The Dim-Post

April 22, 2013

Chart of the day, destruction of wealth vs destruction of independent thought edition

Filed under: finance,general idiocy — danylmc @ 1:20 pm

NZX data on Contact Energy’s share price, which – according to Matthew Hooton and the Herald’s Liam Dann has suffered an unprecedented form of destruction in the wake of the Labour Green power policy announcement:

contact

So Contact’s shares are at their lowest level for like, seven weeks! And still way above their historic average! Hooton is paid to regurgitate preposterous bullshit, and he’s pretty great at his job, but the Herald’s business editor should be a little less gullible.

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27 Comments »

  1. Thank you for this post highlighting the nonsense presently spewing from the hysterical right.
    Your last sentence assumes that Mr Dann is not paid to regurgitate bullshit. The NZ Herald is hardly a beacon of independent journalism.

    Comment by Paul — April 22, 2013 @ 2:01 pm

  2. And, as you said earlier, ‘this is bad for the power companies’ profits’ is a pretty poor criticism, given that most NZers are perfectly happy to see power company share prices suffer if it means cheaper power.

    Comment by Hugh — April 22, 2013 @ 2:05 pm

  3. AND CEN have increased 8 cent today as well.

    Comment by DR — April 22, 2013 @ 2:49 pm

  4. If the Left’a response to Right wing hysteria is just more hysteria then there’s not much point to politics.

    “Superprofits” etc etc

    How about some facts to back up these claims.

    Comment by NeilM — April 22, 2013 @ 3:30 pm

  5. but the Herald’s business editor should be a little less gullible.

    This is the same paper that has Fan O’Sullivan in its ‘business’ section, and lets Rodney Hide write a weekly editorial. The bar was set so low they have just given up, teh Herald can’t compete with facetwitterbook for speed but matches for inanity

    Comment by andy (the other one) — April 22, 2013 @ 4:21 pm

  6. Matthew Hooton even managed to claim that the Lab/Greens power policy Crashed the sharemarket.

    Holy Sh%t, except that this time last year the NZX 50 was at a shocking high of 3513k points and today its has fallen disastrously to unprecedented lows of 4,481k. Its a complete rout, black Friday, 1987 all over again. Oh and Conatct Energy ended the day in the Green.

    Comment by andy (the other one) — April 22, 2013 @ 4:29 pm

  7. I may have poor reading comprehension, but I couldn’t see where Liam Dann said the Contact share price suffered an unprecedented destruction of wealth. This blog is getting closer and closer to the standard.

    Comment by Swan — April 22, 2013 @ 4:39 pm

  8. Its a complete rout, black Friday, 1987 all over again.

    …or 1984 all over again.

    MiniTrue Joyce: Green-Lab = North-Kor EastAsia econ-hate! Double plus bad!

    Comment by Gregor W — April 22, 2013 @ 4:45 pm

  9. @Swan: Dann used the words “…$600 million value destruction suffered by Contact, Infratil and Trustpower in the day and a half after the new policy was announced.” Same idea, no?

    Comment by leftyliberal — April 22, 2013 @ 7:01 pm

  10. “Same idea, no?”

    No, since the point of Danyl’s post relies specifically on Dann having said this was “unprecedented” which he didn’t and if you read what Dann wrote it was very clearly not the point he was trying to make.

    There was a loss in the value of theses State assets due to Labour’s actions and there was quite s lot of cheering.

    For who thought the value of State assets was a public good that’s all a bit disconcerting.

    Comment by NeilM — April 22, 2013 @ 7:41 pm

  11. There was a loss in the value of theses State assets due to Labour’s actions and there was quite s lot of cheering.

    WTF are you talking about, NeilM?
    There was no loss in value of “state assets” – they aren’t in market.

    Comment by Gregor W — April 22, 2013 @ 8:03 pm

  12. There was a loss in the value of theses State assets due to Labour’s actions and there was quite s lot of cheering.

    NeilM goes full ‘Mathew Hooton’. Reality be damned!!!

    Comment by andy (the other one) — April 22, 2013 @ 8:06 pm

  13. Hooters was in fine form this morning on National Radio. Fortunately, Kathryn Ryan wasn’t taken in by his BS. He claimed billions of dollars had been wiped off the sharemarket, almost hinting that the government should intervene! Intervening in the energy market is sacrilege, so it seems, but intervening when the wealthy stand to lose a few bucks seems to be acceptable.

    Comment by Ross — April 22, 2013 @ 9:57 pm

  14. Yeah, my mistake.

    A drop in Contact which is an indicator of a drop in the value of energy companies as as wholle is what I should have said.

    I don’t object to making power priced cheaper for the less well off. Making it cheaper for everyone – including those who don’t need the hand out – i think needs to pass more stringent criteria.

    Devaluing Sate assets for the sake if the middle and upper class doesn’t make a lot of sense from a left wing point of view.

    Comment by NeilM — April 22, 2013 @ 11:01 pm

  15. Funny thing about Pharmac is drug manufactors, unlike the power companies, aren’t owned by the NZ govt.

    Or did the fact that they are State assets become suddenly irrelevant (now that they’ve been deemed enemies of the people I suppose the makes sense).

    Comment by NeilM — April 22, 2013 @ 11:39 pm

  16. That Contact’s share price hasn’t fallen further could indicate: a) investors don’t think this policy, if implemented, would reduce Contact’s future profits (if that’s the case, why do it?!); or b) investors think the probability of L/G getting elected and actually implementing it is very small indeed. Someone with more smarts and time than me could come up with an estimate of the NPV impact on contact’s future profits – and then estimate what the market thinks the odds are of Labour/Greens actually doing this.

    Comment by John MacC — April 23, 2013 @ 2:03 am

  17. Devaluing Sate assets … doesn’t make a lot of sense from a left wing point of view.

    Why not? What is the relevance of those assets’ (hypothetical) share-market price if you don’t intend to sell them?

    Comment by herr doktor bimler — April 23, 2013 @ 9:22 am

  18. I’m not an expert at all but I presume that if MRP wanted to borrow to finance geothermal development then the company being worth less would make that more expensive.

    And for the govt, having its assets valued less would also make life more difficult.

    If the power company shares wind up being sold for less then that doesn’t sound like a great achievement either. It means if Labour is the next govt the face having less funds themselves in addition to the loss of tax and dividends.

    The biggest irony will be Labour and the Greens having devalued our geothermal and hydro resources because if the past 10 years high price for natural gas.

    Comment by NeilM — April 23, 2013 @ 10:36 am

  19. herr doktor: The share price is indicative of expected earnings (with various adjusting factors) therefore if the valuation of shares sitting on the government books goes down, then it’s usually because the expected earnings have dropped… which is a bit shit for whoever owns those shares at the time.

    Comment by Andrew M — April 23, 2013 @ 10:46 am

  20. “I don’t object to making power priced cheaper for the less well off. Making it cheaper for everyone – including those who don’t need the hand out – I think needs to pass more stringent criteria.”

    @NeilM
    Receiving a block of subsidised power per household is progressive, similar to a cut in GST as a poorer families electricity spend as a share of their disposable income is much higher.
    The policy involves a degree of wealth redistribution. The Power Companies dropping in value due to expected lower profits means a loss for wealthier asset holding NZers and international investors. That loss in value represents the expected dividend of cheaper power to electricity consumers.

    You can argue that if redistribution is the goal then there are more efficient ways to do it via the tax system, but it is not correct to argue that this is middle class welfare or would not be progressive in it’s outcomes. In fact most of the hysteria over the policy and allegations of socialism are exactly because it is a progressive redistribution of wealth.

    Comment by Richard29 — April 23, 2013 @ 12:17 pm

  21. Receiving a block of subsidised power per household is progressive, similar to a cut in GST as a poorer families electricity spend as a share of their disposable income is much higher.

    I wouldn’t be so sure of that. For instance it costs me, in absolute terms, less to heat and power my brand-new 3-bedroom suburban home (with all the energy efficiency bells and whistles) than it used to cost to heat my rented 1-bedroom 70-year-old flat. In my case, the percentage cut I’d be receiving on a heating bill (assuming a fixed per-dwelling subsidised allocation) is larger in the new home.

    Cutting GST off fresh fruit and vege (still a Lab+Green policy?) would also be ‘regressive’ as we know that wealthier households spend relatively more of their income on fresh produce than poorer households (based on expenditure data which is used in the HES) so would gain a proportionally larger benefit from the lower prices.

    Comment by Phil — April 23, 2013 @ 12:58 pm

  22. Phil wrote: Cutting GST off fresh fruit and vege (still a Lab+Green policy?)

    not a Labour-Green Policy – just a Labour policy. Removing GST from fresh fruit and vegetables has never been a green party policy, partly because it is a regressive tax cut.

    Comment by kahikatea — April 23, 2013 @ 3:01 pm

  23. Every day I wonder “why don’t these lefties embrace a version of Morgan’s Big Kahuna?”
    Where every adult citizen gets a basic payment, and then we all pay a flat rate of tax on our earnings. It goes a long way to reduce the effect of high marginal taxes on beneficiaries. And would go a long way to helping those on low incomes pay for the basics.

    Comment by Clunking Fist — April 23, 2013 @ 8:00 pm

  24. (So fecking obvious, I’m wondering why I am bothering to post this) On falling share values: as the market begins to suspect that the Lab-Greens are serious (and have a chance of governing) then the value of Contact may fall further. If the market thinks that Lab-Green haven’t a snowball, then the value may well recover.

    Comment by Clunking Fist — April 23, 2013 @ 8:04 pm

  25. @Richard29

    The policy involves a degree of wealth redistribution. The Power Companies dropping in value due to expected lower profits means a loss for wealthier asset holding NZers and international investors. That loss in value represents the expected dividend of cheaper power to electricity consumers.

    I agree that it is form of wealth redistribution but some of it is being distributed to those who don’t need it.

    And it’s not just the rich and overseas investors who will lose out but us NZ citizens because we lose the value of our share of these SOEs.

    Which were until recently being proclaimed the jewel in the State asset crown by the opponents of asset sales.

    At the moment what is happening is that the share price if MRP – which should by all rights be considered one if NZ’s major assets because if its geothermal resources – will niw have a lower price enabling whatever foreign investment there will be to buy shares for less. And given Labour’s scheme will take quite sometime to implement- if ever -then those foreign investors will get a good quality investment at a discount.

    Comment by NeilM — April 24, 2013 @ 1:57 am

  26. Yeah, if Labour wanted to be really bold then a negative income tax would have been the way.

    Instead we’re getting a rehash of the no GST on fruit and veges schmozzle – poorly thought out and oven by the next focus group.

    Comment by NeilM — April 24, 2013 @ 2:03 am

  27. ““…$600 million value destruction suffered by Contact, Infratil and Trustpower in the day and a half after the new policy was announced.” Same idea, no?”

    Not really the same as “unprecedented”, no.

    Comment by Swan — April 26, 2013 @ 1:53 pm


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