Category Archives: RICH PEOPLE

Palmer notches $200m court win against Chinese state-owned enterprise Citic Pacific

Clive Palmer has described his victory in the long-running royalties battle in the Pilbara against Chinese state-owned enterprise Citic Pacific as a “win for all Australians”.

Palmer was awarded around $200 million in damages and a further $200 million to be paid annually for the next 30 years by the Western Australian Supreme Court last week in the dispute over royalty payments.

The dispute stems back to dealings between the two parties in 2006. Citic had paid Palmer $US415 million as part of takeover agreement, which included two separate royalties, for the Sino Iron project.

However, Citic refused to pay the second royalty, causing Minerlogy to make the claim in court.

WA Supreme Court Justice Kenneth Martin ruled that Citic’s wholly-owned subsidiaries Sino Iron and Korean Steel pay Palmer’s Mineralogy the damages.

“This is a win for Australian law over Chinese Communist Government powerhouses who have wasted precious court time, resources and energy,” Palmer said.

“Many Australian companies have lost these battles because they haven’t been able to afford to fight them.

“For too long they have used their power to try and crush Australian enterprise and thankfully today justice has been served.”

Another hearing will take place this week to address remaining issues in the dispute.

Henry Sapiecha

Billionaire Mike Cannon-Brookes confesses to having impostor syndrome

The man in the baseball cap and hoodie may be Australia’s 17th richest individual but is scared of being found out as an impostor.

As a keynote speaker at TEDxSydney, Mike Cannon-Brookes  confessed he suffered from impostor syndrome and most days felt like he did not know what he was doing.

“Have you ever felt out of your depth, like a fraud, and just kind of guessed-slash-bullshitted your way through the situation, petrified that at any time someone was going to call you on it?” he said on Friday.

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“It’s not a fear of failure. It’s not a fear of being unable to do it. It’s more a sensation of  getting away with something, a fear of being discovered, that at any time someone is going to figure it out.

“And if they did figure it out, you’d say to yourself, ‘well, that’s fair enough actually’.”

Mr Cannon-Brookes said when he and his partner, Scott Farquhar started their IT company their main aim was not to wear a suit to work but success brought complications.

Hiring their first HR manager, he did not know what questions to ask and later, attending board meetings in a T-shirt, he found himself  “surrounded by suits, acronyms flying around and feeling like a five-year-old as I write them down secretly in my notebook so that I can look them up on Wikipedia when I get home later”.

“For me impostor syndrome is a feeling of being well out of your depth. Internally you know you’re not experienced enough or qualified enough to justify being there. Yet you are there. And you have to figure a way out because you can’t just get out.”

The Australian Financial Review‘s 2017 Rich List named Mr Cannon-Brookes, 37 and a Sydneysider, as the nation’s 17th most wealthy individual with a personal fortune of $2.51 billion. He co-founded Atlassian , a collaboration software company that helps teams organise, discuss and complete shared work. More than 68,000 organisations – including eBay, Twitter, Coca-Cola, Visa, BMW and NASA – use Atlassian’s products.

Mr Cannon-Brookes joked he had met his wife posing as an impostor.

A weekly commuter to San Francisco some years back, he was in the Qantas lounge when she approached mistaking him for somebody else. He did not disabuse her of her initial impression.

“Classic Aussie bullshit became some sort of forward movement and a phone number … a decade later she is my wife and we have four children,” he said.

Mr Cannon-Brookes thought most successful people “felt like frauds” but the key was to realise they were out of their depth and harness self-doubt as a force for good.

Recently, when South Australia had a power crisis he saw something on Twitter that Tesla thought it could solve the situation so he fired off some tweets only to see the media descend on him as “some sort of expert in energy”.

At the time, he said, he did not know the difference between a AA battery and 100 megawatt battery.

“A chronic case of  impostor syndrome … I remember thinking, ‘I’ve kind of started something here I can’t really get out. If I abandon the situation, I could set back renewables in Australia and maybe look like a complete idiot on Twitter’. All I could do was to not freeze and try to learn,” he said.

He ended up brokering talks between Tesla boss Elon Musk, South Australian Premier Jay Weatherill and PM Malcolm Turnbull on the nation’s energy shortages.

Henry Sapiecha

 

Ever heard of the Australian Rae family? They just reaped in over $300m

It is one of the richest families in the country, and now the low-profile Rae family of Perth has pocketed more than $300 million from the sale of its New Zealand fuel retailing business to Caltex Australia.

In 2010, the family sold its Gull petrol retailing operations in Western Australia for an estimated $500 million

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Now it has offloaded its Kiwi interests, Gull New Zealand, for $NZ340 million ($324 million) to Caltex Australia.

A few years after the sale of the WA operations in 2010, the Rae family’s fortune was estimated by The West Australian newspaper at $392 million, which has been pumped up significantly with Thursday’s sale.

The family moved into petrol retailing in the 1970s after Gull’s founder, Fred Rae, had spent time working in both the house building game as well as building grain silos.

It built its stake in the fiercely competitive fuel industry by sticking to a low-cost strategy, which in New Zealand has seen it rolling out unmanned petrol stations, helping it carve out a handy 5% share of the market from the majors.

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Gull New Zealand is an independent fuel importer and distributor, which brings with it a fuel import terminal at Mount Maunganui, on the north island, and the company’s petrol stations and retail outlets.

Caltex has established a large fuel import centre at the recently closed Kurnell refinery site in Sydney, while also establishing a buying and trading arm in Singapore to supply its Australian operations.

The New Zealand acquisition “optimises Caltex’s infrastructure position, builds trading and shipping capability, grows the supply base and enhances Caltex’s retail fuel offering through low-risk entry into a new market”, the company said in a statement on Thursday.

It was acquiring the company on a multiple of 8.2 times the forecast earnings before interest, depreciation and amortisation for 2017, it said, which will decline to around 7.5 times taking annualised synergies into account. The acquisition is expected to increase earnings per share from the first full year of ownership.

Gull operates 77 retail sites in total, of which it controls 55 sites. Around a third of those are unmanned. It also operates a further 22 supply sites. The company sells about 300 million litres of transport fuel annually.

The Mount Maunganui terminal is the largest facility of its type in New Zealand, with total storage of about 90 million litres. Its retail network is concentrated in the northern half of the north island of New Zealand, and “is well placed to profitably grow via new to industry and/or new supply site expansions”, Caltex said.

Caltex would retain Gull’s brand, management and employees, it said.

Gull has a reputation for being a low-priced market competitor by operating a large number of unmanned outlets with payment by Eftpos or credit card, with no retail outlet. Its outlets are concentrated near its import terminal, with negotiations in the past with rival importers to acquire competitively priced wholesale product blocked when it has sought to expand onto New Zealand’s south island.

The bulk of the country’s population is located on the north island, with Christchurch the largest city on the south island.

The purchase by Caltex follows a period of upheaval in the New Zealand market following the exodus of US group Chevron, which operated the Caltex brand in New Zealand. This was bought for $NZ785 million ($750 million) by Z Energy, which now has close to 50 per cent of the local market.

Ratings agency Standard and Poors said the purchase “will enhance Caltex’s regional supply base, adding scale to its trading and shipping activities”.

“We view New Zealand as being a low risk market for expansion of retail fuel assets,” it said.

 

Atlassian: the Australian millionaire factory. Story in videos & pics.

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Atlassian surges in debut

Shares of Australian business software maker Atlassian soar in their Nasdaq debut.

They’re known as the “Royals” and “the chosen ones” — the select few invited to be in New York on Thursday morning to ring the bells celebrating the opening of the stock exchange and Australian tech darling Atlassian’s massive IPO.

About 40 Atlassian employees — many of whom were hand-picked by co-founders Mike Cannon-Brookes and Scott Farquhar in the company’s early years — celebrated overnight as they became multi-millionaires and Atlassian became a company with a market cap of $US5.74 billion ($7.9 billion).

Atlassian, a leading provider of collaboration software for teams with products, opened for trading on The Nasdaq Stock Market image www.money-au.com

Atlassian, a leading provider of collaboration software for teams with products, opened for trading on The Nasdaq Stock Market on December 10, 2015. Photo: Christopher Galluzzo

By the end of Thursday’s trading in the US, however, more than just those 40 became millionaires. Former Atlassian employees say more than 100 staff are now either millionaires or multi-millionaires.

It’s also understood the shares of a number of staff who joined in recent years are now worth six figures.

“There are going to be a hundred people who are going to be millionaires today — at least on paper,” a former Atlassian employee, who didn’t wish to be named, told Fairfax Media.

Atlassian co-founders Scott Farquhar (right) and Mike Cannon-Brookes image www.money-au.com

Atlassian co-founders Scott Farquhar (right) and Mike Cannon-Brookes. Photo: Trevor Collens

They added that the Royals had been “going out on lavish dinners and celebrations” while in New York in recent days and were already discussing how they should splurge their cash, and whether it should be on luxury cars.

Many are also considering investing their money in Australian start-ups, or starting their own.

“Mike and Scott’s legacy will be beyond Atlassian,” the former Atlassian employee said. “They want to make billionaires in Australia that are going to invest in Australian companies — the next wave of start-ups

Those likely to make the most from the IPO are those who joined between 2002, when the company started, and 2008. That’s when Atlassian offered employees the chance to buy shares at a much lower price than $US27, the price shares were trading for on Thursday as the market closed. For employees who were offered — and purchased — shares at 50 cents several years ago, their stake is now 5300 per cent more valuable.

While some employees chose to hedge their bets and sell some of their shares last year for $US16 to T. Rowe Price and Dragoneer Investment Capital in a financing round, many are understood to have held on to most of them.

When Atlassian received that financing, which valued the company at $US3.3 billion, Mr Cannon-Brookes declined to specify how many millionaires his company had made at the time, but said it was “not double digit”.

“That number [of millionaires] blew both Scott and I away,” Mr Cannon-Brookes said at the time to The Australian.

“That was probably the biggest achievement to come out of this [new investment] and [something] we hadn’t thought about.”

There’s never been a more exciting time to be an Australian — as Prime Minister Malcolm Turnbull would say — or, in this case, to be an Atlassian employee.

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Henry Sapiecha

Australians are getting poorer, comparatively speaking…

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The global purchasing power of Australians is diminishing Photo: Jessica Hromas

Australia is sliding down the ranks of purchasing power and in US dollar terms we can’t nearly buy as much as we could at the peak of the commodities boom.

As recently as last year, gross domestic product per person in Australia (in USD terms) was the fifth highest in the world. Only Luxembourg, Norway, Qatar and Switzerland outranked Australia in 2014, Deutsche Bank points out.

For 2015, however, the International Monetary Fund estimates Australia’s ranking will drop from fifth, to ninth.

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Deutsche chief economist Adam Boyton expects the country to fall further down the rankings due to a continuing plunge in the dollar and lower nominal GDP growth over the next years.
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“If we apply our 2015 and 2016 forecasts for nominal GDP growth in Australia (and assume 5 per cent nominal growth in 2017) as well as our forex forecasts – a decline in the AUD to 65 US cents by end-2016 and 60 US cents by the end of 2017 – then Australia’s ‘ranking’ falls from ninth in 2015, to 11th in 2016 and then 17th in 2017, Mr Boyton wrote in a note to clients.

A further decline in the dollar was a necessary element of the economy’s transition to non-mining led growth.

Mr Boyton said that the strong Australian dollar during the boom years had also led to a surge in online shopping from offshore retailers and overseas tourism, which allowed a large number of Australians to benefit from the mining boom.

“As the Australian economy and the Australian dollar adjust to the end of that boom, one of the unfortunate ‘side-effects’ will be a decline in the global purchasing power of Australians,” Mr Boyton added.

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Henry Sapiecha

The remarkable life and lessons of the millionaire janitor . Lesson in frugality for us all.

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Ronald Read quietly accumulated a fortune worth millions by the time of his death at the age of 92. Photo: Bloomberg

You may have read about the remarkable life and times of Ronald Read. He was the gas station attendant and lifelong resident of Windham County, Vermont, who had quietly accumulated a portfolio worth a fortune.

As the Brattleboro ­Reformer reported earlier this year, Read died in June 2014 at age 92. Despite his relatively modest wages, he left an estate with “stock holdings and property” valued at nearly $US8 million ($AU10.1 million). His bequest was to leave most of it to the Brattleboro Memorial Hospital and Brooks Memorial Library.

His close friends and family were shocked when they learned the value of his estate.

There is wisdom to be learned from Read’s investing and life experiences. How a man of modest means accumulated so much wealth contains exemplary lessons for saving that apply to all of us. But there is also a cautionary tale about recognising the value of your finite time here on Earth. Perhaps learning to enjoy life while you can is part of that equation.

What do we know of Read? He served in World War II, seeing action in North Africa, Italy and the Pacific theatre. The local paper reported that when the war ended, he returned to Brattleboro. For the next 25 years, he worked at Haviland’s service station, which the Wall Street Journal reported was owned by his brother. He apparently did not enjoy retirement much, choosing instead to “retire from retirement” to work as a janitor at a J.C. Penney store until 1997. He was extremely frugal, saving money, avoiding waste and eschewing even modest luxuries.

What follows are the lessons from the remarkable Read.

The good

Not an active trader: Read had remarkable patience. When he died, he had a “five-inch-thick stack of stock certificates in a safe-deposit box.”

The key word is “certificates.” Keeping his holdings in cert form meant that any time he wanted to sell them, a laborious process was involved. He had to drive to the bank, remove the physical paper certificates from his safety deposit box, then drive over to the office where his brokerage account was. Only then was a sale possible.

Compare that with launching an app on your phone, then a quick finger swipe. Trading in the modern era is too cheap and too easy for our own good.

Time was on his side: Many of the stocks he owned he had held onto for decades, the Journal reported. To do so required a great degree of patience. It also helped to live to be 92 years old.

That patience allowed the power of compounding to work to his advantage. His gains grew on top of earlier gains, over decades.

Most investors don’t take advantage of time. They start saving seriously too late in life, they are not at all patient, and they don’t allow the years to work in their favour.

Dividend stocks do well; reinvesting the dividends does even better:

Read typically bought shares of companies that paid out regular dividends. He owned railroads, utility companies, banks, health care, telecom and consumer products. Those dividend cheques were then reinvested back into more shares of the same companies.

The reinvested dividends allowed him to keep making regular purchases over time. Read was not an active trader — he was an active buyer. There is a very big difference.

Avoid speculating; own blue chips: What did he buy? He owned 95 stocks, with many blue chips among them: Procter & Gamble, JPMorgan Chase, General Electric, Johnson & Johnson, Dow Chemical. He also owned consumer names such as J.M. Smucker and CVS Health. Like an investor named Warren Buffett, he avoided technology stocks and the hot stocks of the moment.

He did not own a concentrated portfolio; instead, he had a diversified portfolio with lots of companies in many sectors. This diversification allowed him to spread the risk broadly. Even owning failures such as Lehman Brothers had only a modest impact on his returns.

Charity avoids the tax man: The estate-tax exemption in 2014 was $US5.34 million ($AU6.78 million), or $US10.68 million ($AU13.58 million) for a married couple. Since Read was a widower, his $US8 million estate ($AU10.1 million) was not subject to federal estate tax.

But any size estate can do what he did, regardless of whether it is $US80 million ($AU101.7 million) or $US8 billion ($AU10 billion). Simply giving the money away to a qualified charity beats the IRS.

There is an estate tax in Vermont, and it ranges from 0.8 per cent to 16 per cent. But there is no gift tax in the state, and that means Read’s bequest to the local library and hospital passed unmolested to their intended beneficiaries.

Consider a revocable trust: Depending upon the circumstances (and the portfolio), some investors might want to take advantage of a revocable trust. Also called living trusts, they are an easy way to avoid probate. Heirs avoid a lengthy court process; assets transfer after the original holder dies.

In the case of Read, the process appears to have been rather painless. It took less than a year after his passing to get to his intended beneficiaries. Vermont is better than many states; your heirs may not be quite so fortunate, especially if you live in larger states with more complex laws. By many accounts, California is among the worst for beneficiaries; a three-way tie for next-most difficult is between New York, Florida and Illinois.

A revocable trust will cost you some dollars in legal fees to set up, but your heirs will thank you.

The bad

Certificates are a pain in the neck: As the Total Return blog pointed out, Read was lucky in that the certificates were all current and up to date. “That doesn’t always happen.” It can be a challenge to determine “all of the income-tax return info via dividends over the year.” Stocks that are not in physical form or in an account can be difficult or time consuming to trace. Certificates that are in electronic form and consolidated with an adviser or broker can save heirs lots of headaches later on.

Money is a means to an end, not an end in and of itself: Read might have benefited from reading one of the very first columns I wrote for The Washington Post back in 2011: “7 life lessons from the very wealthy.” That column discussed the insights about investments and experiences with wealth.

Among them were some specifics that Read might have enjoyed. Perhaps he could have given away his money while he was still alive. That might have provided some joy to him, seeing the effect of his legacy.

Understanding the value of your time was another. Of course, money has value, but so too does your time. One can wonder if we are using our limited time on Earth in a way that brings us additional life satisfaction. It’s a trade-off we all make.

The Washington Post

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Henry Sapiecha

SYDNEY AUSTRALIA WHERE THE GAP BETWEEN RICH & POOR GETS EVEN WIDER

Sydney ghetto alarm: wealth gap splits city

Darling Point and Point Piper reported the highest average taxable income.

JESSICA IRVINE 7:53am | Much time has been spent focusing on Mount Druitt but another suburb lags even further behind.

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Henry Sapiecha