Friday, June 25, 2010
There seems to be very few comments from Craig Norgate in the media these days. Which is not very surprising of course, since his investment balloon burst in last year’s recession. An estimated one billion dollars of value apparently evaporated during his watch and severely affected the fortunes of his friends, business partners and shareholders.
The New Zealand Herald recently ran some very well researched articles on the misadventures of Craig Norgate in the market place. Columnist, Brian Gaynor, saw the cause of Norgate’s rise and fall due to making three classic mistakes. These were also made by corporate leaders in the nineteen eighties. As Brian Gaynor puts it, “they expanded far too rapidly with too much debt and not enough equity”.
The complex history of how this happened is beyond the scope of this article. However, it probably shows the danger of weak boards of directors letting charismatic leaders move companies outside prudent restraint and expose shareholders to excessive risk. Leaders with flair and imagination often need competent bean counters to keep them on the rails.
The nineteen eighties should have been a clear reminder that easy access to debt fuels the illusion of growth. Paper profits soon disappear when markets contract and the time inevitably comes to pay debts off. Even so, statements from farming leaders make it clear that Craig Norgate still has some mana in the rural sector. The fact he took huge risks is seen as entrepreneurial and farmers seem to admire people with guts who give things a go – even if the odds are stacked against you.
Even so, it has not gone un-noticed that his own personal finances appear to remain in good shape and suggests that his exposure to company collapses will be minimal. If that is the case, then like other corporate adventurers in the nineteen eighties, he will parachute safely out of the reach of liquidators.
Craig Norgate’s various roles with the Kiwi Co-operative Dairies company, Fonterra and PGG Wrightson were very lucrative and he no doubt has the means to rise again. New Zealand is losing its attraction for him and he has been making noises of moving overseas. I think is very likely that we will see the re-emergence of the Norgate Starship Enterprise “Going where no man has gone before”. No man prudent man that is, who likes to keep his money warm in his own wallet.
Hedging Your Bets
When Hamish parted the curtains in his front room, he could see the Jackson’s place on the other side of the street. Every night their house was a blaze of light and it appeared to him that they switched on every light bulb as a rude gesture of defiance against energy conservation. They were noisy too with their large teenage family coming and going at all hours of the night.
If Hamish was to get any sleep at all he had to use ear plugs to defend himself against the deep booming music resonating out of the Jackson’s old cars and stereos. To his ears it was jungle music. Primitive stuff that provoked undesirable impulses and headaches.
“Not surprising really,” he mumbled to himself, as he washed the dishes after getting hot water from a pot whistling on the wood stove. “Just look at the way they have the telly on most of the time. The poor kids are saturated with the propaganda produced by the false gods of mindless consumerism.”
“When the crash comes, I’ll take them out into the bush and re-educate them in the ways of our ancestors. They can then plug into something that is really good for them. A huge cosmic jigsaw puzzle is coming together as I predicted years ago. All the signs are there. A Holy War in the Middle East, terrorists attacking every Western country and AIDS spreading everywhere like the plague.”
Hamish was well prepared. His veggie garden would help him survive ok. It was so productive that he was able to fill his freezer and pack his garage with preserved fruit and pickles. He took pride in being self-sufficient and spent as little as possible on things he could not make or grow himself. He had such a low power bill that the power company even sent an electrician out to see if his meter was being bypassed.
One day, the power meter reader came unexpectedly to Hamish’s front door. He gave Hamish a new hand held device that the power company was trialing - called the ‘Brownlee Bingo’. He explained to Hamish that it could calculate power consumption and pay household accounts. “And what, might I ask, are those coloured buttons for?” inquired Hamish.
“Oh those ones take you onto the Energy Hedge Market. You can take a punt on the Australian Stock Exchange and invest your savings to offset increased power prices.” Hamish thanked the man and took this new technological marvel into his garden. His face was beaming like a miner who had struck gold.
“All my work will not be in vain!” he shouted. “I once thought that The System would collapse from outside forces, but now I see we are going to do it ourselves by ruinous gambling!”
Across the road, Moana Jackson called out to one of her sons, who was busy fixing his car on the driveway, “Hey Sam turn down your stereo will you. Poor old Hamish is having one of his fits again.”
Saturday, June 12, 2010
Don't Bank On It Bill
I was expecting to tackle Bill English’s mid term budget in this article and tell you how surprised I was to see low income earners get a tax cut along with the rich (I suspect a John Key influence in that PR masterstroke). No such luck, the furore over comments made by Bill English on the future of Kiwibank swamped my enthusiasm like a tidal wave.
There always seems to be a group of politicians around Parliament who despise community owned enterprises – no matter how successful they are. These days, state owned enterprises (SOEs) and co-operatives are an anathema to monetarist die-hards.
In their eyes, private ownership (foreign and local) is the only way to go to create prosperity regardless of plain evidence to the contrary - like stock market crashes and massive private enterprise credit frauds that threatened world wide social stability.
In New Zealand, SOEs and co-operatives seem to work very well in our mixed economy. I get a buzz seeing them successfully competing in the market place and assisting kiwi owned private enterprises. Kiwibank is one of them and I am now sad to see its ownership status threatened by Bill English.
It was set up to provide New Zealand owned competition for the Australian owned banks who grabbed over ninety percent of the banking market. Right from the start, Kiwibank performed brilliantly. It has almost repaid all of the Government sourced capital in dividends and most financial analysts agree that it has restrained Aussie owned bank interest rates and their administration charges.
Bill English claims that Kiwibank needs a lot more capital - but Kiwibank management and its Board Chairman, Jim Bolger, deny this. In 2009 it had 650,000 customers, assets of $10 billion, account holder loans of $7.7 billion and had an asset yield not much lower than its Aussie owned competition. In other words, it is well run and deserves its rapidly increasing customer base (passing 700,00 in 2010).
After a period of uncertainty, John Key has apparently decided against the sale of any part of Kiwibank, “as long as I’m Prime Minister”. Any plans to sell other state assets will be announced well before the next election. I wonder if Sir Keith Holyoake’s recipe for winning elections is influencing our Prime Minister?
Holyoake supported SOEs and championed rural co-operatives. New Zealand owned private enterprises prospered and home ownership rose to record levels. He managed Labour’s social reforms and the National Government took a nationalist approach to investment. In my opinion, these policies were popular and contributed to winning four elections.
In sharp contrast, Bill English led the National party to a record election loss in 2002. Obviously, the New Zealand electorate rejected his brand of politics and also those of his monetarist successor, Don Brash, in the following election.
I think a lot of John Key’s popularity comes from his ability to feel the shifts and mood of voter sentiment. Like Sir Keith, he knows he will need to neutralize the unpopular intentions of his colleagues if he wishes to win future elections.
Saturday, June 5, 2010
Stairways To Heaven
About seven years ago, it was announced that an American led team had finally worked out the basic structure of the human genome. I remember thinking at the time, “Well, that’s useful. We will now be able to begin sorting out medical problems caused by defective human genes. I might even take up the opportunity (suggested at the time), to one day finding about my own genetic makeup and ancestral origins.”
Since that announcement, I have hardly given the matter much thought. I was therefore quite surprised to see recently that the same team had created a functioning, man made DNA molecule. They inserted it into a living cell (after removing the cell’s own DNA) and successfully enabled the cell to grow, multiply and carry out the instructions given to it by the synthetic DNA.
This important scientific achievement changes the evolutionary game plan that Mother Nature has played out for millions of years. I have heard some Christian speakers explaining the mountain of evidence proving natural evolutionary changes by describing the process as, “evolution by design.” I can well imagine that many of them will be now quite disturbed to see humans getting on with the job without divine assistance in a laboratory.
Are we now able to play God? Should we stop mucking around with Nature? Dr. Craig Venter, who led the genome project and now the synthetic DNA experiments, has been reported to say that we should not be concerned about this issue or any other kind of scientific progress. He believes that most religions want to improve the life of mankind and scientific knowledge will do this. It all depends on how the discovered information is used and that is an ethical matter.
I needed to know more about this man, so I searched the Internet for more information. I came across a fascinating Youtube video, where Richard Dawkins, the famous science campaigner, interviewed Dr Craig Venter in his hi-tech laboratory (http://www.youtube.com/watch?v=3E25jgPgmzk). They chatted as they walked through some of the rooms that were full of equipment and busy staff members getting results from the many millions of dollars of government and private investment.
It was astonishing to see the amount of grunty computer power being used. One room contained computers that were the equivalent of thirty thousand PCs. What is even more amazing is that new machines coming in will cost less, take up less space and have ten thousand times the current capacity. In five years it might be possible to get a precise read out of your DNA for one thousand American dollars.
I am keeping my fingers crossed that I will be around when they can turn off the gene for aging and offer me another 300 years in a new body (minus a few imperfections of course). It remains to be seen however, if Dr. Venter’s research will be a double helix stairway to heaven, or as some religious commentators fear, a route in the opposite direction.
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