05/12/2006 - 22:00

Straight talk from Nigel Satterley

05/12/2006 - 22:00


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There’s no doubt that Nigel Satterley is the man of the moment. He’s on top of his game at a time when his game is the central focus of almost anyone who isn’t running a mine.

There’s no doubt that Nigel Satterley is the man of the moment. He’s on top of his game at a time when his game is the central focus of almost anyone who isn’t running a mine.

Property is big news anywhere in the world, but for the past year it has been very big news here.

That’s why so many people turned up at the Hyatt last week to hear him talk about his career and how it has followed the ups and downs of Western Australia’s corporate fortunes.

Rather than basking in the glory of it, for which he could have been forgiven, Mr Satterley issued a warning to investors that things were overheated and some of the excesses of the past were creeping back in. It’s not just politics, it seems, where flashes of the 1980s can be seen.

He’s been making utterances along these lines in private for a while, but this time the warning was well and truly public, in front of 500 or more people at one of WA Business News’ popular Success & Leadership events.

It is pleasing to hear this level of concern from an industry leader.

It is very easy for those involved in real estate, or any other boom market, to become arrogant about success, as if it’s all their own doing.

The reality is that few people can pick a boom, or a bust, and the smartest operators are those who know their sector well, recognise when things are under or over valued, and have a long-term game plan to that gets tweaked to suit the circumstances.

Everybody knows that there is no way property in Perth ought to be selling for the same price as that in Sydney.

Some investors have already started making the most of that arbitrage. Others are overcommitting themselves at the top of the market.


Don't overlook the fundamental issues

Speaking of property, there’s an old adage that when an investment is the subject of dinner party discussion, it’s time to get out.

I’ve heard that line a few times of late, with the note that property was dinner party conversation in Sydney two to three years ago, then it was Melbourne and now it is Perth. Track the corresponding prices is the suggestion.

Of course, it’s not just property that works in this way.

I recall a conversation I overheard at Scarborough Beach in the summer of 2000.

Out seeking a few waves for a body surf, a poor swell gave me the opportunity to briefly overhear the conversation of a couple of fellow swimmers, both young and doing well from jobs in the trades.

Their discussion then led on to the share market and, in particular, ERG Ltd stock.

ERG was trading at or near its peak in those days.

Soon after that came the technology crash and this company, along with many others, has never recovered the ground that it lost in those months, when it became evident there was no paradigm shift in market fundamentals.

The message is, keep those ears open, whether at dinner or not – its all food for thought.


Boom provides a boost for graduates

Another booming sector is graduate salaries.

Our story on page 18 shows just how strongly those with a freshly minted university degree are positioned in today’s job market, especially if you have studied a discipline that takes advantage of the boom.

The big winners are engineers, who are making the boom happen on the ground, and financial services people, who are finding the capital to pay for it.

While, like any boom, this may not last forever, there is no doubt that this period is reminding companies of the value of investing in people, especially talented people.

It was interesting to note the level of recruiting activity by employers had stepped up markedly to match their new-found need for qualified people.

At many universities in Western Australia, the amount of spending on graduate recruitment activity had doubled in just one year, admittedly off quite low bases in some instances.

It is, without doubt, a tough time to be in the university business; but at times like these it shows how valuable these institutions are.

Let’s hope that the universities can capitalise on this new-found interest in their product and that longer, more sustainable relationships can be forged with corporate WA that benefits them both through the whole economic cycle.

Of course, when the boom’s over, much of this activity will be ended, much like the way advertising gets cut when a recession hits.


Afloat in listings, but who's leading?

The number of floats this year has been extraordinary, especially in WA.

While I am always hesitant to get too excited, the lion’s share of the nation’s 190 listings are from this state, marking a major step up in the number of ASX-traded entities operating out of Perth.

Of course, many of these will be small, and significant numbers will disappear when commodity markets tighten or the exploration budgets dry up.

While it’s great news for the corporate sector, there is one big question to ask: where do we find all the CEOs, key management and suitable directors for these companies, many of which have barely operated before the money was raised to float on the stock exchange?

Much of the administration, regulation and financial control is handled by an army of busy, and increasingly rich, part-timers who manage a portfolio of small companies.

But the actual job of running the real operations, and finding the field talent to succeed in exploration or marginal mining, must be a significant challenge.

Then there are the boards seeking the breadth of experience and independence required for investors to be made comfortable.

In my view, the talent pool can’t be deep enough to sustain such an influx of new companies, especially in the relatively transparent world of the ASX.

Good management and good governance have never been more useful an investment guide than they will be over the next year or two.


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