Tasmanian Times

The individual has always had to struggle to keep from being overwhelmed by the tribe. If you try it, you will be lonely often, and sometimes frightened. No price is too high for the privilege of owning yourself. ~ Friedrich Nietzsche

The individual has always had to struggle to keep from being overwhelmed by the tribe. If you try it, you will be lonely often, and sometimes frightened. No price is too high for the privilege of owning yourself. ~ Friedrich Nietzsche

Economy

The Oracle’s Market Update (Evening): Don’t buy a Bugatti

Credit ratings, like Bugattis, are only owned by the rich and/or seriously indebted.

Contrary to popular opinion, buying a camcorder at Harvey Norman on an easy payment plan won’t secure a credit rating. But issue a few billion dollars worth of corporate or government bonds, and the ratings agencies might take an interest.

Rating agencies are just analysts with a specialty focus on credit-worthiness. Until now, United States debt has been judged as safe as French, Norwegian and Australian debt.

Moody’s still thinks it is, but rival Standard & Poors took a dim view of last week’s fiasco in Congress.

By downgrading the US for the first time ever, S&P now believes US Treasuries are riskier assets than some corporate bonds. And that’s big news.

Markets had the weekend to stew on the downgrade with Australia the first significant equity market to open. It wasn’t pretty at the opening bell – the main indices fell around 100 points, before staging a remarkable rally back to nearly par.

Then the Hong Kong market killed the party atmosphere by collapsing. It was downhill all the way after that, with local losses big enough to make headlines in the evening news bulletins. Expect to see sombre faces talking about the end of civilisation as we know it.

Early signs are for further falls on Wall Street, which will make tomorrow even more interesting here. Media commentators, as they do, will gloss over the fact Australia’s AAA credit rating is intact. There’s little analysis of our listed company sector, which is still showing resilience against the backdrop of crap consumer spending. The falling local currency also adds some spice to the upside mix.

But gloom and doom make for a more entertaining media spectacle than reality, so don’t expect to hear anything positive for a few days at least.

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6 Comments

6 Comments

  1. William Boeder

    August 8, 2011 at 5:51 pm

    #5. There is a total agreement with you by myself regarding caring for one’s superannuation investment strategy.
    Here below are a few instances of my past actions relative to the protection I have engaged in toward my own superannuation and my advices given to others on this “most largely ignored, independent fund-member, hugely important concerns to one’s personal superannuation accruals.

    Just prior to 9/11 World Trade Centre demolishments, I had received a flyer in the mail from my super fund suggesting I move my accruements into a high risk-high return overseas shares strategy, all can be done for a fee of only $50-00.
    Twas then I demanded why fund members were being canvassed to enter into a higher risk investment strategy that may be against their own personal preferences?
    After some fervent correspondences by snail mail, I was finally advised by a super-fund trustee, we know what we are about Mr Boeder, we are the acknowledged experts, not little persons such as yourself!
    I demanded to know why there was no facility for fund members such as a Bank interest only investment option and also an Australian shares only option?
    At that then time I requested my superannuation balance to be placed in the most secure low risk investment strategy available.
    (Why must I be told to trust the American and other overseas share-markets?)
    Then came 9/11……

    As time transpired and the financial markets began their rise back to their heavily inflated former status, I had read a report by a highly ranked and respected financial analyst, (though not too popular among the ranks of blow-hards and know-it-all financial analysts and commentators,) that a major event is going to plunge terror into the American financial system, thus I began advising friends and family of this dire prediction, then to quickly place their accumulated super funds in the “now available,” “just in case investment strategy of Bank interest only.”
    Then whoosh, came the rampaging GFC (Wall Street stock-market collapse,) with its destructive and damaging consequences to Billions of dollars of collective super-fund members entitlements and or fund-member accrued balances.

    Fortunately, my then fiancé, (now wife,) took heed of my advices and placed the whole enchilada of her super into a Bank-interest-only investment option and was to save considerable losses upon her super-fund accruals.
    A close relative who declined my opinion lost heavily, (over $100,000-00) of his then held super-fund accruals!
    He went on to say how could I have any idea of this pending crash, I replied it was based upon the then best advice available to the discerning and acutely aware persons whom cared for the destiny of their very own money held in their superannuation investments!
    Thus there were some who lost nought, but a great many who lost heavily, simply by not caring so much about that of their very own retirement money.

    An addendum to this story is the fact that the ANZ Bank recently, so very recently, (one week or more prior,) sent out flyers to its customers to now enter into a higher return-higher risk investment strategy, this gambit was just before the now deeply plunging Stock markets around the World.
    The lesson to be learnt here is that the financial houses around the world are carelessly eroding the super-fund holdings of most everybody in their haste and desire to profit from the money that invariably belongum others!

    William Boeder.

  2. Robin Halton

    August 8, 2011 at 1:07 am

    $ William, from personal experience it is essential that you control your own super , the financial institutions dont care as they are quite happy to collect their management fees on a weekly basis, based on your super total.
    For those that did not convert from High and Medium Risk Shares over two weeks ago to Cash then it could be a hard down hill ride with heavy losses to those dependent on drawing super regularly.
    Reduce your exposure to volatility when bear markets appear eminent, easier said than done but now with GFC2+ on our doorstep best to be prudent.

  3. William Boeder

    August 7, 2011 at 11:57 pm

    Of immediate concern to myself and I’m sure many many others, Australia’s superannuation funds are going to suffer enormous losses if these downgrades of the investment dollar value in shares is going to continue to flat-line or plummet further into the unknowns of financial uncertainty?
    Those leading lights of financial wizardry that are charged with caring for the peoples retirement funds have been living a pompous lie for so long, that ‘lie’ is that they who claim to know it all and are the best qualified to muck with the individual employee’s retirement nest-egg, are not as they depict themselves to be, thus they are nothing more than hopeful well-paid spielers.

    Another consideration here is that the whole concept of employees building on employee contributions as a means of retirement saving, then adding to same by way of personal savings thus adding to their already accumulated savings for retirement, only to see that the superannuation model itself is pitted with an unwholesome breed of predatory financial know it alls acting the part of uncaring avarice-minded money-gobbling spooks.
    Ahh, tis a good feeling to be safely away from the cut and thrust of this corroded financial dream scheme.

  4. mpd

    August 7, 2011 at 11:25 pm

    For 50 years Warren Buffet has been proven right, in the long term, every time. Why should this time round be be any diferent?

    http://www.bloomberg.com/news/2011-08-08/buffett-bet-on-stocks-before-rout-by-spending-most-since-2008.html

    Also note holier than thou Chinese taking cheap shots at the US S&P downgraded AA+ rating. Not said is that Chinese S&P rating is AA-, two levels lower, or that US maintain top level rating from two other major ratings agencies. Perhaps pot calling kettle black.

  5. JenBoon

    August 7, 2011 at 9:56 pm

    Nobody seems to question who the people are behind the credit ratings agencies? At the last GFC they were still AAA rating those banks and insurance companies that then needed bailing out with taxpayer’s monies? Maybe this is just another way of shocking the regular investors and just sitting back and waiting so that those with serious money simply pick up many blue-chip shares around the world for half the price?

  6. max

    August 7, 2011 at 9:53 pm

    Back in Tasmania Gunns is riding out this storm by refusing to allow their shares to be sold by hiding behind a very flimsy subterfuge.

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