Merry Christmas, Food's the Future, Happy to be Here
We started TBK Capital earlier this year and have received a very good response to the gap in the financial markets we’re looking to fill.
We started TBK Capital earlier this year and have received a very good response to the gap in the financial markets we’re looking to fill. See our website here
As far as raising debt is concerned, we've been concentrating on arranging loans for businesses - from SMEs and up. We go into the holiday season expecting loan settlements in January of $500,000 and $5 million.
The most interesting projects we’ve been involved with are those where we’ve been working with clients seeking equity – instead of, or as well as – debt. You can see some of these on our website here
Perhaps not surprisingly - with the subject receiving much media attention recently – the greatest response has been our client’s offer to manage Carbon Credits for forest owners. Their offer is to lease the forest in return for the Carbon Credits. This gives the forest owner a regular return without having to worry about all the volatility and contingent liabilities associated with the Carbon Credit regime. Only a limited area of forest is being sought, and at the rate interest is being received, this opportunity will be closed well before due date. You can see the offer here
We’ve also got several new opportunities in the pipeline which we’ll be announcing in the New Year.
The Global Outlook
It’s been an interesting year for the global economy. With the Capital Comment newsletters I’ve tried to give you my thoughts about where it’s all heading and what we’re doing. In summary, we’re coming into Christmas with:
- The European economy not looking good. The feuding governments of these diversified countries keep kicking the can down the road and who knows what will happen with the Euro. To see John Maudlin’s newsletter click here
- China – the saviour of Australia with its mineral wealth – is looking fragile with a property bubble looking more likely. See my June newsletter here
- But for all the bad news there are great opportunities in this part of the world. My November newsletter – Tough Choices, Big Opportunities dwells on this. To read that issue click here
Housing Looking Better
As I’ve always said, the residential market leads the economy and here it looks like it’s recovering.
I’ve just been talking to a friend who’s in the business of renovating groups of apartments and houses in the $300,000 to $400,000 bracket and seeing excellent sales. The banks are chasing first home buyers and finance in this area is relatively easy to get.
This is a great kick for the economy. As my friend correctly pointed out not only are people getting a chance to own their own house, the government is a winner too. The builders and the developer made money and pay income tax, the suppliers sold products, and the GST take from the difference between their buying and selling price on just one of the deals was over half a million dollars.
In the general residential market things are looking better too. The Real Estate Institute of New Zealand data on the New Zealand housing market for November 2011 showed 6,008 unconditional sales for the month, up 870 sales (+16.9%) compared to November last year. The November figure is 1,001 sales higher than last month (+20.0%) and rose by 4.3% on a seasonally adjusted basis. To see the news release click here
The Asian Crescent Moon
If you look at a globe of the world and the West Pacific Ocean, and think of New Zealand at the bottom of a crescent moon shape through Australia, Indonesia, the Philippines, China, South Korea and Japan, you would be right in thinking these are the places to be compared with the countries bordering the Atlantic Ocean. (Yes there are other growing economies like India. and parts of South America but I think you can see what I mean.)
And the reason why is food – or rather protein. In a newsletter I wrote in January 2010 there was a section headed “The opportunity for New Zealand – protein”. Following a discussion about the Chinese economy I said:
It’s not so much that there are so many people in China to feed; it’s their shifting diet habits that people seek as they move from the equivalent of “serfdom” to “lower middle class” so to speek. In a post from Daily Reckoning published last year, Chris Mayer speaks about “Food – The Trade of the Decade”.
He points out ”The world’s population has more than doubled since 1950 – from about 2.5 billion to 6.7 billion. By 2050, there will be more than 9 billion people on the planet. Almost all of this growth will occur in the emerging markets like China and India. And their populations will all be doing one thing, for sure – eating.
“After population growth, the second layer is the mix of food eaten, which is important. These undeveloped economies are becoming wealthier. Predictably, as people everywhere have done and continue to do when they have a little more money in their pockets, they change their diets. They spend more on food. The average Chinese person spends 40 cents of every additional dollar earned on food. In India, it’s about 70 cents of every additional dollar. What do they buy?
“They buy more meat, more fruits and more vegetables. Their calorie intake rises. That’s why the UN says we’ll need to boost food production by 70% by 2050 – a big task, given increasing restraints on water and quality arable land.”
And to remind us all opportunities exist at the worst of times he says “In the Great Depression, purchases for jewellery and clothing and the like fell by 50%. But purchases for food – even for meat – held steady. We’ve seen similar patterns in recent busts. In the Asian Crisis of 1998 –2001, the demand for food held steady, even while other markets collapsed.”
And where is all that going to come from? Well a large part will be from New Zealand and Australia. (Yes, our next door neighbours – when they get over their tunnel vision of their mineral wealth – have a huge agricultural economy too.)
Let’s make no apology for saying these are great places to be - now and in the future.
Our office is closed from the 23rd of December and opens on the 16th January. I’ll be in and out of the office over the break and can be contacted on mobile any time.
From all of us at TBK Capital – have a great Christmas and New Year.
Cheers
JP