About 10 years ago my local council started an eradication program to rid the local area of feral foxes. Initially, people were happy but as time went by and as some pesky newcomers moved in, the euphoria of lynching the foxes didn’t last.
Within a few months people noticed feral rabbits in their yards. Eating vegetation and ruining gardens. People insisted that action be taken as the rabbit population exploded. The local ranger asked people to remain calm and let nature take its course. None of us had any idea what that meant.
The ranger explained that the explosion in the rabbit and possum populations was a direct result of the ridding the neighbourhood of foxes. Duh. He added however, that this new found abundance of fauna would in-turn invite native predators to hunt them. As there are Powerful Owls in the area everyone thought that’s what he meant (never mind that the disappearance of a small shitzu had been blamed on one of these creatures). Given the majesty of these creatures we all decided it was for the greater good and waited patiently.
For a while…
Possum poo was everywhere. In our outdoor dining areas, pools, paths, pergolas, patios … you name it. There was a party going on upon my roof every night. Between their fighting, screaming and running It was like the possum equivalent of Snoop Dog and Metallica were jamming in a terrible musical collaborative nightmare. My neighbour used to trap the possums and move them to another location. Whilst illegal, he felt he had to do something. He’d lost all patience and the Powerful Owls were nowhere to be seen.
Then earlier this year – as if by divine intervention – the rabbit population started to decline and we no longer had evidence of possums in our outdoor areas and the nights have become eerily quiet. At last we can swim without our mouths firmly shut. But where were those magnificent Powerful Owls?
Given that there had been no sightings what was causing the decline in the possum and rabbit populations?
At first it was a bit of a mystery as to why this phenomenon had taken place. No owls, no eagles even the Kookaburra’s had taken a break from laughing at us.
While I knew why – and I’ll get to that in a minute – I didn’t want to share the information with others.
You see, this time last year as I was driving up my driveway I had to stop for a snake sunning itself on the concrete. From behind the wheel of the car I couldn’t make out the species of the snake. But, when I followed the reptile to my front yard, hidden underneath foliage was a slithering hero whom I christened Monty.
Monty is a diamond python – a non-venomous native Australian snake. His/her (not sure of Monty’s gender) main diet are possums and rabbits.
Until now, I had kept Monty’s existence a secret from my extended family as I have a relative whom, whilst an otherwise rational and highly intelligent human being, suffers from an irrational fear of snakes. This snake phobia is so acute that she once collapsed from her anxiety and was in a coma.
I also hesitate to tell my neighbour as he’s 87 and very old school – he still burns rubbish in his backyard every Saturday – and I fear would try and kill Monty.
In the end, my attempts at concealing Monty’s existence was thwarted by Monty. A neighbour across the road kept pet Guinea Pigs in their garage. The garage faced the street. Monty slithered down off my property whilst some tradesmen were carrying out work in the street. They raised the alarm and the secret was out. Monty was seen knocking on the neighbours garage door trying to get at those pesky guinea pigs.
Inevitably, even though Monty’s harmless, people will be up in arms and want Monty removed.
Apparently Monty’s demand of food was well and truly matched by the abundant supply of it in our small street. When that supply is depleted Monty will leave and he/she will slowly make its way back to the bush.
So, how is all this relevant to the financial markets? Glad you asked.
You may recall a couple of years ago, I was apoplectic about the lack of attention being given to small business owners by our banks. I further lamented the fact that private funders were as scarce as hens’ teeth to take up the slack. Back then, 80% of SME’s who applied for a business loan were rejected.
These SME’s are a little like the rabbits and possums. Inevitably, they would attract predators (and I mean that in the nicest possible way). And they have.
We now have the Monty equivalents in the loan markets. Where, two years ago we couldn’t get a single private lender to look at a reasonable deal, we now have access to a couple of dozen and there’s more entering the market almost daily.
Just 18 months ago it was almost impossible to get a loan without property security now sophisticated investors from South Africa have re-directed their funds from the UK to our shores (you can thank Brexit for that).
Previously, private funders tended to congregate in the affluent suburbs of Sydney and Melbourne. Then the Chinese entered the market chasing yield. But they would only lend against property and predominantly Chinese borrowers. Now, the South Africans will lend senior, mezzanine debt and equity against non-property assets (such as receivables).
Like Monty, they’re not everyone’s cup of tea and some people have an irrational fear of these private funders.
I acknowledge that we must be very careful that these private funders don’t get too carried away. Risk fundamentals need to be adhered to. Otherwise we’ll have a feeding frenzy and accusations of usury.
Currently there is more funding in the market than the market can bear. So, the financial Monty’s have done their job in meeting the demand for funds. I just hope they don’t move on to the market equivalent of the bush too quickly.
In the mean-time I’m still looking for that mythical Powerful Owl.