Tuesday, 24 July 2012

Kiwisaver conned confirmed

The NZ Herald ran a story last weekend entitled Bigger KiwiSaver investment overseas predicted

Onepath predicts KiwiSaver will grow from about $12 billion now under management to $50b by 2020. At the same time it share of retail funds under management will increase from about 40 per cent to about 70 per cent, with total retail funds reaching about $70b, it says

This will mean that we have saved through Kiwi saver more than our share market is worth by 2020 and we will invest that money in the productivity of other countries – what losers we are!

Because our economy can’t absorb that level of savings under the current model the investment whizzo’s are going to put it into international share markets.  These while they have fallen back somewhat from their hysterical highs of the last decade are still horribly over valued and even the optimists expect no more than 2.5% return on capital from the Dow Jones for the next decade.  And that is if the money doesn’t disappear down the hole in the meantime either through business failure, skullduggery or inflation.  Remember that at the same time the EU, the USA and Britain are printing money like it was going out of fashion.  Your Kiwi saver will evapourate as this continues.

"The more money available [from KiwiSaver] the more money can come into the New Zealand capital markets and the more companies will use them," Body says.  "But the growth in the [KiwiSaver] industry will probably be too fast. That means more global exposure for a lot of fund managers.

So your savings are being used to help NZ’s capital markets grow fat- a bunch that even Stephen Joyce acknowledges as being less than honest over the past decade.  The investment advisors can’t see where in the NZ market they can invest so they are going to take it off-shore.  But BillE says that we need the money and the asset sales to build our capital markets.  The capital markets are saying that the asset sales wont make much difference.  And all that money pouring into the global capital markets is competing with all of the retirement funds of every other rich countries plus the money magic of the bank’s fractional lending and we will soon be wondering were our money has gone – a fool and his money – is an image that leaps to mind.

Body says state-owned asset sales will help. "But if you think about the raw numbers, we think KiwiSaver is going to grow $50b in the next 10 years and the [assets] float is about $6b in total.

Even if growing savings sees that triple by 2015, by that time the NZX may have a market cap of about $75b thanks to growth and proposed SOE privatisations, he says To date about $1b of KiwiSaver money is invested in the local share market from a NZX market cap of $58b

If the government wanted capital put into public assets why not just let KiwiSaver invest directly in our energy company through bonds.  Remember however that when all us old farts want our money out it wont matter whether it is through taxes or power bills - the next generation will cop the bill.

Why not use all this cash to get rid of the foreign banks that are bleeding us white and use the savings to fund our own internal borrowings – far safer and better returns than the share market, particularly the foreign share market.  Why not invest it in the rebuild of Christchurch?  Why not invest in energy self sufficiency? 

Do our leaders have no vision? No sense? No courage?

The current account deficit for the year to March 2011 was $7.2 billon, or 3.7 per cent of gross domestic product, Statistic New Zealand figures show.  Kiwi firms paid out $9.6b more to overseas investors than Kiwis received from other countries. On top of that we export another $4billion each year in Kiwisaver investments.  This is all stupid.

We are bleeding money and yet our leaders want to accelerate the bleeding.  Are they bleeding idiots or what?

Bigger KiwiSaver investment overseas predicted ELOISE GIBSON Business Day STUFF 23/07/2012

And Time magazine agrees with this current article...  Are Dividend Stocks the Next Bubble?

Dividend stocks are leading the market and some pundits believe the rally is a bubble about to end badly. But they may be underestimating the flood of income-starved retiree money heading this direction in a record low-yield environment

Monday, 16 July 2012

The answers are simple the solutions are complex.

We are broke and getting broker for some very simple reasons …

  1. Our exchange rate is too high
  2. Our exchange rate is open to manipulation (it is unstable).
  3. The worse our economy gets the higher our currency rises when we need it to fall – this is the complete opposite of what needs to happen
  4. We play by the rules of free trade and no one else does
  5. Foreign owned banks use inflation and speculation to fill the country full of debt and capture our productive surpluses.
  6. Banks can print money without any effective control by the state
  7. We spend more than we earn
  8. We are squandering the talents of our young while burdening them with debt
  9. Our retirement savings are inflating the share-market
  10. Anything of value is sold to foreign investors
  11. Our employers have to meet the social costs of trading in New Zealand while their competitors don’t (an effective subsidy)
  12. Labour is taxed while energy capital and land aren’t
  13. We treat basic infrastructure as an “investment” rather than as a basic function of production – roads aren’t there to make money they exist to allow business to function - same with power telephone and a whole raft of other things.
  14. And we too often allow the core institutions of community and commerce to act with impunity with regard to the law and to moral behaviour.

It is not foreign forces or some compelling logic causing these things to happen to us.

The last reason is that we have just suffered thirty years of ideological leadership.  

It is our leadership that has made us poor as we have wished this on ourselves.  The mess that is the Euro is the best illustration of the problem of exchange rates not reflecting the relative earning potential of separate national economies.  We have the same issue with Australia the US and China,  as Greece has with Germany - our principal trading partenrs are cheating on the free trade deal   and we are the losers.  Our dollars is over-valued to an extent of about 30% in comparisons to them.  This could be resolved overnight - but it would take courage.

It is this ideological base that is the first thing that needs changed. 

Once that has happened then fixing this country is easy - we are rich in resources, we are well educated, we should be energy self sufficient.  We should be the luckiest country in the world but our leadership prevents this from happening.

Wednesday, 11 July 2012

Kiwisaver Con

Are the asset sales necessary to suck up money being taken from working kiwi’s through the Kiwisaver scheme to fund their retirement? 

It seems so because Stephen Joyce thinks supporting our capital markets is more important than retaining state ownership of our power companies.

It seems most unusual that a Minister of the Crown would consider that supporting capital markets a key responsibility of government and the provision of energy infrastructure a key responsibility of investment markets.

"I don't believe the government's going to back down on that at all," Mr Joyce said on TV One's Q+A programme on Sunday.

He said the role the policy would have in strengthening New Zealand's capital markets had not been discussed enough.

"Now, the New Zealand capital markets actually historically, certainly over the last 10 years, have performed very poorly relative to the rest of the world, and that's because there's been some breaches of faith historically."

The sale of stakes in the energy companies would be an opportunity to list strong companies.

"That's an opportunity to actually strengthen the capital markets and get more kiwis interested," Mr Joyce said.
No backdown on asset sales, says Joyce NZ NewswireUpdated June 24, 2012, 2:13 pm

It is interesting to note that Mr Joyce comments that “there have been some breaches of faith historically” with reference to the capital markets not always acting honestly. Not only is this a profound understatement but Mr Joyce now expects this den of thieves to be trusted with these assets.

Power companies are nothing less than a pipeline straight to the wallet of every kiwi.  It is easier to avoid paying tax than it is to avoid paying the power bill. 

And this turkey also intends to rely on the Electricity Commission to regulate the “electricity market” which is about as useless a guard dog as any burglar could wish for.


Bill English also openly acknowledges on his National Party Webpage that the asset sales are simply another way of putting your savings in the share market's pocket at your expense.

As well as reducing the Government's debt, the mixed ownership companies will also provide New Zealanders with another investment option for their large and growing pool of savings.

In fact, New Zealanders are telling us they're hungry for other options as they look to diversify their investments away from highly-leveraged property and finance companies.

Kiwi investors have about $100 billion sitting in term deposits. And there are tens of billions of dollars invested by other New Zealand investors from KiwiSaver providers to the NZ Super Fund, ACC, Government Superannuation Fund.  
A mixed ownership model for state assets by Hon Bill English, Finance15 February 2012

Why Bill is so keen to give your assets to the share market?

The reason is that the quantity of money flowing into the capital markets from enforced savings is artificially inflating the value of the whole share market. Bill has acknowledged that in recent press comments. Bill needs more assets to be put in the market to soak up the enforced transfer of your cash in the form of your household savings plus your Kiwi Saver investments and ACC into the share market. You then pay the profit on these investments through your power bills. 

This is the circular idiocy that is Kiwisaver.

Kiwisaver and other retirement saving schemes are at the root of why the investment markets are so unstable and dishonest. The money is going into the share market because investment funds need to put the money somewhere and there are few other options that can absorb the vast volume of cash that these enforced schemes introduce to the market each year.

When there is no increase in the scale of the market – when new assets are not being created - but there is a constant inflow of cash, then there can only be an inflationary response in asset values.

The retirement fund managers also play the market as they attempt to generate decent returns and this reinforces the speculative behaviour. The investment advisors working for these firms are also not putting their own money at risk so they have no moral balance to their investment decisions. All they are interested in is producing paper returns on assets and so they play bidding wars with their fellows.

In effect what Silly Bill and even Sillier Steve are doing is using your hard earned spare cash to subsidise the very destructive behaviour that has brought the world to the precipice of a financial disaster.

Bill is old enough and rural enough to remember when farming was subsidised and the wreckage that happened when that distortion was corrected. He doesn’t seemed to have learned anything from that experience. Subsidising farming at least produced salable goods even if at a loss. Subsidised capital investment and subsidised banking just creates a vast and destructive waste.

Right now the best investment is getting rid of debt both private and public. It might have a low rate of return but it has a very high degree of certainty as to outcome.

Debt repayment also has the benefits of avoiding inflation risk. The chances of ever getting the real value of your Kiwisaver money back is slight. History provides good evidence of the erosive risks of both inflationary forces and share market under-performance. The future for both only looks bad in the longer term particularly as your money is, as Stephen Joyce acknowledges, being placed in the hands of thieves and the swindlers.

There is also a demographic issue with Kiwisaver. That issue is the same one that government raises for the impossibility of funding pensions from taxes and that is that there will be too many retirees and not enough taxpayers.

The same effect occurs when there are too many sellers and not enough buyers in the share market. When the bulge of baby boomers seek to withdraw their cash from the market it will collapse for want of buyers. Indeed the wisest long term investment strategy for both retirees and for future taxpayers is to build an essentially debt free society.

We need to be building an investment in the future. Instead we have loaded our children with debt. We have either run the assets we inherited from our parents into the ground or sold them off and we have not prepared ourselves, or our children for the future.

It is not too late to resolve this situation but there is very little time left and the best years for doing this have passed.

And the orthodoxy does not have the answer it just provides more fuel for the problem.