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23-10-2007

Brace yourselves for repeat of 1987, says developer

Property developer Olly Newland, who gained and lost a fortune at the time of the 1987 sharemarket bubble and bust, believes New Zealand is about to repeat the experience.

"All around I see people repeating the mistakes of the 80s," he wrote in the 20th anniversary edition of his book on the crash, Lost Property. "People seem simply not to want to learn.

"Once again the sharemarket, not to mention the property market, has become a gambling den - infested by hucksters and get-rich quick spruikers who want to part us from our money by selling false dreams and impossible promises."

The world has been caught in a fresh frenzy of speculation and greed aided by technology and fancy products, he said.

Central banks cut interest rates in the wake of 9/11 that had fuelled a real estate boom unparalleled since the Roaring 20s.

Now, with rates rising, he said it is payback time and even some lenders are going broke in the credit crunch.

"In New Zealand the property party continues unabated but we all know that sooner or later the day of reckoning will come."

Newland had already forecast the current "bubble" would have burst by now in another book - The Day the Bubble Bursts - on how to profit from the coming property slump.

Lost Property describes "dreadful times" in the aftermath of the October crash, when Wall St slumped 22 per cent in a day and the New Zealand market plunged 15 per cent.

"No amount of time can erase the savagery, the deception, the intrigues, and the downright dishonesty that ran amok through the business community during that time. "Unlike the movies, the baddies often won and the goodies often lost."

 He notes that New Zealand, which has had a far worse crash hangover than any other developed country, has largely stood still since. The New Zealand sharemarket is still 10 per cent below its 1987 level while the Dow Jones index is more than five times its pre-crash level.

His book is an insider's view outlining the exhilarating ride he and shareholders of his publicly listed property, Landmark Corp, took in the lead up to the crash.

Lavish parties were held where vast quantities of champagne were swilled, company executives were transported in Rolls Royces and company jets, and generally good times were had.

When Black Monday arrived, shredding one trillion dollars off the value of the New York market, Newland said he was totally unprepared for such an eventuality.

He describes the "terrifying, helpless" period that followed, plunging him to the depths of despair.

He believed people would pull together like in a natural disaster, but the reality was quite to the contrary. Shark behaviour prevailed.

On that fateful Tuesday, October 20, when he heard the 6am news of Wall St's plunge, Newland said a cold lump filled his chest. Like many others, he went down to the flash new Auckland exchange, then still an open outcry market, and watched hypnotically.

The market opened "with the roar of a cannon" and the noise steadily increased. Sell orders outnumbered buy offers 10 to one.

Huge blocks of shares sold at bigger and bigger discounts.

Back in the office, a stunned Newland began taking calls from fearful shareholders to whom he mumbled meaningless reassurances.

"What I did know was that the party was over. Things were never going to be the same."

He details the following days and months of market free-fall briefly interrupted by the odd "dead cat bounce" (where if you throw a cat from a skyscraper it will bounce, but it will be be dead).

Landmark's once $2 share price fell to around 40c. Margin calls and demands from bankers made Newland's life hell. As problems mounted, he sold one of his many Rolls Royces.

On that fateful Tuesday, October 20, when he heard the 6am news of Wall St's plunge, Newland said a cold lump filled his chest. Like many others, he went down to the flash new Auckland exchange, then still an open outcry market, and watched hypnotically.

The market opened "with the roar of a cannon" and the noise steadily increased. Sell orders outnumbered buy offers 10 to one.

Huge blocks of shares sold at bigger and bigger discounts.

Back in the office, a stunned Newland began taking calls from fearful shareholders to whom he mumbled meaningless reassurances.

"What I did know was that the party was over. Things were never going to be the same."

He details the following days and months of market free-fall briefly interrupted by the odd "dead cat bounce" (where if you throw a cat from a skyscraper it will bounce, but it will be be dead).

Landmark's once $2 share price fell to around 40c. Margin calls and demands from bankers made Newland's life hell. As problems mounted, he sold one of his many Rolls Royces.

Under severe pressure from his bankers, Newland quit his holding in Landmark, exiting with $30 million of property and debt, before the company slid into receivership in August 1989.

His final financial demise came when his backer, the Government's Development Finance Corp, itself dramatically went into receivership in October 1989. With no lender, all his properties were sold at a loss.

"I found myself and my family back where I had been 30 years earlier - no job, few substantial assets, little cash, no income and three children to school, clothe and feed."

With help from family, Newland began to invest again, first residential, then commercial property. He doesn't disclose his current wealth but you can be sure he doesn't go short.

 NZHERALD

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