Sunday, 27 February 2011

Warren Buffett on the Human Spirit

Investor Warren Buffett is, through his big shareholding in Munich Reinsurance, along with Swiss Re, going to underwrite the bulk of the devastation in the Christchurch Earthquake and in his 2010 Annual Letter to Berkshire Hathaway Shareholders out today, has some very sage advice for America, which as we know is in financial strife and trying to rebuild its economy as we will have to rebuild Christchurch and our economy as a whole:

"Don’t let that reality spook you. Throughout my lifetime, politicians and pundits have constantly moaned about terrifying problems facing America. Yet our citizens now live an astonishing six times better than when I was born. The prophets of doom have overlooked the all-important factor that is certain: Human potential is far from exhausted, and the American system for unleashing that potential–a system that has worked wonders for over two centuries despite frequent interruptions for recessions and even a Civil War–remains alive and effective. We are not natively smarter than we were when our country was founded nor do we work harder. But look around you and see a world beyond the dreams of any colonial citizen. Now, as in 1776, 1861, 1932 and 1941, America’s best days lie ahead."

We must not give up, Mr Buffett is right, like America, Christchurch and New Zealand's best days lay ahead of us.


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Wednesday, 23 February 2011

Christchurch Earthquake Friend Finder

To find friends and loved ones in the Christchurch earthquake and to let others know you are safe go to the google Christchurch Earthquake friend finder.

To donate funds to the Christchurch Earthquake Appeal:

The Salvation Army appeal could call 0800 53 00 00 or do it online at www.salvationarmy.org.nz or to Westpac account 03 0207 0617331 00.

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Monday, 21 February 2011

3 News Reid Poll: National set to Govern Alone

My pick for November based on who I talk to from a wide variety of social , political and economic backgrounds at the moment is another creaming for Labour with the ability of National to govern alone if they so choose.

I picked the National landslide in 2008 when others were picking a close election and I get the feeling again, anecdotally, that voters see little merit in what Goff has to offer and that national are performing well despite the economic situation.

There appears to be a few disgruntled waifs and strays argueing from the political pulpit but by and large they didn't vote for National anyway so the argument that these people are so annoyed they might vote for some of the smaller parties as a protest vote holds little merit.

Sun, 20 Feb 2011 6:00p.m.

By 3 News Political Editor Duncan Garner - go here for the full article from 3 news

Our first 3 News Reid Research poll in the election year.

The numbers show:

  • National sheds a point to 54.6
  • Labour drops back to 30.9
  • Greens are strong at 8.2
  • New Zealand First moved from 1.9 to 3.3 – the highest level of support for Winston Peters’ party since 2008.

“I think it shows the public are rewarding us for being honest and upfront,” says Mr Key.

“We are saying we are going to spend less money and a partial sell down of assets.”

The other minor parties remain very minor:

  • The Maori Party is 2.3
  • ACT continues its collapse to 0.6
  • While not one person indicated support for Peter Dunne’s United Future party

In the Preferred Prime Minister rankings:

  • Mr Key sheds five points, still high at 49.1
  • Mr Goff stays flat at 6.8 – no movement
  • Mr Peters moves up to 4.9 – the highest in more than 3 years
  • While former Prime Minister Helen Clark still has a few supporters

So 3 News asked voters how the leaders are performing:

  • Mr Key slips almost 7 percent to 69.6 percent.

He won’t want that to become a regular feature, and he’s up amongst those who think he is a doing a poor job.

  • For Mr Goff, just one in four voters think he is doing a good job – the numbers are down from the last 3 News Reid Research poll.

But the emerging factor in this poll is Winston Peters.

He has still got some way to go, but he’s made a move, without saying much at all.

“I don’t trust him,” says Mr Key.

It will be a nervous five months for the Prime Minister if Mr Peters makes it back – it could make Mr Key’s chance of governing again that little bit weaker.

3 Newsare performing:

  • Mr Key slips almost 7 percent to 69.6 percent.

He won’t want that to become a regular feature, and he’s up amongst those who think he is a doing a poor job.

  • For Mr Goff, just one in four voters think he is doing a good job – the numbers are down from the last 3 News Reid Research poll.

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Monday, 14 February 2011

The Case for State Asset Sales

Originally posted @ Share Investor Blog

Much has been written over the last month since the National Party announced its policy to partially sell State Electricity assets should they win the November 26 election and most of it the typical rantings of those commentators from the left and those politicians from the same place that are scaremongering for political gain.


If we look at the facts before us though, in terms of the economic fortunes of New Zealand we are in a dire situation.

These are the main points of the National Party Policy:

  • The Government would have to maintain a majority controlling stake by owning more than 50 per cent of the company.
  • New Zealand investors would have to be at the front of the queue for shareholdings, and we would have to be confident of widespread and substantial New Zealand share ownership.
  • The companies involved would have to present good opportunities for investors.
  • The capital freed up would have to be used on behalf of taxpayers to fund new public assets and thereby reduce the pressure on the Government to borrow.
  • The Government would have to be satisfied that industry-specific regulations adequately protected New Zealand consumers.

Very specific guidelines for a sale process that do not mention full sales.

We have very high debt levels, both personally and publicly and this debt is a heavy weight on out present and future economic stability.

We owe almost as much as we own and borrowing and interest costs are currently having a big impact on us, with the State borrowing NZ$300 million a week and individuals still borrowing and servicing their own debt.

This impact will have long term effects if we do not do anything to either pay down more debt, cut spending or drastically cut both. Nobody would attempt to do the latter, apart from the most rabid right wingers so we have to do something right?

Absolutely is the unequivocal answer.

While I would be happy to sell non-essential assets to the State like schools, hospitals, airlines, banks and many other under-performing state monopolies, the National Party are only considering selling partial minority stakes in 4 electricity companies to Mum and Dad investors -hardly a sell-down of the family silver!

The control of those assets remains in the hands of the State on behalf of all of us, so it shouldn't be a problem to the left who have championed the same sort of sell-down of Air New Zealand Ltd [AIR.NZX] that happened under Labour nearly 10 years ago, so the current opposition seems at the very least sour grapes that the left are not in power and at the most hypocritical to the extreme.

The proceeds from a sell down of 49% stakes in the 4 remaining state power companies should go to paying down debt, there are indications that Government want to use the cash freed up to buy other assets for the State but that would clearly be a mistake given the poor quality of management of State assets under any political party.

The sell-down will also encourage prospective small Mum and Dad investors to invest in good companies based in New Zealand rather than putting money into dead end stuff like term investments, private real estate or investing money overseas.

The vast proportion of Kiwisaver money and money invested in various New Zealand superannuation schemes is currently invested offshore and that clearly needs to change.

We need to invest in ourselves, promote a savings culture based on our own assets and the National Party proposal ticks all those positive boxes.

To scaremonger by saying this policy is one based on failed models of the 1980s and 1990s is simply that and is not based on fact at all but a political agenda and lack of economic education, business skills and a determination and political ethos that will have us stuck with the debt we have now for generations to come.

We need to take politics out of this and take a good hard look at the merits based on fact.


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Friday, 11 February 2011

Don Brash Speech to Orewa Rotary - 7 Feb 2011

Don Brash gave a speech to the Orewa Rotary Club last Monday. It was not widely reported in the media but it is a speech that is measured, precise, factual, un -PC and it is full of common sense.

The speech is therefore worth looking at and posting here:


When I was first invited to address you today it was suggested that I might talk about the issues I spoke about to the Orewa branch of the National Party in November last year.

In that speech, I noted that as the Government reached the second anniversary of its election there was much to be pleased about.

The economy was out of recession.

Unemployment was lower than in most other developed countries.

Personal income tax had come down.

We'd come into line with other developed countries by allowing employers to agree a probationary period of up to 90 days when hiring new employees.

And so on. But I also noted that I was deeply worried.

Some of my worries were quite specific.

For example, I was dismayed that the government had taken no action to reinstate youth minimum wages.

This despite National knowing that after Labour abolished youth rates, youth unemployment shot up by 12,000.1

Thanks to Labour's action and National's failure to reverse it, thousands and thousands of young people now leave school or training and quickly become demoralized.

These young people don't have the skills to earn the minimum adult wage - but they'd be quite happy to take a job for a couple of dollars an hour less.

Maybe you can remember doing the same thing - you were thrilled to get a foot on the bottom rung of the job ladder, and it wasn't long before you worked your way up.

But the Government says these teenagers have to find a boss who's prepared to pay them an adult wage for no relevant experience and few skills.

Otherwise they have to go on the dole.

If they can't get a job for $12.75 an hour, they're not allowed to accept one for, say, $10. They have to go home and lie on the couch for $4.50!

In doing this, the Government has denied them the chance to support themselves. In effect, it's said to them, "If the dole isn't enough, maybe you should do some burglaries, deal in drugs, or get pregnant and live on the DPB." I worried that we've not put a stop to zoning laws which drive up the cost of urban land to ridiculous levels.

This despite knowing that New Zealanders face higher house prices relative to our incomes than people in most other countries.

And despite our being one of the least densely populated countries on earth. I worried that John Key told New Zealanders before the election that we should be fast followers and not leaders in the race to reduce carbon emissions.

Yet after the election his government introduced an all-sectors Emissions Trading Scheme.

We weren't being fast followers, or even slow followers, because none of our three largest trading partners - Australia, China, and the United States - showed any sign of doing the same, and still haven't. I went on to argue that I had two more big worries.

One was around economic issues. And the other was around the way the Government was dealing with Maori issues.

I expressed grave concern that these issues were simply not being dealt with. So more than two months on, where are we now?

Well, the present situation seems rather bleaker than it was in November.

Some economists suggest we may have just experienced a double-dip recession. Even if we haven't, the economy is barely growing.

Unemployment is almost back to the level of late 2009. In the short term, we're at risk from our very heavy reliance on the savings of foreigners.

For almost 40 years, since 1973, we've spent more on imports2 than we've earned from exports. The difference we've had to borrow from foreigners.

Now there's nothing inherently dangerous about using the savings of foreigners to supplement our own savings. Not if that money is used to increase the productive capacity of our economy.

But it's not being used for that. It's being used to finance a spending binge off the back of over-inflated house and farm prices. We're using it to buy things we haven't earned.

And that is very risky.

Today, our net debt to foreigners is about 90% of GDP. That's as bad as in some of the most debt-burdened European countries.

And on present policies, there's little chance we'll get that debt down by much.

Indeed, we keep spending more overseas than we earn, even with some of the best export prices in decades, and with local demand for imports reduced by recession.

The risk is that financial markets could become concerned at New Zealand's vulnerability.

They could decide to stop lending to us - and they could do it quite suddenly.

Even worse, they could start demanding some repayment.

That would force a painful adjustment on all New Zealanders similar to that facing several European countries today. In the longer term, the threats are of several kinds.

First, the ratio of government debt to the size of our economy is growing fast. To meet the gap between what it earns and what it spends, the government is now borrowing some $300 million every week.

Luckily, right now the ratio of government debt to GDP is not that high. In fact it's one of the lowest in the developed world.

The reason for that is the prudence of the National Government of the nineties, and the Labour Government between 1999 and 2004.

But in its third term, the Clark Labour Government threw all prudence to the wind.

It embarked on a massive increase in government spending. And much of that was of very poor quality.

So what has this National Government done to reverse this wasteful spending?

Sadly, not much.

In fact, government spending as a share of GDP is now more than it was in any year of the last Labour Government, and the structural budget deficit is now bigger than it was under the Muldoon Government.

The Prime Minister has said this year's Budget will aim to keep spending for new initiatives to some $800 million.

But of course this is on top of the increased spending built into the system for existing programmes - for education, health, New Zealand Super, KiwiSaver subsidies and so on - so this degree of restraint is trivial compared to the scale of the problem.

As a result, government debt is growing fast.

And the bad news is that if the government doesn't show more restraint soon, that debt is going to get a lot worse.

Treasury predicts that on current policies the ratio of government debt to GDP will reach 220% by 2050.

How bad is that?

Well, in the late eighties and early nineties, both Labour and National Governments got the jitters when our public sector debt blew out beyond 50% of GDP.

Today, the United States is right to be deeply worried about a government debt-to-GDP ratio of almost 100%.

We just can't afford to stay on our current track. For the sake of our children and grandchildren, we need to manage our economy better. Secondly, over the last four decades we've gradually drifted off the international pace.

For much of our history, we enjoyed one of the highest living standards in the world. In the early twentieth century we were the highest.

By the early fifties, our living standards were still fourth or fifth in the world.

But today, we've fallen to near the bottom of the 30-nation group of developed countries.

Because of this, more and more New Zealanders have voted with their feet. They've left New Zealand. Most of them have gone to Australia, where they help to drive the Australian economy forward.

Only two days ago, the Weekend Herald reported that there was a net loss of almost 22,000 Kiwis to Australia last year. All the signs are that this exodus is going to get worse.3

Just before the 2008 election, John Key gave an excellent speech.

In it, he stressed how committed he was to doing something serious about reversing New Zealand's economic decline relative to Australia.

He sounded genuinely concerned about the resulting exodus of hundreds of thousands of our children and grandchildren.

In the immediate aftermath of the 2008 election, the National Party reached a Confidence and Supply agreement with the ACT Party.

One of the key components of that arrangement was that the Government would aim to lift New Zealand's living standards to the Australian level by 2025.

Well, promises are easy.

Helen Clark promised to lift New Zealand back into the top half of the OECD within 10 years.

But did her actions match her words? Did she manage to take us even part way up the ladder?

No.

In nine years, she didn't manage to lift New Zealand by a single rung.

She was careful to avoid being held to account for her broken promise. As time went by and our economy went nowhere, she even tried to pretend she'd never made it.

Not National.

To John Key's credit, his arrangement with ACT called for the setting up of an advisory group to suggest the best ways to achieve that catching-Australia goal.

More than that, it required that group to report each year on progress towards the goal.

I have the privilege of chairing that group.

Last November, the 2025 Taskforce, as the advisory group is called, published its second report.

In our first report in 2009, we had estimated that on average Australian incomes were at least 35% above those in New Zealand.

Our second report did not put a precise number on the gap at the end of 2010. But no serious observer believes the gap got smaller over the last year.

The important question, of course, is not whether the gap narrowed over the last year.

It's whether we're putting in place policies which will help close the gap by 2025.

And make no mistake, closing the gap is a big challenge.

To close the gap within 15 years, New Zealand incomes will need to grow by about 2% faster than Australian incomes, on average, for that entire period.

On realistic assumptions about Australian growth, this implies that New Zealand incomes will need to grow at about 4% per annum for the same period.

Can it be done?

Pessimists argue it's impossible. I don't agree.

I'm absolutely sure it can be done. After all, for much of our history, standards of living in the two countries have been very similar.

But I'm equally certain it won't be done on our present track. And nobody that I've spoken to thinks it will.

Treasury's own projections suggest that New Zealand's trend rate of growth is now just 2.7% a year.

Average incomes are growing even more slowly - well below what they'd need to grow by to bridge the trans-Tasman gap in living standards.

So there's every prospect the gap will keep widening. And the wider it grows, the harder it will be for us to survive as an independent nation.

No, I'm not kidding. Yes, it's that serious.

Now don't get me wrong.

Governments don't create one dollar of wealth. People and firms operating in vigorously competitive markets do.

But government policy choices affect the environment all of us face. Those choices affect the ability of this country and its people to reach their potential.

We need to get those choices right. And sometimes that means asking hard questions, and making tough calls.

But we owe it to ourselves, and to our children, and to our children's children, to ask those questions, and make those calls.

New Zealand's economic decline over the last half century is one of the steepest on record anywhere.

Reversing that decline won't be easy.

To use a phrase sometimes used in another context, we dare not settle for the soft bigotry of low expectations that says "ah yes, but New Zealand is a nice place to live".

Of course it is.

But we need to transform our economic destiny too.

We need to give our people a reason to believe that we can once again offer a standard of living similar to that in other developed countries - as we had only 50 years ago.

In 1975, another National leader, Rob Muldoon, campaigned on "restoring New Zealand's shattered economy".

Sadly, he didn't. By the time he'd finished with it, it was almost totally shattered.

This generation of political leaders must do better. The third long-term threat to New Zealand is in race relations.

The Treaty of Waitangi guaranteed to all New Zealanders "the same rights and duties of citizenship as the people of England". (Those are the words of the English translation of the Maori version of the Treaty.)

And the National Party campaigned in the last three elections on a commitment to one law for all New Zealanders.

But since being elected, they've moved time and time again in the opposite direction. The Government signed the United Nations Declaration on the Rights of Indigenous Peoples.

Among other things, this says indigenous peoples have a right to "self-determination" and "autonomy or self-government in matters relating to their internal and local affairs, as well as ways and means for financing their autonomous functions".

National no longer talks about its promise to abolish the racially based Maori electorates. To appease the Maori Party, the Government has introduced legislation to surrender Crown ownership of the foreshore and seabed.

They've done this against the wishes of the general public - and despite the fact that the Prime Minister gave a commitment that the new law would not go ahead if there was not widespread public support. At the moment, it appears that not even most Maori Party supporters support the proposed Bill.

The Government is in a Confidence and Supply Agreement with the race-based Maori Party.

The Maori Party makes no secret of its desire to see the New Zealand constitution restructured.

They want it to be a partnership between Maori and non-Maori. A partnership that confers special privileges on Maori. A partnership in breach of the clear meaning of the Treaty of Waitangi.

The Government supported legislation which has resulted in non-elected Maori representatives sitting on all the committees of the Auckland Council.

And why? Such an arrangement was clearly not required for Maori to be involved in decision-making in Auckland. The recent local body elections resulted in Maori members on the Council in roughly the same proportion as their share of the Auckland population.

Maori traditions are an important part of New Zealand culture and should be respected as such.

But for the life of me I can't see why so many public events must begin with a prayer or lengthy speech in Maori, even if none of those present can understand it.

Nor can I fathom why some government agencies assume that all New Zealanders should respect the animist religious views of a tiny minority.

We must not, we're told, have a barbeque on Mount Taranaki.

We must not build a highway where a taniwha might be offended.

We must not let pregnant or menstruating women visit the national museum.

We are now in the 21st century, when the vast majority of all New Zealanders, Maori and others, do not share these animist beliefs.

And what of the Treaty itself?

I've always believed that the Crown should pay compensation where it can be shown that it breached its commitment to protect the property rights of Maori.

I still believe that. Article II of the Treaty guarantees those rights.

But Article III of the same Treaty makes it crystal clear that all New Zealanders should have equal rights under the law.

It doesn't matter whether those New Zealanders are of European, Maori, Pacific Island, Asian or other ancestry.

And it doesn't matter whether they're descended from those who arrived 700 years ago, or whether they became New Zealand citizens yesterday.

Article III makes it clear that all New Zealanders should have equal rights under the law, with no special privileges for any creed, or for any culture, or for any race.

Yesterday marked the 171st anniversary of the signing of the Treaty of Waitangi.

The Treaty was not our constitution when it was signed. And it's not our constitution today.

But it is a hugely significant document and I strongly disagree with those who wish we could forget it.

But it's vital that we all know what it involved and what it did not involve.

Article I involved the Maori chiefs who signed it ceding sovereignty to the British Crown.

In other words, Article I made it very clear that New Zealand should be one nation, not two nations within the same boundaries.

Article II committed the Crown to protect the property rights of those who signed it.

And Article III made it clear that all citizens were to have the same rights and duties as the citizens of England.

There was no suggestion whatsoever of a partnership between two races.

There was no suggestion whatsoever that some citizens would have rights based on their race, or the date on which they or their ancestors arrived in New Zealand.

It was a mighty basis for starting a new country.

But today that country is in real trouble. If we're going to get out of it, we - Maori and non-Maori alike - are going to need to focus all our energy on the serious economic challenges we face.

We just can't afford to be distracted by revisionist theories about what those who signed the Treaty 171 years ago really meant. Having said all that, I am enormously optimistic for our country.

We have a great country. A country of wide open spaces, of soaring mountains, of giant kauri forests, of magnificent fiords, with a benign climate.

A country rich in resources - fast-growing forests, rich dairy land, a vast fishery, plentiful water, large deposits of coal and iron sands.

A country which gave the world Ed Hillary, Peter Blake, Katherine Mansfield, Ernest Rutherford, Kiri Te Kanawa, Susan Devoy, Peter Snell, Archibald MacIndoe, Peter Jackson, Jane Campion, Roger Donaldson, Richard Hadlee, Dan Carter and William Pickering.

A country which was the first in the world to grant women the vote, and one of the first to grant all men the vote.

A country where we take it for granted that an election will be held roughly every three years, and that a government will be elected without bloodshed, with the army safely in its barracks.

We have no excuse for throwing it all away by failing to deal with the issues which so clearly threaten our future.


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Wednesday, 2 February 2011

Ministry of Silly Walks


You may have heard or seen the Monty Python Sketch "Ministry of Silly Walks".

It is of course comedy and lampoons politicians and bureaucrats.

Well little did you know is that in NZ we have a commissioner of silly walks. He would command northwards of $200,000.00 and said this about a $11,000.00 "fact finding" tour overseas to see how other people walked.

"That's what you get from talking to individuals ... you can read their annual reports, which I did, but it doesn't give you the personal views and feelings of where things are at, the soft information and that's been very helpful"

Apart form the fact that there shouldn't be a ministry of silly walks has Mark Neeson not heard of the telephone?

New Zealand has countless numbers of these drop kick commissions, most of which you would have you rolling your eyeballs over the nonsense of them.

They all have heads making serious six figure incomes and also staff, offices and the attendant expenses.

Mr Neeson seems to take it all in his stride though.

Perhaps if we all developed silly walks with the help of a taxpayer grant we might be able to forget a particular recession we are having, which isn't that funny at all.

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Tuesday, 1 February 2011

Labour Set to Buy 2011 Election

Why is it every time I think of Labour and their policies for the 2011 Election the Abba song "Gimme, Gimmie, Gimmie" goes swirling around in my head like a nightmare from earlier elections they have fought.


It can be explained in the following way.

Every policy and indication of policy from Labour has thus far shown the electorate that Labour are set to try and bribe their way into power in November 2011.

It is all about taking from some to give free stuff to others and is a clear extension of policy that flourished under the party during Helen Clark's reign.

Extra holidays, extended working for families, higher subsidies for childcare and a host of other handouts already announced and no doubt more to come cement Phil Goff's former leaders lead in these kind of policies.

It seems to have passed Phil Goff and his fellow Robin Hoods by that we are in the midst of one of the biggest financial recessions the world has seen and he wants to compound the affects of it by higher taxes and higher debt because he wants to spend recklessly to buy votes.

One would have thought that he might have taken some notice that during the 9 years this country suffered under Labour, from 1999-2008, that these policies don't work and in fact contributed to the dire situation we now find ourselves in.

As bad are things are now, at least we have a reasonably fiscally conservative Govt with vast economic experience at the top. The alternative is a tax and spend regime that will lead us down the garden path, past Goff's barbeque to financial ruin.

Lets go past our greed and ask what we can sacrifice rather than what we can take and cant afford, from others.

Most traditional Labour supporters like myself were hoping to see a return to the older style Labour that looked after the worker rather than the bludger and we then would have considered switching our votes from National back home where our hearts lay.

But we simply cant afford another Labour term at this time, fiscally, morally and socially and we must vote for the good of our country and not ourselves.


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