Top 10 at 10: Mark Hotchin's toilet paper; Diplock wakes up; 'Break up the big 4'; Sub prime carbon credits; Dilbert

Here are my Top 10 links from around the Internet at 10am. I welcome your additions and comments below or please email your suggestions for Monday's Top 10 at 10 to bernard.hickey@interest.co.nz We love our customers. 1. Couldn't resist - Anne Gibson at the NZHerald picks out the little detail of Mark Hotchin striding onto the stage at yesterday's meeting of angry Hanover Finance investors with bodyguards in tow and toilet paper stuck to the heel of his shoe. Investors yelled abuse at him and demanded he sell his Paritai Drive mansion. He apparently told them it wasn't an option. You've got to admire the gall of the guy. At least he has some gumption for turning up every day at these meetings. Eric Watson has been AWOL throughout. He deserves the same criticism fired at Hotchin with interest.

"Sell your blimmin million-dollar house," yelled one irate investor of the $30 million Paritai Drive mansion Mr Hotchin is building. "Bloody right," retorted another. "You've got off scot-free," yelled another when he told of investing millions. "Mark Hotchin has not even had the temerity to say sorry," shouted another investor. The meeting closed with shouts of "bastards", but not before investors called for Mr Hotchin to contribute more money to help them out. Receivership was an unpalatable option and an alternative to Allied, Mr Hotchin said. But a receiver would sell properties and this would return low sums to investors, he said, citing other failed financiers such as Orange where investors might only get 12-15 per cent of their money back, Capital + Merchant, only 0-2 per cent, and Dominion Finance, 10-15 per cent. "Allied don't need to sell to move forward. We do. We have to. I don't want to be the one standing here saying we have a whole pile of troubled assets. The market has turned a long, long way," Mr Hotchin said. But one investor shouted, "You said this 12 months ago. Same shit, same face, different day".

2. In a rare move - Securities Commission chair Jane Diplock has written a piece in the NZHerald explaining the Allied Farmers deal to Hanover Finance. She's onto it. New Zealand needs an aggressive securities regulator who thinks about the investor and helps them make the right decisions. If only she had stopped Mark Hotchin, Eric Watson and Richard Long selling their toilet paper to investors 3 years ago this would seem credible. Here's a few gems of her advice.

Shares can offer the chance of greater gains than more conservative investments such as a cash deposit with a major bank. But share prices can fluctuate greatly and carry the risk of falling in price. Shares also offer the opportunity for an investment return in the form of dividends, but this is not guaranteed as companies are under no obligation to pay a dividend. In general, the longer you keep your shares, the greater the chance that their value will increase.

3. In a more common move - Meanwhile here's a real securities regulator issuing some useful information for investors.  The Australian Securities and Investment Commission (ASIC) have released a Swimming Between the Flags guide for investors. It is 23 pages long and full of useful tips.

The guide sets out six steps to investing between the flags:

• Understand some key things about yourself "” think about your tolerance for risk and your goals and timeframes;
• Understand some key things about investments "” understand how different types of investments work, only invest in what you understand, be clear on the trade off between risk and return (e.g. the higher the rewards, the higher the risk);
• Develop an investment plan "” don't put all your eggs in one basket, spread your investments between different asset classes, managers and sectors so that you don't risk losing everything if an investment fails;
• Decide how to invest "” when it comes to investing, decide whether to take a "˜do-it-yourself' approach or get a professional to do it for you;
• Implement the plan "” do your homework, paying close attention to paperwork such as Statements of Advice and Product Disclosure Statements; and
• Monitor your investments "” rather than just adopting an 'invest and forget' approach, keep track of your investments over time.

Investing between the flags also provides case studies to illustrate how people at different life stages have different investment goals and what to consider in working towards those goals.

4. Australian entertainment - New Liberal Party Finance Spokesman Barnaby Joyce has come out with a few pearlers in his first days in the job. The Age is reporting after an interview that Joyce thinks America will default on its debt and that the Australian government should threaten to break up the Big 4 Australian banks (which are also our big 4 banks) to get them to push interest rates down. He might not have said these things if he was the Australian Treasurer... HT Greg Elliott via email.

''You don't even have to break them apart,'' he said. ''But you have to suggest to them that those powers could be in place to do that if they aren't more diligent in how they respect the Australian community.'' Senator Joyce came under attack from several ministers, including Treasurer Wayne Swan, who said he had been elevated ''straight from the reactionary fringe of our economic debate to the second most senior economic policymaking job in the alternative government''. In an interview with The Age, Senator Joyce said he did not want to alarm the public, but there needed to be a debate about Australia's ''contingency plan'' for a sovereign debt default by the US or even by an Australian state government. ''A default by the US means complete economic collapse around the world and the question we have got to ask ourselves is where are we in that?'' he said.

5. Sub prime carbon credits etc - I have studiously avoided getting into the climate change debate until now because...er...I am a scaredy cat. The science and politics of it all is just plain ugly on both sides. There seems to be an awful lot of heat and not much light most of the time. I don't spend enough time (luckily for me) watching the debate to be confident of my views. Gulp...so here goes...I am starting to get worried about all these cap and trade carbon credit trading schemes developing. They appear to be more about providing loopholes for lobbyists to exploit and new 'instruments' for investment bankers and traders to profit from than any genuinely useful attempt to cut greenhouse gas emissions. Here's 'George Washington' at Naked Capitalism with a few interesting points, including that even cap and trade experts say these schemes won't work and how the founder of toxic Credit Default Swaps, JP Morgan's Blythe Masters, is behind the carbon derivatives market, according to Bloomberg. HT Troy Barsten via email.

Two EPA lawyers with more than 40 years of cumulative experience "“ including the guy who has been head of California's cap and trade offset programs for more than 20 years "“ say that sulfur dioxide was different, and that cap and trade for climate is a scam which only benefits the financial players. Specifically, they point out that:

• Cap and trade was tried in Europe, but ended up raising energy prices, creating volatility, produced few greenhouse gas reductions, but made billions for the financial players
• Even the guy who invented the cap and trade concept doesn't think it will work in regards to climate change
• Carbon offsets "“ which are part of the cap and trade plan "“ increase pollution
• One reason that offsets lead to more pollution is that investors fight to keep toxic chemicals legal, so they can make more money off of trading the offsets
• Like subprime mortgages and other creative financial instruments which brought us the economic crisis, carbon offsets lack integrity and don't work

6. Poison pills - Former Morgan Stanley Chief Economist Andy Xie is saying Ben Bernanke's super low Fed Funds Rate is poison for the US economy because it is fueling a wave of speculation, Bloomberg reported.

Bernanke is making decisions based on "marginal considerations" that will help short-term growth and employment, instead of focusing on the "soundness of the system," Xie wrote in an e-mailed note today. The next worldwide crisis will probably strike in 2012, driven by inflation as the low cost of borrowing spurs increases in asset prices, he said. "There is a Chinese saying that one could quench the thirst by drinking poison," said Xie, who predicted in September 2006 that the U.S. economy would fall into a recession in 2008. "Bernanke seems to be prescribing exactly this to the U.S. economy. The slower Bernanke raises interest rates, the bigger the next crisis."

7. Policitally risk free return method? - Gordon Campbell at Scoop has a useful and detailed look at the idea being considered by the Tax Working Group of taxing the equity in rental property investments using the 'Risk Free Return Method'. Campbell speaks to PwC partner Geof Nightingale about the idea, which has been around since the McLeod review in 2001.

In the weeks and months ahead, the RFRM will doubtless receive a makeover, before being readied for public consumption "“ but increasingly, it looks more politically viable than either a capital gains tax, or a land tax.

8. A good tax - Matt Nolan at TVHE rebuts one of the arguments used in favour of a land tax (forcing people to develop land), but still says he likes the idea overall.

Arbitrarily adding costs to get people to arbitrarily do other things is coercion, and I don't know if I can support the actions of any private or public agents that are based solely on coercion. I like a land tax as a replacement for other taxes given that the elasticities of supply and demand are low "“ implying that the "deadweight loss" from taxation will be relatively low.  Furthermore, the tax on land is a "fixed cost" of production, implying that the impact on downstream costs should be minimal (depending on how this changes relative land use in the long-run of course). These reasons are not related to some arbitrary goal of maximising statistics, but instead on the idea that we should be trying to raise any target level of revenue at the lowest possible social cost.

9. New Depression - Felix Salmon at Reuters points to some interesting comments by David Rosenberg, the former Merrill Lynch economist now at Gluskin Sheff.

The credit collapse and the accompanying deflation and overcapacity are going to drive the economy and financial markets in 2010. We have said repeatedly that this recession is really a depression because the recessions of the post-WWII experience were merely small backward steps in an inventory cycle but in the context of expanding credit. Whereas now, we are in a prolonged period of credit contraction, especially as it relates to households and small businesses.

Felix Salmon makes the following points.

I'm not optimistic that those of us in the post-boomer generation will be able to rekindle America's historic rates of growth even as the percentage of the population of working age continues to dwindle and the boomers continue to demand the lifestyle to which they have become accustomed. The point here is that while most recessions are cyclical phenomena, this one could mark a secular turning point "” the beginning of the end of America's hegemony in the global economy and the capital markets. And the turning point has come too early, before the rest of the world has generated enough internal momentum to take America's place.

10. Totally irrelevant video - This is an old favourite of mine explaining the real reason why Zinedine Zidane headbutted Marco Materazzi during the World Cup final. It was for Materazzi's safety, apparently.