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Thursday's Top 10 with NZ Mint: How 'Mom and Pop' investors are abandoning the US stock market; 'You don't say no to a princeling'; The death of a Supergrass in Surrey; Dilbert
Here's my Top 10 links from around the Internet at midday in association with NZ Mint.
As always, we welcome your additions in the comments below or via email firstname.lastname@example.org.
My must watch is #2 on how China operates. Jon Stewart is pretty funny too.
1. The slow death of the stock market investor - Felix Salmon at Reuters highlights some useful charts showing 'Mom and Pop' investors are largely withdrawing from the US stock market.
He says they've lost faith in the market after the volatility of the last decade, fears about insider trading and the rise of the 'machines' nano-trading the market.
I think the ageing population is a factor too.
They are naturally keener on less risky investments such as bonds.
That's part of the reason bond yields are so low. There is so much demand for 'risk free' investments, even though yields are so low.
The irony of course is this withdrawal of 'Mom and Pops' in America is happening at the same time that 'Mum and Dads' seem to be reconsidering the stock market here.
What we’re seeing is the slow death of the stock-market investor — the kind of person who subscribes to Barron’s, idolizes Warren Buffett, and thinks of stock-market investing as a do-it-yourself enterprise. During the dot-com bubble, lots of people thought they were really smart when it came to stock-market investing, and then after the dot-com bubble burst, the rise of discount brokerages helped encourage new people to step in to the market and try their luck.
Nowadays, however, the message is sinking in: it’s a rigged game, you can’t win, and you’re better off with a passive strategy.
2. How China's Princelings profit - Henry Sender at FT.com looks at how the Princelings (children of China's revolutionary heroes) profit from their connections in China and what it means for foreign companies. He also makes the point that many people in China are not a fan of this corruption.
From abroad, observers prefer to believe that this dynamic is purely domestic. But foreigners may also be affected. For one thing, they employ the princelings. Mr Wen’s daughter Lily worked for Credit Suisse while former president Jiang Zemin’s grandson Alvin worked for Goldman Sachs before joining one of the local private equity firms, Boyu.
The daughter of Wang Yang, governor of Guangdong province, works for Deutsche Bank. And the daughter of Chen Yuan, head of China Development Bank who himself is the son of the former powerful official Chen Yun, worked for Morgan Stanley before attending Harvard Business School. If anything, investment banking, like private equity, has become far more political in hiring today than 20 years ago. Few of the first generation working for the foreigners were born with silver chopsticks in their mouths as is the case now.
3. Chart and table of the day - The Department of Labour (now the much snappier titled MoBIE) has released its quarterly employment update with a special look at migration to Australia and also migration out of Christchurch.
The chart and table below show (as you'd expect) that the majority of New Zealand born emigrants to Australia are young and slightly more skilled and professional than the workforce they are leaving behind. The high proportion of community and personal service workers suggests we may find it more difficult in the decades to come to look after all those baby boomers as they move into retirement homes. Unless we import a whole bunch of immigrant labour, which is possible.
Table 3 shows the occupation distribution of people departing to Australia over the year. While technicians and trades workers from New Zealand are somewhat over-represented in departures to Australia relative to the total New Zealand workforce, the general pattern is for Australia to draw broadly from New Zealand occupations. The high number of technicians and trades workers, and also machinery operators and drivers, may show the influence of Australia’s mining and resources boom, but it does not dominate the overall pattern.
There was a net loss in all occupation groups to Australia over the year to September 2012, especially for highly skilled workers. Professional workers had the biggest net loss (with 4,000 fewer people over the year), followed by technicians and trades workers (with 3,400 fewer people over the year).
4. 'Give us back our cash' - Barron's reports US companies are lining up to hand back cash to their shareholders to take advantage of a 15% tax rate discount before it (potentially) falls over the fiscal cliff on January 1 and becomes a 40% tax rate.
But where are they putting all this cash? Government bonds. Money, money everywhere, but not a drop to invest and hire. The engine is flooded with petrol.
5. Sudden death in Surrey - The Independent reports a whistleblower on the Russian mafia has been found mysteriously dead outside his house in Surrey.
Alexander Perepilichnyy, a wealthy businessman who sought sanctuary in Britain three years ago after falling out with a powerful crime syndicate, collapsed outside his mansion on a luxury private estate on the outskirts of Weybridge. He was 44-years-old and was in seemingly good health.
The Independent has learned that Mr Perepilichnyy was a key witness against the “Klyuev Group”, an opaque network of corrupt Russian officials and underworld figures implicated in a series of multi-million pound tax frauds and the death in custody of the whistle-blowing Moscow lawyer Sergei Magnitsky. He is the fourth person to be linked to the scandal who has died suddenly.
6. Diana Fox Carney - The new boss of the Bank of England is the current head of the Bank of Canada, Mark Carney.
The Guardian points out his wife, a development economist, has some interesting views:
In a recent piece on inequality, the mother of four wrote warmly about the Occupy movement – which channelled public anger against the bankers. And despite her husband being set to earn £624,000 from his new role, she blames the "visibility and excess" of those in the "top 0.1%" for increasing the gap between the rich and the poor. She even goes on to enthuse about The Spirit Level, a book that suggests economic growth is less important than equality of income, declaring: "The politics of division are coming home to roost."
Then there is her environmental campaigning. As well as being vice-president of research in a "progressive" thinktank in Canada, Fox Carney also runs an eco-products review site. Alongside discussions of what she will buy her four daughters for Christmas (referring to them as the "young Foxes") she is scathing about our consumerist culture. She writes that she has "seen, firsthand, the devastation that our willful refusal to change our consumerist habits is wreaking on marginal communities".
7. Google non-plussed - The debate about how Google and Amazon pay hardly any tax in Europe is heating up.
Here's a non-plussed head of Google UK wondering via The Telegraph what he's done wrong.
Mr Brittin said MPs were blaming companies for a system that they had designed. "Google plays by the rules set by politicians," he said. "The only people who really have choices are politicians who set the tax rates."
Meanwhile, French ministers signalled they are ready to change the laws to force online companies to pay full levies on earnings made in France. Fleur Pellerin, the French technology minister, told reporters: "There's a serious issue around fiscal harmonisation in Europe. There's a will to change this in Europe but the timeline is too slow. Tax rules set at a time when commerce was physical are not appropriate any more."
8. One juicy airline meal - The FT.com reports corrupt executives at the Bank of Kabul smuggled cash out of Afghanistan in the planes of Pamir Airways. Overall, they stole US$861 million in what was described as a Ponzi scheme, forcing a state bailout of the bank that cost Aghanistan as much as 6% of GDP.
The brother of the current President Harmid Karzai was involved. Karzai used a Presidential decree to get his brother off.
New Zealand soliders have died to defend this regime.
Kabul Bank operated with two sets of books – one of them fraudulent to show the auditors – and used more than 100 corporate stamps for fake businesses to provide an appearance of authenticity as money was funnelled to Dubai for property purchases and other forms of personal enrichment, the report said. Money was smuggled out, sometimes in cash in the food trays of Pamir Airways.
Ten of the airline’s pilots were paid $320,000 in salaries over more than two years as “pilots of cash delivery”. The findings will embarrass not only the government of President Hamid Karzai – whose brother Mahmoud was one of the bank’s beneficiaries – but also the western nations that support him, and the Afghan and international auditors and agencies that failed to put a stop to the audacious Ponzi scheme.
The report criticised as “likely illegal” and “direct political interference” a presidential decree from Mr Karzai last April that absolved debtors of criminal and civil liability if they repaid the capital of the loans they received. His brother was one of those who took advantage of the amnesty.
9. CEO excess - The Press reports the CEO of the Port of Lyttelton was paid over NZ$1 million last year, up from NZ$430,000 the previous year. Some long term incentive payments were involved.
The annual reports also show the number of employees being paid more than NZ$100,000 rose to 93 last year from 70 the previous year.
The reaction this story is getting in Christchurch will grow, and is growing all around the world as rise in incomes and wealth of the 0.1% happens as incomes and wealth of the middle to lower tiers stagnates. Spending by middle to lower tiers is stagnating too as they repay debts built up in past years to keep growing spending despite flat incomes.
The irony is the 0.1% are nervous about the future of consumer spending, so are saving their money in 'safe' investments such as government bonds and government guaranteed bank term deposit accounts. This hoarding and lack of investment is worsening the unemployment situation. It's a vicious cycle. Rinse and repeat.
(Updated with cartoons)