The Dim-Post

May 21, 2013

Economic sabotage redux

Filed under: finance,psuedopolitics — danylmc @ 8:24 am

Ten days ago National’s Housing Minister announced an inquiry into the cost of building materials:

Nick Smith, speaking on “The Nation” said there was significant concern that items “the likes Batts, likes of Gib and concrete” were more expensive than what they were in Australia.

Batts and Gib are Fletcher’s brands and the company is a major concrete supplier.

Here’s what’s happened to Fletcher’s share price over the past thirty days:

fle

According to the Steven Joyce/Fran O’Sullivan theory of political sharemarket vandalism, Nick Smith has ‘destroyed’ about $260 million dollars worth of wealth in the last ten days. I look forward to their columns/press releases warning of capital flight, skies raining blood etc.

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33 Comments »

  1. When is someone going to tell Danyl that the students he has subcontracted the Dim Post to while he is overseas for the last year are turning in ever more sub Standard efforts.

    Comment by Roger — May 21, 2013 @ 8:57 am

  2. This is a disgrace. The National Government has attacked everyone’s Kiwisaver accounts, destroyed confidence in the sharemarket, signaled a North Korean house-building policy, and spooked international investors with their investigation into Fletcher’s rorting of the building supplies market.

    Comment by Bill Engrish — May 21, 2013 @ 9:42 am

  3. This just reveals – yet again – how incoherent and irrational they are. It seems to be very much a neo-liberal / conservative thing.

    Comment by Steve (@nza1) — May 21, 2013 @ 10:54 am

  4. The difference being that the enquiry is aiming to make building materials cheaper by making the market more competitive, not by setting up a central purchaser for building materials and forcing Fletchers to sell to it at a price that the purchaser chooses, and forcing all retailers to buy from the central purchaser.

    Comment by Dave — May 21, 2013 @ 11:02 am

  5. Dave – obviously the policy issues are different (although the focus of NZ Power is to also reduce costs) – but one of the specific criticisms levelled at Labour/Greens was that they attacked the market and caused a loss of shareholder value.

    Before Smith made his announcement – Flectchers was worth $5,940,000,000. It dropped 1.3 per cent on the first day, bounced around for the rest of the week and closed yesterday with a market capitalisation of $5,681,000,000.

    Meaning, if you use the same criticism that was levelled at Shearer and Norman – Smith has destroyed $259 million of value and National should never be allowed near the Treasury benches.

    That’s being facetious of course, but it mirrors the hysterical overreaction to the Opposition’s announcement.

    Comment by Bill Engrish — May 21, 2013 @ 11:21 am

  6. It would be an issue if the govt lost money from selling share sales – as it did with MRP.

    It would be an issue if National were deliberately talking down the value of a State asset.

    It would be an issue if you were a Fletcher share holder and you thought National were talking down your wealth for political gain.

    The graph isn’t that clear but it doesn’t look like there was any drop in the price in the few days after the announcement.

    Comment by NeilM — May 21, 2013 @ 11:30 am

  7. It would be an issue if the govt lost money from selling share sales – as it did with MRP.

    But this wasn’t the main attack line at the time. It was that the Greens/Labour had caused the share value of Contact and TrustPower to fall, thus costing “billions” (thanks, Hooten) in losses to “ordinary Kiwis” who were invested through Kiwisaver, etc. Wonder how much Kiwisaver funds are invested in Fletchers?

    It would be an issue if National were deliberately talking down the value of a State asset.

    Why? Are you saying that it’s OK for Governments to “talk down” the value of private companies? So that when the Greens/Labour announce that they plan to take action to force supermarket prices down (as Farrar is “convinced” they will, scoff, scoff), you’ll shrug and say “that’s OK”? And, if it is so bad to talk down the value of State assets, what are your views on John Key’s rubbishing of Solid Energy (a “broken company”, no less).

    It would be an issue if you were a Fletcher share holder and you thought National were talking down your wealth for political gain.

    Why exactly do you think Nick Smith is doing this? Just for the shits and giggles of it all?

    The graph isn’t that clear but it doesn’t look like there was any drop in the price in the few days after the announcement.

    The point isn’t whether the claim is true. It’s whether it can be deployed as an attack line against a political opponent.

    Comment by Flashing Light — May 21, 2013 @ 11:54 am

  8. @Roger,

    When is someone going to tell Danyl that the students he has subcontracted the Dim Post to while he is overseas for the last year are turning in ever more sub Standard efforts.

    This comment alone indicates how effective a post this was.

    Comment by Flashing Light — May 21, 2013 @ 11:55 am

  9. …the govt lost money from selling share sales – as it did with MRP.

    No they didn’t. Investor’s priced risk.

    Comment by Gregor W — May 21, 2013 @ 12:04 pm

  10. The point isn’t whether the claim is true. It’s whether it can be deployed as an attack line against a political opponent.

    It help your case a litlle if you had a real example since Labour talking down the value of states assets was a real example.

    But I have no problem with this as a valid attack line. If Fletcher shareholders feel aggrieved then they can take the matter up with the securities commission.

    Comment by NeilM — May 21, 2013 @ 12:06 pm

  11. there, FIFY : talking down the rentier value of arbitrarily and inaccurately priced states(sic) assets

    Comment by paritutu — May 21, 2013 @ 12:17 pm

  12. So, NeilM … John Key’s comments on Solid Energy (http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10885062)?

    Plus, care to explain why the Securities Commission is the appropriate forum for complaints about Nick Smith, and not for the Labour/Greens announcement? Aside, of course, from the fact that for you Blue does no wrong, while the other colours do.

    Comment by Flashing Light — May 21, 2013 @ 12:23 pm

  13. Yes, Labour’s line at present is they are rentier profit seekers. If so i don’t understand why they’re opposed to the sale.

    Surely whip them off to the private sector and let them suffer the pain of decreased dividends rather than the govt.

    Just as with Fletcher.

    Comment by NeilM — May 21, 2013 @ 12:25 pm

  14. Key’s comments didn’t cause the decline in value of Solid Energy.

    That was caused by the company’s poor performance.

    Comment by NeilM — May 21, 2013 @ 12:28 pm

  15. To be fair to Smith (which I am not always inclined to be) there is a substantial difference between “the price of a thing is different in New Zealand and Australia” to “We’re going to restructure an entire industry for no reason other than political pandering”

    Comment by Phil — May 21, 2013 @ 12:33 pm

  16. care to explain why the Securities Commission is the appropriate forum for complaints about Nick Smith, and not for the Labour/Greens announcement?

    I don’t believe SecCom would have any interest in either case. Public statements by politicians aren’t their field.
    Unless, of course, an MP bought or sold shares in the lead-up to either announcement. That would be a fascinating piece of investigative journalism.

    Comment by Phil — May 21, 2013 @ 12:41 pm

  17. I shouldn’t have said the sec com, I just meant that if shareholders believe that politicians have manipulated share prices for political gain then they would have a valid complaint.

    Comment by NeilM — May 21, 2013 @ 12:46 pm

  18. Look at the FBU graph for the past year. You’ll see that the recent fluctuation is well within normal variability of share prices.

    Nothing to see here.

    Comment by davidinnz — May 21, 2013 @ 12:52 pm

  19. @Phil, does our MSM do investigative journalism?

    Comment by northshoreguynz — May 21, 2013 @ 1:06 pm

  20. Key’s comments didn’t cause the decline in value of Solid Energy.

    But given that the company still exists and is still taxpayer owned, why isn’t he damaging any remaining equity in it by his comments (which contrast strongly with those made by the Board’s chair, who is trying to negotiate the company’s future with the banks)?

    Oh, yes, sorry … he’s in the blue team. So obviously it’s different. Because it is.

    I just meant that if shareholders believe that politicians have manipulated share prices for political gain then they would have a valid complaint.

    So – Fletcher’s shareholders do have a valid complaint! Where, then, is the outrage Danyl references in the original post?

    Comment by Flashing Light — May 21, 2013 @ 1:10 pm

  21. given that the company still exists and is still taxpayer owned, why isn’t he damaging any remaining equity in it by his comments

    Two reasons:
    1) Solid energy is effectively in a ‘frozen’ state while the corporate adviser, KordaMentha reviews the business and assesses the courses of action available.
    2) Key isn’t saying anything we don’t already know. He’s not adding uncertainty (which is the biggest killer of value) to the market by saying “yep, it’s not looking good”.

    comments (which contrast strongly with those made by the Board’s chair, who is trying to negotiate the company’s future with the banks)

    In the very same article:
    “Chairman Mark Ford says he has “total confidence” Solid Energy’s s revamped business plan would be acceptable to the Government and banks. Asked if Ford’s plan was viable, Key yesterday said he hadn’t seen it. “If it is that would be great. That’s not the advice we’ve had just yet.”

    Comment by Phil — May 21, 2013 @ 3:13 pm

  22. So – Fletcher’s shareholders do have a valid complaint! Where, then, is the outrage Danyl references in the original post?

    I’ll leave the outrage to the Fletcher shareholders but since this did not happen anyway there might not be any.

    However as a kiwi and therefore having shares in the energy companies via the govts I was disconcerted to say the least with what Labour and the Greens got up to which was one big cut off their (and ours) noses to spite their face exercise.

    And before you go on about how I’m just on the blue team, can I just say that I supported most of what Cullen did apart from making WFF and student loans too generous to the middle class.

    Comment by NeilM — May 21, 2013 @ 4:21 pm

  23. I’ll leave the outrage to the Fletcher shareholders but since this did not happen anyway there might not be any.

    So you agree the outrage expressed by various bloggers/political flacks/newspaper columnists on behalf of Contact/TrustPower shareholders was out of place? Thus, you agree with Danyl’s actual post – that the reaction to these two political announcements reveals a partisan discrepancy? Excellent.

    I judge you less on what you say about what you believe, and more on what you actually say.

    Comment by Flashing Light — May 21, 2013 @ 5:27 pm

  24. Umm Nick Smith Smith obviously didn’t say anything about nationalising the building supplies sector by legislation. He wants an inquiry, anyway, thought the Green Party liked inquiries?

    Comment by Grant — May 21, 2013 @ 5:30 pm

  25. dont you guys have a day job???

    Comment by Wimmmmmy — May 21, 2013 @ 5:50 pm

  26. Hi Neil M
    Re: “However as a kiwi and therefore having shares in the energy companies via the govts I was disconcerted to say the least with what Labour and the Greens got up to which was one big cut off their (and ours) noses to spite their face exercise.”

    Funny that, I was outraged at the govt privitising part of my share in those energy companies, and goof on Labour and Greens for coming up with an alternative to the neo=liberal looting clap trap.

    So i suppose that makes us even?

    Comment by Andrew R — May 21, 2013 @ 9:29 pm

  27. @Andrew R

    I suppose it does

    I was only ever a luke warm supporter if the partial sale. I’m not averse to the govt having major stakes in critical industry.

    Had National not put this on the agenda i wouldn’t have been going round agitating fot it.

    But they did and on balance, given what the govt gets and looses, I was not opposed.

    But I did accept that the partial sale would mean loss for the govt, and hence for us all, of a portion if an important asset and a portion of an important income stream for the govt.

    I just agreed that the range of benefits such as having that money go to schools and hospitals was worth the cost.

    It’s something people can reasonably differ on.

    But why then does Labour go and all of a sudden start alleging these State assets are just capitalist rentier exploiters?

    Weren’t they supposed to be these valuable people-owned assets?

    I just never believed Labour was really opposed to the this, it was just opposition for oppositions sake.

    Comment by NeilM — May 21, 2013 @ 10:31 pm

  28. NeilM – 2 thoughts:

    The assets became the domain for entire exploitation when they were sold. Prior to that they had a semblance, however minuscule, of providing a public good to the net benefit of taxpayers.

    Secondly, the ‘earmarked or schools’ meme is poppycock. That’s what government operating expenses are for. To put it into perspective, how can a government that borrows hundreds of millions a year to keep universal pensions ticking over, suddenly claim poverty to justify an asset sell off?

    Comment by Gregor W — May 21, 2013 @ 11:55 pm

  29. Hey Danyl, David says you’re dumb…http://www.kiwiblog.co.nz/2013/05/silly_comparison.html

    Comment by Ben — May 22, 2013 @ 7:11 am

  30. OH! The Penguin has written a rebuttal. DPF’s problem is Danyl has a sense of humour, so his posts are bitingly more effective.

    Comment by Sanctuary — May 22, 2013 @ 7:37 am

  31. But if the announcement was ten days ago, on May 11(?) then why did the share price take its tumble on the 3rd? I’m guessing the dip we’re talking about is the one nearer the 13th?

    Comment by Stuart — May 22, 2013 @ 7:44 am

  32. Yep DIM bites alright. Problem is the penguin takes the biter to the cleaners………again.

    Dont need an enquiry heart of the issue of why prices higher in nz than oz will be nz government regulation.

    Comment by Simon — May 22, 2013 @ 7:55 am

  33. nice one Simon. So pleased to hear that Nick Smith’s wasting our money with his inquiry. But I wonder why he didn’t just call you first.

    Comment by jps — May 22, 2013 @ 8:17 am


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