The Dim-Post

July 28, 2012

There’s an ordinary New Zealander born every minute

Filed under: finance — danylmc @ 7:38 am

According to John Armstrong, National’s asset sales program is about encouraging hundreds of thousands of ‘ordinary New Zealanders’ into the sharemarket, thus transforming New Zealand into a capital owning democracy.

I wonder if National – or Armstrong – know that several million New Zealanders now own shares via their investment into KiwiSaver funds?

(My guesses to that question: absolutely yes, and absolutely not.)

It’s not quite the same, of course. If you put your money into KiwiSaver it gets spread across a range of different asset classes according to your risk profile. If you sink all your money into buying shares in four different power companies then you could lose almost all of it in the event of, oh, say, a Waitangi tribunal finding and High Court decision that has a huge impact on the value of companies in that sector.

About these ads

37 Comments »

  1. Shades of Michael Cullen my dear Danyl – ‘those rich pricks’ll deserve it if the Waitangi Tribunal immolates their investments’

    Comment by Tim — July 28, 2012 @ 8:49 am

  2. Are there any other hidden messages in the post that are not obvious to the general reader, or was it just the one?

    Comment by Psycho Milt — July 28, 2012 @ 10:40 am

  3. Unless you are the oldest Billy Goat Gruff I would avoid interacting with the troll.

    Comment by Sanctuary — July 28, 2012 @ 12:44 pm

  4. @3 Sanc

    Oh, it’s amusing to poke him with a stick now and again. What I find most funny are his persistent beliefs that a false nose will completely disguise him and that his jibes have the slightest wounding effect – it’s rather like watching a chihuahua yapping at a wolf. The wolf can choose to care or not, but it’s amusing nonetheless.

    Comment by Rhinocrates — July 28, 2012 @ 2:34 pm

  5. LOL. Lone Wolf Rhino, god you’re an ass hat.

    Comment by Tim — July 28, 2012 @ 3:11 pm

  6. See?

    Comment by Rhinocrates — July 28, 2012 @ 3:13 pm

  7. I think the point Tim, is that this investment isn’t being pitched at “rich pricks” and that rather, the current government is actively discounting / dismissing a significant risk which could seriously impact the savings of “ordinary New Zealanders” .

    Comment by Gregor W — July 28, 2012 @ 3:14 pm

  8. I’m going to spell this out, I guess. The “wolf” in my simile is the blog itself, the community of people who are articulate, mature, experienced in life and who on the whole (now that Pete George has flounced off), possess a sense of humour. Timmy, typically, thinks it’s all about his personal ranking in relation to whom he is currently addressing.

    Comment by Rhinocrates — July 28, 2012 @ 3:53 pm

  9. Gregor, I suspect that’s why the Government is signalling quite loudly that the Waitangi Tribunal will not be allowed to derail the sale process.

    Oh Rhino how you love to twist and turn and show off your shiny plummage. Now you aren’t the Wolf dear boy? The blog is a simile … you really are peacock.

    Comment by Tim — July 28, 2012 @ 4:41 pm

  10. You say that like it’s a bad thing.

    Comment by Rhinocrates — July 28, 2012 @ 4:58 pm

  11. And back to the point, Armstrong’s analysis is almost astute, almost coherent and almost honest – which is quite remarkable considering his usual standard, though he could just be a stopped clock that happens to be sorta kinda right now and again and maybe even accurate for a split second, provided you look at exactly the right moment. Still, I can’t get over his perennial inability to construct a paragraph or follow through with logic. Take this for example:

    always with Key, it is all about shoring up the centre for National by offering something which – when you strip it down – amounts to a tidy tax break in drag.

    “Tax breaks” work well as headline rhetoric, but surely he appreciates that net income versus cost of living is what “the centre” is increasingly noticing. It’s a very one-dimensional analysis and represents the shallowness of the “Economists’ Party” mentioned in an earlier post.

    I wonder if National – or Armstrong – know that several million New Zealanders now own shares via their investment into KiwiSaver funds?

    How many New Zealanders consciously appreciate this themselves (one can “know” a thing, but forget it when forming gut reactions)? That’s not a rhetorical question, but a real one – though I am inclined to think “very few” is the answer, but I’m a cynic. If relatively few know it, then the sale could be sold as a tax break and an opportunity, overcoming the general opposition to “selling the silverware”, which I gather is what National calculates. On the other hand, the visceral opposition to selling the silverware coupled with a sense that the cost of living is too high, that there’s no cash in the kitty for shares at $1000 a pop cannot be overcome, even by presenting it as such.

    In any case, the sales process, but not the sales themselves are a fait accompli and then they’ll run into court challenges and claims around the Waitangi Tribunal, with repercussions for the Maori Party once again.

    Interesting times…

    Comment by Rhinocrates — July 28, 2012 @ 5:18 pm

  12. 5/11

    Comment by Tim — July 28, 2012 @ 6:00 pm

  13. “If you put your money into KiwiSaver it gets spread across a range of different asset classes according to your risk profile. If you sink all your money into buying shares in four different power companies then you could lose almost all of it in the event of, oh, say, a Waitangi tribunal finding and High Court decision that has a huge impact on the value of companies in that sector.”

    If you put your money into kiwisaver, you get your profits eroded by management fees. If you own your own shares, not so much. But back to your strawman, no, obviously it is not a good idea to sink all your money into four companies in the same industry. Thanks for the tip Danyl.

    Comment by swan — July 28, 2012 @ 9:09 pm

  14. @Tim #9

    Sure, but that’s not the real issue. If a case to determine economic rights to river water is pursued via the courts as a result of Key fobbing of the Tribunal’s determination (a he has essentially done) then the government could be in real trouble, particularly if it turns out that they’ve sold something they don’t own and the stocks tank, but more importantly, in terms of precedent.

    Conceivably, Canterbury farmers could kiss their shiny new taxpayer funded irrigation goodbye without ponying up to Ngai Tahu.

    Given the rural sector is principally Nat, we could be looking at an epic own goal in the making.

    Comment by Gregor W — July 28, 2012 @ 10:00 pm

  15. Gregor W: “Conceivably, Canterbury farmers could kiss their shiny new taxpayer funded irrigation goodbye without ponying up to Ngai Tahu.”

    And to think Supplementary Minimum Prices were so 1986.

    Comment by deepred — July 29, 2012 @ 2:54 am

  16. The lefts wet dream, a failed float. Caring.

    Comment by Tim — July 29, 2012 @ 8:59 am

  17. “Waitangi tribunal finding and High Court decision that has a huge impact on the value of companies in that sector”

    “Conceivably, Canterbury farmers could kiss their shiny new taxpayer funded irrigation goodbye without ponying up to Ngai Tahu.”

    Interesting stuff.

    Throughout the markets there are rumors to influence prices one way or the other. It is a whole industry by itself.

    If the IPO is a flop I will be backing up the truck. The SOEs will be sold at a discount anyway plus all this WT talk will further discount the price. These SOEs are going to be nice little earners.

    Keep the chatter up.

    Comment by Simon — July 29, 2012 @ 9:34 am

  18. I don’t think the IPOD will be a flop. The Govt will ensure it isn’t by juicing the list price to enforce an oversubscription and thus ‘success’.

    It’s what happens down the track if the court rules against the Govt and the shareholders face a significant unaccounted liability. My guess:

    1. Profit and EPS now starts to look marginal and insto’s exit holdings on uncertainty.
    2. Stock tanks 20-30 % and Mum and Dad take a bath blaming the Govt.
    3. Insto’s with inside knowledge (probably including Iwi funds) pickup depressed stock at bargain price prior to Iwi settlement.
    4. Govt. shrugs and blames Maori and market forces.

    Comment by Gregor W — July 29, 2012 @ 9:51 am

  19. Maori are nor monolithic. The “Brown table” and the Iwi leadership group along with their political vehicle the Maori Party might be keen for a backroom deal that give National an escape avenue and let the asset sales proceed. But we would be foolish to believe there isn’t a political and ideological dimension being hidden behind a the waving shroud of cultural and treat claims against privatisation. My view is that significant parts of Maori are genuinely opposed to asset sales because they don’t like then for ideological and political as well as cultural reasons and their wish to stop the sales is therefore fundamentally unappeasable.

    I was watching Country Calendar last night -(with its wonderful Maori sub titles, when did that start happening??) with its feature on a Maori logging/contracting family and it occurred to me that much of what is called Maori culture is also a genuinely proud working class culture. It seems to me that at one level, Maori groups represent the last coherent working class alternative power base to the ruling elites we have in this country. Now, the last four decades have shown us the typical elite response to genuine working class opposition is to buy off its leaders with the baubles of power and also to use the law and the media to de-fang and smear their opponents. If that doesn’t work, plan B is to simply take off the velvet glove and use the iron fist to smash opposition. That approach has worked very well over the last forty years against the working class with the demonisation or usurptation of their chosen political vehicles (trade unions and socialist political parties) and the atomisation of working class solidarity. But in this identity politics age, Maori have used identity and culture to buttressed themselves from much of the propaganda assault from the right and that allowed them to retain significant residual organised political power. Added to that, plan B isn’t really an option against Maori, since they’ve shown themselve quite willing to shoot back if some shoots at them and the Pakeha political elites are sphincter suckingly petrified of any hint of Maori rebelliousness – surely the massive over-reaction of the Urewea raids can only have come from minds where the idea Tame Iti running a Tuhoe military camp represented every worst nightmare come true!

    Key over the teapot tapes showed what a fundamentally egotistical and willful man he is when he feels his status as CEO God-King of NZ inc is challenged. He has made the asset sales his personal mission. We’ve seen how quickly he’ll resort to using the levers of state power as if they are merely the HR department of his personal corporate empire if he is crossed. If he is not careful, the country may witness the dangerous sight of his unstoppable ego crashing headlong into the immovable object of Maori opposition.

    Comment by Sanctuary — July 29, 2012 @ 10:24 am

  20. @ Sanc

    I’m not suggesting all Maori interests are monolithic.

    I’m suggesting that powerful ownership / financial class, including those that are nominally ‘Maori’, are very more tightly aligned in terms fleecing everyone else (including in the case of the Maori elites, their own people, just as European elites have no hesitation in doing).

    Any racial / ideological posturing is lipstick on the pig.

    Comment by Gregor W — July 29, 2012 @ 10:43 am

  21. Do the words “too big to fail” come to mind with the MoM process?

    Comment by deepred — July 29, 2012 @ 1:01 pm

  22. I’m thinking labour could say if they become government they will buy back all the shares for either their purchase price or current market value – whichever is less. They would pay for it by taxing the rich. Any rich who don’t want to pay are free to leave…and their assets here will be re-distributed to “Mum and Dad” investors….who pay tax. That should add to the risk profile……

    Comment by Steve (@nza1) — July 29, 2012 @ 8:30 pm

  23. Labour should make it clear they will buy back all shares sold at either the sale price or the current market price when they take office, whichever is less. The money will come from taxing the rich with funds squirrelled away overseas. Any rich who don’t want to pay their fair share of tax are free to leave…and their assets will be re-distributed to “Mum and dad” investors. If National can take public property and give it to their mates…then Labour (or someone else useful) can take it back. But give fair warning.

    Comment by Steve (@nza1) — July 29, 2012 @ 8:35 pm

  24. @ Steve – that would be the Labour party that does not consider electricity generators like 3 of the SOEs up for sale (Mighty River, Meridian, Genesis) to be worthy of public ownership… (ie they are not on Labour’s closed list of vital infrastructure). Chris Trotter is giving Shearer & chums what-ho over this.

    Nice dream but, one I share. But they should be nationalised at sale price, less inflation, dividends extracted, assets sold from the SOE after privatisation, or the amount by which assets have been revalued down (to prevent the Kiwirail rort). That guarantees anyone buying shares in our SOEs a loss based on what they have taken out of our SOEs. Should scare off the free market lions.

    Real question is – why are so many NZ political parties so keen on free market capitalism (and the consequent SOE sales) when so few voters seem enamoured of it?

    Comment by bob — July 29, 2012 @ 11:11 pm

  25. bob, if you read this http://www.google.co.nz/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0CH0QFjAA&url=http%3A%2F%2Fwww.ea.govt.nz%2Fdocument%2F13381%2Fdownload%2Findustry%2Fmonitoring%2Fforecasting%2Fdemand-forecasting%2Fdemand-forecast-review-documents%2F&ei=TKQVUPmVIam5iAewy4HICw&usg=AFQjCNGgZMkPXN2kPtT3zI53O6IzXxdFaw&sig2=huy4zJKP0REGip-2Y1PhHQ

    one way you could think that electricity demand growth is flattening out and as such generators will provide flat value growth and flat dividend growth.

    (hope the link works, it is to:

    A review of the methodology and models
    used by the New Zealand Electricity Commission
    for national electricity demand forecasting
    undertaken for the
    New Zealand Electricity Commission
    by
    Peter Thomson
    Statistics Research Associates Ltd
    Wellington, New Zealand
    8 February 2010
    Revised 17 February 2010)

    Comment by merv — July 30, 2012 @ 9:03 am

  26. Merv

    http://www.gridnewzealand.co.nz/f4847,60654968/transpower-demand-forecast-sept-2011.pdf is probably a better reference

    A.

    Comment by Antoine — July 30, 2012 @ 10:06 am

  27. No, you couldn’t lose all your money in the event of a Waitabgi Tribunal finding because it is not within the scope of white superior reality for something as ‘appalling’ (read: fair) as that to happen. The system is designed not to award Maori with their rightful ownership of assets but instead to reach a so-called compromise whereby they are given a bit more of taxpayer money each year in an unofficial understanding that they will keep quiet, or at least minimise their “kerfuffles”.

    Comment by Dan Lang — July 30, 2012 @ 11:12 am

  28. Labour should make it clear they will buy back all shares sold at either the sale price or the current market price when they take office, whichever is less. The money will come from taxing the rich with funds squirrelled away overseas. Any rich who don’t want to pay their fair share of tax are free to leave…and their assets will be re-distributed to “Mum and dad” investors. If National can take public property and give it to their mates…then Labour (or someone else useful) can take it back. But give fair warning.

    Why didnt they buy back/nationalise Contact Energy when they were in power? Especially when we were running those big surpluses in the early naughties, it would have been a piece of cake.

    Comment by swan — July 30, 2012 @ 11:50 am

  29. The money will come from taxing the rich with funds squirrelled away overseas.

    What’cha gonna do when the tax authorities in those other countries send you a less-than-polite message saying “These funds currently pay tax in our jurisdiction… get your filthy fucking hands off them.” ?

    Comment by Phil — July 30, 2012 @ 12:11 pm

  30. You can choose your Kiwisaver approach. You’ll notice that typically, the less they put in clever share investments, the better they’ve done. I’ve gone with bank deposits, which are near the top and will survive all but the harshest market crashes.

    At two percent, Kiwisaver’s pretty bloody useless anyway. If someone is in Kiwisaver for a 45 year working life, they’ll retire with 90% of earnings, which might give them a couple of years of subsistence on half pay. (I don’t believe long term real returns will happen: both because of the Fisher hypothesis and the simple fact the everything pensioners consume needs to be produced by the working population. However much nominal wealth pensioners have, they can only achieve a better standard of living by reducing that of the workers).

    Comment by Rich d'Rich (@rich_d_rich) — July 30, 2012 @ 12:25 pm

  31. “If someone is in Kiwisaver for a 45 year working life, they’ll retire with 90% of earnings”
    Um, you’ve forgotten the employer contribution (less tax) and the interest/investment income. Someone on a $60k salary putting 2% aside for 45 years and earning 3% (inflation free) will have a pot of $193k. Approx. Which is about 320% of annual salary (or say 394% of your after-tax salary of $49k).

    Comment by Clunking Fist — July 30, 2012 @ 1:02 pm

  32. Assumptions: no wage inflation, return of 3% after tax, 30% tax on employer contrib, monthly contributions, monthly compound interest.

    Comment by Clunking Fist — July 30, 2012 @ 1:06 pm

  33. Oops: critical assumptions: (1) continuing benign political/economic scene in NZ, (2) no theft of funds by fund manager or the state.

    Comment by Clunking Fist — July 30, 2012 @ 1:07 pm

  34. ” However much nominal wealth pensioners have, they can only achieve a better standard of living by reducing that of the workers).”

    You don’t really understand what capital is, do you?

    Comment by Swan — July 30, 2012 @ 9:47 pm

  35. We may never know David Parker’s true positon on mining I think we can conclude he’s capable of digging a very deap hole.

    At some point Labour will have to stop talking out of both sides of its mouth.

    Comment by NeilM — July 30, 2012 @ 10:05 pm

  36. At some point National will have to stop talking as though they’ve got a **** in their mouths

    Comment by Dan Lang — July 31, 2012 @ 9:21 am

  37. Swan @ 34, he makes a valid point: if the price of power is to do business with Winston, then we may well see the National Super increase. And NS is paid out of taxes, and taxes are paid by workers.

    Comment by Clunking Fist — July 31, 2012 @ 12:20 pm


RSS feed for comments on this post. TrackBack URI

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

The Rubric Theme. Create a free website or blog at WordPress.com.

Follow

Get every new post delivered to your Inbox.

Join 421 other followers

%d bloggers like this: