John Linton
I skim read the financial press this morning as usual and then started again and read it in a little more detail as the 'wall to wall' reporting of corporate disasters seemed even bleaker than usual. When the shares in the largest bank in the world fall to below $US1.00 there has to be time made for reflection:
http://online.wsj.com/article/SB123625477682739223.html
The Wall Street close of down another 4% seemed almost incidental to the disaster stories about Citibank, GM, IAG, GE and endless others. The fact that the two remaining 'strong' banks in the US were now reported to be in 'trouble' just rounded off the most dismal financial reporting day I can remember.
I didn't bother with the tech media after spending so much time on the financial press as money and investment futures are very much on my mind at the moment. As with most bad things and bad times there is usually an up side and one of the up sides is that as property prices fall buying properties, if you are able to, becomes progressively more attractive. At least that has been the case in the last few recessions in Australia - the best example I know is that we bought our current house at the depths of the recession that lasted from 1989 to the end of 1992 when we paid something less than 60% of the original asking price.
As I have made reference to previously in these meanderings we were looking to buy our own office (or rather a floor in a commercial building) in late 2007/early 2008 but decided against it because although prices had fallen quite sharply at that time it seemed to me they were going to continue to fall. That is pretty much what has happened and we are now, again sorely tempted to buy our own floor space to the point there is a sale contract sitting on my desk waiting to be signed as I write these words. While the sale price for a floor in North Sydney is almost 50% of the original floor in the CBD we very nearly committed to some 15 months ago I am almost certain that, 'bargain' that it is, prices of commercial real estate will continue to fall over the remainder of 2009.
I fully understand that my knowledge of finance and global economics is as close to zero as makes no difference but I, like any other adult, have to continue to make decisions that affect themselves, their family and in my case playing a part in the decisions that affect a small business that has employees, suppliers and customers who would be negatively affected by my input into decisions if they are more incorrect than usual. If I could find some positives in what I read daily, I would be overjoyed to do that. I don't seem to be able to find anything positive today or for quite a while.
The more I read sensible people's opinions the more I'm inclined to accept that we aren't just experiencing the failure of some 'overseas' financial systems but the failures of many other systems too. In fact it wouldn't be that extreme to accept that we may well be seeing the failure of 'democracy' in the ways we have perverted that description of our electoral and governmental processes. Now such a statement would be truly stupid until you remember that 'communism' spectacularly 'failed' and then totally fell apart only two decades ago and that showed that just because something has been in existence for a few decades or more doesn't mean its right or even that it has that much longevity.
Such doubts/views aren't very helpful when you are thinking of committing nearly $A2 million of your personal money to buying a commercial 'home' for Exetel. While it is undoubtedly a good idea in that it reduces the rent we are currently paying and gives us the opportunity of installing a commercial grade server room to, over time, reduce the co-lo costs we currently incur (by moving out of one of the to co-los we currently use). We can also provide a more useful work space layout than the current space that we have evolved by taking over three additional tenancies on the same floor as we grew. There are, prima face, many advantages in moving to our own owned premises......
.......except the current economic outlook, sensibly viewed with no hysteria nor unfounded optimism, is not good and it really is a case of just how bad is it going to be. We have already taken the huge risks involved in moving much of our back end processes to Sri Lanka and while the economics of that 'brave' decision are undoubtedly there and the results to date are very positive the concomitant risks and disadvantages are equally there 'hovering in the wings'. We have also committed to several directional changes to the fundamental business we have run for the past five years and while, again, they are sensible and clear cut in terms of sensibly looking in to the future they are taking a great deal of money and effort of which we have very limited amounts.
Our alternative is to stay where we are and the landlord has agreed to let us have the remaining floor space by re-locating two smaller tenants and allowing us to put in additional air conditioning to allow us to move our back up equipment from the current Powertel colo to a properly constructed server room in our current rented space. However, as Annette pointed out, it makes very little sense to invest $A150,000 in a modest server room in rented premises that will only do 'half the job'. So while my inclination is that incurring a major personal debt and then the hassle of a move is just more problems than we need right now there is at least one compelling reason to move.
So - some very tough decisions to be made over the next few days - just for a change.