On the Ground in New Zealand with Warwick Lampp

Warwick Lampp of New Zealand has an interesting story to tell both of internationalization, as well as what is was like on the ground during the recent Christchurch earthquakes. It makes for an interesting conversation.

International Man: Tell us a bit about yourself.

Warwick Lampp: Well, I was born in a small town of 5,000 people called Marton. It’s a very rural community. I lived on a farm until I went to high school in Palmerston North and then to Massey University, which is about half an hour away from home. I got a business studies degree and while I was doing that, it was right at the time of the share [stock] market boom in the mid 80′s and one of our first lecturers said to us all, “Well, now that you’re all business students, you should be investing money in the share market,” and I said, “Oh, that sounds like a bloody good idea, why not, how hard can it be?”

So I met with the local broker and bought some shares. Of course, at that time, the markets went absolutely crazy and, luckily, I managed to sell out just before my 21st birthday, just a few months away from the market crash.

With my new money, I thought how great was this, and went on an overseas holiday for my 21st.

Since then, I’ve been hooked on investing in the share and financial markets. In that regard, I was lucky not to have a bad first experience.

After I got my business degree, I started working for a local government and the local councils. From there I got into doing counts for elections, running the council elections.

I now work for a company based in Christchurch that runs election for councils, local governments, school board of trustees, boards of directors, and large and small national companies. We have a lot of private elections, most of it either all online voting or a combination of postal and online. We are, what you could call, a “trusted authority” on how to run an election from start to finish.

So, my actual business experience is around sales – selling those services, business development services, and looking after the running of the management of those elections, but I’ve always been interested in speculating in the share market.

IM: Was all of your initial trading done on the New Zealand stock exchange?

WL: Yes. After the share market crashed, I looked at investing seriously again and in 2002, I started to look at investing overseas. That’s when I came across Doug Casey.

IM: Speaking of Doug, how did you start the process of internationalization?

WL: In 2001, we sold our family farm. And so we had almost $1.5M in cash lying around that we needed to invest. We had the choice of going to a fund manager, giving them the money and saying, ‘Here, go and invest it.’ Or, we could look after it ourselves. I have always been pretty skeptical about the funds management industry – how they charge and how they work.

And because of my interest in shares, I was always of the view that I could do a better job myself.  So, with a little bit of advice, I started investigating what the options were. We knew, of course, about the local share market. But I started doing a lot of reading from Kitco and around the stocks that my share broker recommended to me. Through my education, I learned about options overseas, investing options overseas, and decided that the advice that I could get from the share brokers here in New Zealand was too limited. They didn’t really know anything about shares in the States or Europe and how to invest direct.

They know how to invest through a managed fund or hedge fund, but they don’t know how to do it direct, and frankly don’t want you to.

Through Casey Research, I started following their gold and silver stocks and energy stocks. We did the futures and options trading seminar and as a result, started using the RMB brokers in Chicago (which is now RJ Obrien). They have the global perspective and greater understanding, which our brokers over here do not.

I have a bank account in Australia. We also have family and friends there – it’s easy for New Zealanders to swap between the two countries. We can live over there tomorrow without a problem.

We haven’t seriously investigated living elsewhere around the world other than New Zealand or Australia, but we do really like what we hear about Argentina.

We are likely to go there next year for the Harvest Festival an annual event held at La Estancia de Cafayate, the development Doug Casey is a partner in Cafayete, Argentina] and check it out.

IM: So, to summarize, you trade around the world but specifically through the Chicago broker, you have a bank account set up in Australia, and you have a Plan B location over there too if need be.

WL: New Zealand is home but with family in Australia, it’s easy to go there if things turn to custard. And if there were more natural disasters here, then I guess we’d look over there pretty quickly.

IM: What are the biggest advantages to this particular setup for you?

WL: Well, I think just flexibility. And it’s quick to make things happen—especially when it comes to my investments.

Because I’m investing direct into the States, it’s easy for me to do what I want with the click of a button or a phone call, and yet, I can get the right advice, as opposed to calling a local who then has to call someone else, who has to call someone else, who has to call someone else…

You know, my share broker here (who I use for some local trades from time to time) looks in disbelief at what I invest in on the Venture exchange. He’s never heard of these companies and doesn’t understand them at all.

I just had a meeting with him last week and he couldn’t believe how successful my investments have been because he doesn’t get it. It’s not on his radar.

IM: Being from New Zealand, did you ever have any trouble trading on the North American exchanges?

WL: No, I mean, it depends on the broker I guess. I’ve never done the eTrade thing.

I haven’t gone online myself because I’m probably a bit lazy in that regard—my relationship with the broker is that I just say, “Here, go and do this. I don’t’ want any questions. I don’t want any advice – just execute this trade. Tell me when it’s done.” I could do that online but I haven’t as yet.

IM: Did you run into any problems signing up with a broker in Chicago as a New Zealander?

WL: Other than filling in truckloads of forms. No.

It was a bit of a mission but I understand that’s what you got to do. It was all pretty straight forward, once I got the right form and ticked the right box.

I do think it was much easier because I was referred to the right broker in the first place. If I had been doing it myself, I wouldn’t have known where to start or whom to contact.

IM: On a related topic, is it complicated to buy precious metals in New Zealand?

WL: Nope.

IM: You just walk to the bank and get it there?

WL: You couldn’t do it through a bank, but there are a few bullion retailers. New Zealand Mint is one which is sort of like a Perth Mint but a private company, not backed by the government.

And they’ll sell over the counter and buy it back with about a 10% commission.

But there are others – they’re just starting to advertise here on TV and in the print media on buying and selling gold. They will want to store it themselves allocated and unallocated. I’m pretty skeptical – I just got my hands on some physical and look after it myself.

IM: That makes sense. Do you have to pay tax on the metals?

WL: New Zealand is a bit strange in that respect. There are no capital gains unless you are seen to be a “trader.” The rules around that are pretty loose, but it essentially works like this: if you buy and sell shares more than 20 to 30 times a year and deemed to be trading for a profit, you could come to the attention of the tax department and they might ask you to pay tax. But if you’re buying for a long term like I say I am then there’s no issue there. There’s a fine line though, and it depends if it is your main source of income or not.

IM: Thanks, that’s good information. Now, let’s change gears and talk a bit about what’s going on in Christchurch. I know you were there a few weeks ago.

WL: It’s a bit of a mess, really, in fact, a pretty big mess!!

Nothing has really happened because the earthquakes are still coming. Basically all building has stopped because the authorities don’t want to give consent until the ground has stopped shaking. There are some parts in the city that experienced severe liquefaction. (Liquefaction is where the ground shakes so much that water comes to the surface along with balls of silt – basically sand). The problem is widespread and there has been debate about whether people will be allowed to build on that area again or whether what’s there will be demolished and off limits.  The engineers are studying that at the moment, but are waiting for the shocks to slow down before making any big decisions.

The city counselors are looking at the plan for the new CBD (Central Business District). They’ve got a few months to put something together and are currently consulting with residents and businesses.

Not much is going to happen in a short period of time.

IM: Are they demolishing anything yet or they are just leaving it as is?

WL: They’ve demolished quite a few buildings – a couple hundred in the CBD so far – and are slowly getting around to the suburbs to decide which houses will be knocked down. There are truckloads of houses that are basically stuffed.

There are lots of big high-rise buildings and office blocks that while aren’t, at the moment, likely to fall down straight away, are completely buggered and will need to be taken down. The city is currently putting most of them out to tender for demolition.

These are buildings that have popped off their foundations or where the internal stairwells have collapsed to the point where they can’t be rebuilt.

The reality is that whole blocks in the CBD will have to be flattened completely and rebuilt from scratch. The issue is that the businesses that were located in the CBD have had to relocate elsewhere. They will have taken leases for other parts of the city and are unlikely to come back in the medium term, if ever. And certainly most people aren’t going to go into high-rise buildings in a hurry.

IM: That makes sense. So, what do you think will be the long term effects of the earthquake on the local and I guess even national economy, if any?

WL: My wife and I were talking about that last night. It seems that many companies have relocated their staff to other parts of the country and even to Australia. A lot of people are doing what I’m doing and working from home. I think perhaps 30,000 to 50,000 people will at least leave Christchurch and go to the other parts of the country. I imagine the businesses with offices in Christchurch will look to spread their risk by setting up small offices elsewhere around the country – Wellington and Auckland. I think Auckland will get an influx of people which creates a few issues itself as Auckland is one of the most expensive cities in the world to live in.

It also has terrible traffic issues. The traffic in Auckland has always been bad because it’s so spread out. There’s no decent mass public transport. Most people who could probably go live somewhere else would do so. But because it’s the biggest city, it’s self-generating. There are plenty of business opportunities and so people are going to go there.

IM: Seems like that will cause an even further rise in real estate prices… How’s the rental market there?

WL: Auckland has got a hot rental market problem at the moment – it’s very hard to find a rental property because there’s so much demand. You go to look for rental property and there might be 30 or 40 people chasing the same property.

It’s been like that for a couple of years and I think it’s only going to get worse because of Christchurch. The crisis will underpin the real estate market in the rest of the country, be it small towns and large cities.

Keep in mind, though, that only one side of Christchurch is severely damaged and the other half isn’t. And so once again there are opportunities for rental properties in Christchurch in the area that is okay.

IM: That leads perfectly to the next question… Can you see opportunities in the disaster itself once people somewhat got back to normal?

WL: Certainly.

Tourism is being badly hit on the south island and to some degree all of New Zealand because of the quake. I think there is probably a contrarian opportunity for some decent tourism businesses – particularly at the high end. You just have to wait a bit until things start to improve.

There are obviously opportunities for rental properties in the safe areas of Christchurch.

IM: What attributes do you think must an entrepreneur/investor have in order to survive and thrive in the New Zealand’s business climate?

WL: You’ve got to be pretty resilient as things can change quickly – the earthquake has changed how people live and how people operate and do business in the south island. Whether it is earthquakes, floods, severe storms or the like, New Zealand is vulnerable to natural disasters. You need to have good disaster recovery plans in place, and tested.

You’ve got to be able to adapt really quickly. That’s something that some New Zealanders are good at and some aren’t. You’ve got to be innovative – Kiwis are always known for doing things a bit differently and being innovative.

You also need some decent networks. That’s probably the hardest thing about coming to New Zealand – getting those networks up and running. But there are opportunities in the local community to join business clubs or rotary clubs or groups like that. Once you build the network, you know you’ll get some opportunities out of it.

IM: Is New Zealand very much a place where people do business with who they know? Or is it a place that recognizes hard work, intelligence and smart marketing?

WL: A bit of both, In Auckland, it’s more cutthroat and often the best price or best offering will win. In the rest of the country – particularly in the south island where it’s much more conservative – it’s often the case of who you know and those networks that you have. People will tend to do business with their friends and negotiate the price later – just depends on the location.

IM: Are there any potential pitfalls that you’d recommend the potential investor or entrepreneur avoid when getting involved in this market?

WL: You need to get good legal advice about how to structure a company and avoid legal and tax complications. As a foreigner, you will need to meet overseas investment commission requirements. There are certain criteria to be able to purchase land and invest in New Zealand. I’m not sure what those requirements are but I understand they are not too onerous. But it’s still a process.

IM: Are there any political or economic trends that might be of some concern to investors coming in?

WL: The government can change the rules very quickly, which is a concern.

The labour market is well regulated and it’s quite strict. Staffing issues are probably the biggest concern of a small business operator in New Zealand because it has become very politically correct and there is a lot of protection for employees.

Having some good employment law advice as well as the right structure is critical to managing that, especially when the government can change things so fast.

For example, the Kiwis have a superannuation [retirement] scheme that they can opt in to here and pay through their weekly wages. The government is set to change those rules in the next couple of weeks. I don’t know what they are going to change but it could be big. This could have relatively important implications. So as an employer, you need to be pretty quick on your feet to understand those changes and make things happen.

IM: How is the tax situation or tax structure in New Zealand for businesses?

WL: There’s a flat 30% corporate tax rate, irrespective of the size of the business. Personal tax rates start at 19% and go up from there. The system is pretty straightforward. There are also plenty of options to minimize your tax obligations but be sure to have expert advice on doing that properly.

IM: From an outsider’s point of view, are there places that are better than others to set up shop?

WL: It depends on the person. You can argue Wellington, New Zealand’s second largest city, is becoming more attractive because it’s not as cutthroat and as difficult to live in as Auckland, and it doesn’t have as many traffic issues. It’s of a more transient nature and it’s more a matter of what you know rather than whom. But if you are looking for some peace and quiet, there are plenty of smaller cities in the 30 to 70K size, where you can go, set up and do quite well with a minimum of trouble.

As mentioned before, the high-end tourism market is a potential opportunity, though it’s something NZ has struggled with as we haven’t had the sophistication to provide the service many people want at that level. It is getting better though.

But at least in that business, you can be successful anywhere, not just the main centres.

IM: Speaking of tourism, I’ve always wondered: Where were the Lord of the Rings movies filmed?

WL: There’s a small place called Matamata on the north island – which is a very small town where they did most of the Hobbit filming – they actually built a place called Hobbiton. Mordor and all such places were filmed in the mountains of the south island.

IM: How would you recommend one gets started if he’s interested in learning more about the opportunities in New Zealand?

WL: There’s a government department called the Ministry of Foreign Affairs and Trade. They are probably the first point of contact for people who want to come to New Zealand and invest on a large scale. There’s the overseas investment commission, which will outline the requirements to invest in the country.

IM: Excellent, well, we’re out of time. Thanks for spending some time with us today, Warwick.

WL: My pleasure.

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