Another quick Money Morning today as we concentrate on getting the December issue of Australian Small Cap Investigator out the door.
So rather than blathering on forever as I normally do, I’ll just make a few brief observations on the subject of superannuation this morning.
First up, we noticed the front page of today’s Australian Financial Review (AFR) with the headline:
“Super funds want risk targeted”
According to the article, “Superannuation funds want products to be labeled high, medium or low risk to make it easier for members to understand their investments and compare risks.”
Hmm, nice idea. A bit of a cheat-sheet if you like. No need to read the entire brochure or the 200-page product disclosure statement, instead a simple table with “High Risk”, “Medium Risk”, or “Low Risk” on the front page.
The next question is who’s going to provide that risk analysis? Will it be the funds themselves? Or will it be the product providers?
We can’t imagine the funds wanting to get too involved with that sort of thing. Having to assess the risk of every single product offering is a job for more than one man or woman.
You’d need an entire team of analysts whose sole role was to assess the risk of the product.
What about the product providers? Maybe they can self assess the risk profile of their own product.
That’s probably a better option. They’d surely know better than anyway how risky their product is. They’d know what each individual investment contains and what the potential upside and downside is.
In addition to that they could easily compare the risk profile of one of their products against their other products. That would allow super funds to make a direct choice based on their risk appetite.
Trouble is, will the product provider be completely honest about the risk profile? Will they understate the risks of some products to encourage some investors and even overstate the risks of other products to attract other investors?
Of course there is another option. The risk profile of a product could be assessed by an external ratings agency. A firm such as Standard & Poor’s perhaps.
Yep, we know the problem with that idea. The independent analysts sometimes aren’t independent at all. Especially not when they’re being paid to give their analysis.
Besides, as we mentioned a few weeks back, S&P have decided they don’t want to apply for an Australian Financial Services Licence so any rating they give to a product can’t be supplied to retail investors anyway.
It’s a perfect example of how regulations ensure less protection to investors rather than more.
But that won’t stop the rules and regulations coming thick and fast. The Cooper Super Review is delivering the first section of its report today. It will apparently cover “governance and trustees.”
Doubtless this will mean more regulations and more rules.
And furthermore if our hunch is right about what the government has planned for your superannuation, then it will probably mean major disincentives for setting up a self managed superannuation fund (SMSF).
With such a large amount of retirement savings out of reach of fund managers and the government, the popularity of SMSFs will clearly be in the sights of regulators.
As we wrote last week, there is over $1 trillion stashed away in super funds. A big proportion of that is in self managed super.
It’s clearly much easier for government and the superannuation industry to exploit and make money from these funds if they have more control over it.
The irony is, that even though the professionally managed super industry has performed so badly over the last twelve months, with “more than $13 million a day… sucked from Australian retirement savings…” any changes to the rules on superannuation are only likely to lead in one direction.
And that is for less choice for investors and more control for the failing superannuation industry.
Cheers.
Kris.
60-Second Market Round Up
by Shae Smith
The S&P/ASX200 finished up on Friday to 4,635.20, higher by 0.62%. The Aussie market has opened up slightly this morning.
The Dow Jones Industrial Average gained 65 points to close at 10,471.50. The economic outlook report will be released in America this week, so expect pretty low volumes of trading until then. Read more here.
Overnight in the UK, the FTSE finished higher to 5,261.57, up by 17 points.
The Nikkei finished the day at 10,107.87, up by 2.48%
The price of spot gold in Australian dollars is trading at $1,221.71 while in US Dollars it is trading at $1,1141.80. The price of silver in Aussie dollars is $18.79 and in US Dollars it is $17.15.
The US dollar has strengthened, but this has been linked to increased consumer spending in the US.
The Aussie dollar versus the US dollar is trading at USD$0.9111, and against the Japanese Yen JPY81.07
Crude oil has continued its downhill run, closing at USD$69.87.
For the biggest movers on the market yesterday click here…
{ 12 comments… read them below or add one }
super…..what a rort
PF – This, I think, is the sort of problem that we all agree is a problem and needs something done about it.
http://www.abc.net.au/am/content/2009/s2771775.htm
You suggested that perhaps the focus on CO2 is only a front, and that the real agenda is to address these sorts of problems with the environment.
If only that were true. I do not believe that it is, as the language and the science underpinning the two problems are distinctively different. If we were serious about cleaning up our environment, then for us a very obvious place to start would be to replace the plastic shopping bag with paper bags.
You would think that those concerned with the health of our environment and about saving the planet would start with such low-hanging fruit. But I have not yet seen Rudd, Wong and Turnbull pushing for the obvious. No, instead they are proposing to control the climate through dodgy science, THE CLIMATE!!!!!!!
I do not for a minute trust their intentions. Both the justification and the stated object of their proposals are dodgy, and the only explanation for their proposals that seems to stick and makes any sense is arrived at via the asking of the old, familiar question: Who benefits?
This set of charts, based on historical ice core data puts in proper perspective the Earth’s climate history and the current, extended warm period we are experiencing.
http://www.youtube.com/watch?v=DFbUVBYIPlI&feature=player_embedded
To my mind, these graps say it all. Our politicians and their masters and minions are selling us the biggest pup in human history.
“”"”To my mind, these graps say it all. Our politicians and their masters and minions are selling us the biggest pup in human history. “”"”"
WOLF WOOF
why they left it so late to fix things ????,,problems should have been addressed 10 -15 years ago
I would like to see something similar for Australia…if there is any honest institution out there with some guts!
http://www.youtube.com/watch?v=RrP9qJmjIsA&feature=player_embedded
Nick – you would like to put 11% of the workforce out of work?
Why? What purpose would that serve?
Why do you want to punish people?
Is that the same logic you used when you stated that sun cancer is not caused by the sun?
I thought that was your best yet.
11% out of work? Where did I claim that Peter?
I’m in the medical game Peter. I know what I am talking about. Just like the global warming “thing”, there are many very qualified people who have seen the evidence but no one wants to listed to their research. So once again, lets just go with the “populist” theory and dismiss these guys as nut cases. I’m glad it gives you a laugh. I guess the hole in the ozone layer hasn’t been plugged up yet.
Nick – in your previous post you said you wanted something similar for Australia and then you posted a map of the growing unemployment in the USA which is now officially around 11%
Do you read your own posts?
Medical game – what are you a phrenologist.
PF – you might be reading that wrong. Saying that it would be good if someone could create the same illustration to give us the real picture of where we are at is not the same thing as wishing that we were in the same place as the illustration being referred to illustrates. Sorry, that came out as a mouthful, but if you see the difference, Nick meant to say the former, whereas you interpreted him to be saying the latter.
Incidentally, on climate change, there are signs of sanity returning to the mainstreet media. Finally. This is where things are at:
http://www.dailyexpress.co.uk/posts/view/146138
A taste of things to come?
PF, if you have the time to follow this up, I would be interested to know whether you are still of the view that Rudd and Wong should be allowed to implement their program.
“THE amended emissions trading scheme put forward by the Government threatens to wipe off about 3 per cent of the value of Australia’s top 200 companies, according to research to be released today…
An analysis of the revised plan by carbon risk firm RepuTex and Arbor Partners, consultants to institutional investors, shows that indirect factors such as electricity and supply chain costs, will make up 60 per cent of the total carbon liability of S&P/ASX 200 companies.
That would add $3.1 billion to the $2.1 billion in direct costs companies face through trading permits.
And then there are the fines the United Nations will impose on us – fines some countries already face under the Kyoto Protocol:
Because of breaches of its emissions target under the Kyoto Protocol, Canada owes about $1 billion… ”
http://blogs.news.com.au/heraldsun/andrewbolt/
There is an interesting story in Saturdays Age about how compulsory super is being used to prop up failing businesses including the banks. Each week the banks or their fund managers receive a billion dollars plus from Aussie workers and then use this money to buy shares that they print and then pay themselves hefty fees whilst at the same time using this artificial stimulas to drive up the share price. Super must be the biggest ponzi scheme in history.
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