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…
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“”"”"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?”"”
its not super-annuation..its scam-annuation
thats why smart DIY people have put their money in property & have won out big-time
I agree, etch. The more you can keep it under your control and away from all the ticket clippers, the better for you, all things being equal. Also, in the current environment, the bulk of it should be invested in a range of real assets, rather than paper assets whose value can be gutted, stolen and evaporated by crooks and incompetents.
“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.”
So, what exactly do they live on when they have no money? It will cost us (taxpayers) plenty of pennies with the age pension. I can’t see the logic in these statements.
Yes, I agree that fund managers, in and out of super, charge too much for doing too little, but abolishing super and hoping people will save just doesn’t hold up as far as I’m concerned. Especially when people can manage their own super, invest directly, and avoid the fund managers.
I work in the super industry (not for a fund manager) and the percentage of people who either (a) don’t know how super works and (b) try to get their hands on it to spend at any opportunity is very high. The chances of these people saving/investing to fund their retirement is quite low.
On a side note, I find the views on this site refreshingly different and welcome alternate views to the mainstream media, who I agree, don’t have much clue but pretend to know everything. Keep up the good work.
The way I see it, super is an added cost to the employer, or an added tax, in return for nothing. This is a burden to any small business, so less people are employed on a full time basis. If an employee were to be offered a extra 9% to their pay packet in exchange for increased production, would they accept this deal?
If you are a small business and draw your wage from your own business, then you loose an additional 9% from your profit. Just an additional tax. You can earn up to 4.9% on that extra cash. No fees etc. Try getting that from a super fund today and fees on top.
Now there are rumblings that our super may not be their in it’s entirety when we eventually need it. They can change the rules in a flash. All super paid to people on working visas has been confiscated by the government. Who benefited from that? The emloyer? The employee? No! The government. Now they want those with less than $100K to “volunarily” give it to the govcernment. Next will be the rest of super.
I beleive New Zealand does not have compulsory super nor capital gains tax but higher GST. If you spend it you pay tax. If you save it you benefit.
In Australia, if you spend it you pay tax, if you save it you pay tax, if you invest it you pay tax…am I missing something here?
People will always spend given the freedom to do so. It is always at the expense of the frugal ones. I beleive that should you have the will, inteligece and “guts” to invest to secure a content retirement then you should be free to do so. No one else has your wellbeing in mind more than yourself.
If you want to “protect” the ones who cannot protect themselve and cannot save then you protect them by cutting their source of easy credit an give them an incentive to SAVE.
Interesting though, have a look at the politicians super fund deal. If they practiced what they preached we would have a very different set of rules.
Nick – the super contribution was made in lieu of a wage increase at the time, and increases since should have been offset against greater productivity. It is not a tax on the employer.
The real purpose is to ensure that all workers take at least some responsibility for their retirement funding instead of completely relying on the government pension, which increases our taxes.
I understand that it may be a good idea to force people to save for their retirement (so as to avoid a tax burden when reckless pensioners have their hands out and no savings of their own)…
But what I dont understand is why I had to start putting away super at the age of 14 and 9 months. I was getting $4.50 an hour to flip burgers at Maccas, yet somehow the Government decided I needed to start saving money already!!! WHAT IS THIS!!!!!!!!!!!!!
I cant believe no-one agrees with me that Super contributions shouldnt start to you hit 30. At my age 27, I have so many things I want to do with my money, why should I be forced to start saving already.
Rich kids that are given trust funds dont mind, but for people like me, that have 1000 ideas of things they want to do in life, that 9% a year of my income would be very handy and would actually increase my wealth and allow me to save more money for my retirement.
I think the scale should be something like this…
30-40 – 8%
41-50 – 12%
51 -65 – 14%
That to me seems way more logical – as it still ensures people have savings, but doesnt deprive them of their own money when they need it most (WHEN THEY ARE MAKING THEIR START IN LIFE!!)
What makes it even more infuriating, is that I am forced to bloody rent coz houses cost so much – yet I am also forced to save for my future!!! Great – so I will be a renter at 60….but with a nice little super nest-egg!! Sometimes I seriously think about leaving Australia
Have to agree with Ad – the bulk of the population will never voluntarily put money aside for their retirement, particularly as they know they have a fall-back to the aged pension. People rarely plan for next year, let alone 30-40 years from now.
Have to admit that I am extremely concerned about the pending outcome of the Henry Review. There is no question it’ll target the rich, but the rich will just move their wealth offshore, so the reforms will fall on those of us who are trying to get rich.
Peter.. the super was introduced surreptitiously and definately not with the peoples benefit in mind. No different to the current manipulation of the super. (with hints of increasing it to 15%)
The frustration of puntpal are indicative of many young people who are feeling their way through life.
I am very doubtful that what is promised today will be relavent in the future, regarding super. Look at what is occurring in the US. What is the future for Australia? If people are working part time, how much super do they accumulate, or will their super be confiscated at some point in the furture. I’m sure a majority of Americans thought two years ago that they would all retire comfortably.
What is there in our economy that may “surprise” us like those in the US? There is an old saying “you don’t know who is swimming naked until the tide goes out”. With the massive uncertainty, job losses, currency deterioration I feel for the younger ones amongst us and really do not believe that compulsory super has been a success, not by a long shot.
Nick I didn’t promise the system would be perfect, and It’s not my system, I was just trying to explain the theory behind it.
“swimming naked” ???? Your pool parties must be interesting.
Peter… good thing I don’t own a “tidal pool”!!
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