It is late September 2008 as I write this RAAS Report. I am sitting in front of SBS News on my plasma flat screen and if I wasn't such a confirmed optimist, I would be climbing the stairs to get a razor! No - not to remove a bad case of 5 o'clock shadow - I would need the razor to slash my wrists! I am probably so distracted by the evening news that I am overlooking how difficult it is to slash your wrists with a 240 volt Braun Multi Head. Maybe I can throw it in the bathtub and then jump in!

Why all this manic panic, you may ask! Well, the so called "Masters of the Universe" on Wall Street have been proven to be fraudsters, charlatans and men of straw! The roulette wheels have stopped spinning in the dreamtime casino and the dice lies unloved and un-owned on the floor! Lehmann Brothers - gone; AIG, the largest insurance company in the world has knelt with begging bowl before the taxpayers of America; the so called "investment banks" have either been bankrupted or swallowed. If I believe what I am seeing on TV, the capitalist free enterprise world as I know it is ending! Now that I have got your attention with over-the-top descriptions of doom and gloom, let's talk reality and get a few things into perspective!

Can we really equate what is happening to the greed-meisters on Wall Street with what is happening in Australia - or even more cogently, in the management rights industry in Queensland? I realise that one of the dangers of writing

a RAAS Report that contains market commentary, but has a copy deadline almost three weeks ahead of publication, is that fast moving events can leave you looking like a goose when your words are eventually published. I run this risk in the October RAAS Report, but will push ahead with some predictions anyway.

It seems to have escaped the notice of many commentators that the "investment banks" that managed to survive the downfall of the dreamtime casino have all been taken over by, been absorbed by, or morphed into, REAL banks! Real banks actually have branches, collect deposits, pay interest, and lend money to Mums and Dads and viable businesses. Real banks are regulated and must maintain adequate capital reserves. You know the ones I mean - banks like the ANZ, Commonwealth, NAB and Westpac! The banks that learnt their hard lessons back in the Eighties when our home grown masters of the universe like Bond, Skase and Herscu almost brought the Big Four to their knees when the bubble burst!

This time, the Australian banking system thankfully has, in the main, avoided the excesses of overseas. Australian banks are profitable and have first class balance sheets. Australian banks are still lending for management rights. OK! These may not be days of wine and roses; there is a universality about world money markets that suggests that when money is tight overseas, money supply will tighten in Australia. Tighten, perhaps, but not disappear!

The good news for management rights people, from my point of view, is that banks will pursue a "flight to quality" approach to lending for the next six to twelve months. Lending for the purchase of solid management rights businesses with long agreements will represent "quality" lending for our banks, just as it has always done.

One possible downside is that some of the banks & lenders outside the Big Four, who have been particularly active in the last two years in chasing management rights lending, may draw back their aggressive approach to market share. On the positive side, active MR industry player, BankWest, has now become part of the massive Lloyds TSB group, one of the biggest banks in the world.

There is no doubting there are still some "interesting" days ahead in the world of high finance, but as a wise old man once told me, "There is no good stressing about something you have no control over. You will develop an ulcer and will have personally changed nothing!"

Just keep in mind that the management rights industry remains a blue chip industry, and if you are considering selling, ensure that you have done everything you can to enable the banks to view your business as a quality lending opportunity.

If you would like to comment on anything you have read in The RAAS Report, please write to PO Box 1325, Sunnybank Hills, Qld 4109 or send an email to mike@raas.com.au.

www.raasrights.com.au • www.raas.com.au