Gotta love budget night! What did you do on budget night? We have some friends who work in banking and finance. A few of them work at the big four. As one of them recently said to us, ‘Budget night tonight — like [the] Brownlow for economists and bankers.’
Back in the day, the banks used to throw lavish events for budget night. Invite a few clients. Have a nice dinner. Sink a few bottles of wine. Happy days.
Not so much anymore. More dour affairs these days. And the way we see it, budget night for the banks will, going forward, be more like devil’s night.
The Liberal government (yes, Liberal!) took a hatchet to the big Aussie banks on budget night. Treasurer Scott Morrison dropped a $6.2 billion tax on them. And it’s a permanent one, too.
We’re surprised at this tax because it’s a Liberal government. Labor and the Greens have long been pining for a tax on the big banks. But the Libs? No, didn’t see that one coming.
We’re also surprised because it’s a tax on every Australian. But thanks to some political spin, it appears as though the government is taking on ‘fat cat bankers’.
Ironically, the likely outcome of this tax is that banks will pass the cost on to customers. Expect higher rates, higher fees and less choice. If the banks don’t pass on the costs of this new tax to customers, it’ll hit their profits.
As we explained last week, the banks don’t really care about the average customer. Their responsibility is to provide returns to shareholders. And if they cop this one in the neck, that’ll decrease profits and adversely affect shareholders.
And when it comes to shareholders, well, that includes almost every single Australian.
$45 billion in just four big companies
You see, Rainmaker Group did a study into portfolio holdings disclosure. It figured out that around 23% of Australian share portfolios in super funds hold bank stocks.
It also calculated this to be about $45 bln in portfolio holdings. The combined market cap of CBA, NAB, ANZ and Westpac is $423.41 bln.
For example, AustralianSuper is Australia’s largest industry super fund. Its ‘balanced’ portfolio holds $77,303,640,000 of super money.
It also invests in a wide array of Australian stocks. If you look at the ‘balanced’ portfolio’s four biggest stock holdings in order…
- Commonwealth Bank: $1,484,027,271
- Westpac Bank: $1,264,038,691
- ANZ Banking Group: $1,102,350,825
- NAB: $832,800,030
That’s $4.68 bln that AustralianSuper holds in the big four banks. And that’s just one of its portfolios. Its ‘high growth’ option holds another $424.7 mln in the big four. Even its ‘stable’ option holds $43.15 mln in the big four.
And let’s not forget that’s just one big super fund. We tried to dig up the other big funds, like Hostplus, CareSuper and MTAA Super — but they make it incredibly hard to find that info.
However, we know they all have major holdings in the big four banks. Easily in the mlns and most likely the same as AustralianSuper — in the blns.
That means when the big four banks fall in price, it hurts Australia’s biggest funds. That hurts people like you. You might have an industry super fund. Maybe a private one with the likes of BT or AMP. Or maybe you have a SMSF.
Either way, we’re pretty confident that, somewhere in there, you hold some shares in one (or a few) of the big four banks.
It means this tax on the banks isn’t just on them. It’s on you. That’s what this really is. It’s just another tax on you, dressed up to make you vote Liberal in the next election.
The scary thing is that if a Labor government gets in, it’ll be worse. Labor will tax you even harder. Whether it’s directly — or indirectly through these ‘big bank taxes’ — they’ll tax you more. They’ll all tax you more.
Call in the administrators!
This is the world you live in now. A government that borrows up to its eyeballs and then looks to corporate Australia to bail it out. Maybe instead of taxing you, we should tax the government for its ineptitude.
In fact, that might be the best idea we’ve come up with to date. Perhaps we can crowdsource a tax on the government. Tax it for incompetence. Tax it for every day it spends more money than it makes. If enough people apply enough pressure, then maybe we should hit Canberra with a ‘dimwit tax’.
Let’s be frank. If the government was a business, it’d have administrators and receivers crawling up its backside. It’d be liquidating its assets and getting out of Dodge.
You’ll also note it’s not imposing this tax on the miners. Or Telstra. Nope. Just the banks. Why? Well, why not? It wins votes.
That’s all these budgets are designed to do — get the masses on board to score points. The government doesn’t actually have any interest in the long-term future of the country. It’s all about what it can do now that will win votes. This government won’t even be in office by the time it thinks it’ll deliver a surplus.
It simply doesn’t care.
The banks don’t really care about you. The government doesn’t really care about you. So where does that leave you? You simply have to fend for yourself.
And that’s why you’re here, reading this to figure out how to fend for yourself. Well, in this situation, the best answer is to invest in a way that none of them can get their grubby mitts on your money.
That’s why we’ve been banging on recently so much about Bitcoin, Ethereum and other cryptocurrencies. This is a world free from government regulation, and free from bank profits. It’s the only place we know of right now that gives you ultimate freedom with your money.
But then again, cryptocurrency isn’t for everyone. And if you’re one of those people who isn’t quite sure, then you still need another way to protect yourself. And while we’re still very bullish on markets, we think you need to cover all bases, because, heck, we might be wrong.
We think the best preparation you can do is to get your hands on Vern Gowdie’s book, The End of Australia. In the event we’re wildly wrong, and everything from cryptocurrency to global markets comes crashing down, then you still need to be prepared
All of his protection measures are easy to implement, and don’t cost an arm and a leg. Even if you’re as bullish as we are, to put some downside protection in place is, in a way, having your cake and eating it too.
Sure, going 100% cash is extreme, in our view. But there are other measures, such as ways to protect bank savings, which are vital to know. If you want to get a copy — and you better before our print run sells out — then head over here to get yours now.
Also, keep an eye out in tomorrow’s Money Morning as we look at how cryptocurrencies will reshape your financial future. And how you can keep them safe, secure and secret.
Editor, Money Morning
PS: Fund manager David Tice is known as the wildly successful manager of the Prudent Bear Fund. He sold the fund to Federated Investors just as the 2008 financial crisis was unfolding.
Tice recently told CNBC: ‘“The market has tended to go down about every seven years. It went down in 1987, 1994, 2001 and 2008. During these periods after the declines, it rallies like crazy. But now bad things are about to happen again.”’
Vern Gowdie agrees. He shows you how to bunker down and prepare for those ‘bad things’ today. And how you can capitalise on the coming downturn once the dust settles. To find out more, go here.