One of the first initiatives of the newly elected Whitlam Labor government in 1972 was the nationalisation of the Australian health care system. Every doctor in Australia was bleating about "the doctor-patient relationship", when it was obvious the only relationship the doctors were interested in was the relationship between the patient's wallet and the doctor's bank account. The health system didn't implode as the doctors had predicted, but it did cost them money.
Compared to the US system, the Australia health care system is a model of sanity. No-one asks, if you have a heart attack, who is your insurer? Everyone is covered for these events. However, if you have private insurance, which is subsidised by the government, you will go to the head of the queue for elective surgery, such as hip replacements, knee operations and so on. Thus, private insurance is a discretionary item.
The Australian healthcare system is a mixture of public and private. It is impossible to meet the demand for health care, as it is always expanding. As the population ages, as in Australia, health outlays will grow and the demands on the healthcare system, especially for elective surgery, will expand. Having a vigorous private health system makes good economic and political sense.
For many years, Australia has had a strong private health insurance industry. Most states had a major insurer, usually mutually owned, such as the Hospital Benefit Fund (HBF) in Western Australia. In other words, it was a not-for-profit model. Now, the health insurance sector operates on a profit based model. Some of the main players are BUPA from the UK and the acquisitive NIB.
Medibank Private was established in 1976 to provide competition to the private sector insurers. No government would dare interfere with the basic model of health care in Australia. That would be political poison. The doctors whine they don't make enough money, but I haven't seen any of them claiming low income benefits at Centrelink. Medicine is like anything else. Stars like ophthalmic surgeons make a motza while the average general practitioner can make around $250,000 if he or she is in a high volume practice.
Shadow Treasurer Joe Hockey announced in February 2010 that Medibank Private, which is wholly government owned, would be sold off by an incoming Coalition government. Medibank Private is the government's ;private health insurance company. The incoming Liberal Treasurer needs to find $60 billion fast. As for the Libs so called "razor gang" finding this sort of money through savings in the bureaucracy, having seen several in action, I have three things to say -- "ha ha ha". To do this, they would have to find savings equivalent to abolishing the Department of Defense, the biggest department in the federal government. If you believe the razor gang can find these sorts of savings, I have a nice near-new bridge going cheap.
Medibank Private is a profit maximising entity. The substantial annual dividend it pays to the government is very much appreciated. No reason exists why the government should own it. From personal communication, Medibank Private does not attempt to restrict premium increases to the rate of inflation. Premiums are increasing at about twice the rate of inflation. Due to the "community rating" model, policy holders liable to catastrophic injuries due to the nature of their employment or recreation, such as professional sportsmen and skiers, pay the same premiums as everybody else. Changing this would open a can or worms no-one would like to confront. The private health sector is one of those things Labor "doesn't like" because "rich people" use it to jump the queue. Queues are the essence of socialism. Private health will get a much better deal from the Coalition.
If Joe Hockey were wise, he would aim for an initial public offering (IPO) rather than a trade sale. A trade sale to industry would raise a lot of money quickly, but it would put the noses of millions of policy holders -- or "members" as Medibank Private prefers to call them -- out of joint. A float along the lines of the Commonwealth Bank of Australia IPO would make Joe Hockey a very popular man.
Friday, 22 February 2013
Friday, 8 February 2013
Why Melbourne doesn't have an airport rail link
Transurban has one good asset -- its CityLink system. CityLink is a good system, it provides quick and reliable freeway transport for motorists across Melbourne. The rest of its assets are a pack of dogs. Without CityLink, Transurban would be a dog too, not the steady earner beloved of pension funds. Or a "dog with fleas" as Gordon Gekko said.
The absence of a rail link to Melbourne Airport suits Transurban fine, because you can only get to Melbourne Airport by car, taxi or bus. The SkyBus service costs $17 one way. Taxis cost around $50 from the airport to the city. A rail link would mean Transurban would lose a great many of these customers. Transurban operates toll roads, so it makes sense for them to maximise traffic.
Tansurban is not alone in applauding the lack of an airport rail link. Australia Pacific Airports, which operates the airport, has just completed a multimillion dollar upgrade of its parking facilities. It costs around $20 just to park long enough to pick someone up. It is almost impossible to pick someone up from the curb at the airport. Melbourne Airport's parking fees are said to be among the highest in the world. Australian Pacific Airports would be very upset by an airport rail link, which would see much of their business disappear. Even a recent suggestion there should be a dedicated bus lane on the freeway to the airport caused barely concealed alarm.
Transurban, the taxi industry and Australian Pacific Airports are what economists call "rent seekers". Who would benefit from an airport rail link? Only the consumers. And who cares about them? Certainly the Baillieu Government doesn't, because they could change the "no rail link" policy with the stroke of a pen. Good old "Do Nothing Ted" is maintaining his reputation.
The absence of a rail link to Melbourne Airport suits Transurban fine, because you can only get to Melbourne Airport by car, taxi or bus. The SkyBus service costs $17 one way. Taxis cost around $50 from the airport to the city. A rail link would mean Transurban would lose a great many of these customers. Transurban operates toll roads, so it makes sense for them to maximise traffic.
Tansurban is not alone in applauding the lack of an airport rail link. Australia Pacific Airports, which operates the airport, has just completed a multimillion dollar upgrade of its parking facilities. It costs around $20 just to park long enough to pick someone up. It is almost impossible to pick someone up from the curb at the airport. Melbourne Airport's parking fees are said to be among the highest in the world. Australian Pacific Airports would be very upset by an airport rail link, which would see much of their business disappear. Even a recent suggestion there should be a dedicated bus lane on the freeway to the airport caused barely concealed alarm.
Transurban, the taxi industry and Australian Pacific Airports are what economists call "rent seekers". Who would benefit from an airport rail link? Only the consumers. And who cares about them? Certainly the Baillieu Government doesn't, because they could change the "no rail link" policy with the stroke of a pen. Good old "Do Nothing Ted" is maintaining his reputation.
US shale gas makes life hard for Australia
Canada has announced its third export gas project aimed at the Asian market. Another export gas project in Texas is likely to get the go-ahead soon. The hopes of US gas consumers for a captive market have been dashed. The availability of low cost feedstocks has revolutionised the US chemical industry but there is just so much shale gas around in the US it would be silly not to take advantage of the current seller's market in Asia.
Australian gas producers have a window of about five years before US gas projects come on stream but after that the market will become very competitive. When the Panama Canal is widened in 2015, it will be economic to ship Texas Gulf coast gas to Asia. That will really set the cat amongst the pigeons. As predicted in my post "Dump Australian Gas Stocks" (16 Nov. 2012) Australian producers, who are committed to multibillion dollar gas trains, are getting nervous about US competition. Australian gas users as seeking some form of reservation for local use but that bird is unlikely to fly, at least on the terms they are seeking. Also, with shale gas being flared off in the US, it makes no sense not to export it. And the US is a much more reliable supplier than than Oman.
Australian gas producers seem to be getting edgy about missing the market. With major Australian projects way over budget, Shell has said they will build a floating platform for their Browse project, which will be made in Korea, or some similar country, where workers actually work. Of course, Shell is too smart to say "Australian workers are just too expensive and strike prone" but as Bob Dylan said "You don't have to be weatherman to see which way the wind is blowing." Western Australian state Premier Colin Barnett is pushing hard for a land-based facility for Browse, but insiders say he is unlikely to win on this one.
Several other US shale gas export plants are awaiting approval, often with similar stake holders to the Australian projects, for example Shell. It's going to be an interesting couple of years. As for the coal seam gas to be produced in Queensland, it's an inferior product and the wells sunk on agricultural land make it very unpopular with farmers.
Australian gas producers have a window of about five years before US gas projects come on stream but after that the market will become very competitive. When the Panama Canal is widened in 2015, it will be economic to ship Texas Gulf coast gas to Asia. That will really set the cat amongst the pigeons. As predicted in my post "Dump Australian Gas Stocks" (16 Nov. 2012) Australian producers, who are committed to multibillion dollar gas trains, are getting nervous about US competition. Australian gas users as seeking some form of reservation for local use but that bird is unlikely to fly, at least on the terms they are seeking. Also, with shale gas being flared off in the US, it makes no sense not to export it. And the US is a much more reliable supplier than than Oman.
Australian gas producers seem to be getting edgy about missing the market. With major Australian projects way over budget, Shell has said they will build a floating platform for their Browse project, which will be made in Korea, or some similar country, where workers actually work. Of course, Shell is too smart to say "Australian workers are just too expensive and strike prone" but as Bob Dylan said "You don't have to be weatherman to see which way the wind is blowing." Western Australian state Premier Colin Barnett is pushing hard for a land-based facility for Browse, but insiders say he is unlikely to win on this one.
Several other US shale gas export plants are awaiting approval, often with similar stake holders to the Australian projects, for example Shell. It's going to be an interesting couple of years. As for the coal seam gas to be produced in Queensland, it's an inferior product and the wells sunk on agricultural land make it very unpopular with farmers.
Friday, 28 December 2012
Is Australia ruled by the one percenters?
I have a Canadian friend who lives in Taipei, where he works for the Taiwan international trade development corporation. We have been friends for many years and I have a high regard for his judgement, especially when it comes to China. Most of his friends are, and always have been, Chinese. On politics, however, we are polar opposites. I am a free market conservative and he is a Trotskyist.
He began going on about the "One Percenters", the target of so much wrath around the world, the one percent of the population who are supposed to rule the world. I initially wrote it off as part of his Trotskyist leanings. When I said it was hard for Australian workers to "maintain the rage" when many of them earn $100,000 a year, live in million dollar houses and change cars every couple of years, he said they were being "bought off". The Occupy Wall St movement did much to highlight the alleged role of the One Percenters. According to my friend, the Sage of Omaha, Warren Buffett, said the One Percenters were a bunch of crooks. That is irrelevant. Membership of the One Percenters is not decided by personal nomination.
I have been involved in politics since I was a teenager and I have been writing about business-related topics for over 30 years. I will restrict my comments to Australia, as I have a fairly intimate knowledge of Australian business, government and politics. I also know quite a bit about Taiwan and China, both of which are very different to Australia.
The first thing to note is that Australia is a small country in terms of economic activity and population. The population of Australia in mid 2012 was just under 23,000,000. Second, Australia is, and always has been, an importer of capital and an exporter of raw materials. Its finance and trading industries are not internationally significant and are oriented towards the domestic market. As Australia is a young country, very few of its business and financial elite are more than a few generations removed from the farmyard or factory floor. Few people would rate as being wealthy by intrernational measures, with obvious exceptions such as Rupert Murdoch (now officially an American), Gina Reinhart, the iron ore heiress (said to be the richest woman in the world) and Frank Lowy (Westfield shopping centres, one of the world's largest chains). The Australian business elite is highly concentrated, less than one percent, but its membership is not a secret.
Australia has only four significant centres of economic activity. Sydney, capital of New South Wales, and its hinterland, the financial centre of Australia; Melbourne, capital of Victoria, mining, commercial and manufacturing centre of Australia; south-east Queenland, centred on Brisbane, the coal centre of Australia; and Perth, capital city of Western Australia, administrative and service centre for iron ore production, Australia's number one export. South Australia, the Northern Territory and Tasmania are mendicant states that contribute little to national output.
Thus, we have four more or less distinct centres of economic activity. Not so long ago, most enterprises were restricted to one State. They would be closely related to the State governments, over whom they would exercise significant influence. National players, like the Broken Hill Proprietary Co (BHP) would tailor their investment decisions to maximise their political leverage. Now, most of the regional companies have gone and have been consolidated into national or international enterprises. The business elite has thus become more concentrated. I would, however, doubt that the membership of the business elite would be much of a secret to regular readers of the financial press. I have only ever met one businessman who didn't like getting his name in the paper. He introduced himself only as "Michael" and said his investment bank made several billion by buying up pubs and their accompanying poker machine licenses when they were introduced into Victoria. He certainly wasn't the average pub blowhard but I have no idea if he was telling the truth. He valued his privacy above all else. As indicated, the fact that membership of this elite is widely known does not mean shonky deals between business and government do not occur.
Other elite structures, such as goverment, public service, police, armed services are, in Australia at least, largely meritocratic and contestable. Some, such as the Australian Labor Party, are developing family linkages similar to the Mafia. While deals are done under the 'old mates act' and many institutions are more corrupt that we would like to think, Australia is a fairly clean country. Blatant nepotism in official structures is rare.
That a governing elite exists is beyond doubt. The important thing to keep in mind is that membership is contestable In my (brief) socialistic youth I toyed with the idea of confiscatory death duties to 'level the playing field' but it would be almost impossible to imagine a more unpopular policy for the average Australian voter than death duties. Death duties are political poison. No-one seems to mind, or even envy for that matter, billionaires like James Packer or Gina Reinhart as long as they are gainfully employed. Australia is a young country and dynastic fortunes are not common. Most second and third generation "trust fund babies" don't like to dirty their hands with business and go in for philanthropy, the arts and so on. China is not a meritocractic country. The elite is co-opted into the Communist Party, which is ruled by the 'princelings.' We have no idea what goes on in the Communist Party. That is not the case in Australia. Shareholders in companies with a family tradition, such as the Myer department store chain, find it reassuring that the founding family still takes an interest in the business.
He began going on about the "One Percenters", the target of so much wrath around the world, the one percent of the population who are supposed to rule the world. I initially wrote it off as part of his Trotskyist leanings. When I said it was hard for Australian workers to "maintain the rage" when many of them earn $100,000 a year, live in million dollar houses and change cars every couple of years, he said they were being "bought off". The Occupy Wall St movement did much to highlight the alleged role of the One Percenters. According to my friend, the Sage of Omaha, Warren Buffett, said the One Percenters were a bunch of crooks. That is irrelevant. Membership of the One Percenters is not decided by personal nomination.
I have been involved in politics since I was a teenager and I have been writing about business-related topics for over 30 years. I will restrict my comments to Australia, as I have a fairly intimate knowledge of Australian business, government and politics. I also know quite a bit about Taiwan and China, both of which are very different to Australia.
The first thing to note is that Australia is a small country in terms of economic activity and population. The population of Australia in mid 2012 was just under 23,000,000. Second, Australia is, and always has been, an importer of capital and an exporter of raw materials. Its finance and trading industries are not internationally significant and are oriented towards the domestic market. As Australia is a young country, very few of its business and financial elite are more than a few generations removed from the farmyard or factory floor. Few people would rate as being wealthy by intrernational measures, with obvious exceptions such as Rupert Murdoch (now officially an American), Gina Reinhart, the iron ore heiress (said to be the richest woman in the world) and Frank Lowy (Westfield shopping centres, one of the world's largest chains). The Australian business elite is highly concentrated, less than one percent, but its membership is not a secret.
Australia has only four significant centres of economic activity. Sydney, capital of New South Wales, and its hinterland, the financial centre of Australia; Melbourne, capital of Victoria, mining, commercial and manufacturing centre of Australia; south-east Queenland, centred on Brisbane, the coal centre of Australia; and Perth, capital city of Western Australia, administrative and service centre for iron ore production, Australia's number one export. South Australia, the Northern Territory and Tasmania are mendicant states that contribute little to national output.
Thus, we have four more or less distinct centres of economic activity. Not so long ago, most enterprises were restricted to one State. They would be closely related to the State governments, over whom they would exercise significant influence. National players, like the Broken Hill Proprietary Co (BHP) would tailor their investment decisions to maximise their political leverage. Now, most of the regional companies have gone and have been consolidated into national or international enterprises. The business elite has thus become more concentrated. I would, however, doubt that the membership of the business elite would be much of a secret to regular readers of the financial press. I have only ever met one businessman who didn't like getting his name in the paper. He introduced himself only as "Michael" and said his investment bank made several billion by buying up pubs and their accompanying poker machine licenses when they were introduced into Victoria. He certainly wasn't the average pub blowhard but I have no idea if he was telling the truth. He valued his privacy above all else. As indicated, the fact that membership of this elite is widely known does not mean shonky deals between business and government do not occur.
Other elite structures, such as goverment, public service, police, armed services are, in Australia at least, largely meritocratic and contestable. Some, such as the Australian Labor Party, are developing family linkages similar to the Mafia. While deals are done under the 'old mates act' and many institutions are more corrupt that we would like to think, Australia is a fairly clean country. Blatant nepotism in official structures is rare.
That a governing elite exists is beyond doubt. The important thing to keep in mind is that membership is contestable In my (brief) socialistic youth I toyed with the idea of confiscatory death duties to 'level the playing field' but it would be almost impossible to imagine a more unpopular policy for the average Australian voter than death duties. Death duties are political poison. No-one seems to mind, or even envy for that matter, billionaires like James Packer or Gina Reinhart as long as they are gainfully employed. Australia is a young country and dynastic fortunes are not common. Most second and third generation "trust fund babies" don't like to dirty their hands with business and go in for philanthropy, the arts and so on. China is not a meritocractic country. The elite is co-opted into the Communist Party, which is ruled by the 'princelings.' We have no idea what goes on in the Communist Party. That is not the case in Australia. Shareholders in companies with a family tradition, such as the Myer department store chain, find it reassuring that the founding family still takes an interest in the business.
Thursday, 20 December 2012
sense and nonsense about homosexuality
When I told me wife I was going to write about homosexuality, my wife's advice was "don't say anything nasty." It is not gay men or lesbian who are peddling nonsense, however, it is their critics. Some of their beliefs seem to defy reason.
Take for example the belief that all males are naturally heterosexual and are somehow converted -- or subverted -- into being gay. In my experience, most gay men discover around the age of 15 -- usually to their horror -- that the are not attracted to the opposite sex. Rather, the reverse. They are quite alarmed to find the are attracted to other males. This can be very disturbing, especially to young men who have strong religious beliefs in faiths that emphasise heterosexual marriage. A humorous account of this can be found in "Naked" by David Sedaris (Little, Brown 1997). I am not much in favour of the "Scale of Sexuality" where there is a progression from heterosexuality to homosexuality -- most men are either gay, or they are not. Of course, particularly in show business, many men are not as heterosexual as they appear but this mainly for publicity. You can't "convert" someone to homosexuality.
Other cultures have different ideas. In Asia, its quite acceptable for gay boys to have their fling, particularly in cultures like Thailand. They are expected to eventually settle down, marry and produce children. I once had the extreme misfortune to share a dorm room with two Thai boys who went to sleep in each other's arms every night and played the same three Thai songs over and over again, day and night. A relation of mine is Chinese, gay, married and has recently produced a child. He does not live with his wife. This is not as unusual as it sounds in China.
Are there no genuine bisexual men then? I am told that most gigolos are bisexual and that they are very good lovers. On the other hand, I believe the number of genuinely bisexual men to be small. "As Nature Made Him: The Boy Who Was Raised as a Girl" by John Colapinto (Harper Collins 2000) shows just how difficult it is to change a person's sexual orientation. I therefore regard aversion therapy and other forms of behaviourial modification therapies aimed at changing a person's sexual orientation as being a form of torture. David Riemer had his penis and testicles removed by surgery but he was still a heterosexual male.
I have a number of friends who I either know or suspect are gay. To be quite honest, I feel uneasy around the classic effeminate gay man but mostg gay men don't worry me at all. I consulted two experts on what I should do if one one of my friends made a pass at me, as has happened before. One said that gay men have a very good idea about a person's sexuality (gaydar) and if he valued our relationship he would be unlikely to make advances. Another said "if he loves you, why shouldn't he?"
According to my research, a certain proportion of males (always small) in any culture are gay. Even where homosexuality is punishable by death, these gay men will seek an outlet for their sexuality. A smaller proportion will be lesbians. This accounts at least in part for the "man shortage". It is not a figment of the imagination of 30 something women looking for partners. These days, it is far more socially acceptable to be both openly gay and unmarried.
The whole discussion about male and female sexuality has become enmeshed in the gay marriage debate. The two are related, but only tangentially.
My advice to those who campaign against homosexual people, rather than the radical gay political agenda, is to follow the advice of "The Moonshiner"
I'm a rambler, I'm a gambler, I'm a long way from home
And if you don't like me well leave me alone
I'll eat when I'm hungry, I'll drink when I'm dry
And if moonshine don't kill me I'll live til I die.
Take for example the belief that all males are naturally heterosexual and are somehow converted -- or subverted -- into being gay. In my experience, most gay men discover around the age of 15 -- usually to their horror -- that the are not attracted to the opposite sex. Rather, the reverse. They are quite alarmed to find the are attracted to other males. This can be very disturbing, especially to young men who have strong religious beliefs in faiths that emphasise heterosexual marriage. A humorous account of this can be found in "Naked" by David Sedaris (Little, Brown 1997). I am not much in favour of the "Scale of Sexuality" where there is a progression from heterosexuality to homosexuality -- most men are either gay, or they are not. Of course, particularly in show business, many men are not as heterosexual as they appear but this mainly for publicity. You can't "convert" someone to homosexuality.
Other cultures have different ideas. In Asia, its quite acceptable for gay boys to have their fling, particularly in cultures like Thailand. They are expected to eventually settle down, marry and produce children. I once had the extreme misfortune to share a dorm room with two Thai boys who went to sleep in each other's arms every night and played the same three Thai songs over and over again, day and night. A relation of mine is Chinese, gay, married and has recently produced a child. He does not live with his wife. This is not as unusual as it sounds in China.
Are there no genuine bisexual men then? I am told that most gigolos are bisexual and that they are very good lovers. On the other hand, I believe the number of genuinely bisexual men to be small. "As Nature Made Him: The Boy Who Was Raised as a Girl" by John Colapinto (Harper Collins 2000) shows just how difficult it is to change a person's sexual orientation. I therefore regard aversion therapy and other forms of behaviourial modification therapies aimed at changing a person's sexual orientation as being a form of torture. David Riemer had his penis and testicles removed by surgery but he was still a heterosexual male.
I have a number of friends who I either know or suspect are gay. To be quite honest, I feel uneasy around the classic effeminate gay man but mostg gay men don't worry me at all. I consulted two experts on what I should do if one one of my friends made a pass at me, as has happened before. One said that gay men have a very good idea about a person's sexuality (gaydar) and if he valued our relationship he would be unlikely to make advances. Another said "if he loves you, why shouldn't he?"
According to my research, a certain proportion of males (always small) in any culture are gay. Even where homosexuality is punishable by death, these gay men will seek an outlet for their sexuality. A smaller proportion will be lesbians. This accounts at least in part for the "man shortage". It is not a figment of the imagination of 30 something women looking for partners. These days, it is far more socially acceptable to be both openly gay and unmarried.
The whole discussion about male and female sexuality has become enmeshed in the gay marriage debate. The two are related, but only tangentially.
My advice to those who campaign against homosexual people, rather than the radical gay political agenda, is to follow the advice of "The Moonshiner"
I'm a rambler, I'm a gambler, I'm a long way from home
And if you don't like me well leave me alone
I'll eat when I'm hungry, I'll drink when I'm dry
And if moonshine don't kill me I'll live til I die.
Saturday, 15 December 2012
Exams for investors are a bad idea
ASIC chairman Greg Medcraft's suggestion that investors should sit a two hour exam before investing in certain financial products has set the cat among the pigeons.
The Australian Securities and Investment Commission (ASIC) is intended to regulate certain financial markets. The big four banks are regulated by the Australian Prudential Regulation Authority (APRA). Among ASIC's clients are a host of deadbeats that give the appearance of being banks without being banks. The most recent failure was the Banksia ( note "Bank"sia ) finance group centred on Kyabram, a rural township in the north of the State of Victoria. Why anyone would entrust their life savings to an institution of this nature when they could cross the street get the security of a major bank at the cost of a few percent is beyond me. But then I am a city slicker, I don't hate the banks as many country people with long memories do. As far as fixed interest investments are concerned, the difference between the return on a secure investment and a risky one is so inconsequential it is not worth bothering about.
But what the ASIC chairman was really on about were things like contracts for difference (CFDs), debentures, FX trading and self managed super funds (SMSFs).
There may be people who make money out of CFDs, let us just say I've never met anyone who has. CFDs tend to be marketed to gullible people who have no idea of the risks involved. As for FX trading, the average punter would be competing against professional traders who in all likelihood have PhDs in maths. I was at one time fairly good at maths, but when I last tried balancing my cheque book (a long time ago when I had one) and was defeated, I decided my maths weren't up to FX trader standards. The truth is all these instruments exist to transfer money from the amateurs to the professionals, much the same as any gambling product.
Can you tell people this? Of course you can. Will they listen? Probably not. It's amazing how many people will commit thousands to an investment they don't understand when their largest previous outlay was a Lotto ticket.
Any investment is about the evaluation and management of risk. Without risk, there will be no return. The greater the risk, the greater the potential return. The risk involved should be appropriate to the individual concerned. If a young man gets dudded for a few thousand on CFDs, it will be probably be a worthwhile learning experience. For an old age pensioner, it may be the difference between eating steak or cat food.
Even if it could be shown that a two hour examination would prevent people from making foolish investments -- which I very much doubt -- do they have a place in financial management? It is not the government's role to protect people from themselves. Financial advisers, stockbrokers and a host of other professionals exist to help people invest their money. On top of all that, do we really need an exam?
For a time I invested in what are known as "penny dreadfuls." Some people claim they make money from these stocks, which are more formally known as "small cap mining stocks". I know for a fact that some investors do make money from these stocks, but like most gamblers, you hear more about the winners than the losers. I broke about even. In the end, I decided it wasn't worth the aggravation. But if someone thinks they have found the next Woodside or News Corporation, they should be allowed to have a punt. If they want to have a share in a stock whose sole asset is an expanse of kangaroo pasture, that's their business.
A fool and his money are soon parted. It's an old saying but a true one. No investment is risk free, even if it is the risk that the capital value will be eaten away by inflation. In the end, you can't protect people from themselves. Exams for investors are a bad idea.
The Australian Securities and Investment Commission (ASIC) is intended to regulate certain financial markets. The big four banks are regulated by the Australian Prudential Regulation Authority (APRA). Among ASIC's clients are a host of deadbeats that give the appearance of being banks without being banks. The most recent failure was the Banksia ( note "Bank"sia ) finance group centred on Kyabram, a rural township in the north of the State of Victoria. Why anyone would entrust their life savings to an institution of this nature when they could cross the street get the security of a major bank at the cost of a few percent is beyond me. But then I am a city slicker, I don't hate the banks as many country people with long memories do. As far as fixed interest investments are concerned, the difference between the return on a secure investment and a risky one is so inconsequential it is not worth bothering about.
But what the ASIC chairman was really on about were things like contracts for difference (CFDs), debentures, FX trading and self managed super funds (SMSFs).
There may be people who make money out of CFDs, let us just say I've never met anyone who has. CFDs tend to be marketed to gullible people who have no idea of the risks involved. As for FX trading, the average punter would be competing against professional traders who in all likelihood have PhDs in maths. I was at one time fairly good at maths, but when I last tried balancing my cheque book (a long time ago when I had one) and was defeated, I decided my maths weren't up to FX trader standards. The truth is all these instruments exist to transfer money from the amateurs to the professionals, much the same as any gambling product.
Can you tell people this? Of course you can. Will they listen? Probably not. It's amazing how many people will commit thousands to an investment they don't understand when their largest previous outlay was a Lotto ticket.
Any investment is about the evaluation and management of risk. Without risk, there will be no return. The greater the risk, the greater the potential return. The risk involved should be appropriate to the individual concerned. If a young man gets dudded for a few thousand on CFDs, it will be probably be a worthwhile learning experience. For an old age pensioner, it may be the difference between eating steak or cat food.
Even if it could be shown that a two hour examination would prevent people from making foolish investments -- which I very much doubt -- do they have a place in financial management? It is not the government's role to protect people from themselves. Financial advisers, stockbrokers and a host of other professionals exist to help people invest their money. On top of all that, do we really need an exam?
For a time I invested in what are known as "penny dreadfuls." Some people claim they make money from these stocks, which are more formally known as "small cap mining stocks". I know for a fact that some investors do make money from these stocks, but like most gamblers, you hear more about the winners than the losers. I broke about even. In the end, I decided it wasn't worth the aggravation. But if someone thinks they have found the next Woodside or News Corporation, they should be allowed to have a punt. If they want to have a share in a stock whose sole asset is an expanse of kangaroo pasture, that's their business.
A fool and his money are soon parted. It's an old saying but a true one. No investment is risk free, even if it is the risk that the capital value will be eaten away by inflation. In the end, you can't protect people from themselves. Exams for investors are a bad idea.
RBA despairs as Aussie dollar powers ahead
Everyone wants the Aussie dollar to retreat, except for travelers going overseas. The welcome fillip tourists get to their spending power is little consolation for exporters and import competing manufacturers who cannot compete against cheap imports.
The Reserve Bank of Australia (RBA) cut the cash rate by 25 basis points (bp) on Tuesday 4 December 2012 to 3 percentage points, a level which the RBA had previously described as "desperation". The 3 percent rate has not been seen since the days of the global financial crisis (GFC) when the RBA and the government hurled everything except the kitchen sink at the economy to prevent a "depression". As it was, Australia was lumbered with useless school halls, self igniting ceiling insulation and cash handouts that pensioners -- working on the principle it wasn't their money anyway -- shoved down the the mouths of poker machines all over Australia. That even a dysfunctional organisation like the Australian Labor Party could even contemplate reinstating the author of this lunacy, Kevin Rudd, as prime minister is enough to make one despair for the democratic process.
The reason the Aussie dollar won't come down is that it is now a reserve currency. In the days gone by, when the International Monetary Fund (IMF) ruled the world, fixed exchange rates were fixed by governments. Nations could devalue their currencies in a series of competitive devaluations. With exchange rates now -- in theory -- set by the market, this shouldn't happen. These "beggar my neighbour" policies, which many economic historians blame at least partially for the Great Depression of the 1930s, are not supposed to happen now. But the pundits didn't count on the Fed's "Helicopter Ben" Bernanke cranking up the printing press and flooding the world with greenbacks. It's only dawning now on America's competitors that this is a form of devaluation aimed at giving US exporters a competitive advantage. This devaluation works because most the world's trade is still conducted in US dollars.
For smaller economies without the clout of Bernanke's Federal Reserve or the US Treasury, there is only so much they can do to hold the line. The Swiss have accumulated reserves running into the hundreds of billions as they try to hold their peg against the euro. For Australia, no matter how low the cash rate goes, the Aussie dollar will hold up, not least because the Aussie dollar is a proxy for the Chinese yuan. Unless the Chinese banking system collapses, which is possible but unlikely, the Aussie dollar will hold up. The more likely situation is that China will go from double digit growth to steady growth in the mid to high single digits on the back of domestic demand. For those buying the Aussie dollar, it's an indirect bet that the Chinese economy will achieve sustainable growth without China basing its economic growth on being the lowest cost exporter. As for the RBA being able to force the Aussie dollar down through unilateral action, forget it. About all they will be able to do is annoy FX traders from time to time.
For previous posts, see "Aussie dollar unlikely to collapse" (4 Oct. 2012) and "Aussie dollar just won't stay down" (9 Nov. 2012).
The Reserve Bank of Australia (RBA) cut the cash rate by 25 basis points (bp) on Tuesday 4 December 2012 to 3 percentage points, a level which the RBA had previously described as "desperation". The 3 percent rate has not been seen since the days of the global financial crisis (GFC) when the RBA and the government hurled everything except the kitchen sink at the economy to prevent a "depression". As it was, Australia was lumbered with useless school halls, self igniting ceiling insulation and cash handouts that pensioners -- working on the principle it wasn't their money anyway -- shoved down the the mouths of poker machines all over Australia. That even a dysfunctional organisation like the Australian Labor Party could even contemplate reinstating the author of this lunacy, Kevin Rudd, as prime minister is enough to make one despair for the democratic process.
The reason the Aussie dollar won't come down is that it is now a reserve currency. In the days gone by, when the International Monetary Fund (IMF) ruled the world, fixed exchange rates were fixed by governments. Nations could devalue their currencies in a series of competitive devaluations. With exchange rates now -- in theory -- set by the market, this shouldn't happen. These "beggar my neighbour" policies, which many economic historians blame at least partially for the Great Depression of the 1930s, are not supposed to happen now. But the pundits didn't count on the Fed's "Helicopter Ben" Bernanke cranking up the printing press and flooding the world with greenbacks. It's only dawning now on America's competitors that this is a form of devaluation aimed at giving US exporters a competitive advantage. This devaluation works because most the world's trade is still conducted in US dollars.
For smaller economies without the clout of Bernanke's Federal Reserve or the US Treasury, there is only so much they can do to hold the line. The Swiss have accumulated reserves running into the hundreds of billions as they try to hold their peg against the euro. For Australia, no matter how low the cash rate goes, the Aussie dollar will hold up, not least because the Aussie dollar is a proxy for the Chinese yuan. Unless the Chinese banking system collapses, which is possible but unlikely, the Aussie dollar will hold up. The more likely situation is that China will go from double digit growth to steady growth in the mid to high single digits on the back of domestic demand. For those buying the Aussie dollar, it's an indirect bet that the Chinese economy will achieve sustainable growth without China basing its economic growth on being the lowest cost exporter. As for the RBA being able to force the Aussie dollar down through unilateral action, forget it. About all they will be able to do is annoy FX traders from time to time.
For previous posts, see "Aussie dollar unlikely to collapse" (4 Oct. 2012) and "Aussie dollar just won't stay down" (9 Nov. 2012).
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