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...

MARKETS, REAL ESTATE AND SME

Dear readers, I trust you have had a pleasant weekend so far and I hope you find today's Markets, Real Estate and SME informative and interesting.

MARKETS

Why the Stock Market is Like a Deer in the Headlights (Click on title to view original article)

 By +Nick Hubble +Daily Reckoning Australia 

The daily debate between our office's bulls and bears continues. Dr Alex Cowie, Greg Canavan, Dan Denning and Kris Sayce all agree and disagree with each other about where the stock market is headed.

The discussions and email chains are getting longer and longer. To be honest it's getting old. The flyovers of the Melbourne Grand Prix's acrobatics planes make for more interesting background noise.

The reason you shouldn't listen to them is that they're all wrong. And they're all right too. The simple truth is that the stock market as a whole is going nowhere. It's like a deer in the headlights. A few percent up, a few percent down. We'll show you just how flat it's really been below.

There are only three ways you can make money in a market like this:

1.        You can pick a specific part of the economy and punt big, like Dan Denning is doing on certain shale gas stocks;
2.        You can actively trade distributions like Slipstream Trader Murray Dawes; or
3.        You can get paid to wait by investing in dividend paying stocks.

What makes bear markets such a brilliant time to invest is that you have such an interesting choice of strategies. Every type of personality and investment mentality is represented in those three choices.

Strategic thinkers like making targeted bets. Traders keep busy picking off opportunities on the long and short side. And patient investors who have better things to do with their time can collect cash.

In a bull market, everyone should make money simply by having their money in the market. It's a bear market that sets us apart.

But with Wall Street partying over new all time highs for the Dow Jones index, how can we be in a bear market? Well, adjusted for inflation, the US stock market is still down more than 10% from its 2000 and 2007 highs.

Source: WSJ

And even though the market may be at an all time high, it's still within what Murray Dawes calls a 'widening distribution'. If we understand Murray's theory correctly, chances are the stock market will be heading back down again soon. Here's what the widening distribution might look like going forward, if it continues:

If the Widening Distribution in the Dow Continues

Source: Yahoo Finance, Nick's Imagination

As you can see, there's a whole load of ups and downs, but in the end the market just keeps going sideways. To an investor, that's frustrating. To a trader like Murray, each one of those moves is an opportunity to profit.

In the end, despite all the ups and downs, the market is still going sideways. Until it experiences a proper breakout from this distribution, buy and hold isn't going to work for a diversified portfolio of growth stocks. And there are plenty of reasons to believe Wall Street's new highs aren't a proper breakout.

Chris White of Dewiler compared today's economic indicators to the last stock market peak in 2007:

•          GDP Growth: Then +2.5%; Now +1.6%
•          Unemployed: Then 6.7 million; Now 13.2 million
•          Food Stamp users: Then 26.9 million; Now 47.69 million
•          Fed's Balance Sheet: Then $0.89 trillion; Now $3.01 trillion
•          Debt as a Percentage of GDP: Then ~38%; Now 74.2%
•          Total US Debt: Then $9.008 trillion; Now $16.43 trillion
•          Consumer Confidence: Then 99.5; Now 69.6
•          Stock Market Volatility Index: Then 17.5%; Now 14%
•          10 Year Treasury Yield: Then 4.64%; Now 1.89%
•          Gold: Then $748; Now $1583
•          NYSE Average daily volume: Then 1.3 billion shares; Now 545 million shares
•          Dow Jones Industrial Average: Then 14164.5; Now 14,304

In other words, the economy is about half as good as it was in 2007, but the stock market is at the same level. If the US stock market halved to reflect what's going on in the real world, that would bring us back to the bottom of Murray's widening distribution. By the way, Murray would mention that this is the most likely outcome, but not the only possibility.

Back to what you should do about all this.

To be honest, a combination of all three investment strategies we mentioned is the ideal portfolio. For most of your portfolio, you should be in dividend paying companies that give you a return no matter what happens to the wider stock market.

While those stocks go up and down, you can calmly collect the cash they pay you to own them. You can also apply some 'punting money' to making specific bets in stories and investment opportunities you believe in. Right now, shale gas, gold stocks and biotech are on the lists of the office's analysts.

But what most people are missing is the ability to be a little more active. If you can turn the stock markets toos and fros into profitable moves, imagine how that changes your investing outlook. Here's a real example.

Back in 2009 and 2010, the Aussie stock market was moving sideways just like the American one is now, but on a smaller scale. Most investors were frustrated their stocks were going nowhere. Dividend paying investors sat pretty and there were plenty of small scale success stories that made punters money. But overall, things were pretty dismal.

Meanwhile, Murray Dawes identified the widening distribution. In April 2010 he made a bet that certain Aussie shares would tumble back to the bottom of the distribution. His subscribers captured the fall represented by the last arrow on the right below.

ASX 200's Widening Distribution in 2010

Source: Yahoo Finance

Imagine making money while the stock market tumbles.

Rather than imagining it, why not give it a go? If the US market turns back down to the bottom of its distribution, Aussie stocks will likely follow. While there's a metaphorical deer in the headlights, why not have venison for dinner?

Nickolai Hubble.
The Daily Reckoning Weekend Edition

REAL ESTATE

Buy an Investment Property, find $30 million worth of art included in the deal for $2,500...

Two friends who bought a bungalow together as an investment property could soon be millionaires after discovering art worth $30 million in the garage of the New York home.

Thomas Schultz and his friend Larry Joseph bought the Long Island home in 2007 with plans to renovate and sell it, CBS reports.

The men also paid an extra $2500 for artwork that the family of continue reading...

Best spots around the country to buy and sell property revealed...

Buying and selling property is no mean feat, with where and what to buy among the most crucial decisions.

New research from Australian Property Investor reveals the hottest spots around the country, using a combination of the areas most searched for on realestate.com.au and the lowest number of days on market.

In New South Wales continue reading...

China scouts for joint ventures

A delagation from China's $48 billion state-owned investment holding company, the State Development Investment Corp, has travelled to Australia to meet representatives of superannuation funds, property trusts and other institutional investors to explore potential co-operation opportunities with Chinese property investors. Find out more...

UBS-SDIC, a joint venture between the state-owned

SME

Australia's top 30 female entrepreneurs 2013

Meet Australia’s top female entrepreneurs, they are smart, focused and risk takers. Many have built their businesses from scratch and together they generated $6.452 billion in revenue last year.

There are some names you will recognise on this list like continue reading...

Small food stores face fiercest competition

Of all small retailers, competition is toughest for businesses selling food and groceries, Roy Morgan Research reveals.

55% of small food retailers in Australia—such as grocers and convenience stores—report that competition affected business performance in the last 12 months. This is 23% points higher than for small businesses across all industries continue reading...

Australians ranked no. 2 for Entrepreneurship

Australians are the most entrepreneurial in the world after the United States, with nearly 11 per cent of adults starting a new business.

This is according to research compiled by the Queensland University of Technology's Australian Centre for Entrepreneurship and the Global Entrepreneur Monitor, which also found that most entrepreneurs started a business due to a "perceived lucrative business opportunity". One in five started out because of a lack of alternative work.

The study also found that eight per cent of women set up businesses in 2012, the highest figure amongst developed countries. Additionally, 40 per cent of female entrepreneurs recognise new business opportunities and believe they possess the skills to run a business.

Source: D & B Small Business

WATCH THIS SPACE!

We are excited to announce that in the coming week we will be posting our first Gen Y Entrepreneur highlight! Thanks for your support and enjoy the rest of the weekend. Until the next time dear readers...

Australian Start-ups - Pay Attention...

I was fortunate enough to go to a Startup Ideation Bootcamp last night in Sydney, which was held at Tank Stream Labs, one of Sydney's co-working and entrepreneur communities.

The event was held by the Founder Institute,  an early-stage startup accelerator and global launch network that helps entrepreneurs create meaningful and enduring technology companies. 

There were probably about 25 entrepreneurs who turned up for the event, of which for 90% of them it was there first time at a startup networking evening. The age of the average attendee was probably around 25 years old, mostly full time employees, ranging from different industries and backgrounds.

The event was free and presented a great opportunity to network with fellow entrepreneurs, industry peers and mentors a like. The focus of the evening was to look at the process of elimination when it comes to 'ideas', establishing who would be using your product and service, identifying the actual problem it would be solving and identifying your "secret sauce!".

Tom and Ben from FI then put the attendees to the task of creating a "lighting pitch", which consisted of pitching your business proposition in less than 60 seconds while incorporating some of  the points mentioned earlier; identifying your company, what it is developing, who would be using your product and/or service and what it would be solving through it's "secret sauce".

Try and condense your whole business or idea, with those points, in a few sentences ...Not as simple as you may think right?

It was a great night, presented some exceptional opportunities and I would recommend to anyone considering a startup to go to one of the Founder Institute's events. You will meet like minded people, entrepreneurs with established businesses and other industry contacts from the 'startup scene'.

Thanks for a eye opening evening guys!
 +Founder Institute

Julia Gillard cites concerns, not evidence, to back crackdown on 457 visas

Does this ring any bells with regards to our comments yesterday?

View the original article here

BEN PACKHAM The Australian  March 05, 2013 9:42AM 

JULIA Gillard says her crackdown on foreign workers is based on anecdotal "community feedback".
The Prime Minister, who has presided over the biggest yearly increase in 457 visa approvals in the past 15 years, blamed the former Howard government for leaving a working visa system “riddled with rorts”. 

She said people were complaining about missing out on jobs to foreign workers but was unable to provide examples of where this had occurred.
“I and members of parliament in the Labor team do hear concerns from people about them being ready to take a job, with the appropriate qualifications, and not getting a go,” Ms Gillard told Sky News. 

“We make policy based on evidence, but community concern is there. People have raised examples and of course, when we get that kind of feedback, we should respond.”
 She said the Coalition wanted 457 workers to be a “mainstay” of Australia's immigration system.
Opposition Leader Tony Abbott accused Ms Gillard of stoking fears about foreign workers.
“I tell what we will never do,” he told SBS.
“We won't run around the place demonising foreigners the way the Prime Minister has sought to do over the last 24 hours.” 

Ms Gillard said Mr Abbott's words rang hollow. 

“This is the man, who in the run-up to 2010 campaign and almost every day since has been out in the community ... trying to raise fear,” she told Sky News, citing Mr Abbott's use of terms such as “peaceful invasion” to describe a surge in arrivals of asylum seekers by boats.
Immigration Department figures reveal the number of 457 visas approved in the 2011-12 financial year was 125,070, a 52.3 per cent increase on the previous year, with employer groups saying the growing number highlighted the genuine demand for skilled labour.
Business groups have warned against any further tightening of 457 visa rules.
“Any over-tightening of the system would carry real economic risks,” the Australian Industry Group's Innes Willox said yesterday. 

The Migration Institute says politicians should focus on the facts around the program and not engage in a slanging match ahead of the September 14 federal election.
“I just think we need a steady mind and calm conversation going on around it, and not pitting Australian workers against some of these overseas people,” chief executive Maurene Horder said.
“That's the thing I'm a little bit alarmed about - that we don't develop a political bunfight for the purposes of an election."

MARKETS, REAL ESTATE AND SME

Welcome to another edition of Markets, Real Estate and SME, the Australian news-filter that provides you information with regards to your financial future when investing in Australian Real Estate, Markets and Small to Medium Enterprise. We offer occasional opinions on the subjects we post about, the views of which should be taken in context and represent the view of the author only. We have no political affiliation, but will be providing articles relating to politics, especially considering the upcoming federal election and how the government influences your financial future. Enjoy!

REAL ESTATE

Hope rises for property market on yet more solid auction sales

Analysts are growing more confident of a sustained recovery in the property market following yet another strong weekend of auction clearance rates, with over two-thirds of residential properties selling at auction in Melbourne and Sydney.

However... continue reading...

How to score an investment property at a bargain price

HERE'S how professional investors ensure they pay the best possible price for a property.

Auctions: Auctions can be a great place to find a bargain but they can also be a great place to get caught out and pay well above the odds.

They key is to continue reading...

Don't wait for fixed rate loans

Most of the first-home buyer incentives have gone, but some determined young purchasers have found a way to fix their place on the property ladder.

Industry insiders say current low rates are just the carrot on a stick to give uninitiated buyers confidence -- and fixing them for one to two years could seal the deal.

L Janusz Hooker, LJ Hooker deputy chairman, said now was the time to continue reading...

MARKETS

"The heart of the matter, in today's context, is that the people running the world's financial systems are thieves." - Words from the article below. I can't agree more!

Monday, 4 March 2013 - View the Daily Reckoning Australia's home page here
Delray Beach, Florida – Melbourne, Australia
By +Dan Denning

• What would a clown make of Australia's finances?

• The Sequester: Paul Krugman's worst nightmare...

• Plus, reckoning with the fringy cyber experiment that threatens the lifeblood of the State...

From Dan Denning in St Kilda:
--Today's Daily Reckoning begins the week with a difficult task: dismissing the muddled thinking that passes for conventional wisdom in order to focus on the heart of the matter. The heart of the matter, in today's context, is that the people running the world's financial systems are thieves. As such, their idea of wealth is, at best, confused. At worst, they have no idea what wealth is, which would explain why they keep adding more debt.
--But let's deal with some facts first. It's a fact that China's official purchasing manager's index expanded in February. It read 50.1, according to the China Federation of Logistics and Planning, and anything over 50 indicates an expansion. It's also a fact that the February reading was lower than the January reading. Cue the nerves about the strength of China's expansion.
--It's not a fact that the China PMI is at all useful for investors. It's a survey. And there's no telling if the survey of China's purchasing managers produces accurate information about what's going on in the Chinese economy. And anyway, in causal terms, the PMI survey is secondary. In the world we live, the first cause of all growth is credit expansion.

--Australian investors worried about China's PMI should pay more attention to Chinese house prices. Some of those prices are rising 'excessively fast,' according to China's State Council. The Council warned banks to raise interest rates and down payments, especially for second homes and investment properties. It's worried that a property bubble is bad for social harmony.
--This is always the issue with excessive credit growth. The money has to go somewhere. The banks that take advantage of low central bank interest rates tend to put the money to its quickest use: inflating property prices. This happens at the commercial and residential level.
--China would prefer to have a more orderly flow of credit into fixed assets and public infrastructure. But you can't always get what you want, even in a command economy. And for Aussie investors hoping that China's credit growth flows directly into industries that demand commodities, there's no guarantee that resources will rebound.

--By the way, we know that both Alex Cowie and Greg Canavan have staked out their respective positions on this China issue. They have different positions, which is what happens when thinking people disagree. But it's a mistake to say you're either a China bull or a China bear. That's simplistic.
--The issue here is whether Chinese credit growth can be channelled into productive investment. If it can't - because there's too much credit growth - it's a bubble. If it can, well then it can. But this isn't about being a bull or a bear. It's about the real rates of return on investment in China and whether the investment boom is driven by investors or speculators.
--You can't blame Chinese speculators for buying extra houses, though. You have to beat inflation somehow. And what's happening in China is happening the world over: investors are pouring money into asset classes that can help them beat inflation or at least own something of value.
--Take US stocks. The Dow Jones Industrials are again trading at over 14000. The S&P 500 is prepared to make an attack run on 1600. Weary cash, tired of sitting on the sidelines waiting for something of value to come along, is off the bench and into the game. And the game itself is at an interesting turning point.
--Let's bring your attention back to a chart we published a few weeks ago. It's the gold/Berkshire Hathaway 'B' shares ratio. It tells you how many Berkshire 'B' shares it would take you to buy an ounce of gold. We've been using it as a way to measure the strength of stocks and the weakness of gold, and to identify turning points. Have a look.

Productive Businesses vs. Gold

--The lower the ratio gets, the stronger Berkshire's 'B' shares are relative to gold. If you wanted to translate that into economic and investment terms, you might say that the lower ratio goes, the more willing investors are to takes risks on stocks that can produce real wealth instead of buying gold as a defensive way to preserve real wealth.
--The ratio has declined 22.3% since we first looked in May of 2012. It was 19.88 then. The gold price is actually about the same now as it was in May of 2012. What's changed is that Berkshire's 'B' shares have rallied from US$82.22 to $102.25. Stocks and risk - or the flight from inflation - are beating gold.
--A caveman chartist could draw a nice crude trend line from 2004 to now. It would find 'support' right around 14. By 'support,' we mean that the gold price would start to get stronger. Since 2002, gold has gained on stocks. When you multiply the current share price by fourteen, you get $1428.70. That would be a ten per cent decline from gold's current price at $1580.
--We 'like' that level because it would clearly shake out all the weak gold hands and seriously question the conviction of the bulls. You don't get durable rallies until all the selling has been exhausted. But for the record, the ratio could just as easily return to 14 with a rally to $112.85 in the 'B' shares and a stable price.

--But what's this? Are we really constructing short-term forecasts on the basis of an unproven indicator? Is this really a secret signal for when to buy gold or when to sell stocks?
--What we're really trying to measure here is public perceptions of real wealth. Central banks have pacified the public into a stupor by inflating stock prices. This gives the impression of real wealth creation. But it's only inflation. Real wealth comes from producing more, not paying more for assets and calling yourself rich because you can afford it with debt.
--But all performance-enhanced stupors eventually wear off. And when they do, the investing public can't help but see things for what they really are. The ratio above tells us that when the gold price goes below $1500, people will see it as 'cheap'. When the S&P approaches 1600, investors will realise its expensive, given the weak growth in the US and the huge support the Fed has given the market.
--It's easier to see this process play out in politics, and much more entertaining. A start-up political party led by a retired clown won 25% of the vote in Italy's recent elections. This must be applauded as a big upgrade in the calibre of Italy's political class. Clowns are merely clever buffoons. Politicians are dangerous psychopaths.
--The clown in question, 64-year old Beppe Grillo, is performing the jester's role admirably. He refuses to form a government with either of the major political parties. And because he's a jester, he can say things to the ruling class that most people wouldn't dare utter.
--For instance, Grillo says that if 'conditions do not change' Italy 'will want' to leave the euro and take up the lira again. He points out that Italy must renegotiate its $2.5 trillion in debt, which it can never repay. He says that, 'Right now we are being crushed not by the euro, but by our debt.'

--Italy cannot devalue the euro to make its debts more bearable. The Germans control the value of the euro. The Italians do not. Even a clown knows you cannot beat the Germans at a game like this. And even a clown knows that adding more debt to the problem will not solve it.
--But the young voters who supported Grillo in a rush of exuberant adolescent defiance are now being overwhelmed by their idealistic desire to 'make things better'. Viola Tesi, a 24-year old member of Grillo's 'Five Star Movement' started a petition on-line asking him to save Italy's 'gentle revolution' and not waste her vote.

--Oh dear.

--Ms Tesi is still under the illusion that her vote matters. She's still under the illusion that in a modern democracy, the people have inalienable rights and that those who govern are accountable to those who vote. She's under the impression that the political system can be reformed from within by well-meaning students and the clowns they support.
--She's going to be bitterly disappointed, but such is life. Italy's politicians are engaged in a giant game of pretend, just like politicians in America and here in Australia. They pretend that the debts incurred are payable and that more government is the key to more economic growth. They either pretend this, or genuinely believe it, which is even worse.

--It's not an Italian problem. It's a misunderstanding of wealth problem. For instance, here in Australia Treasurer Wayne Swan has assured us all that the economy will be just fine because there is $187 billion in capacity expanding investment in the pipeline for 2013. He says $105 billion of that spending is in the mining industry and $63 billion in 'other industries'.
--This is presented as evidence that the mining boom isn't over, and even if it is, other industries will come along to support the economy in its time of need, and the government in its time of deficits. It is a nice tidy political and economic narrative. But it's unlikely to play out the way the Treasurer expects.

--Investment booms - big increases in cap ex - are much closer to the end of the commodity cycle the beginning. You get a rush of investment by firms hoping to crank up production in order to take advantage of higher prices. You get marginal firms banking on higher commodity prices spending on projects that can only work when prices are high.
--Commodity prices have already begun to fall. The cap ex in the pipeline doesn't indicate a longer boom. It indicates the end of the boom. The government has to tell it otherwise because it took advantage of booming commodity prices to raise the level of structural government spending. Now, with the revenues disappointing, the deficits are set to blow out even more.
--A clown would absolutely love to comment on what happened to Australia's public finances during the commodity boom. The country spent most of the boom running larger deficits and adding to the public debt. And because of the way government spending works, the higher base for public spending will be permanent, even though the revenues from the commodity boom were cyclical.

--The added trouble with all this new public debt in Australia is that it doesn't build anything productive. That's why you can be sure that between now and election in September there will be repeated calls for Australia to have a Chinese-style infrastructure boom, especially if it involves channelling money from the superannuation system into high-cost projects.
--Or, Australia could go the American route and buy an army of death drones. Your editor spent most of Sunday at the air show down in Avalon. America's military might was on full display, which is impressive for a country supposedly undergoing a budget crisis. Apparently the Pentagon didn't get the memo.

--There was an agile C-130 doing a touch-and-go on the runway. And there were four F-18s screaming through the skies over simulated explosions. And there was the titanic C-17 cargo plane spinning like a top, 180 degrees of rotation, in order to turn around and take off. And of course, there was the world's most expensive fighter plane, the F-22 Raptor, which sent the crowd into shivers of delight on a hot Melbourne day.

--But our favourite aerial vehicle of the day, by far, was the one you see below. It's the US Navy's new MQ-4C Triton. It looks a bit like its Air Force cousin, the more famous RQ-4 Global Hawk. But even though it has the same air frame, the Triton is designed for what the Navy calls 'Broad Area Maritime Surveillance,' or BAMS. It will have a sensor array allowing it to spot objects on the surface of the ocean in a 360 degree field of 'vision'.

--Your editor gave it the big 'thumbs down', but not because it's an ugly design. Because it doesn't have a pilot, we're assuming the Triton has room for a bigger sensor 'package' - electronic equipment that can pick up signals. Or it could be the above-mentioned radar. As a design, it's a cross between the head of the aliens in the Alien saga...and a cute beluga whale.
--In fact, that contrast just about captures the contrasting narratives around drones (or pilotless aircraft, as the Pentagon prefers). The soft and cuddly story is that they can improve border security and public safety by monitoring for 'threats' on a continuous basis. They are cute but formidable, like a Beluga whale.

--But let us not forget that drone technology is always migrating towards the lethal. That's the alien death aspect of the technology, and it's already familiar to anyone living in the tribal regions of Pakistan, or in Afghanistan and Yemen. Lest we forget.
--Your editor gave it the big 'thumbs down' because we can see drones becoming the un-manned gladiators of the modern world. Right now, President Obama can give an extra-judicial 'thumbs down' to anyone he deems a terrorist and an enemy of America. The drones do his bidding, without the oversight of the legislature or the people.

--But it will only be a matter of time before drone technology is democratised and commercialised. Pretty soon you may be able to start a petition at change.org to have your annoying next door neighbour killed by drone strike. If you get enough 'likes' on your Facebook page or 100,000 or more people to sign your petition, the Pentagon may be compelled to take your neighbour out (for a fee, of course...drones aren't free like healthcare).
--The democratic distribution of death is a great distraction from the plutocratic theft of wealth. The idea has legs. But perhaps it would make a better game show, though. Hmm. We'll think on this and get back to you tomorrow. Until then...

Regards,
Dan Denning
for The Daily Reckoning Australia - +Daily Reckoning Australia 

SME

Jobs ad rise for a 2nd consecutive month

Job advertisements rose in February to their highest level since October 2012, a leading employment survey says.

The ANZ Job Ads survey, released on Monday, showed the total number of ads was up continue reading...

Retailers' cries about online are a 'furphy'

SHOPPERS are flocking to online websites with almost $13 billion spent last year.

But it is domestic retailers rather than international websites that are the biggest winners with almost 75 per cent of goods purchased bought from Australian-based companies at an average price of just $60, according to the latest research.

National Australia Bank chief economist Alan Oster said this exposes as a "furphy" the cries of unfair competition from continue reading...

Gillard rejects business call to relax restrictions on foreign 457 work visas

JULIA Gillard has delivered a stern rebuke to calls by business to loosen restrictions on foreign workers, saying the 457-visa scheme was "totally out of control" during the Howard years.

On the second day of her blitz of marginal electorates in Sydney's western suburbs, the Prime Minister challenged the NSW government to submit a detailed plan to construct the WestConnex Motorway or forgo federal funding of the road, which would connect the M4 to the inner-city.

Asked about the government's recent crackdown on alleged abuse of foreign temporary work visas, including reducing the number of applications that can be made under the scheme and requiring businesses to demonstrate a genuine skill shortage in their area of operations, Ms Gillard said continue reading...

I would like to point out something with regards to the previous article which I am sure many of you may be thinking too. Focus on limiting the illegal immigrants entering our country, thus relieving the Australian Tax Payer of the burden of expensive 'humanitarian' expenses; especially considering we need to rebuild the detention centres every other week. At least 457 holders are paying taxes and for private health care. The government should stop showing the people entering our country the legal way in a negative light. If the system is being abused, the problem lies with the regulation thereof, not with the majority of applicants.

Until next time dear readers, we bid you adieu!

Do you have Entrepreneurial DNA?

By David K. Williams, CEO of Fishbowl - view the original article here, courtesy of Forbes.com

What does it take to be a successful entrepreneur? 

Plenty of opinions abound that if you’re not a 20-something young Turk with 100 hours a week to burn and an outsized ego, your chance at a thriving startup is gone. Then we spotted the admission test to the Founders Institute training program (www.fi.co). 

Founders Institute is the creation of serial Silicon Valley entrepreneur Adeo Ressi. In 3 years the early-stage startup accelerator has helped to launch 650 companies in 39 cities in 5 continents.

How do they know you’ll succeed? Founders Institute has been testing its applicants – 15,000 of them – since 2009, to assess which personality and aptitude traits match up with revenue growth and market success. So what kind of personality traits will mark your startup firm for success? Which will doom you to failure?

Here’s a fun tidbit for all of us “old dog” entrepreneurs: experience counts. What’s the ideal age to start a company? Thirty-four. In fact every year of age continues to increase your chance for success up to 40, but your odds don’t diminish thereafter. Let’s hear it for the world’s gray-haired entrepreneurs!

Now for the personality traits that predict your success: High fluid intelligence—not your IQ, necessarily, but your ability to apply known rules to new problems. A high degree of openness is helpful. Are you willing and able to challenge the norms? Moderate agreeableness is helpful. Can you balance cooperation and antagonism? Are you generally warm and considerate, but with the ability to be straightforward and firm when needs be? The best founders exhibit these flexible traits.

What are the death knell traits? Not surprisingly, they are:

Excuse making

Emotional instability

Narcissism

Deceit

Predatory aggressiveness

There are always exceptions. But the traits you see below have proven to be the statistical norm. To test your own aptitude, check the full list of traits in the following infographic, or pay a visit to Founder Institute at www.fi.co. The organization has scheduled 20 events in 2013. Enjoy!

Additional reporting for this article provided by Fishbowl President Mary Michelle Scott.