Just one of the many great companies I have identified over the years - Xero Ltd (NZE:XRO)

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In Jan 2010 I recommended a NZ stock called Xero. Based on the Google Finance chart it was $1.64. Anyway, 3.5 years later its $17.64 and worth $2 billion dollars, and its NZ's largest listed company apparently...that's hard to believe. Normally its hard to find such stocks in a small market like NZ.
Anyway I wanted to convey the appeal of managing your own money, and dumping the 'dumbed down' investor belief that you should passively outsource your money to some fund manager who takes you for a commission. Here is the recommendation. There are few sectors which offer that scale of profits. Mining is one of them; online services is another, but that is generally a sector that does not need money. Mining needs money, and it pays nicely. Now is good timing for gold, and a good time to prepare for industrial minerals. Companies like MLX are good examples of the types of company, but you wait for the right time for these companies. Let me explain how to do it - start with Global Mining Investing.
At the time I was less than enthusiastic about NZ Windfarms (NZE:NWF), but thought that they might be worth a punt at 22c. Today they are 7.5c, though if I invested, I am sure I would have long abandoned that one. The reasons it was not a good option:
1. It was investing - always a less scalable option given the high capital cost
2. It had a major strategic partner who as a controlling shareholder could probably care less about capital optimisation
3. It was competing with China
4. Lack of local subsidies for wind
5. The problem with Resource Management Consent - I believe matters are improving in this respect
6. Not much growth in electricity demand - but then incremental capacity additions are well-suited to wind
7. The fact that grid stabilisation is currently not well-suited to a strong reliance on wind, particularly with the under-capitalised NZ grid, though I suspect that problem has since tipped in the other direction.

The reasons to like it were:
1. Prospects for technological innovation
2. Strong local support for wind
3. Appealing local market conditions for wind
4. The possibility of new wind subsidies

I note that Oceana Gold might be a stock to look at because its high cost, so has leverage to gold price incease, but I doubt it has a good resource base to interest me..so I'll steer away from it. I'll stick to the deeper 'Australian' fish bowl.

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Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Wanganui - the best property value in NZ

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The latest property affordability survey results place Wanganui first in NZ as the most affordable for living. I have lived in Wanganui for the last 3 years. We bought when the NZD was 0.53-0.55 to the USA, and that rate is now $0.80. We expect it will be fairly stable at these rates for the foreseeable future. NZ has healthy exposure to food exports, albeit premium product. We expect some trade off in volumes and prices, and otherwise a soft economic outlook. Not as bad as offshore, and we see monetary policy (i.e. yields) as a weak influence on exchange rates.

If you'd like to know more about Wanganui, take a look at this article in the local newspaper.

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Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

NZ - The way to boost "innovation nation"

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Niche industrial player sees the opportunities to provide high value technological services to foreign markets. Laznatech is merely one type of industrial innovation to be found in NZ, and there is room for many more. This is the type of innovation culture that NZ needs to promote. So you might ask how it can go about that:

1. Provide a more encouraging culture at home to attract creative foreigners; not least all those NZ expatriates who might have left for good.

2. Reform the education system to make it more 'externally focused' like Australia's, and more critical thinking.

3. Encourage external relationships in trade and personal interests.

4. Encourage local govts to set up region or national-based hubs in major trading nations to promote trade, familiarity and cultural exchange. I look at NZ efforts at this, and its poor in execution. i.e. Wanganui, my town, has a sister city relationship with Toowoomba in Qld, and some small town in Shizuoka, Japan. The problem with this strategy is that its 'boring' sameness, not interesting 'differentiation'. Why would they come here, and why would we go there. These relationships we defined by their proponents, who as individuals, happened to like living in Wanganui. This fails as a community stretegy. Its success was subsidised by its proponent, then unthinkingly supported by the state. I would suggest Hanno should drop its relationship with Toowoomba because its a competitor, not a prospective partner, and drop its relationship in Shizuoka, and adopt one with Hanno, Saitama. Why? Hanno is likewise a small town, but its on the edge of a big city (Tokyo). There are many factories there. Another good option is Mito, north of Tokyo, close to the airport. Do the same in India, and you just might turn Wanganui into a future IT hub, developing call centres, and VOIP technologies for pertinent industries. Expect technology costs for such centres to come down in future.

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Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

The outlook for the NZD

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This story highlights the positive short term outlook for the NZD. The reality however is that the EUR, USD and JPY are sinking ships and we will be looking at stronger rates for NZD and AUD for a long time yet. The current inflation is not going to die. That is 'cost of living' inflation, and this is going to see the hard currencies do very well. Australia will do even better than NZ in the long run, though in the short run, we can expect Australian agriculture to be hurt by floods. NZ will benefit.

I have not looked at the short term chart...but I take it from the article cited that 78c is a recent resistance.

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Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Wanganui has a great outlook

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An article in the Wanganui Chronicle cites real estates saying that foreigners are taking a growing interest in NZ property. There are compelling reasons for taking an interest in NZ....though also some negatives. The positives are:

1. Economic reform - there are some efforts to improve the administration of the economy. i.e. some cost cutting. Some streamlining, like reforms to the Building Code.

2. Local government elections - locally this can be an important issue for expanding population, or retaining people. For instance, Wanganui is one city which would benefit from a turnaround in population. It is a full-service town losing people to the major cities and abroad, unless the new govt can create jobs. It has a better chance than most towns. Elections are being held in Oct-2010.

3. Commodity prices - NZ is a major producer of commodities, and thus it is a pretty hard currency in an era when China and India have an insatiable demand for them. This will tend to support the currency...as long as consumption is controlled, or interest rates are raised to curtail a blow-out in spending.

4. Rural areas offer lifestyle values, but also significant improvements in services. The depth of entertainment in Wanganui is restrictive, but there are a great many good cafes, a full range of good restaurants, e.g. Chinese, Korean, Japanese, Indian, Thai, Greek, Turkish, Italian, and of course 'meat and potatoes' NZ cosine.

There are however negatives:

1. Population stagnant: The reality is that in recession a lot of NZ'ers are going to Australia in search of jobs, and increasing integration has limited capacity to create 'manufacturing jobs. NZ does however have the ability to export services to Australia, so few NZ'ers need to move to Australia. There is already a 30% wage differential between the countries, so NZ has a growing competitive advantage. At some point this will prove a strong advantage to NZ.

2. Nothing else comes to mind. There is more..there n

The implications for NZ are clear. At some point it will do very well. We might even see a lot of expatriates return. These rural towns will attract more people. People will find value in the rural acreage as lifestyle blocks and subdivisions; however there is also value in cities like Wanganui. I need only compare the prices in cities like New Plymouth and Stratford to Wanganui. Wanganui is cheap because of depopulation. The time will come when it will start to grow its population. The city has a large 'service catchment', it is well-situated between Auckland and Wellington, it is a weekender from Wellington, it has a lot of resource upside from oil & gas and iron ore, as well as agriculture. It is one of the more appealing towns in NZ. It has an 'undeserved' reputation for gangs. I've lived here 2 years and saw the first person who even resembled a gang member last week.

The town is lovely, the people are friendly, and the beach is ok. The city has the nicest gardens. I kind of wish you don't come because I might have to compete for the use of the park services. It is a windy place, but that makes it 'fresh' for a breezy walk around town. I'm only complaining because I'm from Australia, and I still like it.

Other great value I feel is a place like Port Stephens to Taree in NSW, Australia, and maybe Tasmania if you don't mind being isolated from mainland Australia.

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Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Important news for Australian & NZ investors

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If you are a foreigner interested in investing in NZ, you should read this, particularly if you are an Australian or a NZ planning to go to Australia. Most people will not have the breadth of knowledge to generate these insights. It encompasses a mix of finance, economics, mining engineering, metallurgy, geology, politics, and a touch of critical thinking....and its all sugar coated. Anyway, what type of analyst looks 20 years into the future. Yep, there are not too many futurists around.

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Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Xenophobia in NZ - Chinese owned farms?

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According to a NZ Herald article, NZ is displaying the same 'xenophobia' that we have seen in other countries over the years. Noteworthy cases are Japan and Australia. It is apparently the ultimate effrontery to have people or enterprises from another country to buy property in your country. In the 1970s to 1980s Australians were worried about Japanese companies and individuals buying up a lot of properties on the Gold Coast. In Hawaii, Americans were wary of Japanese buying up housing as well, sending prices higher. Apparently it was forcing people out of homes. The 'property boom' collapsed and most of those Japanese were caught out selling their properties at record low prices. It was a coup for Australian and US investors. For NZ, the Chinese have perhaps a better case to make. They will probably end up buying productive dairy assets and selling them as lifestyle blocks to another set of foreigners in 20 years. Good deal? That ultimately depends on the opportunities explored and seized by the NZ investors who sold the land. What will they do with their money? Build more profitable businesses for NZ? We don't know. We might look at the financial literacy of the people concerned. I must say this is a current time of high prices for milk, and Chinese demand is taking off. Is this a time to sell dairy farms? Probably not. So why don't those concerned buy the assets? No money? I guess its just not their time, or maybe they never got the chance.

Anyway, its a nice rationalisation ! The Chinese are prepared to pay 40% above market price for the asset. Maybe they will export any produce as raw material. Is that your concern? That's because it makes sense to process the stuff in China because that is the market, and they have the lowest processing costs in the world.

Fearful of selling off the NZ farm? Seen it all before. Selling off under-performing assets, and NZ farming is not terribly profitable, releases NZ savings to invest in other businesses with greater profit potential. If you are lucky you might get another google, but at least you will be giving another NZ'er a chance to try. So my for freedom, when you can strike down a sellers 'good deal', or disable his ability to try. Farming is the 'old NZ', you need to wake up to yourself and allow people to invest in the new.

There are some reasons for concern. It could see the dairy cows switched to China in future. That is the nature of markets though. NZ ought to be investing in higher value businesses....not 'ancient' farming practices, nor even labour-intensive modern practices. That ship has sailed. We ought to do it as long as it is competitive, then we ought to be either buying farms in China, or building niche technology and web-service businesses.

That is not to say Chinese businesses ought to be allowed to buy 'open slather' in NZ. There ought to be restrictions on the nature of the enterprising. You don't want NZ enterprise to be competing with Chinese state (possibly subsidised) enterprises. If this was the case, then I think some requirements are needed. i.e. The buyer has to dilute Chinese government equity to less than 20% within 2 years. The reality is that such investments are not technologically strategic, and China will greatly improve its farming anyway, so NZ'ers ought not to be prevented from selling out.

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Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Australians retiring or moving to NZ

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I have been living in NZ now for a year. In the process of being here we have bought a home in a rural regional town with a complete range of services. I am 40yo, and have a Filipino partner with me, and we find the place rather idyllic. I am a writer, my partner does online product marketing. There is no question in my mind that if you are an income-earner, the best place to live is Australia; at least if you are earning money from the usual form of salaried employment. Those people earning foreign exchange (say USD abroad), then NZ makes a lot of sense because of the weak NZD, and the 4-year tax concession the NZ tax office gives to new immigrants with offshore income. I have written all about this in my NZ Property Guide. You can learn more by reading my property blogs, however the book offers a more comprehensive and detailed guide.

The biggest factors for retirees is finding the right climate. The big factors compared to Australia is the climate. The rainfall here is generally far greater than Australia so its mostly green, except where there is rain shadow effects. The biggest concern for some I think will be the hours of sunshine each year and the wind factor. If it is sunny it can still be miserably cold in NZ if it is windy. For this reason avoid places with too much wind unless you like being indoors. I also suggest buying a house with a sunroom for this reason. There are a lot of wind farms in NZ for a reason - and its not because they get huge tax concessions. In fact there are none. The wind here is reliably constant in places. So make sure you chose your retirement destination wisely.

It is not simply a place to retire. You can invest here of course. Just make sure you buy wisely and transfer money at the most opportune time. I am telling you this because you are about to get the best opportunity to buy property in NZ. People will rightly be concerned about the high prices for property in NZ. The fundamentals which have driven up property prices in Australia are the same for NZ. The difference is that NZ has less population growth and less growth in national income. For this reason, you need to target certain areas until property prices bottom. Another solution is to transfer money to NZ at the opportunity time. You can hedge your bets by buying certain stocks in NZ with favourable exchange rate exposure, e.g. Pike River Coal (PRC.ASX or PRC.NZX) exports premium metallurgical coal to Asia. It benefits from a weak NZD, so even if you move your money here, you can still hedge your bets by profiting from an increase in a non-NZD revenue stream. This stock happens to be at lows after start-up issues. see my discussion of this stock, but I suggest looking at other commodities related stocks in NZ.

NZ relativism needs to end

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New Zealand is lagging the world in terms of economic prosperity. Being an Australian living in NZ, I am surprised at the extent to which NZ is clinging to the prospects of catching up to Australia. Notwithstanding the importance of the Closer Economic Relationship (CER) and the proximity of the countries, and their similarities, it seems a bit myopic to focus on this one particularly small country, particularly from the point of view of public policy formulation.
In NZ constant comparisons are made with Australia - the latest one being the fact that national income per capita in NZ trails Australia by 34%. Whilst I can understand the appeal of Australia from the perspective of being a 'close market', I would suggest it might be a little too close in some respects. i.e. NZ is like Australia a producer of low value commodities. Why enter a competitive market for the same products where you might differentiate yourself overseas. Certainly I can understand the attraction of exports to Australia for NZ Small-Medium Sized Businesses (SMEs). They need to keep costs down and familiarity makes sense.
I am more concerned with NZ public policy makers trying to emulate the Australian 'success' because its not what it seems. Australia is enjoying a lot of economic prosperity simply because it has huge, world-class resources of minerals, which NZ does not. Australia is experiencing huge capital inflows by Chinese, European and US companies to finance mining projects, which will generate sizeable revenues for 50+ years.
Australia is making use of its competitive advantage. These large resources are close to the coast, Australia is close to Asia, and it already has established infrastructure to service these mines, including deepwater ports and rail linkages. There is the possibility NZ will find some large gas fields in future, but at the moment that is a 'pipe dream', and anyway Australian projects will likely seize the lions share of gas developments in the next few years because of resource security issues in NZ.
The right strategy for NZ is not to copy Australia because we can see there are some important differences between the two countries. NZ needs to get clever at developing its intellectual capital. Hopefully it will entice some of its expats to return home to develop businesses, or use those links to make connections in foreign cities. The reliance on low-value farm products has to end. Just $5 billion of NZ's $38 billion of exports comes from more sophisticated technological goods. NZ needs a Nokia-type enterprise. That is where the future of NZ lies, and here is one company making a great impression in accounting (business) services. The company is Xero , and its listed on the NZ Stock Exchange. It offers online accounting services to companies around the world. This is exactly the area which makes sense for NZ. I wanted to recommend this company because there are too few great stocks in NZ, and this is one which could make a great impression. I like Windflow Technologies as well, however this one has more leverage because of internet scalability.

Attraction of NZ property for foreign investors

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For NZ investors things could not be worse. Asset markets are collapsing, commodity prices are collapsing, the terms of trade are deteriorating, the national debt is at its worst. NZ has been there before. But now it finds itself there again. The NZ dollar has is already down 37%, and it looks like falling further to USD0.40 to match its previous lows set back in 1999.

For foreign investors and NZ exporters things could not look better. OK, its true that the marketability of food will get harder during a global recession, but one must remember that NZ has a currency advantage, even over Australian produce, where NZ brands are already well-established. For foreign investors, particularly the British who have enjoyed holidays in NZ, they will be well-aware of the currency advantages investing in NZ. They have been here for years. There are already a great many English living in NZ. In the last 10 years the number of Asian immigrants from Korea, China, Thailand, Malaysia, the Philippines and other countries has greatly increased the population diversity, even outside the major cities. Many large towns have Chinese, Thai, Indian and Turkish restaurants.

The timing for investing in city property is premature since these prices are still falling. I however I recommend investors buy a rural-based property to establish a base in the country. Some rural property is offering excellent yields and the very low NZD offers a superb opportunity to lock in a very attractive cross rate, as well as giving you the opportunity to mortgage your local home to purchase more property. Depending on whether you intend to live here, repay the loan from offshore income (which makes excellent sense), the benefits are readily apparent.

There are also compelling financial benefits for property investors, including ZERO capital gains tax, stamp duty, GST and transfer taxes. None on property! This will suit medium to long term investors depending on their investment objectives.