King of the kitchen
04
reading tip the financial web
Time-travelling financial crisis Not long ago, many of America’s biggest banks made terrible bets on overpriced real estate and suffered huge losses. While the banks insisted that they were fundamentally healthy, economists and politicians declared many of them to be insolvent. Government regulators, though, allowed the banks to stay in business. The banks hunkered down and cut back sharply on new lending, and the resulting credit crunch made an already weak economy worse. That sounds like the story of what just happened to the U.S. economy, but actually it’s the story of what happened at the beginning of the nineteen-nineties, after banks found themselves sitting on billions in worthless loans to Sun Belt developers and other commercial builders. And, if you tweak the details a bit, it’s also the story of what happened in the early eighties; that time, it was loans to developing countries that got the banks in trouble. In other words, while the current banking crisis is exceptionally severe, it’s not new. It’s the third major banking crisis in the past thirty years, which is at least a couple of crises too many. And that’s forcing the Obama Administration to confront two huge tasks at once: rescuing the economy from the current meltdown, and figuring out how to prevent the next one. James Surowiecki The New Yorker www.newyorker.com
Companies must find new road The U.S. government’s specific judgment against the Chevrolet Volt, a hybrid-electric model, is telling. Some earlier political statements had pulled the companies in opposite directions, calling for both affordable, fuel-efficient vehicles and expensive, advanced ones. The sacrifice of the Volt is prudent; an unrealistic restructuring of General Motors would do nothing to protect the environment or arrest global warming. Mr. Obama and his task force were particularly severe on Chrysler, openly recognizing the possibility of its demise, not just bankruptcy protection. While General Motors was granted 60 days to revise its plan and working capital for that period, Chrysler won only 30 days and some working capital. The labour unions and the bondholders should take this very seriously. The Globe and Mail www.theglobeandmail.com
The great escape As the anxiety index rises, many are turning to chocolate, QuarterPounders, gym memberships—presumably to work off the chocolate and the quarter-pounders—gardening, sewing, and the movies for relief to help treat wounded psyches. The trend has been set in motion as luxury and moderate stores, among others, take big hits. “There is definitely one collective mind-set across all consumers at the moment: People want to control the things in their lives that they can control,” said Phil Rist, executive vice president, Strategic Initiatives at BIGresearch, a consumer and retail research firm based in Worthington, Ohio. “That’s why you’re seeing upticks in escapes, such as going to the movies, or indulgences in comfort food. Cecily Hall Porfolio www.portfolio.com
⋆ the armchair investor Liar’s Poker Michael Lewis Hodder & Stoughton, 1989 Dh59 ⋆⋆⋆⋆
It has been almost 20 years since Michael Lewis wrote his exposé on the goings-on inside Solomon Brothers, then one of New York’s titanic investment banks. Yet the book remains a mustread for anyone interested either in the excesses of Wall Street’s go-go days in the early and mid1980s or the foundational assets and attitudes that have played a major role in the unfolding of the current financial crisis. Ostensibly, Liar’s Poker is about the author’s brief stint as a salesman for Solomon Brothers, starting with his string-pulling to get a job and progressing to his rise to become one of the firm’s top earners. More fundamentally, however, the book is a candid analysis by an insider of the culture and the colourful personalities that underpinned Solomon’s – and Wall Street’s – frothy modern rebirth in the ‘80s. From the Solomon CEO John Gutfreund chomping on cigars and challenging traders to liar’s poker, a cutthroat variant of the game from which the book gets its name, to a foul-mouthed trader nicknamed the Human Piranha intimidating trainees, one gets a vivid sense of just how wasteful and testosterone-drenched the Street was back then. One of the best parts of this well-told tale (and the one that’s most relevant now) involves the “fat men”, a group of gluttonous mortgage-trading pros who pioneered the securitisation of the American home-loan market. Ultimately, it was Lewie Ranieri, a brash, not-so-well-educated trader at Solomon, who invented what have become the most toxic of today’s oft-discussed toxic assets. He wasn’t dealing in subprime mortgages, to be sure, but his innovation – bundling up mortgages to be sold on to investors – was an essential one in the chain of events that led to the global financial crisis. Liar’s Poker for that reason remains an essential read, and stands as one of the most biting and incisive nonfiction entries in Wall Street lore. Even if finance doesn’t interest you much, there’s enough pure entertainment in Liar’s Poker to make it well worth picking up. Asa Fitch
The National personalfinance
Saturday, April 4, 2009 www.thenational.ae
‘The Four Pillars of Investing’, by William J. Berstein, provides investors with the tools they need to build a profitable portfolio without paying for a financial adviser. In a relaxed style, the author takes the reader through four simple steps to prosperity
how I did it Ashley Austin
King of the kitchen This salesman hit the pavement. After arriving in Dubai with a dream, he gave presentations to project managers in car parks. And persistence served up success. Inga Stevens explains Ashley Austin, the 33-year-old Australian from Melbourne, came to Dubai in Jan 2008 armed with only a dream. A dream that rested on the success of a product that he believed in and wanted to share with the people living in the Middle East. Roundhouse, a high-end kitchen design company from the UK focusing on “bespoke design, function, quality and attention to detail” was Mr Austin’s passion and he bravely took on the task of single-handedly introducing the product to the Middle East. With a background in cabinet making, Mr Austin set up his first kitchen design company at the age of 21. It took Dh125,000 of his parents money and a business partnership with a friend, Grange Joiner, for the enterprise to get off the ground. And despite enjoying immediate success, he felt he needed more of a challenge. He left the company in the hands of friends, and headed for London in search of adventure. In August 2005, Mr Austin became involved with Roundhouse in the UK working as their project manager. “I became heavily involved with the sales team and was given free reigns to test out my newly found sales skills. It really sparked my passion for the brand and I knew that I wanted to take it further,” he says. “I felt I had the ability and determination to become the driving force behind the launch of Roundhouse in the Middle East and, despite the worsening economy and the parent company’s inability to provide me with any initial financial backing, I decided to make the move to Dubai. “ Armed with three boxes full of Roundhouse marketing brochures, limited knowledge of local business culture and laws and no supporting staff to speak of, Mr Austin faced the challenge head on. With the knowledge and promise that, when the business take off, he would become the owner of 25 per cent of the company, Mr Austin was determined to get his brand noticed. With Dh100,000 in his savings account and Dh62,000 as an additional investment from his father, Mr Austin was aware that he had a tough road ahead of him. When he arrived in Dubai Mr Austin stayed with a friend from Melbourne for about a week and then they both picked up a month to month rental in the Marina. They were both unemployed for the first three weeks and then had to wait four weeks to receive their salaries. Those initial expenses were significant for the first two months. “We paid Dh8,000 for the rent per month and we had to get a laptop and furniture, hire a car and buy suits, so it added up very quickly” he recalls. Adding everything up Mr Austin estimates he spent Dh30,000 for the first six to eight weeks just getting set up and finding work. “I spent my first few weeks in Dubai mailing the marketing material out to prospective clients. “When they had fun out within weeks they had run out my biggest expense became printing and at Dh140 for a full profile pack, this became very expensive indeed.” Facing a steep up-hill struggle to get his brand noticed in the kitchen design market and with no funds to set up a showroom, manufacture material samples or to cover the basics such as phone bills and travel expenses, he needed to get creative. “Initially, I was chasing leads all around the Middle East,” he says. “I would frequently have to pay for flights to Bahrain and often have to extend my hotel stay by another day or two at an extra expense when a business meeting were cancelled or delayed.” A three night trip to Bahrain, for example, would cost about Dh4,500, including taxis, plane, hotel and food. Mr Austin would find himself in Muscat or Bahrain every five to seven weeks, as well as two days a week in Abu Dhabi or the northern emirates. All together Mr Austin spent in the vicinity of Dh35,000 to Dh40,000 on travel. Mobile usage was necessary evil. Not having any real contacts in the UAE, Mr Austin knew that the phone was going to be his “best friend”. It
Ashley Austin came to the Emirates from Australia with Dh100,000 and no business contacts. Amy Leang / The National
was one expense he could never really trim, as it was an important tool to get into the market and get traction. Most months were Dh600 or Dh800, with some months hitting the Dh1,000 mark. “I have spent over Dh13,000 purely on phone bills since I have arrived” he says. Then there were printing costs which were about Dh500 a week, and the cost of internet. All added up meant that Mr Austin had no option but to keep delving into his savings to stay afloat. It became increasingly difficult to compete with the other companies who had a large marketing budget. “It was a very organic process,” he explains. “I would literally be out in a car park gluing sample materials onto a sample board while waiting for the relevant project managers or designers to return to their cars at the end of their meeting. I would sometimes even pay Dh1,000 just to attend a trade dinner and to have the chance to speak about my product.” While some might see his marketing tactics as slightly pushy, his perseverance seems to have paid off, and he feels that with a Roundhouse design kitchen costing anything from Dh150,000 upwards, it is important to go the extra mile to prove to the client that your product is worth investing in. Mr Austin explains: “I have no doubt that this is why we are still standing and other people are now closing their doors.” With most of the senior designers and architects based in the UAE hail-
ing from Australia and the UK, Mr Austin feels that this “cultural connection has perhaps made it easier to build that initial rapport and get my foot in the door”. By the end of 2008, and having exhausted nearly all of his savings on promoting the Roundhouse brand, Mr Austin knew it was time to make some serious decisions. Concerned about the safety of their financial investment, Mr Austin’s parents were pushing for him to make a decision about his future in the UAE and he finally narrowed his business options down to two. The first choice was to set up a Limited Liability Company (LLCs). “In order to secure financial backing from Lloyds Bank I needed to obtain a Letter of Intent (LOI) for three large-scale projects in the UAE,” he explains. “Although I had quickly achieved this and we looked very secure with this option, as soon as the banks started to experience the economic downturn I was told that I now needed four LOI’s to secure financial backing which, at the time, seemed like an overwhelming task.” Focusing on his second option of becoming a joint venture, in Dec 2008, Mr Austin signed a deal with a locally based company called TCFS International who became the sole distributor of Roundhouse in the Middle East. TCFS International was a perfect company to enter into a partnership not only because it had the licenses to accommodate his product, but it offered a slightly
A Roundhouse design costs Dh150,000 or more. Courtesy of Roundhouse Design
lower-end kitchen design range as well as a soft furnishing package called “The Complete Furnishing Solutions” providing an entire furnishing package for your home. Mr Austin knew that partnering with another company that has the facilities – including a showroom and design staff – along with the financial backing to make a real go of things was the only way to get Roundhouse officially off the ground. “This is a great partnership for both TCFS and I,” Mr Austin agrees. “The owner of TCFS International, Mr Godfrey Page knew that I was financially down on my knees but what he was really interested in was the network of contacts that I had developed over the past 12 months canvassing the UAE.” From January 2009, Mr Austin became the business development manager for TCFS International, and finally, after a year of no earnings, he started taking in a commission based salary promoting both kitchen design brands. “Despite my financial losses I am immensely satisfied with everything I have achieved in the past 12 months,” Mr Austin says. “I have succeeded with what I set out to do and that was the bring Round House kitchens to the Middle East.” TCFS International now has an impressive new project portfolio including a Private Palace in the UAE with 23 bedrooms, 19 bathrooms and 4 kitchens with an estimated value of over Dh3.5 million. “We have secured another new project in Yemen worth Dh2m providing the furnishings and kitchen design for five private villas for a wealthy Sheikh,” he adds. Confidence in your product is vital, and Mr Austin is certain that Roundhouse will survive. “Many of our clients are rich enough to afford our kitchen designs regardless of the credit crisis,” he explains. “However, I am still kicking myself that I waited until 2008 to bring my product to the UAE instead of making it out here during the ‘booming’ years but with our future firmly rooted in the Middle East and our plans to expand further into the likes of Qatar, Libya and Saudi Arabia will see our client base grow even further.”
reading tip the financial web
Time-travelling financial crisis Not long ago, many of America’s biggest banks made terrible bets on overpriced real estate and suffered huge losses. While the banks insisted that they were fundamentally healthy, economists and politicians declared many of them to be insolvent. Government regulators, though, allowed the banks to stay in business. The banks hunkered down and cut back sharply on new lending, and the resulting credit crunch made an already weak economy worse. That sounds like the story of what just happened to the U.S. economy, but actually it’s the story of what happened at the beginning of the nineteen-nineties, after banks found themselves sitting on billions in worthless loans to Sun Belt developers and other commercial builders. And, if you tweak the details a bit, it’s also the story of what happened in the early eighties; that time, it was loans to developing countries that got the banks in trouble. In other words, while the current banking crisis is exceptionally severe, it’s not new. It’s the third major banking crisis in the past thirty years, which is at least a couple of crises too many. And that’s forcing the Obama Administration to confront two huge tasks at once: rescuing the economy from the current meltdown, and figuring out how to prevent the next one. James Surowiecki The New Yorker www.newyorker.com
Companies must find new road The U.S. government’s specific judgment against the Chevrolet Volt, a hybrid-electric model, is telling. Some earlier political statements had pulled the companies in opposite directions, calling for both affordable, fuel-efficient vehicles and expensive, advanced ones. The sacrifice of the Volt is prudent; an unrealistic restructuring of General Motors would do nothing to protect the environment or arrest global warming. Mr. Obama and his task force were particularly severe on Chrysler, openly recognizing the possibility of its demise, not just bankruptcy protection. While General Motors was granted 60 days to revise its plan and working capital for that period, Chrysler won only 30 days and some working capital. The labour unions and the bondholders should take this very seriously. The Globe and Mail www.theglobeandmail.com
The great escape As the anxiety index rises, many are turning to chocolate, QuarterPounders, gym memberships—presumably to work off the chocolate and the quarter-pounders—gardening, sewing, and the movies for relief to help treat wounded psyches. The trend has been set in motion as luxury and moderate stores, among others, take big hits. “There is definitely one collective mind-set across all consumers at the moment: People want to control the things in their lives that they can control,” said Phil Rist, executive vice president, Strategic Initiatives at BIGresearch, a consumer and retail research firm based in Worthington, Ohio. “That’s why you’re seeing upticks in escapes, such as going to the movies, or indulgences in comfort food. Cecily Hall Porfolio www.portfolio.com
⋆ the armchair investor Liar’s Poker Michael Lewis Hodder & Stoughton, 1989 Dh59 ⋆⋆⋆⋆
It has been almost 20 years since Michael Lewis wrote his exposé on the goings-on inside Solomon Brothers, then one of New York’s titanic investment banks. Yet the book remains a mustread for anyone interested either in the excesses of Wall Street’s go-go days in the early and mid1980s or the foundational assets and attitudes that have played a major role in the unfolding of the current financial crisis. Ostensibly, Liar’s Poker is about the author’s brief stint as a salesman for Solomon Brothers, starting with his string-pulling to get a job and progressing to his rise to become one of the firm’s top earners. More fundamentally, however, the book is a candid analysis by an insider of the culture and the colourful personalities that underpinned Solomon’s – and Wall Street’s – frothy modern rebirth in the ‘80s. From the Solomon CEO John Gutfreund chomping on cigars and challenging traders to liar’s poker, a cutthroat variant of the game from which the book gets its name, to a foul-mouthed trader nicknamed the Human Piranha intimidating trainees, one gets a vivid sense of just how wasteful and testosterone-drenched the Street was back then. One of the best parts of this well-told tale (and the one that’s most relevant now) involves the “fat men”, a group of gluttonous mortgage-trading pros who pioneered the securitisation of the American home-loan market. Ultimately, it was Lewie Ranieri, a brash, not-so-well-educated trader at Solomon, who invented what have become the most toxic of today’s oft-discussed toxic assets. He wasn’t dealing in subprime mortgages, to be sure, but his innovation – bundling up mortgages to be sold on to investors – was an essential one in the chain of events that led to the global financial crisis. Liar’s Poker for that reason remains an essential read, and stands as one of the most biting and incisive nonfiction entries in Wall Street lore. Even if finance doesn’t interest you much, there’s enough pure entertainment in Liar’s Poker to make it well worth picking up. Asa Fitch
The National personalfinance
Saturday, April 4, 2009 www.thenational.ae
‘The Four Pillars of Investing’, by William J. Berstein, provides investors with the tools they need to build a profitable portfolio without paying for a financial adviser. In a relaxed style, the author takes the reader through four simple steps to prosperity
how I did it Ashley Austin
King of the kitchen This salesman hit the pavement. After arriving in Dubai with a dream, he gave presentations to project managers in car parks. And persistence served up success. Inga Stevens explains Ashley Austin, the 33-year-old Australian from Melbourne, came to Dubai in Jan 2008 armed with only a dream. A dream that rested on the success of a product that he believed in and wanted to share with the people living in the Middle East. Roundhouse, a high-end kitchen design company from the UK focusing on “bespoke design, function, quality and attention to detail” was Mr Austin’s passion and he bravely took on the task of single-handedly introducing the product to the Middle East. With a background in cabinet making, Mr Austin set up his first kitchen design company at the age of 21. It took Dh125,000 of his parents money and a business partnership with a friend, Grange Joiner, for the enterprise to get off the ground. And despite enjoying immediate success, he felt he needed more of a challenge. He left the company in the hands of friends, and headed for London in search of adventure. In August 2005, Mr Austin became involved with Roundhouse in the UK working as their project manager. “I became heavily involved with the sales team and was given free reigns to test out my newly found sales skills. It really sparked my passion for the brand and I knew that I wanted to take it further,” he says. “I felt I had the ability and determination to become the driving force behind the launch of Roundhouse in the Middle East and, despite the worsening economy and the parent company’s inability to provide me with any initial financial backing, I decided to make the move to Dubai. “ Armed with three boxes full of Roundhouse marketing brochures, limited knowledge of local business culture and laws and no supporting staff to speak of, Mr Austin faced the challenge head on. With the knowledge and promise that, when the business take off, he would become the owner of 25 per cent of the company, Mr Austin was determined to get his brand noticed. With Dh100,000 in his savings account and Dh62,000 as an additional investment from his father, Mr Austin was aware that he had a tough road ahead of him. When he arrived in Dubai Mr Austin stayed with a friend from Melbourne for about a week and then they both picked up a month to month rental in the Marina. They were both unemployed for the first three weeks and then had to wait four weeks to receive their salaries. Those initial expenses were significant for the first two months. “We paid Dh8,000 for the rent per month and we had to get a laptop and furniture, hire a car and buy suits, so it added up very quickly” he recalls. Adding everything up Mr Austin estimates he spent Dh30,000 for the first six to eight weeks just getting set up and finding work. “I spent my first few weeks in Dubai mailing the marketing material out to prospective clients. “When they had fun out within weeks they had run out my biggest expense became printing and at Dh140 for a full profile pack, this became very expensive indeed.” Facing a steep up-hill struggle to get his brand noticed in the kitchen design market and with no funds to set up a showroom, manufacture material samples or to cover the basics such as phone bills and travel expenses, he needed to get creative. “Initially, I was chasing leads all around the Middle East,” he says. “I would frequently have to pay for flights to Bahrain and often have to extend my hotel stay by another day or two at an extra expense when a business meeting were cancelled or delayed.” A three night trip to Bahrain, for example, would cost about Dh4,500, including taxis, plane, hotel and food. Mr Austin would find himself in Muscat or Bahrain every five to seven weeks, as well as two days a week in Abu Dhabi or the northern emirates. All together Mr Austin spent in the vicinity of Dh35,000 to Dh40,000 on travel. Mobile usage was necessary evil. Not having any real contacts in the UAE, Mr Austin knew that the phone was going to be his “best friend”. It
Ashley Austin came to the Emirates from Australia with Dh100,000 and no business contacts. Amy Leang / The National
was one expense he could never really trim, as it was an important tool to get into the market and get traction. Most months were Dh600 or Dh800, with some months hitting the Dh1,000 mark. “I have spent over Dh13,000 purely on phone bills since I have arrived” he says. Then there were printing costs which were about Dh500 a week, and the cost of internet. All added up meant that Mr Austin had no option but to keep delving into his savings to stay afloat. It became increasingly difficult to compete with the other companies who had a large marketing budget. “It was a very organic process,” he explains. “I would literally be out in a car park gluing sample materials onto a sample board while waiting for the relevant project managers or designers to return to their cars at the end of their meeting. I would sometimes even pay Dh1,000 just to attend a trade dinner and to have the chance to speak about my product.” While some might see his marketing tactics as slightly pushy, his perseverance seems to have paid off, and he feels that with a Roundhouse design kitchen costing anything from Dh150,000 upwards, it is important to go the extra mile to prove to the client that your product is worth investing in. Mr Austin explains: “I have no doubt that this is why we are still standing and other people are now closing their doors.” With most of the senior designers and architects based in the UAE hail-
ing from Australia and the UK, Mr Austin feels that this “cultural connection has perhaps made it easier to build that initial rapport and get my foot in the door”. By the end of 2008, and having exhausted nearly all of his savings on promoting the Roundhouse brand, Mr Austin knew it was time to make some serious decisions. Concerned about the safety of their financial investment, Mr Austin’s parents were pushing for him to make a decision about his future in the UAE and he finally narrowed his business options down to two. The first choice was to set up a Limited Liability Company (LLCs). “In order to secure financial backing from Lloyds Bank I needed to obtain a Letter of Intent (LOI) for three large-scale projects in the UAE,” he explains. “Although I had quickly achieved this and we looked very secure with this option, as soon as the banks started to experience the economic downturn I was told that I now needed four LOI’s to secure financial backing which, at the time, seemed like an overwhelming task.” Focusing on his second option of becoming a joint venture, in Dec 2008, Mr Austin signed a deal with a locally based company called TCFS International who became the sole distributor of Roundhouse in the Middle East. TCFS International was a perfect company to enter into a partnership not only because it had the licenses to accommodate his product, but it offered a slightly
A Roundhouse design costs Dh150,000 or more. Courtesy of Roundhouse Design
lower-end kitchen design range as well as a soft furnishing package called “The Complete Furnishing Solutions” providing an entire furnishing package for your home. Mr Austin knew that partnering with another company that has the facilities – including a showroom and design staff – along with the financial backing to make a real go of things was the only way to get Roundhouse officially off the ground. “This is a great partnership for both TCFS and I,” Mr Austin agrees. “The owner of TCFS International, Mr Godfrey Page knew that I was financially down on my knees but what he was really interested in was the network of contacts that I had developed over the past 12 months canvassing the UAE.” From January 2009, Mr Austin became the business development manager for TCFS International, and finally, after a year of no earnings, he started taking in a commission based salary promoting both kitchen design brands. “Despite my financial losses I am immensely satisfied with everything I have achieved in the past 12 months,” Mr Austin says. “I have succeeded with what I set out to do and that was the bring Round House kitchens to the Middle East.” TCFS International now has an impressive new project portfolio including a Private Palace in the UAE with 23 bedrooms, 19 bathrooms and 4 kitchens with an estimated value of over Dh3.5 million. “We have secured another new project in Yemen worth Dh2m providing the furnishings and kitchen design for five private villas for a wealthy Sheikh,” he adds. Confidence in your product is vital, and Mr Austin is certain that Roundhouse will survive. “Many of our clients are rich enough to afford our kitchen designs regardless of the credit crisis,” he explains. “However, I am still kicking myself that I waited until 2008 to bring my product to the UAE instead of making it out here during the ‘booming’ years but with our future firmly rooted in the Middle East and our plans to expand further into the likes of Qatar, Libya and Saudi Arabia will see our client base grow even further.”
