Reader, you know your editor is like a dog with a bone. Once we start on a subject it tends to consume us for several days, almost without break.
Our property mumblings are a perfect example. We take a massive bite and just can’t let go. Eventually one of us gets bored and so we move on to the next thing.
As for property, we’ll come back to it at some point. We’re just waiting for something big and juicy to turn up before we do.
Yesterday we spent most of the day researching for the next issue of Australian Small Cap Investigator. There are two stocks we’ve got on the radar, and unless something turns up which we don’t like then we plan tipping both of them.
According to our assistant publisher, Joanne Ha, this month’s edition should be completed and mailed out to subscribers by tomorrow…
But according to your editor, it will be completed and mailed out next week.
We’re not normally game enough to argue with our Taekwondo-kicking assistant publisher, but now that we occupy separate rooms in our office on Fitzroy Street there’s less chance of us receiving a kick to the head if we’re late! [Closes office door]
So, if you subscribe to Australian Small Cap Investigator, stay tuned, and you should get your September issue by early next week.
Anyway, our point is, yesterday while taking a break from poring over presentations, balance sheets and income statements we couldn’t help but pay a visit to the Tax Review website.
I know, I know… we’ve got a fab office in Fitzroy Street, just a two minute stroll from the beach, and I’m looking at submissions to the tax review.
Well, before we get stuck in to the September issue of Australian Small Cap Investigator again today we decided to have another look at the website. If you haven’t looked yet you can do so by clicking here.
As you can imagine, it’s not exactly a barrel of laughs, but it does – in our opinion – make for a number of interesting reads…
And a few worrying ones too.
In a moment we’ll take a look at one of the submissions. But based on all the ones we’ve looked at they have a striking similarity.
That is the belief they’ve discovered the ‘magic bullet’ for tax and pension reform.
Look, there’s nothing wrong with looking for the perfect solution to something, we try to do that all the time. There is one difference though. We favour getting rid of regulations, taxation and compulsion and letting free enterprise and dare we say it, the individual make their own choices.
Who am I to say I know how to do anything better than someone else? I reckon I’m pretty good at picking small cap stocks, but I don’t force you take out a subscription to Australian Small Cap Investigator.
If you want to, then great, welcome aboard. If you don’t, then no hard feelings.
Yet the coercive sector (government) forces you to pay a subscription to their services through taxation. Even if you don’t want to use it, or can get a better service elsewhere.
Take education for example. Whether you like it or not, a portion of your taxes go towards paying for government schools. Even if you don’t have kids. But even if you do have kids and you choose to send them to private school, then you’re still paying for the government schools.
How does that make sense? Imagine being forced to pay for Australian Small Cap Investigator even though you didn’t want it. Would that be fair?
It would be great for us of course, but it wouldn’t be good for you.
But, the submissions to Dr. Henry’s expert panel all seem to want to make decisions for everyone else.
Several times we’ve seen promising statements in the submissions which support abolishing a tax rate, only for our hopes to be dashed by the suggestion of an alternative tax rate which is just as bad – or worse.
Above I mentioned this was all very ‘worrying,’ well, it’s sad too. Because the idea that individuals should be controlled and manipulated by government and special interest groups has filtered down to the youngsters as well.
That’s right, it’s not just the nutters in Canberra that think they know best.
Take these excerpts from a submission by tertiary student Michelle But:
“As a tertiary student and a member of the public, I am honored [sic] to contribute my submission based on the topic of “Retirement Income System” to the Review Panel, which is led by Dr Ken Henry, Secretary to the Treasury. I welcome and look forward to future improvements on the Retirement Income System made by the Australian Government.”
“Honored” – your editor is speechless. Perhaps we should now all bow when Emperor Henry enters a room!
Michelle’s submission continues:
“Australia’s retirement income system plays a pivotal role on financial security and retirement welfare. Currently, not every retired Australian in receipt of Centrelink Age Pension can afford to have the lifestyle they want, not every working Australian qualifies for the 9% compulsory employer superannuation and not every Australian has sufficient voluntary savings at retirement. If, however, the Government acts NOW through the implementation of specific changes to the superannuation rules, then ‘YES, WE CAN’ alleviate these issues in the future.”
Those are Michelle’s bolds and caps, not ours.
Of course, Michelle has a solution, which is, “increasing compulsory employer SG contribution from 9% to 15% by 2012.”
The funds management industry couldn’t have put it better themselves.
But young Michelle goes one step further. She has an idea that not even the fund managers or the unions have dare come up with. But we’re sure they’ll jump all over it when they see it:
“Australians can voluntarily contribute their before-tax income into superannuation through the super salary sacrifice scheme (taxed at 15%). However, the Government needs to enforce gradual compulsory superannuation savings at 15%.”
Got that?! Based on this proposal – if we’ve got it right – 30% of your salary would go towards superannuation. Take off tax, levies, surcharges, etc… and you’ll be left with about $5 in your pay packet by the end of each week.
Look, we had to read that part of the submission again to make sure we read it correctly. We’re almost tempted to give her the benefit of the doubt. Can she really be arguing for a 30% superannuation contribution?
Look, this is an extreme proposal that Lenin would be proud of. We’re not sure that even Comrade Rudd would go that far. But maybe he would.
In fact, long term we’ll probably find Michelle’s proposal to be not far from the mark.
But it’s not just Michelle, look at any one of the submissions on Dr. Henry’s website. They all have similar proposals. And that is pleading with the government to rob you blind.
Every single submission we’ve read advocates taking money from your pocket and giving it to someone else.
Somewhere in the mind of these people they believe that you’re incapable of looking after yourself and your own money. As Michelle puts it, “to avoid squandering.”
What a cheek. Here’s some breaking news. If someone wants to squander their money let them do it. If they know there is no government bail out them odds are they won’t squander the money to begin with.
If they still go ahead and blow it all, well, tough luck. Arguing that your earnings should be taken by force just on the off chance you may make some bad decisions is ludicrous.
Besides, there’s no guarantee you’ll ever see that money again anyway. By the time the government has frittered it away, and fund managers have taken their slice, and inflation has munched at another portion, the New Age Pension won’t be worth waiting for.
In fact, the more government gets involved and the less control you have over your money, the greater the chance is that you never will get your hands on it.
The problem as we see it, is the entirely false belief that people’s behaviour can be controlled. It can’t. Many people can’t control themselves from doing irrational or compulsive things, let alone other people.
But that’s not a bad thing. It’s good, and it should be encouraged.
The problem is, centralists and government-lovers believe they can control every aspect of people’s lives and the economy as a whole. They can’t, it’s impossible.
People make all sorts of decisions on a daily basis. Some of them aren’t rational, and some of them aren’t logical. But that’s just the way it is.
The sad thing is when you have some individuals pleading with control freaks in government to steal more money away from other individuals. And it’s always done in the belief that a centralised government bureaucracy knows how to do things better than an individual.
But the evidence is firmly against this. Everywhere, without exception, where government is involved, things are a mess and the individual is disadvantaged:
Health care, education, roads, public transport, telecommunications, legal system, etc…
There’s not one thing the government does better than could be done by the private sector. Not one single thing.
The fact is – yes, fact – that no-one can manipulate anything without it having unforeseen consequences elsewhere. More money being stolen from individuals to go into superannuation and government coffers means less money remaining with the individual.
What’s the consequence of that?
You guessed it, a greater reliance by the individual on the government. Which means?
You guessed it, an increase in services to be provided by the government, which means higher taxes, and even less money remaining with the individual.
And most important of all. If the government controls the supply of money to the public then they have almost unlimited power over them.
As I mentioned above, I encourage you to take a look at the submissions to the Tax Review website. You may not like what you read but you should know what other people are planning to do with your money.
Other Stuff on the Markets
The S&P/ASX200 slipped 0.29% yesterday, while overnight on Wall Street the Dow Jones Industrial Average added 51 points. In Europe the FTSE100 gained 0.16% and the CAC40 added 0.30%.
The price of gold in Australian dollars is trading at $1,160.54, while in US Dollars it is trading at $1,015.35. And the price of silver in Aussie dollars is $19.62 and in US Dollars it is $17.17.
The Aussie dollar gained versus the US dollar and Japanese Yen, trading at USD$0.8734, and JPY79.63.
Crude oil closed overnight at USD$71.63.
For the biggest movers on the market yesterday click here…
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other day on the radio 3aw ,an older lady rang in the investment hour advice guru ,,,wondering how she can ” side stash,unload ” legitimatly,to her next of kin or watever , her 2 investment properties worth more than $1,000,000 & $200 k in bank &$300k in super & 125 bars of gold & 20lb of karat jewelry & bonds & numerous stocks ,,ohh & the car collection ,, sooooooooo she can revolt back to a PEASENT state & eat her cake too.
that way she get can get the PENSION & HEALTH CARE CARD & concessions, community help ,etc ETC….
the AUDACITY……………………….
rich people try to suck off the welfare also
but aahhh its just a natural phenomen some people are good with money ( & see the future )
others arnt (sqaunderers) & dont see into the future
however in whole 100% picture,the poorer spend their dough to survive & the rich get the jobs, contracts,bigger quality everything etc
so in a sense its a win – win situation to somesort of a degree
lol, etch. Even though we keep hearing that there is no such thing as a free lunch, in truth everybody loves one. Some even want to give up their dinners for free lunches. Oh, or maybe this old lady is willing to sacrifice her lifestyle by suckling at mother public’s tit, as she gifts her milk cows to her descendants? Go figure.
Peter Frazer – it could be argued that most would reckon it is the socialists who are the dreamers and idealists, as socialism has been a dismal failure everywhere in the world. If the Germans couldn’t get it to work, then trust me, nobody can!
The reason is because it goes against human nature. One of the most fundamental characteristics of man is his free spirit. Take away that free spirit and place him in a communal type setup where his freedom is taken away from him and his main toil is for the “common good” – then i’m afraid you will have the makings of a revolt…
Like i said, it seems as if many of the lessons of the 20th century have already been forgotten…
The only way for people to have access to everything they need and as cheaply as possible is capitalism. Whenever the government becomes involved, things are way less efficient and costs skyrocket. Simple as that
Sandra – Not all idealists are dreamers, and not all dreams are pleasant. It was communism that failed, socialism is very much alive in all democracies but to varying degrees. Any state funded benefits are socialist in nature, so it is incorrect to claim that the US is a purely capitalist nation, and definitely incorrect when describing Australia and European nations.
I’m a supporter of capitalism, but not unrestrained capitalism, or unrestrained anything for that matter. Do we need to waste time pointing to the excesses of various political and financial systems that failed due to a lack of oversight.
If you have a political system that gives all a right to vote regardless of status, financial standing, or education, then you must expect the voters to want for something better. If the political system does not re-allocate resources and “keep the peasants happy” then unrest inevitably occurs.
You could argue that the vote for the free man and woman is a socialist principle, therefore a political system should not be at loggerheads with one of its foundations.
By extension, certain controls over taxation, financial system regulations etc are a necessity.
I think we are arguing degrees here, not underlying principles.
PF – While I agree with some of what you’ve said, there are few things i’d like to say.
The US is today but a patch of its former greatness – in my opinion mostly due to this creep of socialism into its way of life. America was at its greatest when capitalism was at its greatest and socialism at its minimum. The ‘balance of power’ has indeed shifted to a large extent towards socialism and hence the USA’s decline…
I believe that here in Australia we will witness a similar decline the larger socialism and government interference grows.
I find it interesting that many uninformed people seem to blame capitalism for the subprime crisis in the US, which then precipitated this whole GFC. This strengthens their belief that socialism and government control/interference should be intensified.
The fact is that it was misplaced government intervention which in fact called the whole subprime crisis. Government policy forced banks to grant loans to people who had no hope in hell of being able to afford or repay these loans. All in the name of giving these ‘disadvantaged people’ a break so that they could own their own home. This did no immediate harm because many (like here) believed that the property prices would continue to rise forever, so even if your income was practically zero, you could still have a mortgage loan, use creditcard debt to pay your mortgage, sell it after a couple of years for a profit, and everybody’s happy. The rest is history. So if government kept its beak out of lending practises, and left it up to good, sound business principles in deciding who qualifies for a mortgage and who doesn’t, subprime mortgages would not have existed to the extent that they did!
typo – I meant to say
“The fact is that it was misplaced government intervention which in fact CAUSED the whole subprime crisis.”
Sandra, I am against BIG government, so we are agreed on that. I also agree that it was largely government intervention that caused the problem initially, but I don’t call governments forcing banks to lend to non-creditworthy people en-masse a policy of socialism, that is lunacy.
I do support governments encouraging people to own their own home because that takes pressure off government funded housing, but they can only do so much, and there are some people who just can’t be helped.
Cheers.
Sandra, I meant forcing banks to lend is lunacy.
Sandra, A more cynical view, not necessarily incompatible with yours, is that the US was at it best when its industry was the last man standing, after it literally carpet bombed everybody else’s industrial capacity.
If I have the only bakery in town, after having burned down all the rivals, nobody should be surprised if I should be the most successful baker in town – for quite some time, anyhow.
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