- - - - - - - - - - - - -

Thursday, January 27, 2011

'Mum and Dad investors' is smile and wave spin



Need to con the NZ Public into flogging off our collective assets to overseas interests? Just keep saying, 'Mum and Dad investors'. Key's used the phrase so often he sounds like a bloody parrot with a cracker.

Or should that be a cracker with a parrot?

I love how the mainstream media refer to 80% of us against asset sales as a 'mixed response'.

These assets have a combined value of $11.75 billion, and earn NZers $700 million a year, selling off core monopoly services will see the profits move overseas. The 'mum and dad' investor thing is bullshit because SOE's can issue bonds to small NZ investors already, this is off shore privatization and we will end up paying for an asset we already own!

My Grandfather, my Grandmother, my father, my mother and I have already paid for these bloody assets! Why in Christ's name should I line up to buy an asset I already bloody well own???

John Key defends flogging off our core assets to the corporate elite because of 'debt' but Debt-servicing cost 1.22% of GDP in 2010, we don't have a debt servicing problem. Labour when in power did what they are supposed to do during the good times and pay down the debt, austerity measures and slashing public services when the most vulnerable need those services most will only succeed in exacerbating poverty and increasing the possibility of a double dip recession. We know recessions have a terrible impact on our communities, in the last one our suicide rate trebled to the world highs they are now.

Whoring off public assets we've already paid for is as counter productive as a Paul Henry Supporter Book club.

Even Bernard Hickey thinks it's a bad idea to sell off assets and forgo dividends in perpetuity. In a small market like the NZ electricity market, private oligopolies will end up manipulating the prices meaning we will actually be worse off!

The role of the State is to prevent private monopolies controlling vital commercial infrastructure and selling this protective role out to provide funding for the day to day social infrastructure responsibilities like schools and public health are a false choice National are simply hoping they can con the electorate into by saying 'Mum and Dad investors' over and over again.

Privatizing assets makes as much sense as mining in conservation land.

20 Comments:

At 27/1/11 7:36 am, Blogger sdm said...

"These assets have a combined value of $11.75 billion, and earn NZers $700 million a year,"

Umm dude thats not a case to keep them. Thats a gross return of less than 6% - hardly worth shouting about. Its not *terrible* but from a commercial perspective its not great.

And if we sell half of it, we are left with a $300mil return on 5.875 billion worth of capital - exactly the same yield.

Look we are not selling the totality of these assets, merely a share parcel. There is no difference in reality between the government owning 51% or 75% of Air New Zealand. It is still control.

 
At 27/1/11 8:07 am, Blogger Bomber said...

A 6% return in this economic environment burnt to a cinder by the very same off shore corporations who will end up with these shares once they suck them away from the 'mum and dad' investors is actually pretty solid and why the bloody hell should I pay for shares in an asset I already own!

 
At 27/1/11 8:42 am, Blogger sdm said...

6% is ok but its not a compelling argument to keep them.

The government does own them on your behalf that is true. And it will retain control - what is the difference between 51 and 75% of Air New Zealand. Well you get to free up capital for other projects. You still own Air NZ, but you also get something else. More schools, roads, hospitals etc.

Mark Weldon made a good point on ZB this morning. Mum and Dad want to invest - they put $14 billion into finance companies. We want them to stop putting $$$ into property - this gives them options. Good solid bluechip companies to invest in. Kiwisaver fund providers could jump in.

Or do you want people to stay in property?

 
At 27/1/11 9:38 am, Blogger Bomber said...

You are presenting a false choice.

The role of the State is to prevent private monopolies controlling vital commercial infrastructure and selling this protective role out to provide funding for the day to day social infrastructure responsibilities like schools and public health is a con.

Why should I pay for something I already own? Property speculation can be dealt with in other ways.

 
At 27/1/11 9:56 am, Blogger sdm said...

How will private monopolies control the asset when they government will own a majority of the shares? Especially if the government, as suggested, puts a limit on the number of shares foreigners can own.

 
At 27/1/11 10:58 am, Blogger Neil said...

Preach it Bomber.

Telecom anyone? That worked well.
Trans Rail? That seems to have gone brilliantly.

Insert sarcasm markup appropriately.

Fire the government and put the NZpost board in charge of the collective purse.

 
At 27/1/11 11:23 am, Blogger AAMC said...

And do you trust the Govt will put "a limit on the number of shares foreigners can own"?

So we (the Govt) retain a majority controlling interest with a 51% stake, and we get a short term influx of capital - "if we sell half of it, we are left with a $300mil return on 5.875 billion worth of capital - exactly the same yield."

But the 6% return isn't a one off of coarse is it sdm, and the 49% shareholding, which will inevitably not be held by "Mum & Dad investors" goes offshore, surely meaning that after the quick fix we have a shrunken return in perpetuity.

Haven't we learnt this lesson?

Perhaps if we weren't borrowing, what is it... $125million a week to give the top earners a tax break, we could put that money into the infrastructure you're suggesting this sale could fund?

 
At 27/1/11 2:54 pm, Blogger Nic Brown said...

So we sell half of said assets to well off NZ investors. There is now a pressure to return government profit share back to pre sale levels, and maximize the return for private investors.

As we are talking about the profits of effective monopolies, resulting price increases drain the pockets of every New Zealander, for the benefit of a few upper-middle class New Zealanders.

80% of New Zealanders are reminded of this fact every time they open an electricity bill.

 
At 27/1/11 3:52 pm, Blogger Bomber said...

6% is ok but its not a compelling argument to keep them.
Bernard Hickey points ut the return from SOE's is actually 7.6% a lot more compelling

The $10 billion Key John wants to make from our assets is only 10 months worth of borrowing, we are about to sell 49% of our assets for a mere 10 month's worth of debt - I've heard of short term thinking but this is ridiculous.

How will private monopolies control the asset when they government will own a majority of the shares? Especially if the government, as suggested, puts a limit on the number of shares foreigners can own.
The only restriction is 49%, NZers who buy the shares can sell them to whomever and if whomever pay high enough then those shares and that money go offshore.

Standard & Poor's is suggesting a downgrade because we owe too much private debt and because of that there is too much money going offshore, sell 49% of these assets and that is even MORE money going offshore.

 
At 27/1/11 9:34 pm, Blogger sdm said...

The government is free to pass whatever legislation it likes restricting foreign ownership. And bomber, you should be applauding this. National is seeking a mandate to do it. If elected, its obvious that that is what the country wants. Unlike the previous government, who just knew best.

AAMC, you obviously have no idea what a yeild is. Do look it up. Remember, its relative to the size of your investment.

Perhaps some private capital may insure that these companies are run more along corporate lines, increasing the return to the taxpayer.

 
At 27/1/11 10:33 pm, Blogger Bomber said...

The government is free to pass whatever legislation it likes restricting foreign ownership. And bomber, you should be applauding this. National is seeking a mandate to do it. If elected, its obvious that that is what the country wants. Unlike the previous government, who just knew best.
Scott my favourite sparring partner, this is perhaps the one thing we will agree on all year in the run up to what will be one of the most brutal political fights over the political direction of the country we have seen in recent political history.

I congratulate John Key for his courage not to hide his intent to sell 49% of our assets, I salut him for having the courage to stand by his political convictions and demand a debate on the issue, because a debate is what he will get.

What I would like to hear is the rest of it now thanks. What other assets will you reclassify as not assets so that technically you can claim - "Hey, I said we would sell assets, but they aren't classified as assets after I reclassified them and if you'll agree to this colossal theft of your public assets, you won't squirm too much when I sell TVNZ, Quotable Value and VTNZ".

And what about this investment you intend to make from this privatization? Into more irrigation in the South Island? You more mean infrastructure investment into Dairy who continue to steal and pollute our diminishing water resources in the South Island? That's what we are selling our assets off for? South Island Dairy Industry interests? Shouldn't you be a little more honest?

Surely allowing Bill English to have a dirty lignite production facility in his own electorate to power his Brother's Federated Farmer's industry cheaply was payment enough for services to be rendered? Why on earth are we finding a monopoly who benefit from our collective pristine environment yet do some of the worst pollution damage, even more corporate welfare while social services are slashed?

You've been very courageous John, now let's hear the rest of it thanks.

 
At 27/1/11 10:46 pm, Blogger sdm said...

He is not selling 49% of our assets. He is selling some shares in some companies. Dont be misleading my friend.

Oh and by the way, why do we own quotable value and vtnz? Can anyone explain that to me apart from ideological grounds? And I ask again - what is the difference between a 51% share and a 75% share in Air NZ? Can anybody tell me please?!?!?!

If the government goes beyond any privatization mandate - they will be punished electorally. I guess for the left it will be excruciating to accept the fact that assets will be part privatized.

 
At 27/1/11 11:18 pm, Blogger Tuff said...

SDM you are preaching what Max Bradford preached in the the 90's.....privatising the power companies will be better for kiwi's...And how good have we had it aye folks..Same sh^t different day...National was full of sh*t then and they are full of sh*t now...Integrity and honesty is rather lacking...If you are going to sell us down the road just be honest about it...But I quess there isnt a man among you clowns

 
At 28/1/11 8:46 am, Blogger sdm said...

Oh nonsense Tuff I am not preaching a Bradford. And cut the man amongst you BS.

The power companies wont be privatised - they will be part privitised - the government retains a controlling share.

Your opposition is ideological to this pragmatic policy idea.

 
At 28/1/11 9:39 am, Blogger Bomber said...

LMAO oh come on SDM, that's the best you've got? A game of semantics and throw the word 'ideology' around a lot? It's 49% so it's not privatization?

That's honestly funny. Now when you start demanding justifications for those assets I noted you are in fact saying yes, John Key is going to privatize more assets than what he has announced?

The reason Key has to flog off the assets that will only cover 10months borrowing is because the GST tax rise to fund tax cuts that was supposed to 'turbo charge' the economy actually led to a $2 billion deficit.

Writing our criticism off as ideology ignores the facts.

 
At 28/1/11 10:56 am, Blogger AAMC said...

"what is the difference between a 51% share and a 75% share in Air NZ"

sdm, you're right, I don't have a degree in Economics and I'm happy for you to enlighten me, but as a layperson it seems that your yield of 75% - or even better - 100% ownership would be greater than that of 51% ownership? So you free up capital by selling that 49% stake, but please tell me, at what point does the loss in yield outweigh the short term profit of the sale?

Also, can you guarantee me that the Government will "pass whatever legislation it likes restricting foreign ownership"? I think "it likes" is the key phrase here, and what is to say that that condition won't in time be redefined. And if the yield on 49% of the shares ends up going offshore and once the money from the sale has been spent, will we then wish we still owned all of the shares? I mean when my children's children inhabit this country sdm, do you have children?

In terms of Ideology, is it not you who are preaching the ideals of the Free Market here? "Perhaps some private capital may insure that these companies are run more along corporate lines", the phrase "corporate lines" scares the shit out of me, has your ideology not been shaken at least a little? I think those of us who are skeptical have reason to be, both in terms of previous asset sales in this country and the efficacy of the market always knowing best.

http://www.nytimes.com/2009/09/06/magazine/06Economic-t.html

 
At 28/1/11 1:00 pm, Blogger sdm said...

Yes I have a child. He turns 1 on Monday, he is my pride and joy.

Yeild = rate of return on investment. The yeild stays the same as a percentage

Eg a $100 return on $1000 is 10%
a $50 return on $500 is 10%. The quality of a return is relative to the level of investment. My example has to equal quality investments, even tho one is making 100% more in terms of cash - the rate of return is equal.

The govt will still make 6%, because even though its return has dropped, so has its investment. That was my point.

By corporate lines I mean accountability. Objective such as value for money, transparency, etc that dont tend to exist in the public sector. These are effectively businesses.

In terms of legislation, I dont know what they will pass, but I am sure it will come out in the election campaign. It can be done - look at Crafer and Auckland Airport.

Bomber - the government is not selling 110 billion worth of its assets (49%). You are misleading. But it does seem to me that you just dont like asset sells period, so therefore you oppose. You havent put up one valid reason why the shareholding in Air NZ cant drop to 51% apart from ideological reasons.

 
At 28/1/11 1:54 pm, Blogger AAMC said...

"its return has dropped"

So again, after the earings from the sale are offset by the drop in return?
How long until that happens sdm?

And as for Corporate transparency? Wikileaks recently helped shed some light on that in Nigeria. Corporate transparency is an oxymoron!

I'm assuming you must exist in that top 1% or have faith in the American Dream, otherwise you would be watching the middle classes disappear in the countries who's ideologies you endorse and you would be worried for your pride and joy.

 
At 28/1/11 2:05 pm, Blogger sdm said...

The return in terms of $$$ has dropped but the return on investment is the same. The capital from the sale can in turn be re-invested, making up the shortfall in $$$.

Corporate transparency is not an oxymoron - there are many good corporate citizens. There are of course bad apples, but they are not every company.

And I am no where near the top 1%.....

 
At 28/1/11 6:17 pm, Blogger AAMC said...

ah, so it's the American Dream then.....

 

Post a Comment

<< Home