Whingers, Losers, Xenophobes and Private Property

The fuss made by some over the possible sale of dairy assets to a Chinese Government owned company just shows how little some New Zealanders know about business, investing, commerce in general, how it all works and how it provides income for the country as a whole.

There is little negative about the prospect of the Chinese or any other foreign organization or business owning dairy assets or any other asset domiciled in New Zealand.

Money will flow into the coffers of the sellers and then that gets reinvested into future business, in this case lenders will receive the funds and this will give them the opportunity of lending that money out again.

These farms and assets bought in general will need New Zealanders to look after them, work within them and manage them. The company will pay tax, so will individuals. GST and other taxes will provide State income as well if you are worried at all by that.

The alternative to not selling to the Chinese or any other high bidder for an asset would be to seriously devalue that asset, any asset in its class and assets in general in this country. A case in point was Michael Cullen's last minute veto of the sale of Auckland International Airport [AIA.NZ] to the Canadian Pension fund in 2008. That particular asset is now worth roughly half the offer the Canadians made for it and the losers were the shareholders who forgo more than NZ$1.5 billion in profits that could have been reinvested in other stock exchange businesses.

Seriously, would you sell to an alternative lower offer to a high bidder for your car simply because you didn't like the genetic origins of that buyer?

It sounds dumb when you put it that way doesn't it?

Those that say the dairy industry is a "strategic" one and shouldn't go offshore or that the "Government" should buy these "strategic assets" miss the point entirely. These businesses are privately owned and as such Governments shouldn't have any say in such business transactions.

To allow this sort of intervention merely puts business in the hands of politicians and the political mood of the day and is no way to run a business let alone a country. It slow downs commerce, interferes with economic growth and provides an uncertainty for business when certainty is essential to a smooth running business and growing economy.

Free trade is also stifled by this head up the backside approach to business. New Zealand business has investment overseas and specifically in farms the world over. NZ Farming Systems Uruguay [NZS.NZ] owns many dairy farms in South America and in turn its majority owner, PPG Wrightson Ltd [PGW.NZ] has a cornerstone Chinese owner.

Any entertainment of such interference from State sanctioned knuckle draggers, who know little about successful business, simply devalues the value of private property rights and the right of the owner of an asset to do what he sees fit to do with it.

Private property rights and the upholding of them, ironically by the State, are one of the most important parts of a smooth running democratic society and it is essential that these rights are upheld at every available opportunity.

The refusal to allow dairy farms, other dairy assets and assets in general to be sold to the Chinese or anyone else for that matter is merely a symptom of xenophobia, the wish to maintain monopolies, in the case of Fonterra, and small mindedness of some New Zealanders who need to either read more widely ( or perhaps read at all) and do a little overseas travel to countries whose main inhabitants have a different skin colour to them.

Shame on you if you think this way.

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c Share Investor 2010

IPO Quality indicative of poor economy

The poor number of IPO's listed on the New Zealand Stock Exchange in 2007 reflect the lack of confidence that the business sector and therefore market investors have in the NZ economy.

This is a good indicator of where our economy might be going, considering share markets usually anticipate real economic factors months before they happen.

Michael Cullen's tax, spend and welfare splurge has finally come home to roost. His huge taxpayer funded surplus has meant Kiwis have used credit to buy consumer goods instead of the cash that is theirs and the Labour Government's contribution to the current finance company mess must be stated clearly.

The quality of some IPO's listed this year have left investors a little bit cold. Xero [XRO.NZ] the software company listed at over NZ$1 and now languish at around 70c, Burger Fuel International [BFW.NZ] listed at $1 and are currently getting grilled at .70c (up 5c today!!!) Pike River Coal [PRC.NZ] , the biggest IPO this year started trading at $1 and is now selling at just above 80c.

We have had several prospective IPOs canceled this year because of investor nervousness. One of them, AMP's listing of their Summerset Retirement Village unit has been canned but ING's Retirement unit will still be listed later this year, even though some of its directors have been involved in major business failures and losses for investors in the past.

The New Zealand share market is lacking a big IPO that would possibly kick off a new wave of investing. One remote possibility would be this countries biggest company, the Dairy giant Fonterra. There has been talk around the traps from time to time about this happening but nothing concrete or with any substance as yet.

It would make perfect sense to list Fonterra, especially now as the Dairy business is doing historically well, more investment is needed to increase capacity and listing would allow farmers to free up capital more easily than currently and using the proceeds to reinvest in their business, pay back debt or buy that new Holden or Ford.

IPO's can be a good indicator of how well the business community sees the economy going. The dearth of good ones in 2007 indicate that the brakes have already been applied to the economy.

Lets hope the impact isn't too hard.

The resumption of some good IPO's will be one indicator of a turnaround.

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