capital intensive and its profitability (which is basically the productiveness of its capital) is dependent on the vagaries of global commodity prices.

The CBA mines 'customers'. Its aim is to provide services to those customers, either by providing debt, insurance or investment management. The CBA is also a highly capital intensive business, but it relies on a leveraged balance sheet to generate returns to shareholders (the providers of 'equity' capital).

On 31 December, 2012, BHP had equity capital of US$67 billion. According to consensus forecasts for 2013, the company should generate a profit of US$14.1 billion on that equity. A simplistic calculation of BHP's return on equity then, is about 21%.

That's a pretty decent return for such a large company. It's why the market values BHP's equity at a premium. That is, the market value of $190 billion (or about US$186 billion) is 2.78 times the value of shareholder equity. In other words, BHP trades at 2.78x 'book value'.

Turning to the CBA, it had $42.8 billion in shareholder equity at 31 December. According to estimates, it should generate a profit of $7.37 billion in 2013, for a 17.2% return on equity. Although not as high as BHP's, that's a decent level of profitability too. Because of this the market values CBA at 2.64x book value.

So, breaking it down, the market values BHP at 2.78x equity value because it generates a strong return on that equity of 21%. It values CBA at 2.64x equity based on its return of 17.2%.

Does that tell us anything? Well, simplistically, it says that by buying at current prices and assuming forecast rates of profitability, the implied return you're getting from BHP and CBA is 7.55% (21/2.78) and 6.52% (17.2/2.64) respectively.

In other words, BHP is cheaper than CBA. But it doesn't take into account franking credits and as you know, one of the reasons the banks are in favour is because of their dividends and franking credits.

Adjusting for that, there's probably not much difference between the two companies from a valuation perspective. That is, they're as equally as expensive as each other. The implied return is poor based on the risks, and it assumes high rates of profitability that we don't think will persist into the future.

Both companies have played the China card, and both have done well. But that is in the past. We think a far more turbulent future for the Middle Kingdom awaits. And because of this, we would ask for much higher 'implied returns' to compensate for that risk. Right now the market doesn't agree. But when it does, you'll see much lower share prices.

Regards,
Greg Canavan
for The Daily Reckoning Australia


REAL ESTATE

Modest property growth forecast for capital cities in 2013

Australia's property market is in recovery mode but there are still some hurdles ahead, a new report reveals.

The latest RP Data Capital Markets Report revealed "a broad-based recovery'' in capital city dwelling values.

While values had dropped continue reading...

New laws to speed up sales in Australian property markets

New laws in Australia and overseas may potentially boost local housing markets, with Chinese investors given more incentive to look down under for their next property purchase.

This month, the Chinese government announced a proposal to step up the enforcement of capital gains tax on home sale profits and also continue reading...

You'll get burnt on luxury apartments, Moss warns

Macquarie Real Estate founder Bill Moss has sounded warning bells for the owners of luxury apartments or lifestyle properties, saying he questions how those who own such assets as investments can cover their expenses.

"Anyone holding a luxury piece of real estate should think very carefully about renting," says the real estate veteran, who built the Macquarie real estate empire into a $23 billion-platform before he left the investment bank in early 2007.

"The reality today, where the world is in its economic cycle, (is that) people continue reading...

SME

Is the NBN good for all small businesses?

I’m a strong advocate of the need for Australian households, businesses, not-for-profits and government bodies to have widespread access to super-fast broadband. And I can’t wait for the NBN to be rolled out to my home and office.

However, as much as there will be many positives from this type of service, there will also be costs and a fair degree of pain for some parts of Australia’s small business sector.

A few years ago continue reading...

National Small Business Summit to address key issues

The 2013 National Small Business Summit will focus on driving policy and building relationships that benefit small business owners. 

The Council of Small Business of Australia (COSBOA) will host a discussion with industry representatives, senior politicians and bureaucrats about key issues facing small businesses in the run-up to the Federal election.

“We need to make sure that continue reading...

Local venture capital industry 'dead', says entrepreneur Matt Barrie

Internet entrepreneur and Freelancer.com chief executive Matt Barrie has declared the venture capital industry in Australia dead, and fears the brain drain to the US will accelerate.

Mr Barrie said funding from venture capital firms for technology start-ups has been in drastic decline over the past three years, showing signs that continue reading...

Until next time dear readers...