Feb09
I’ve recently added a Calendar widget to the blog–just below the login widget on the left hand side.
I will use it to maintain a calendar of upcoming public events–and also conferences where I am speaking–as well as media coverage, if I get enough notice of it. The widget is very well designed–days coloured red to indicate an activity; hover over a highlighted day to see a summary; click on the date to get full details.
The first event there is a discussion about the crisis on the Sky News Program “On the Record”, at 8am this morning.
Please keep an eye on this if you want to know of any forthcoming talks.
Cheers, Steve
Hi Steve & Justthinking
You’ll probably all roll about laughing when I ask this dumb question, but I’m going to ask it anyway.
Steve, commenting on the super industry you say, ‘You don’t invest for the future by buying financial assets: you invest by building physical ones. The super funds could have done so, at the risk of some bad investments, but instead they have simply pumped the share and property markets up.’
What are the physical assets? Property? I’m confused.
Hi justthinking, Alan K revisited the synthetic CDO issue in today’s Business Spectator. He appears to have given up on the possibility of a tiny ray of sunshine.
Bullturnedbear, good call on the Dow Jones so far.
Hi All.
For those that have the time I would recommend this article. A condensed ‘The Fourth Turning” with commentary & prediction.
Baby Boomers- Your Generation’s Crisis Has Arrived – 10th Feb 09 – James_Quinn
For those who say “what has this got to do with Australia”, just remember, we are joined at the hip to America.
Regards CK.
The Link: http://www.marketoracle.co.uk/Article8800.html
My apology.
CK.
Hi Effit,
I’m not answering for Steve. But my answer of what would have been a sensible investment for Super would have been to invest in productive business. That is, A business that produces a product that is then consumed. That way the profit from production can go towards repaying the initial investment and then producing a lasting return. This is hard and risky though, so the Super funds went for shares.
Most people are not aware that buying shares does not invest money into a company (unless it is an IPO or a Capital raising). Therefore buying shares is just speculating that the company’s shares will be sold to another party for a higher price in the future. The irony is that Super fund “investors” had no intention to sell. They still haven’t sold.
I also don’t agree with your comment Steve that the Super Guarantee is holding up share prices. I believe this to be a common misconception. Super funds have been buying and holding all the way down. yet the market is off 50%.
Whenever there is a buyer of shares there is always a seller. Therefore money moving from the sidelines creates the same amount of money on the sidelines. Because the seller receives the cash that the buyer put in. Sentiment on the other hand drives price. That is, If a buyer was willing (bullish) to pay a high price, the price would rise. If buyers are nervous they will be wanting to pay a lower price (bearish). Either way the cash in and out from either trade is the same.
Thanks CK,
I missed that story. Very interesting.
It is just a matter of time now until the Worldwide banking system is nationalised and the shareholders and bondholders are wiped out. The bondholders may be partially saved by some sort of debt for equity swap. But even that will tie up their money for many years to come. Also they would probably only get a sum of cents in the dollar for their bonds.
What that all means for Australia and the rest of the World. I have no idea. One would think that the creditor nations are the safest place. But under the above scenario, the creditor nations would suffer the greatest loss. Because they are the biggest bondholders.
I still do not have a better solution than physical cash. Foreign currency is getting too complex and risky and my views on gold have been well documented.
Bullturnedbear
I agree with Steve when he says that the super funds’ flow of money into the stock market is holding up share prices. I feel sure that if the super funds were to stop buying (I refuse to call it “investing in”) shares the prices would fall even further.
Shares, like real estate, are stll priced well above their real value. This even though they have fallen by 50%. They probable need to fall another 50% before their value as guaged by their dividend returns are realistic. The top 75%(and rising) of their price was maintained only by the proposition that someone would always borrow more and more to sustain the rise. Few people in the immediate past could see this but it is obvious to everyone now. The super funds were adding a bonus, their subscribers were and are simply bubble fodder, now throwing good money after bad as a requirement of statute law.
I must say that I have seen this happening for more than 20 years and have always considered the numbers on my super statements as representing “funny money”. In spite of “financial advice” I have contributed no more than I had to.
A house is worth a house, and a company is worth it’s ability to return a dividend, nothing more.
If the WTO or the GATT, and sucessive incompetent Australian governments had allowed real free trade (with protection from unrealistic exchange rates and economy of scale advantages) there would have been productive corporations to invest in within this country. But they even ruined most of our public assets by selling them into the this world Ponzi Scheme. No, super is just funny money, wasted on the alter of neoclassical economic theory.
Our real superannuation is negative represented by the mountain of debt both household and national.
Hi affordableHomes4aussies & all,
found this interesting: “ACTIVIST PICKETS CEOS’ HOMES FOR NEW MORTGAGES”
“A new kind of street warfare is breaking out against Wall Street titans – and it’s happening on their lawns and outside their lobbies too.”
http://www.nypost.com/seven/02102009/business/bank_on_change_154314.htm
Hi CK,
Thanks for posing the story by James Quinn. Very interesting read.
Hi Bullturnedbear and BrightSpark1
Thanks for your thoughts on a better place for Super money to be invested. It makes a lot more sense to invest in a productive business, and as you say ‘that produces a product that is then consumed. That way the profit from production can go towards repaying the initial investment and then producing a lasting return’.
I think ‘they’ must have done a really good brainwash on me about Super being the best way to invest for my financial future. Probably didn’t help that I worked for a time in one of the first government regulatory bodies.
Last week I came in on the end of a radio interview with John Quiggan where he said that before the 1990s most Super schemes were defined benefit, but since then all Super schemes are market-linked and the investors now bear all the risk. Now we know how true that is, with the majority of funds in the share market.
I’d also been brainwashed that the ‘only way to go’ was to invest in the share market!
I’m so glad I attended that seminar some months ago where Steve gave his warnings about the coming recession/depression and as a result found this site.
Hi Effit and Bullturnedbear
Before Bretton Woods John Maynard Keynes suggested a solution to the same problem that we face now, mountains of cross border debt.
His soloution involved an international exchange currency with negative (stabilising) feedback to penalise and eliminate imbalance by both imposing fines and changing exchange rates depending on national current accounts. Apparently it was the UK position at Bretton Woods, but the US, the worlds biggest creditor at that time, would not have a bar of it and instead set the ball rolling to the current disaster.
The US is now the world biggest debtor! I wonder what the current US goverment would think of this J M Keynes suggestion now? I wonder if the current US government will acknowledge US culpability for the current mess.
Hi all.
Another interesting read: http://news.goldseek.com/GoldSeek/1219039500.php
Cheers CK.
Thanks CK – was a very interesting read.
Brightspark,
Guardian journalist George Monbiot has a good article on it: http://www.monbiot.com/archives/2008/11/18/clearing-up-this-mess/