We’re not going to write about Goldman Sachs today.
Honestly.
OK, just a little bit then.
How could we possibly pass up the opportunity, after reading the Sunday Times interview with Goldman Sachs CEO Lloyd Blankfein.
His most quoted comment has been that he’s a banker “doing God’s work.”
But our favourite quote from the article was this:
“We’re very important. We help companies to grow by helping them to raise capital. Companies that grow create wealth. This, in turn, allows people to have jobs that create more growth and more wealth. It’s a virtuous cycle.”
He tops it off with the following comment:
“We have a social purpose.”
What he really should have said is:
“We have a socialist/sociopathic/unsociable* purpose” [*delete as applicable!]
Look, let’s be honest. If these comments had been made by any other banker they would have been met with a few raised eyebrows and then scornfully dismissed.
But for the CEO of Goldman Sachs – or ‘Government Sachs’ as they’ve become known – to come out with these comments, well, seriously.
We’re not sure if there’s an industry that’s more corrupt or more useless – in its current form – than investment banking.
Actually, now we think of it, there is one industry. It’s the Australian superannuation and funds management industry.
If Blankfein is doing God’s work, then we can only think the funds management industry is doing the Devil’s work.
Dan Denning, down the corridor at The Daily Reckoning emailed your editor a story from The Age. The gist of it was, “aren’t superannuation funds and fund managers wonderful. Look at their lovely returns.”
But if you read the article for yourself, you’ll realize just how useless and pathetic fund managers are. In an article that has the headline, “Positive news for super funds,” the actual facts show the headline should be “Negative news for super funds.”
To quote the article:
“The Australian share market has been among the best performers over the past year. The benchmark S&P/ASX200 is up nearly 55 per cent.”
But the next paragraph states:
“Underscoring the depth of the recovery, just under half of the funds – 40 out of the 87 surveyed by Rainmaker – had positive returns over the past 12 months.”
Are they serious?! The market is up 55% (or 41% since last November), yet not even half the fund managers surveyed can be bothered making money for their clients.
But what do you expect. When you’ve got an industry that has a guaranteed income stream, there is no incentive for them to tear themselves away from the wine bars and corporate functions to do the hard yards.
The funds management industry is no different to any other government supported business regime. Or fascist regime, to put it more accurately.
Look at banking, Australia has four major banks and three rump banks. Look at the healthcare sector – there’s no incentive for health providers to cut costs when there is socialized medicine and compulsory private health insurance.
And look at education. Another compulsory purchase for taxpayers. You either pay for education through your taxes, or you pay for education through taxes and privately.
There’s no way of avoiding it, and the education providers know that.
As an example, we noticed in yesterday’s Australian Financial Review (AFR) an ad from the Australian Health Insurance Association which claims the cost of providing health cover has increased by 10.8% over the last twelve months.
Despite that, the Australian Bureau of Statistics (ABS), Reserve Bank of Australia (RBA), the banks and the mainstream press will try and tell you the cost of living has only increased by 1.2% in the same period.
They’re the same ones who claim we don’t need to worry about inflation for another couple of years. They’re also the same ones who claim we need a little bit of inflation now to help the economy.
We wonder if they’re happy with an increase of 10.8%. If a little bit is good, then a lot must be even better!
Anyway, back to the funds management industry.
Could it just be that even the mainstream press has seen what a corrupt industry funds management is?
Take a look at this article from Adele Ferguson at The Age. I’ve quoted part of it here:
“This means that at least $110 billion of super contributions pour into the industry’s hands each year, without them even having to do a thing. Since the system was first introduced in 1991, it hasn’t changed – it has become fat, lazy and arrogant.”
Of course it was too much to hope the mainstream press would say something radical and really mean it. Because Ms. Ferguson follows up with:
“The case is getting louder for automatic default funds to be endorsed by the Federal Government. If this happens, it will remove some of the cosy relationships that have developed over the years, but in the process have a profound impact on the industry itself.”
That’s right, government can solve all this.
Only that it was government that gave us superannuation in the first place. And it’s government that encourages the “cosy” relationships through further regulation and the theft of billions of dollars from taxpayers every month.
So instead of getting the government to ‘help,’ how about this ‘whacky’ idea…
Abolish superannuation.
That’s much simpler. Let individuals decide for themselves how they allocate their resources rather than having government do it for them.
But what about the claims by nanny-staters that believe individuals would just blow the cash on booze, the pokies and cigarettes?
Well, if someone wants to spend the money that way then good luck to them. Who are we to say they shouldn’t do that? And what business is it of ours anyway. I mean, if they’ve left themselves without enough money to live from later in life then it wouldn’t cost us a penny.
It would be their problem, not yours.
Do you know what? People will always ‘waste’ some of their own money. How boring would life be if we didn’t waste a few bucks every now and again.
But wouldn’t you rather waste your own money rather than having it stolen from you by the government and given to fund managers for them to waste? Where’s the fun in that?
The only fun in that is for the fund managers and those that “cosy” up to them, as they all head off for the junkets and golf days and booze-ups on the company account – all of which is funded by your super contributions by the way.
Don’t forget that.
It’s for that reason, until yesterday, I was happy to tell subscribers to Australian Wealth Gameplan to invest in AXA Asia Pacific Holdings [ASX: AXA].
I wouldn’t touch one of their funds with a sixty foot barge pole, but I was happy to tell subscribers to buy AXAs shares.
But now AMP has put in an offer to take over AXA I’ve told subscribers to take the 38% gain now and run. As I wrote to subscribers yesterday afternoon:
“In this instance you can look at it one of two ways. One way is to say that you’ve got the capital growth bonus you hadn’t expected, so be grateful for it and move on. Or you can look at the current yield of 4.3% and say that this takeover offer has given you nearly nine years of income from this stock in just one day.”
Now that we’ve purged AXA from the Australian Wealth Gameplan portfolio – for a handsome profit – I almost feel clean again!
But the sad fact is that despite all the talk about the need to cut fees, ultimately the fund managers will still be the winners out of the impending superannuation reforms.
Anytime that a government increases regulations it inevitably leads to less competition and therefore less choice.
We’re keeping a very close watch to what happens when the Tax Review and Super Review are completed. As you may have read over the last twelve months we have been very fearful about what the changes will mean to you.
As we get closer to the announcements there is nothing we’ve heard that makes us feel good about what to expect.
We’ll continue to state that the only person who can look after your money properly is you, and you should do all you can to keep it away from the grasps of government and the corrupt funds management industry.
Cheers.
Kris.
60-Second Market Round Up
by Shae Smith
The S&P/ASX200 finished in the positive territory yesterday, closing up 1.76% to 4,674.90. News of AMP’s takeover bid for AXA was well received by traders.
On Wall Street the Dow Jones Industrial Average started the week off strong with a gain of 203 points, finishing at 10,227.09. The news that the stimulus will continue, and next-to-nothing interest rates in the US pushed the Dow to reach a 13-month high yesterday.
In the UK the FTSE100 saw an increase, gaining 92 points to end the day 5,235.18.
The Nikkei rose slightly overnight by 19 points to 9,808.99
And overnight gold has again reached a new record high of USD$1,111.70.
Currently, the price of gold in Australian dollars is trading at $1,187.15, while in US Dollars it is trading at $1,103.49. And the price of silver in Aussie dollars is $18.92 and in US Dollars it is $17.59.
The Aussie dollar has continued to remain above 90 cents.
The Aussie dollar versus the US dollar is trading at USD$0.9296, and against the Japanese Yen JPY83.63.
Crude oil closed overnight at USD$79.70
For the biggest movers on the market yesterday click here…
{ 17 comments… read them below or add one }
← Previous Comments
Peter Fraser is right. The way compulsory super came about was a negotiated deal between the government, employers and the unions, for the supposed benefit of the workers. Poor workers.
The unions were pushing for wage increases and they were pushing hard, but the government was worried about iflation getting out of control if the proposed increases were spent directly into the economy, so the deal was that the workers could have their wages increased, but not as spending money. Instead, it had to be put aside and saved for retirement. This is pretty much what happened.
So, while it is true that compulsory super is an expense to the employer, it is true only in the widest sense of the word in which every dollar paid in wages is an expense to the employer. In fact, if you look at it in the historically correct way, every dollar paid into compulsory super comes out of the paypacket of the worker to which he is entitled – it is almost like tax that comes out of his paypacket, except that it is put aside for him/her and and is not to be touched until retirement.
As regards the wisdom of it all, it is an eminently sensible idea, except for the lack of responsibility the government takes about the whole scheme, which in many instances would be more accurately characterised as a scam. For, while the government forces you to put money aside, so that you have very little control over it, it allows all sorts of questionable and unscrupulous sharks to feast on it at their leisure and pleasure, just so long as they obey certain rules.
The fact of the matter is that, unless you care enough to establish and look after your own compulsory super savings in your own SMSF, your forced savings will be pilfered and largely mismanaged by a lazy and bloated financial industry which is prepared to pay billions and billions in corporate takeovers just so that they can have access to more and more people’s super savings.
Well, guess whose money they are using to pay those billions to each other in these M&A (mergers and acquisitions) activities which is currently putting the fire under the share market right here in Australia? You guessed it: it is your current and future super.
Very true cb and I agree with the facts of how it came about. I still claim however, that the method was surreptitious. The outcome of what you have described is clear. Where is the choice? When something is “force” on a person, it rarely is for the receivers benefit.
You desribed it well when you used the term “scam”. We can disect the hows and whys in many ways but from where we stand today, how is it benefiting us and how will it in the future. Should it be increased to 15%. What effect will that have. I beleve that these are the questions that the younger workers would like clarified.
Yes, I agree, Nick. Whether the money is going to be there for you will depend largely on whether you can take charge of it yourself. If you leave it to the wealth managers, they will grow more and more fat on them. Plus, even the government is eyeing the pot of savings, and the larger it grows, the more sharks will be circling it and taking huge bites out of it, not to mention the stealing that will go on non-stop through inflation. So, if you want to guard it, you will have to take charge of it and invest in sensible, real assets, metals and property, etc., which will guard your purchasing power in the long term. For those who will simply leave it for retail fund managers to look after their savings, they will lose much of it by the time they can access it in retirement, especially the younger people.
Obviously, I am not saying this on the basis of concrete, particularised knowledge, but on the basis of general patterns and tendencies observed in the wealth management industry, where in my view you will be hard pressed to find the occasional workers among the armies of drones.
Actually it is NOT a given that if super were to be abolished that taxes would need to go up to pay for more aged pensioners.
Firstly, this would be assuming that the vast majority of Australians are morons and are incapable of building up a nest egg for THEMSELVES.
Let’s face it, most of us could do MUCH MUCH better things with that 9% to grow our money tree … umm – like for instance paying off our mortgage much quicker, which would mean that we would be paying a much smaller proportion of our life’s income to our bloated, thieving banks! Also, one could invest the money as one sees fit – again, my presumption is that Australians are NOT morons when it comes to money matters and doing what’s best to provide for one’s future.
Secondly, the argument that this would encourage people to ‘squander’ all their money during their earning years, because they know that taxpayers would have to take care of them through the aged pension system… well that’s also a croc!
This is only true IF the aged pension was sufficient to allow a person to live in relative comfort. And i happen to know that the current aged pension system IS INDEED enough to allow pensioners to live in comfort! I know this, because my neighbours are pensioners who live off the aged pension, and i can tell you – they live it up a lot better than i can…. they have no money worries at all! You see, all they had to do was ensure that their home was payed off and that they had no debt by the time they reached pension age.
For people in the position, well life is a pleasure living off the pension – its MORE THAN ENOUGH!!!
So yes, under the current idiotic socialist system – of course this will encourage (many) people to not provide for their own futures (beyond paying their own property off and paying off other debt) because they know they can rely on other people via the thieving tax system.
If we had a system which discouraged people to live off the aged pension, then many of these people would ensure that they could provide for themselves when on pension. but for this to happen the aged pension would have to be dropped from its current more than generous levels.
What of the countless unemployed and/or under employed? How much contribution 9% of their poultry incomes would seriously contribute to their future “pension”? The frugal people who save for their own retiement are slugged tax on everything they save. One step forward, two steps back. Try telling a young person to start putting his pocket money in the bank, like we used to, and watch it earn interest and grow. Worked back then! The incentive was to save for something. Try that today. They loose it all within a year on fees and charges. Why! There are an everincreacing exposure of what they are really wanting for the world and Kris’ latest article starts to touch on that. This is why we can only hope for the better but in reality, prepare for the worst.
I agree, and I wish that someone could have given me some sensible advice when I was younger, such as: save enough money to go down to the bullion dealer and buy some bullion and store it for the long term. Just by putting aside a few thousand worth of gold and silver over a few decades, would pretty much buy you a decent house free of debt after a 20 or 30 years, or pay out whatever debts you might still have approaching retirement. It would be interesting to do the maths on something like this and show it on a graph, say, saving 9% or your salary and consistently putting THAT into bullion, month after month, over 20 or 30 years. Where would that have taken you, as compared to giving that money to the wealth management industry like we are forced to do?
I would probably pay for some advice on how to manage my own superfund.
← Previous Comments