Comments on: Key & English lose us $21mil in 3 months

By: JD

JD — Thu, 05 Nov 2009 02:20:24 +0000

“um, all banks do is invest with borrowed money. They take your savings and lend it to someone else, or invest it. In fact, they lend it out many times over.”

Ah the gentrified world of return on asset. If banks only did this then a lot of nasty things wouldn’t have happened and we would all be happy. No its about return on equity and therefore leverage. Banks generally are thinly capitalised with only a sliver of equity to support ‘investment’. Now that their assets have been downwardly ‘revalued’ by the market in most cases all their equity and a large chunk of their assets are gone, hence the Troubled Asset Relief Program in the US and bank recapitalisation in the UK to rectify this.

By: Homo Domesticus

Homo Domesticus — Thu, 05 Nov 2009 01:32:43 +0000

Corrupt and cant Bill English must resign now or be tried for corruption. He knowingly enriched himself from the public purse with money he is not entitled to. Rise Friends, and oust the bludger English.

Homo d. (FPP)

By: Bright Red

Bright Red — Wed, 04 Nov 2009 23:33:05 +0000

The Cullen Fund has made an 11% return since July. If we had been putting the contributions into it we were meant to have, they would have earned the same or similar returns

By: tsmithfield

tsmithfield — Wed, 04 Nov 2009 23:22:05 +0000

In NZ dollar terms the value of the American stock market has hardly changed due to the depreciation of the American dollar. The rise in the stock market has almost equally been offset by the rise of the Kiwi against the USD if you analyse it since the low point in March. Hence, investments in the US stock market would have yielded very little.

By: snoozer

snoozer — Wed, 04 Nov 2009 23:17:16 +0000

if there wasn’t capitalism, there would still be assets and a system for exchanging control of them and distrubuting the wealth generated by them.

Anyway, you live in the system you live in. You might want to change it but you also shouldn’t act stupidly.

By: snoozer

snoozer — Wed, 04 Nov 2009 23:13:50 +0000

um, all banks do is invest with borrowed money. They take your savings and lend it to someone else, or invest it. In fact, they lend it out many times over.

By: So Bored

So Bored — Wed, 04 Nov 2009 23:11:40 +0000

Sean, too right I criticise all sorts of cocks ups whether I believe in the underlying structures or not.

In the case of the government, they did not play actually play the market themselves, their cock up was to allow somebody else to do it for those Kiwisavers. A good funds manager would have picked the risk and found a safer haven for the cash, so yes I am highly critical.

Your statement on where profits come from is quite pertinent, its actually the way it is, but it is nice to think that profits might come back to the very people doing both the investing and the work.

By: JD

JD — Wed, 04 Nov 2009 23:10:04 +0000

So Marty how much did you make on your heavily leveraged directional play? Probably nothing because you’re talking from the rear view mirror perspective.

Shudda cudda wudda.

One of the main reasons why some many banks are insolvent and remain so today is that they gambled with borrowed money. So how responsible is it for you to advocate that the govt should do they same?

By: sean14

sean14 — Wed, 04 Nov 2009 21:52:49 +0000

After all the evil capitalism threads posted on The Standard you’re now complaining that the Government hasn’t played the stock market well enough?

I thought profits were evil things made from the sweat and broken backs of the poor down-trodden working class?

By: So Bored

So Bored — Wed, 04 Nov 2009 18:33:32 +0000

TS, you under estimate our powers of criticism. I was highly critical of the Cullen scheme because it was going to invest cash in financial markets that were at the time over-inflated bubbles, just plain bad investment practice. Having said that the goal of the exercise was far in advance of anything the NACTs could ever envisage, that is to challenge and do something about that future funding an of aged retired populace.

As to the market crashing again nothing is more certain, its what they do, just a matter of when. On the flip side they go up aswell….commentators on this site atleast question the validity of the whole market based economic approach to providing a fair society.

By: tsmithfield

tsmithfield — Wed, 04 Nov 2009 17:32:55 +0000

I have also seen argued on this site that the market is going to crash again to even lower levels and send the world into a depression greater than the 1932 one. There are also plenty of bearish commentators who share this view and can point to plenty of reasons why it could happen.

Lets say the government had invested the Cullen fund in the markets and such a crash actually happened, I bet there would be plenty of criticism from this site about how much the government had lost us with their foolish decision.

By: logie97

logie97 — Wed, 04 Nov 2009 11:05:39 +0000

What is to stop Nact cashing the whole fund in sooner than later to offer it up as a tax rebate come election time. Be quite a large amount to splash around – they might even suggest we make our own Super arrangements and offer the “gift” as a generous kick start…

By: Jcw

Jcw — Wed, 04 Nov 2009 09:17:57 +0000

This level of return wont continue infinetly into the future, as this is comparing it to when prices were at rock bottom. Comparing the average return made over the funds lifetime would yield a much lower result, remember almost all of that 23% made in the past few montsh would only just balance out the loss made on the dive.

The government should focus on growing the economy – as this is where taxes are collected from. The government is in a unique position to invest in such things as roads, education and other infrastructure that pay dividents indirectly by means of economic growth. As at september 23rd (and stock prices were probably as high or higher then compared to now) the superfund made a return of about ca5%. This is over a number of years since its inception.

If this money had been invested in the New Zealand economy, either as fast tracked infrastructure of yes tax cuts (which if implemented appropriately are an investment as they stimulated the private sector which in the long term will pay more tax) the return would have been higher in my opinion. This is this crux of why I oppose the cullen fund.

Yes borrowing to save would have resulted in a significant profit in this particular case – but this is also a risky move. The government should absolutely not be taking on undue risk. Not only would this increase the cost of credit, but its gambling with all our futures.

By: Draco T Bastard

Draco T Bastard — Wed, 04 Nov 2009 08:29:27 +0000

National are weak on everything that has to do with economics – they’re entire economic policy seems to be spending/borrowing now and have the (assumed) richer later generations pay for it. This shows up in Muldoons dropping of compulsory super back in 1975 (just think of how much better off we’d be now if we’d kept that) and their crying out for tax cuts over the last few years (they may have stopped the present cuts but they’re still in the pipeline). Such a policy falls flat when later generations are going to be worse off.

By: Master Hogwash

Master Hogwash — Wed, 04 Nov 2009 08:26:04 +0000

Settle down mate. I was pointing out that 21 million is small fish in the grand scale of national finances. I stand by that.

Governments of both persuasions have worn greater opportunity costs with needless arts, sports and welfare financing over the years.