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.