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Sunday, 2 October 2011

FIRST DRAFT- LEGISLATED LOSSES ON CRACKED STOCKMARKET

The Australian Superannuation Levy system was introduced by the Federal Australian Government with great fanfare in the belief that it would guarantee the retirement incomes of Australian workers in retirement. The government legislated that every employer would then pay  9% of salary into a Superanuation fund on the belief that by the time the workers retired they would have a suitable retirement income due which the government would not have to contribute any or very little if any.
These assessments were made by the Insurance industry and banking industry who were keen to manage those funds and earn substancial revenues in the $billions.The industry produced a case which showed the the Sharemarket Indices generally rose over time and that if suitably qualified fund managers followed prudent investment procedures it would guarantee very good returns over time be higher than inflation even if sharemarkets were to go down every so often as it indeed did during the GFC in 2008. Statistics would show how the Indices always rose since the times when they were first created, but what they did not show was that the groups of stocks were always changing by including good new stocks like Telstra and the Commonwealth bank to replace defunct stocks like Ariadne, Bell Resources and other out of favour or worthless stocks which the funds usually lost money on.
Having worked in funds management since 1970's and as an Estates administrator later on...I found many portfolios with worthless share certificates of defunct stocks in many deceased estates portfolios. These portfolios like so many others prior or since are repeated in history many times not only by individual investors but also by Institutional Investors still in business today.  The defunct stocks once were included in the indices but were removed after they had colapsed suddenly either due to economic turmoil or fraud by company management which could not have been forseen by the investors prior to their collapse. The investors who had presumed that their investments would have done better than inflation, actually lost 100% of their capital investment.
Many people assume that these so called professionals are smarter more educated and that they are the market experts to be entrusted with their valuable assets. I believe it is because many investors are just too lazy and believe that strangers are smarter than them and appointed people like Madoff to look after their nest eggs.These  examples are just the tip of the iceberg examples and do not cover other means of legal fraud which occurs in the market place, but what I am attempting to show is the futility and disadvantage this type of government policy is doing to our local economic stability.
Australia needs a manufacturing industry for a variety of strategic reasons, but the 9% Superannuation levy ontop of other imposts has put our manufaturing employers at a greater disadvantage than of those of  overseas employers making similar products. It is now cheaper to buy from overseas rather than make a whole range of products in this country. Its not a matter of efficiency anymore ...its a matter of higher cost. The levy helps our competitors in two ways; the first benefit being that foreign companys gain a price advantage and secondly the levy $'s are more likely to be invested in foreign stockmarkets to buy into those cheaper manufacturing companies.  The levy also discourages our banks from lending to our manufaturers because the banks know they are doomed to fail. Are we the clever country or the silly country? While we invest overseas...the overseas companies are buying our cheaper more valuable assets here and we complain that we are being bought out. WHOSE FAULT IS THAT? ARE WE STILL THE CLEVER COUNTRY? We are being told that we need to diversify because we cant pick winners and we need to invest in diferent markets for the future....so Super funds continue to invest in mainly financial assets which are the most violatile and with a higher risk of loss through natural or printed inflation in foreign lands.
I dont believe in all the conspiracy theories but it almost seems like it is an intended policy to rob wealth from the middle classes who enjoy the benefits of what I call "borrowed profits" only to lose them again every time we experience a GFC. More good money after bad...history repeating itself over and over again. One of the problems is human EGO. It has become too fashionable to hold shares in large seemingly profitable companies, to be able to tell everyone that you go to annual meetings and vote on various pretermined matters....get a free lunch and rub shoulders with other paper millionaires. The stress of seeing shares go up and down everyday must make some people feel alive? But when they attend insolvency meetings I see the living dead grieving their losses looking for explanations of what happend? who is responsible? who should be going to jail? Anyone recall the Cox Bros insolvency which went on for at least 30 years if i recall correctly... The reality is there is no easy way to make or protect your financially based assets from losses through INFLATION, FRAUD OR MISADVENTURE.
I will give my point of view on the issue of  destructive power ofcapital gains taxes which are causing our banks to be trading whilst insolvent?

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