Complete rubbish from Michael Pascoe

Discussion in 'Markets & Economies' started by Big A.D., Jun 20, 2013.

  1. boyracer

    boyracer Member

    Joined:
    Mar 13, 2012
    Messages:
    417
    Likes Received:
    0
    Trophy Points:
    16

    Or maybe that will be the very thing that drives entrepeneurial spirit again in place of mere property speculation.
     
  2. Contrarian

    Contrarian New Member

    Joined:
    Dec 16, 2010
    Messages:
    676
    Likes Received:
    3
    Trophy Points:
    0
    Location:
    Australia
    I'm sure the desire will be there but I doubt there will be the borrowing capcity to match.

    C
     
  3. Big A.D.

    Big A.D. Well-Known Member Silver Stacker

    Joined:
    Oct 30, 2009
    Messages:
    6,278
    Likes Received:
    186
    Trophy Points:
    83
    Location:
    Sydney
    That's the exact opposite of what I was talking about.

    What you're describing is riding the trend in a rising market. There's nothing wrong in that in itself, but it's incredibly limited in scope and my point was that a nation of part time property developers and speculators isn't the same thing as having a healthy culture of business and innovation.

    A counter example: a few years ago an acquaintance of mine stumbled across a huge opportunity to expand his small start-up. He had been so passionate about his new business that he'd quit a job with a six figure salary to work part time in the industry so he could devote more time to growing his venture. The new opportunity required more capital than he had - not much in the grand scheme of things - but more than he could safely put in himself. He pitched the idea to nearly two dozen of his mates, all of them earning decent incomes. All except two turned him down because either they had sunk all their money into real estate and had mortgages to pay or didn't have any savings due to lifestyle choices (i.e. they'd pissed it all away).

    I was one of the two that put money in. That business has gone from the classic "kitchen table" start up to a multi-million dollar enterprise that employs 28 people. It will likely have 40+ by this time next year. We might be exporting by that time but at the very least we'll be taking market share away from the foreign-owned conglomerates that dominate the local industry.

    At the beginning I was also pretty very nervous because that money I invested could have been a very healthy deposit on a house for me to live in, but I ultimately went back to the best advice anyone has ever given me when I was starting my own business - "Grow some f**king balls" - and I put it on the table to back a guy I knew was so passionate about what he was doing that he'd work a 20 hour day and sleep on the floor of an abandoned sports club to make it happen.

    Having said all that, when I say "real entrepreneurship" I don't mean to insult you or big-note myself but I'm not talking about submitting a DA for subdividing a suburban block.
     
  4. Contrarian

    Contrarian New Member

    Joined:
    Dec 16, 2010
    Messages:
    676
    Likes Received:
    3
    Trophy Points:
    0
    Location:
    Australia
    What I described was rising property values which enables people to borrow against their property to start businesses or put their entrepreneurial drive into action.

    When property prices stagnate or fall this source of funding will be restricted.

    The definition of euntrepreneurship is irrelevant. Whether we're talking about small business, property development or multi million dollar enterprises they will all potentially suffer if the main source of funding has been to borrow against property which in a lot of cases it is.

    Not sure why you're so hung up on scale as being important. If I was a property developer doing millions of dollars worth of projects a year and employing 28 people would you consider me to be an entreprenuer? Probably.

    If your mate had fallen flat on his face in the first 6 months and didn't even attain the level of a sucessfull small business does that mean that he's not an entrepreneur? Of course not.

    Multi million dollar enterprises dont appear from nothing and as you well know they often start on the kitchen table. Scale is irrelevant in my opinion. What's important is coming up with an idea, acting on it, taking financial risks to follow a dream. This creates wealth and it creates employment and that is the issue here.

    C
     
  5. hawkeye

    hawkeye New Member Silver Stacker

    Joined:
    Nov 10, 2010
    Messages:
    2,929
    Likes Received:
    4
    Trophy Points:
    0
    Location:
    Perth, Australia
    The only reason there won't is because so much of the available capital in society has been leveraged to pay for more expensive housing.

    There are a whole lot of business opportunities out there and (usually) a whole lot of money looking for returns. Now if you juice one sector so it makes outsize returns through crazy capital gains you will have much capital go into that sector at the expense of many others. Sure, some of that can then be leveraged but you have to say the damage has been done at that point especially if the capital gains can't be sustained. And we know they can't be. Whereas many businesses out there that actually make stuff have sustainable business models. But why put your money towards one of these when you can go into property where the government will insure you get returns?

    And it gets even worse. Think of all the potential capital being put into precious metals. What society could do with at least some of that capital. The businesses that could be funded. But instead people are forced to hunker down and protect their wealth from a government trying it's best to steal it through the inflation game which is there largely to pump the price of property.

    I'd call all this madness but obviously there are people in Australia who benefit from all this. In fact, I would say Pascoe is one of their representatives, trying desperately to pump confidence into a system which he and his friends benefit from while probably also trying to scare people that it's the only option we have. Privileged class? In Australia? No, surely not.
     
  6. bordsilver

    bordsilver Well-Known Member Silver Stacker

    Joined:
    May 23, 2012
    Messages:
    8,717
    Likes Received:
    304
    Trophy Points:
    83
    Location:
    The rocks
    It'd be all well and good if many people that acquired capital from property actually used it to invest in other entrepreneurial activities instead of thinking they were a genius and simply used the paper gains to bring forward their consumption. All you have to do is see what all those people in the Investor's Club type products (particularly the "Property Millionaire's" sub-groups) do with their property wealth to see that on paper real estate wealth killed their entrepreneurship and the wealth transfer reduced other entrepreneur's chances at the same time.

    The whole modern wealth through real estate schlock is fundamentally inflationary and inflation also saps entrepreneurship as economic activity is moved into people fighting to get their bag under the inflation tap before others so that they can benefit from the siphoning.
     
  7. Contrarian

    Contrarian New Member

    Joined:
    Dec 16, 2010
    Messages:
    676
    Likes Received:
    3
    Trophy Points:
    0
    Location:
    Australia
    Quite possibly. I know I'd rather start a business now than invest in property. But its rising property prices over the last decade that have given me the capital to be able to do it.

    C
     
  8. Big A.D.

    Big A.D. Well-Known Member Silver Stacker

    Joined:
    Oct 30, 2009
    Messages:
    6,278
    Likes Received:
    186
    Trophy Points:
    83
    Location:
    Sydney
    And that comes back to my point that we've essentially painted ourselves into a corner where virtually the only way to raise capital is via tapping equity in real estate and people are only really interested in doing that to re-invest in more real estate.

    How many people do you think are there out there with a spare $200k of capital who'd put $20,000 into ten new businesses knowing full well that eight of them will probably fail, one will break even and one will make up for all the others and generate a healthy return on top?

    I'd bet it's a lot less than the number of people who'd just buy another investment property and maybe even do their own little version of The Block fix-n-flip routine.

    Like I said, that's not necessarily a bad thing in itself, but it creates a serious problem when we forget how to make money any other way.
     
  9. Contrarian

    Contrarian New Member

    Joined:
    Dec 16, 2010
    Messages:
    676
    Likes Received:
    3
    Trophy Points:
    0
    Location:
    Australia

    I agree 100%.

    C
     
  10. renovator

    renovator Well-Known Member

    Joined:
    Jan 20, 2011
    Messages:
    6,989
    Likes Received:
    83
    Trophy Points:
    63
    Location:
    QLD
    Unless your the one selling lol
     
  11. renovator

    renovator Well-Known Member

    Joined:
    Jan 20, 2011
    Messages:
    6,989
    Likes Received:
    83
    Trophy Points:
    63
    Location:
    QLD
    So a multi million dollar enterprise on paper it all sounds impressive but the profit margin is what matters . its obviously not great because your still whinging property is too expensive .From your post there is the entrepeneur & 2 investors .You can have a 100 million dollar business thats just keeping it head above water .Profit is all that defines a successful business.Have you been taking profit ?

    So you didnt tell us about all the guys who were buying property are they doing ok with it ?are they happy with their investments ?are they positive cashflow ? Are you positive cashflow ? or are you still investing it all back into the company ? until your making & taking profits its just a money pit with wages & overheads to pay
     
  12. boyracer

    boyracer Member

    Joined:
    Mar 13, 2012
    Messages:
    417
    Likes Received:
    0
    Trophy Points:
    16
    Reno ^^ - way to totally miss the point. Where in any of Big A.D's posts is he whinging (as you put it) about the price of property being too high cause he can't afford it? He is talking about the fact of high property prices killing entrepeneurship for people in general. A laudable concern as far as I and no doubt many others are concerned

    Of course, that does not suit your narrative so please do go on and continue to misconstrue sensible debate with your pointless contributions. It really is most illuminating.
     
  13. Contrarian

    Contrarian New Member

    Joined:
    Dec 16, 2010
    Messages:
    676
    Likes Received:
    3
    Trophy Points:
    0
    Location:
    Australia

    If you use your money as a deposit to buy a house and it goes up in value you can then access that equity to start a business, put an idea into practice, produce something etc

    If you use your money as a deposit to buy a house and prices stagnate or fall then all you've got is a house.



    C
     
  14. Big A.D.

    Big A.D. Well-Known Member Silver Stacker

    Joined:
    Oct 30, 2009
    Messages:
    6,278
    Likes Received:
    186
    Trophy Points:
    83
    Location:
    Sydney
    Without going into a huge amount of detail, I'm very happy with how my investment has performed and the guys who had all their capital in real estate are very disappointed that they didn't take the opportunity when it was presented to them.

    I know that because we still see them regularly and they roll out the same old lines about how they always knew it was a fantastic venture but, you know, couldn't put any money in because blah blah mortgage blah blah money tied up in a unit in Whocaresville blah blah...

    Yeah, I still whinge about real estate being over valued because I think it is over valued for what it is, and I'd still think that even if I had a spare ten million bucks in the bank and could buy any house I wanted to live in. I chose to put my money into a productive activity instead of indulging myself immediately with a very expensive consumer item and while that was pretty risky and very scary at the time, the chance to help build an awesome business and make a lot of money in the process was ultimately more attractive than just doing what everyone else does and become a slave to the banks for the next quarter century.

    And hey, the whole thing could still go pear-shaped and I'll lose the lot, but I'll still be proud of myself for having a go.
     
  15. Big A.D.

    Big A.D. Well-Known Member Silver Stacker

    Joined:
    Oct 30, 2009
    Messages:
    6,278
    Likes Received:
    186
    Trophy Points:
    83
    Location:
    Sydney
    To be fair on renovator, I've stated my views on real estate (negative ones) in other threads in the past and he does make very valid arguments about profits defining whether an investment is successful or not...

    ...however, from where I'm standing at least, ever increasing real estate prices has created an incredibly lazy investor class in this country and that's happened at the expense of more risky but ultimately more rewarding and more productive ventures.

    Put it this way: if you want to buy an existing business with a proven track record of solid turnover and healthy profits, no bank will lend you the money to pay for it unless you have real estate to put down as collateral. In fact, they won't even look at the financials (and I know this from personal experience). That is how risk adverse people are in this country - bankers aren't allowed to lend money to a good business because banks these days only know how to sell mortgages.
     
  16. Contrarian

    Contrarian New Member

    Joined:
    Dec 16, 2010
    Messages:
    676
    Likes Received:
    3
    Trophy Points:
    0
    Location:
    Australia
    And lets face it, returns from a sucessfull business can make passive property investment look pretty ordinary.

    C
     
  17. Contrarian

    Contrarian New Member

    Joined:
    Dec 16, 2010
    Messages:
    676
    Likes Received:
    3
    Trophy Points:
    0
    Location:
    Australia
    Which is why Pascoe is right. ;)

    C
     
  18. Big A.D.

    Big A.D. Well-Known Member Silver Stacker

    Joined:
    Oct 30, 2009
    Messages:
    6,278
    Likes Received:
    186
    Trophy Points:
    83
    Location:
    Sydney
    I don't agree.

    The higher house prices have risen, the less people have been inclined to take risks with new non-property related ventures.

    Investors and bankers will simply have to adjust their expectations if house prices do stagnate or fall because if that happens then it would indicate that something is seriously wrong with the economy. If that is the case then the problems aren't going to be fixed by property flippers, they're going to be fixed by people taking risks with new ideas.
     
  19. boyracer

    boyracer Member

    Joined:
    Mar 13, 2012
    Messages:
    417
    Likes Received:
    0
    Trophy Points:
    16
    I disagree with the bolded part. The ever increasing house prices indicates there is something wrong with the economy and them stagnating or falling indicates the economy is trying to right itself. I DO agree with the last sentence. House flipping is not the way to prosperity. Innovation is.
     
  20. bordsilver

    bordsilver Well-Known Member Silver Stacker

    Joined:
    May 23, 2012
    Messages:
    8,717
    Likes Received:
    304
    Trophy Points:
    83
    Location:
    The rocks
    Which is why banks get bailouts as it's people like Pascoe that peddle the line that credit money is essential to growth. How did those industrial revolution entrepreurs (of which there were many more than today) ever possibly manage to get money without a housing backed credit money economy?
     

Share This Page