Bizarreer and Bizarreer

DPF takes issue with my graph of the NZX in wake of the Labour-Greens power policy announcement:

I’m amazed Danyl is trying to argue that as the overall sharemarket is up, then the destruction of value in some companies doesn’t matter.

To use an analogy, it is like someone going into your street and burning your house down, but then telling you not to complain about it because the value of the rest of the street has risen.

Yes the NZX is up.That is because global investors are buying shares in Xero like it is the next Google. Now that is great for Xero shareholders like myself. It isn’t much use however to the person who only has shares in Contact Energy.

So. My original post was about the claim that KiwiSaver accounts have been devastated by the policy announcement, which they haven’t because the market is up and no fund in the country is exclusively invested in Contact Energy shares. If you’re a kiwi mum and/or dad and you only have shares in Contact Energy then the last few weeks have been pretty shaky for you, financially – not that bad though. Contact Energy shares are still at a higher point than their average over the last year, and other events in the market (I have no idea what they were) have wiped out far more value than the Labour-Greens policy announcement.

And there’s an important lesson to learn there, one that I’ve bored everyone to death with ever since the Mixed Ownership Model was announced: ordinary people shouldn’t directly invest in the share market. They should buy index funds or put their money into a KiwiSaver account, and that graph of Contact Energy’s share performance is an object lesson in why: individual shares can lose huge amounts of their value very quickly. It’s the most basic rule of investing, and it’s very unethical for the government to spend millions of dollars on an advertising campaign trying to convince people to break that rule because the Finance Minister needs to drive up the sale value of these assets.

The other point to be made here is that Labour and the Greens argue that the share-value of these companies is over-inflated  because their profits are artificially high – because the current policy settings allow them to price-gouge. So changing the policy settings isn’t wealth destruction, but rather wealth-transfer from the shareholders to the customers.

To pick up DPF’s house price analogy, it’s a little like your neighbor claiming that your back yard is actually part of his property, which inflates the value of his house but at the expense of your own. If you claim it back and it knocks $100k off his RV have you just ‘destroyed’ that wealth? Pft.

Conspiracy theory of the day, GCSB timeline edition

A timeline of GCSB/Kim Dotcom/Ian Fletcher/John Key related events, mostly just to try and understand in my own mind what’s going on:

• Early 2011: New Zealand Police contacted by the FBI to assist into an investigation of Megaupload, a file sharing site founded by Kim Dotcom, on the grounds that the site was involved in copyright infringement and theft of intellectual property. The Prime Minister has assured us that he knew nothing of the investigation until the Solicitor-General briefed him in January 2012, and that the GCSB were not involved in the investigation until mid-December 2011.
• Mid 2011: Prime Minister John Key rejects a short-list of applicants for the role of new GCSB Director and calls Ian Fletcher, who he knew slightly as a child, but has not seen for thirty years, asks him to apply for the job, and advises the selection panel that he did so. Fletcher’s has no experience in intelligence but his previous role was in the UK Civil Service where he was Chief Executive of the Intellectual Property Office.
• 8 September 2011: Fletcher is appointed Director of the GCSB, scheduled to begin in early 2012.
• December 16 2011 (a Friday): GCSB begins illegally spying on Kim Dotcom and his associates
• December 19 2011 (the next Monday):  Acting GCSB Director Simon Murdoch retires.
• January 19 2012: The Solicitor-General briefs the Prime Minister on Operation Debut, the raid on Dotcom and his operation that is scheduled to be carried out the next day. GCSB’s involvement in the operation is not mentioned.
• January 20 2012: Dotcom is arrested in an armed raid and imprisoned in Mount Eden. Email correspondance within GCSB and between them and other involved agencies indicates GCSB consider the operation a great success.
• January 29 2012: Ian Fletcher starts work as GCSB Director
• February 16 2012: Detective Inspector Grant Wormald – head of the Police operation – attends a debrief of GCSB staff and is surprised when a GCSB staffer points out that that there may be ‘potential issues’ with the legality of GCSB’s involvement.
• February 22 2012: The Organised and Financial Crime Agency New Zealand (OFCANZ) contacted the GCSB to advise that there were ‘serious issues’ related to the residency status of Dotcom and his associates and the GCSB surveillance of them.
• February 22 2012: GCSB replied that they had provided a summary document to their legal adviser ’for future reference’ but there would not be an inquiry or ‘witch hunt’.
• February 29 2012: Prime Minister John Key visits the GCSB offices to meet with staff and receive an overview of the bureau’s capabilities. He’s still not briefed on Kim Dotcom. Apparently Dotcom is briefly mentioned in a presentation, but neither John Key or Ian Fletcher remember this when questioned about it subsequently.
• August 17 2012: Deputy Prime Minister Bill English signs a Ministerial Certificate suppressing details of the GCSB’s involvement. English is acting Prime Minister while John Key is out of the country. It appears to be the only such warrant signed in recent history, but English does not advise Key about it on his return. The GCSB does not advise English that they acted unlawfully, and English is not aware of this until Key tells him in mid-September.

Remember, the GCSB still hasn’t advised the Prime Minister that they were illegally involved in the Kim Dotcom operation, even though Dotcom is on the news almost every day, one of Key’s Ministers – John Banks – has been embarrassed over his links to Dotcom, and Dotcom’s legal team are requesting information regarding the GCSB’s involvement in the case – which is why GCSB has English sign the warrant suppressing that information.

• September 17 2012: GCSB Director Ian Fletcher advises the Prime Minister that his department unlawfully spied on Kim Dotcom and his associates. 

Now that I’ve laid it all out like that I don’t really know what to make of it. This reminds me (a) of that season of Lost - I think it’s Season 4 – in which all the dramatic tension relies on the fact that none of the main characters ever stop and have a very brief conversation with each other about what they know and what they think is going on, and (b) one of those undergraduate statistics exercises where you multiply together a bunch of medium probability events to reach a very low probability outcome.

I could just be coincidence that Key decided the GCSB needed change management a year before the dotcom fiasco came to light and decided to hire his old acquaintance who was an expert in intellectual property just as New Zealand’s law enforcement agencies became involved in a huge, international copyright investigation – which Key knew nothing about, despite his dealings with the Hollywood Studios who lobbied for the investigation. It could also be coincidence that Fletcher is then the only guy interviewed and the independent selection committee also decides that he’s perfect for the role, and that he starts work one week after the Dotcom raids, which were seen as a huge success within the Bureau, then briefs Key a few weeks after that but forgets to mention the operation to him.

There’s no one thing here that’s impossible to believe, and some of the coincidences are probably just big ol’ coincidences. But aggregate it all together and it just feels like we’ve been lied to quite a bit and we’re still being lied to about something.

Chart of the day, plus ca change edition

Key urges urgency for second retrospective validation bill

Prime Minister John Key has called for other political parties to throw their support behind another controversial change to the legal system. The National Party will introduce a new bill this week that will update section 171 of the the Crimes Act. As with the changes to the laws around covert police video surveillance, the Prime Minister insists that the bill be passed under urgency and apply retrospectively.

The bill updates the manslaughter section of the Crimes Act of 1961, in which the current definition of ‘culpable homicide not amounting to murder’ will be redefined to exempt senior public servants who accidentally asphyxiate sex-workers at departmental parties.

‘I’ve been advised that the current wording of the law is a loophole in the justice system that could cause great inconvenience to the orderly function of government,’ Key announced in a press statement.

The law will be retrospectively applied back to December 17th 2010, the date of last years Crown Law Office Christmas function. ‘The Solicitor-General has specified this date as the key target for maintaining the integrity and dignity of the New Zealand justice system,’ Key explained, adding, ‘Go the All Blacks!’

Attorney-General Chris Finlayson has defended the move and the use of urgency and repeated the Prime Minister’s calls for political unity over the issue.

‘It is vital that parliament put the needs of the people of New Zealand to have trust in the legal system and its representatives over the rights of some asthmatic stripper and her sentimental, hysterical family who don’t know a good cash settlement when they see one,’ Finlayson told Radio New Zealand in a interview.

The ACT Party has agreed to support the bill to the first stage of select committee, on the understanding that the exemption be further widened. Under the draft ACT bill it will be legal to accidentally run over a teenage baby-sitter fleeing in terror from a private property, so long as that property has a rateable value in excess of one million dollars.

‘This is sensible policy reducing the amount of red tape which is strangling our hitch-hiker. I mean, economy,’ ACT leader Don Brash told reporters at a parliamentary press conference.

Labour leader Phil Goff has yet to form a position on the legislation, but explained that he also supported the All Blacks, a comment that has drawn intense criticism from political commentators and raised fresh doubts about Goff’s ability to lead Labour into the election.

Police Association President Greg O’Connor supports the new bill, and in addition he has called for police to be armed with savage timber wolves and the power to flog anyone who looks them in the eye. Justice officials are considering his recommendations.

Ringing endorsement of the day, stand by your blogger edition

From the Herald’s live chat with ACT Party Grand-Dragon Don Brash:

Compare and contrast

Here’s how Metiria Turei critiqued Key’s helicopter jaunt; juxtapose with Cunliffe below:

Green Party co-leader Metiria Turei was outraged that the air force “ferried” Mr Key to what she called exclusive events.

Mr Key used the Iroquois on Saturday to attend the Hamilton V8s then a black tie dinner at the Royal Auckland Golf Club in Otahuhu, Auckland.

“The Green Party has no problem with the Prime Minister using the air force in order to help out in emergencies or for important government business,” Mrs Turei said.

“We do have a problem with the Prime Minister commandeering the New Zealand Air Force so that he can get snapped at the V8s before heading off for an exclusive knees-up at the Royal Auckland Golf Club.”

Botany results

John Armstrong on Botany:

The net result is: Labour increased its share of the candidate vote in the seat from 21 per cent in 2008 to 28 per cent on Saturday.

Moreover, it did so in the face of a number of handicaps – notably the party’s candidate, Michael Wood, committing one of politics’ great sins early on by saying he would not win the seat.

At a minimum, the result boils down to a psychological victory for Labour, one which Goff wasted no time milking by staging a lunch-time photo-opportunity yesterday at a cafe in Botany town centre.

His claim the result is a “significant swing” against the Government ignores National having won about the same share of the vote as it did in 2008.

Surely most of this swing is about the Greens failing to register, and Labour picking up the majority of the Green vote which was around 4% in the last election. Still, it was an FPP election in a safe seat – there was basically no point in Labour supporters turning out, so holding your share of the vote is actually pretty impressive.

The chart below shows the percentage votes by polling booth in Botany, with the results for National, Labour and the New Citizen Party. (No Greens in this election, ACT did too poorly to chart).

So the big surprise is how well the New Citizen Party did. This is a centrist party representing Chinese New Zealanders and they won 10% of the vote even though they have no representation in Parliament. I guess the message there is that ethnicity is a big deal in electoral politics.

The second thing to note is that Labour did poorly in a majority of the polling booths but in three of them they won massive majorities. I suspect they didn’t even campaign in most of the electorate but ran an intensive GOTV campaign in key areas. This is basically how they won Mana and it’s obviously their strategy for the election in November.

Not

Lew is on fire these days:

Don’t cuss out the media — Labour knows (or should know) how they work, and have in the past proven adept at playing the game. You single out the Veitch interview as a case where Key received an unjustified profile and character boost. I covered this in my post, did you read it? That Key felt emboldened to do that indicates he is cognisant of the opposition’s inability to present a credible threat. Instead of blaming the media for doing what the media does, ask yourself this: how, in New Zealand in 2011, does the Prime Minister get all matesy-blokey with one of the country’s best-known wife-beaters and not get crucified by the opposition for doing so? After all — it’s not the media’s job to crucify him; and goodness knows the National party isn’t going to crucify itself. Only one bunch of people has responsibility for bringing the wood and the nails, and banging them all together, and that’s the opposition. They didn’t even try; the only response was from an isolated 70s feminist from a minor party who’s widely regarded as a bit of a crank and is retiring at the end of the year in any case. Nobody is to blame for that absence of response but Labour.

Of course, Goff did speak on this issue yesterday:

Labour leader Phil Goff said Liz Hurley “was pretty close” to being on his top five hot women list.

Today is Goff’s wedding anniversary and he put his wife Mary in the number one spot.

He said Elle Macpherson and Julia Roberts would also feature in his top five, “all being totally hypothetical of course”.

I bet Goff is one of those guys with hundreds of books on ‘leadership’ on the bookshelves in his office.

UPDATE: Milt comments:

I … suspect the “sports boofhead” demographic to be a lot larger than you think.

I think that’s Goff’s attitude too. He is aware that his party has terrible numbers amongst male voters. And sure, there are a lot of rugby heads out there who think Tony Veitch is a hero and that breaking your girlfriends back and then using your wealth and celebrity to try and destroy her life is awesome – but how many of them are persuadable voters for the Labour Party? I think that number is close to zero. The number of National leaning centre voters – particularly female voters – who think that Veitch is evil, and that a Prime Minister who goes on his show and talks about fucking Jessica Alba is a jerk? Quarter of a million? More? But for Key to lose their votes, Goff would have to show some leadership on the ‘issue’. Instead he proved that he is also basically a jerk, and also a spineless jerk (‘I’d nail the same chick the PM would, oh and also my wife!’) which makes him even less attractive as a leader.

Gouge away

I love this excerpt from Vernon Small’s story about the Goff vs Key fiscal debate:

Goff had signalled Labour would look at ring-fencing losses on investment property so they could not be offset against other income tax.

Key said National had considered and rejected it. At most it would raise $260m a year, but once sophisticated investors restructured their financial affairs ”you might raise $130m if you are lucky”.

He said the Government was borrowing $300m a week.

If Labour borrowed the full $1.1 billion that could rise to about $320m a week.

”Exactly which little pixie is going to deliver that? The answer is a foreign pixie that we have to borrow from.”

Labour countered today, saying Key was planning to ”sell the family silver to foreign pixies”.

Emphasis mine. See, Key is being wise and prudent and fiscally conservative by only borrowing $300 million dollars a week, while crazy, irresponsible Phil Goff might increase that amount by almost 8%! Pixies! Elves! Crazy time!

That point made, while I think the income free threshold is good policy I think it’s a daft idea politically and a textbook case of a general trying to fight the last war. Tax cuts played a crucial role in the 2008 election, when we had nine years of budget surplus without a single tax cut and voters were salivating at Key’s promise that he’d give them an extra $50 dollars a week. Fifty bucks a week! John Key! John Key! John Key!

Three years and three rounds of tax cuts later I think people are jaded about the magical powers of tax relief: each cut has been swallowed up by inflation, GST and various mandatory fee increases, they’ve failed to bring the economic stimulus we were promised and they’ve left the government with a terrifying deficit. I don’t think this idea will be a winner, and I suspect Labour now regrets their GST free fruit gimmick, which didn’t win them any points in the polls but means they’ve got to scavenge up an extra $250 million dollars a year to try and fund it.

These policies preclude Goff from attacking Key on one of his most vulnerable points: the deficit. Key is using the government’s debt as an excuse for the partial privatisation of state assets (of course, if we weren’t in debt he’d introduce the same policy on the pretext of growing the economy). But Key and English are the reason we have this gigantic deficit. John Key’s perceived strength during the election was that his financial genius would transform the national economy, and English was supposed to be this shrewd, wise guardian of the government’s books. In reality they’re proving to be a pair of colossally irresponsible, incompetent fuck-ups – but Goff can’t attack them for their irresponsibility if he’s just going to piss away even more money.

Imagine if Goff had promised to raise taxes on high income earners, crack down on tax evaders and use the money to restore payments into the Super fund and pay down the Key-English deficit. Sure, all the feather-weights in our political class would still be gushing about the color of his hair but I think the wider electorate would respond well to a demonstration of basic competence when it comes to the economy.

How big?

I predict that Chris Carter isn’t a big enough jerk to actually betray his (former, certainly?) friends in the Labour caucus and out them as anti-Goff conspirators, but he is a big enough jerk to try and sabotage the party’s conference this weekend with further attacks against Phil Goff.