Here’s a question for Mr Key but you can play along too.
What if you could buy into an asset that performs well usually but had a very bad year last year? Because of that bad year, the price is now at historically low levels but the outlook over the short and long term is very good. In fact, it has made about 16% in just over two months.
It may dive and rise again but prices are still low now and in the long-term the price will regain its normal levels. Bascially, its a classic chance to buy low and sell high later at the time of your choosing.
To make the investment you have to borrow but at a special low rate. Plus, you’re a smart investor and you tend to outperform the market average by quite a way. Should you buy?
I know what Key would have done when he was at Merril Lynch. He would have bought in a heartbeat.
Right now he faces exactly this choice, as Prime Minister. Should he continue contributions to the Cullen Fund?
Of course he should. The markets are recovering, and Key himself has repeatedly said he thinks the outlook for the would economy is good. Stocks and other assets are still at lowish prices and rising. The Fund has made $1.75 billion in a last two months, half the losses from the recession are already recovered. There’s literally been no time like the present to buy.
The only excuse for not investing is that it will mean more borrowing and that could lead to New Zealand’s credit rating being downgraded. Well, that’s not really a good reason. Moody’s says we’re unlikely to be downgraded. Cancelling the tax cuts and a lower new spending track will be enough to get deficits in the outyears tracking down.
No. If National cancels contributions to the Cullen Fund now, while it is making megabucks and buying assets up cheaply, the only real reason will be ideological.
– the mathemagician