Did you do it?
Were you unable to resist temptation and switch on for the budget… in high definition?
For all the talk of ‘razor gangs’ and ‘tough decisions’, the 2009-10 federal budget is still going to rip $290 billion from your pockets. At a time when we’ve been led to believe that ‘revenues’ have collapsed, that’s only $13 billion less than the final outcome for 2007-08.
That’s less than a 5% drop, which wouldn’t even count as a correction in the stock market, let alone a collapse.
And that $290 billion doesn’t even include the $200-plus billion the government is borrowing to pay for its hare-brained schemes.
As for expenses, well, true to form, it’s up-up-up… for 2007-08 the federal government spent a whopping $280 billion. For 2009-10 it’s forecast to be an even whoppinger $338 billion. An increase of over 20%.
Your editor can imagine similar thought processes happening across the country:
“My income is down by 5%, therefore in order to stimulate myself to recovery I’m going to increase my expenses by 20%, PLUS I’m going to take out loans that equal 30% of my annual income… if that doesn’t help me get back into shape I don’t know what will.”
Of course, it’s all one big load of nonsense.
But it’s not as big a nonsense as the continued peddling of the lie by the mainstream media that the government is able to boost the economy, or step-in where private enterprise has, er, stepped-out.
The front page of today’s Australian Financial Review “Budget 2009 Liftoff” special says it all:
“Tax and super perks axed as Labor pumps $48bn into economy.”
No. They’ve got it all wrong. Notice for a start how paying less tax is seen as a “perk.” We’re only a stone throw away from the view that tax deductions are ‘un-Australian.’
But the idea that the government has pumped “$48 billion into economy” is just plain wrong. It has done no such thing.
What the headline should read is that the government has “Sucked $280 billion from the economy, and a further $200 billion will be sucked out in government debt.”
That would be a more accurate headline.
For an example of how government sucks the life out of an economy, take a look at the stink the pollies are making in the UK. Remember, political incompetence and self-engorgement has no borders.
You see, for every dollar that the government raises in taxes it is one less dollar that is either spent or saved by the individual. Only when money is in the hand of the individual or private enterprise can money truly be ‘pumped’ into the economy. And we don’t mean tax breaks, or bail-outs, bribes, subsidies or welfare.
We mean, not taxing to begin with. Then the individual can decide whether to spend for their own consumption, or whether to invest their money (in the bank, or shares, for instance), so that industry can invest.
Another highlight was the inevitable further inflation of the housing bubble. Why burst today what you can burst tomorrow. We’ll have more to say on housing tomorrow.
But perhaps the biggest eye-opener is what can only be described as the government’s War on Retirement (WOR). In naval terms the changes to superannuation contributions and the raising of the retirement age for the aged pension is just a shot across the bows.
Get ready for worse… much worse.
Who Cares Most About Your Money?
If you didn’t think you needed to plan for retirement yet then think again. And if you thought you could fall-back on the aged pension then think again.
That’s why first thing this morning I collared my assistant publisher Joanne Ha (remember, the black-belt Taekwondo expert!) and got an agreement to fast-track the roll-out of my new income investing service.
Now is the perfect time to plan your future income streams long before you will need them. It’s taken a while to get all the nuts and bolts in the right place, but we’re nearly there. The gameplan is almost set. You’ll hear more soon.
When I see the rash spending by government and the rash and dubious capital raisings by listed companies, it becomes even clearer that you need to take more control over your investments. And not leave your retirement to the whim of politicians or the investment decisions of fund managers.
Take capital raisings as an example. And we’ll use Santos seeing as that’s the most recent instance. Now, without going into the pros and cons of what Santos plans to do with the money it raises, the important thing to note is that if your managed fund holds Santos shares, chances are they will participate and spend more of your money to invest in additional shares…
And you’ve got absolutely no say in the matter. You may think that the money isn’t going to be well spent, or it’s pouring good money after bad. Trouble is, your fund manager doesn’t care, he/she’s got to keep the portfolio weighted according to the terms of the fund – and that means taking part in the capital raising.
An even better example is the fund raising by the banks and auto companies in the US. Who in their right mind would buy Ford or GM shares now? The fund managers that’s who. Because it’s not their money they’re investing.
That’s no way to run your investments.
If we draw a line back to government spending, it’s the same principle. The government takes about a quarter of everything you earn, and spends it how it likes. And you’ve got very little say in it.
To take paid maternity leave as an example. If it really was going to provide a stimulus to the economy and businesses don’t you think private enterprise would take care of it themselves? Of course, those that can afford it have done.
The reality is that business have lobbied hard to push the cost onto the taxpayer, because business knows it will cost the economy not benefit it. The taxpayer gets slugged with the bill again. Be prepared for further budget blow-outs and tax increases in the following few years.
Other Stuff on the Markets
Oil has quietly moved back towards USD$60. This has come in line with the falling US dollar.
The Aussie dollar now trades above USD$0.75. This is a big move since early March. We’ll take a closer look at the currency over the next few days. Is this the silent collapse of the US dollar? Could it go out with a whimper rather than a bang?
The Swarm Trader editor Gabriel Andre is taking a look at the S&P/ASX200 for you this week. He’ll have some comments over the next few days on any new support and resistance points following the index’s move above 3800 points.