Interviews

Talking Business - Bill Moss

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Bill Moss is a former executive director of Macquarie Bank. Bill was an investment banker for 23 years before leaving in 2007 to pursue philanthropic initiatives. Bill has also remained active in the business world and regularly appears in the Australian media providing comment on finance and banking as well as the global economy. Welcome to Talking Business, Bill.

BM Thanks, Peter.

PS Bill, why don’t you give us an idea of what this philanthropic initiative or not-for-profit organisation is that you founded?

BM Sure, Peter. Well look, I suffer from FSHD, which is facioscapulohumeral muscular dystrophy. It’s one of 30 major types of muscular dystrophy and there’s probably about 100 known types of dystrophy in total. They’re all very different. They’re all caused by genetic defects that are different and a cure for one is not a cure for all, so they’re very different. The type that I have, FSHD, is about the third most common type and second most common type in adults.

PS When did you discover that you were actually a victim of it?

BS In retrospect, I knew from early teenage years that I had it. I never actually had it diagnosed till I was in my late 20s but it affects you in your teenage years when you can’t run, you can’t throw a ball, you suddenly realise you go from being the fastest runner in your class at school to the slowest. So it starts to affect you in your early teenage years and progresses as you get into your later adolescent years.

PS Do you think it made you work harder to develop that very prodigious brain that sits inside that head of yours?

BM [laughter] Look, I think it did and it’s quite interesting. I’ve reflected on this quite a lot but I think over time, once I knew I had it, I was told in my mid-20s that basically I shouldn’t work too hard because working hard could actually lead to an onset of this dystrophy and that by the time I was 50 I’d be in a wheelchair so I should enjoy my life. That’s what I was told. On reflection, I didn’t do that.

PS Young men often don’t. [laughter]

BM And I took the view that whatever I was going to achieve by the age of 50, I really had to achieve by the age of 35 so I just worked harder.

PS But you’ve ended up married, you’ve been successful.

BM Yeah, I’ve got lovely kids, I’ve had a very successful business career, I’m still not in a wheelchair although that’s a fine line these days, but I’m still not there and I’m still able to pursue a lot of ideas that I want to pursue that do still have an impact on the business world.

PS Before we talk about what you’re doing in business, do you think as Aussies we could be a lot better in terms of our giving to worthwhile charities?

BM Oh definitely, definitely. I think as Aussies we take the easy way out. I think we tend to donate money when we have money to the major 10 or so foundations in the country and they’re all worthwhile, but there’s hundreds and hundreds of smaller foundations out there trying to make a difference to people’s lives and they really struggle to get exposure, they really struggle to get their word out there, their message out there. We tend to have a lopsided approach to our foundations and particularly on medical research. As a result of that we don’t have a lot of research in Australia into rare diseases and, of course, if you put all the rare diseases together it’s actually a very large category.

PS Yeah, without a doubt. We’re talking to Bill Moss, former Macquarie banker and a property expert. Bill, what’s your view in Australia at the moment, both residential and commercial?

BM Look, I’ve got a very simple view on it. Basically my view at the moment is we’re in the middle of a major global correction. We’ve seen just about every country in the world’s real estate prices fall across the board by between 30 and 50 per cent and that’s across both residential and commercial. There are reasons for that and they’re very fundamental reasons, but essentially we’ve had an asset bubble around the world in real estate and affordability has been out of kilter all around the world. Average people on average wages have not been able to afford an average mortgage and we’re starting to see the world play out in that regard. I think Australia is no different to that, and while Australia may lag the global economy in this recession, there is no doubt at all we are having a recession and we are moving into it and I think you’ll see real estate in Australia across the board start to suffer in the next six to 12 months.

PS And do you think we’ll fall by 30 to 50 per cent or less?

BM Well, in some cases we’ve already fallen by 30 per cent. The upper end of the market has fallen. I think if we were to look at some of the commercial sales out there at the moment, they’re certainly on track for that. I think there’s a very good chance that we could see some assets fall by that much but certainly we’re going to see falls, whether it’s 10, 20, 30 or in some cases in the secondary real estate, the second and third tiers of real estate where we’re looking at sub-prime real estate, I think you could see falls in that nature very easily.

PS Simple question – will it be a mild or a deep recession?

BM I think it’s going to be mild but I think it’s going to take a while.

PS Might hang around for a while?

BM I think it’s going to hang around for a while and I think part of the issue we’re going to have here, we’re in an environment where we’ve got low interest rates. As the world recovers and as we see interest rates rise I think it’s going to be very hard for real estate values in Australia to gain some momentum as the world recovers. So I think for real estate it might be a couple of years to just sit on the sidelines.

PS In terms of one of the things you are doing now, do you chair PPB?

BM Yeah PPB’s an interesting role for me. I’m chairman of one of Australia’s largest insolvency groups and that’s quite an interesting experience because going from retirement and having set up my foundation and feeling a little bit bored I decided to venture back into the business world some 12 months ago and I thought an insolvency company might be an appropriate part-time role to venture into.

PS At that point in the cycle? [laughter]

BM Well yeah, it was 12 months ago. It was about April/May last year I made the decision and it was an interesting time in the cycle but I think having understood what was happening in the economy and being able to look at it from an insolvency viewpoint, you could really see the problems starting to emerge in the Australian economy well over 12 months ago.

PS All right. I know a most recent article suggested that insolvencies are up but business bankruptcy is currently down. Do you think this good news on the business bankruptcy is going to be continued, Bill, or do you think some bad news is in the pipeline?

BM No, I think, unfortunately, there’s a lot of bad news in the pipeline there. Look, we’ve been very lucky in the country because we’ve had a very rapid reduction in interest rates in Australia and we had that at a time where there was a global solution to the global recession and we saw interest rates drop around the world very quickly. In Australia, that rapid drop in interest rates added to a currency that dropped very quickly against the US dollar, I think, made it a very soft landing for a lot of Australia’s businesses, particularly the small to medium sized businesses. However, I don’t think that’s enough. I think we are going to see a big correction in this area and I would predict that really from June/July on this year to the end of this year we’re going to see a lot of small businesses hit the wall and I think that will also have a major impact on secondary real estate.

PS And ultimately it puts an enormous pressure on banks to consider the importance of their small business customers as well?

BM I think it does and I think you can see the signs of it now in the economy. You can see the banks reluctance to pass on full interest rate reductions into the housing market. You can see the reason for that. They’re trying to prepare for the next wave of this cycle and I think it’s all very predictable where it’s going to end up. And unfortunately in this cycle, I think you will find that a lot of the banks learned from the last cycle on their commercial lending and they secure the small business loans to household real estate.

PS And do you think the cash rate will get down to two per cent?

BM I think it could. I think there’s nothing to stop this dropping beyond our expectations at the moment. I think the government will throw everything they can at this and there’s a point, though, when lower interest rates really don’t achieve the desired result.

PS
Bill, I’m not going to allude to your age, but you’re old enough to remember lots of government responses and Reserve Bank responses.

BM Unfortunately, yes.

PS [laughter] Do you think theirs is one of the best responses to a difficult situation?

BM I think they’ve done a very good job. I think the Australian government’s done a very good job in handling this and I think really the leading countries in the world, despite the obvious criticism that we could label at parts of the US program and some of the European programs, I think they’ve done a great job in trying to hold the world together. I think there’s a lot to be learnt from this cycle as to how you can have a global solution but at the same token you can’t have a global solution, but I don’t think you can actually avoid the global consequences of a recession.

PS And do you think because of globalisation, things like credit default swaps need to be monitored very closely, because it looks like to the ordinary person when you explain credit default swaps, that big companies like AIG were like bookmakers who decided not to lay off their bets but to actually become a punter?

BM I think that’s right. And look, when you understand what went on and you understand the risks that were taken, you just role your eyes and you say well, how can that be? I mean there were a lot of stupid decisions made in this financial world over the last few years and I think that we’re going to see a new era, we’re going to see more regulation in this area, and we’re going to see more reporting. I think we’re going to see a lot of soul searching going forward in the financial sector. We’re going to see a lot of change.

PS Well, I think Fortune magazine got it right when they had the heads of the leading banks on Wall Street and the headline was “What We’re They Smoking?” and it seems like a good question, Bill.

BM I think that’s pretty right. And look, I don’t think you can get away with simply saying we couldn’t see it. A lot of people saw this coming. A lot of people had commented at regular intervals about the risk. I mean, I can recall not only over the last three or four years but over the last 10 years continually talking about the mis-pricing of risk, and so it’s been there. There’s been a lot of people talking about this so I don’t think you can use as an excuse that you couldn’t see it.

PS Bill Moss, thanks for joining us on Talking Business. If people want to contact you, what’s the best website?

BM Probably the best website is www.mosscapital.com.au

PS Thanks for joining us on Talking Business.

Talking Business airs on Qantas Inflight Radio. Click here to download complete Talking Business transcripts from the Qantas website.

 

Published: Sunday, June 28, 2009

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