John Key has been unable to turn our economy around

[NinjaNanna]

Funny that, I think one thing that should be privatised is prisons. Free market doesn't care so much about the PC bullshit that politicians need to deal with.

Another thing on prisons, I think that we should impose a levy, say 7.5% of earnings, on all persons that have spent time in prison, bit like a student loan repayment.

[Oscar]

yea da party thing don't work with me. I hate both parties & I don't care who's doing it, selling SOE's should not be done especially not criminal like Police, courts, prisons, medical like ACC, Ambo's, hospitals or infrastructure

Er - if the Govt. doesn't sell the controlling shares, then they are still state controlled. I haven't heard anyone complain about the 20% of Air NZ that is in private hands.

[Ocean1]

Yes, you're right, the correlation is spurious, and it was a little naughty of me to imply one (I'm feeling lazy), but the literature is reasonably unequivocal in arguing that a major cause of crime and the other indicators of a disfunctional society is poverty and now research is showing that the wider the gap between the haves and the have nots, the higher the rate of drug abuse, crime etc

Cart. Horse.

[Scuba_Steve]

Er - if the Govt. doesn't sell the controlling shares, then they are still state controlled. I haven't heard anyone complain about the 20% of Air NZ that is in private hands.

if the Govt. doesn't sell the controlling shares...

[phill-k]

Personally I see it as good sound investing and Key and Co should be proud of it.

At a very basic level, the Government sell excess shares in key companies then use the funds raised to purchase controlling shares in other key assets that are critical to the national interests.

Tell me what part of that is bad? To me it's simple invest diversifacation.

Put simply why would you want to own 100% of your aging power company for example but 0% of your brand new broadband company, when for near enough to the same capital outlay you could control both!


But why do we need to do this at all, why can't we own 100% of both companies? Well that's because Kiwi's have developed a false sense of wealth, primarily this was brought about by 2 income families, all of a sudden households felt rich, but instead of investing in productive assets they went on stupid bidding wars for residential realestate, but still using borrowed money instead of savings. This spiraled because more people felt rich because their property value had now doubled for no other reason than people had more money to spend.

The grim, dark reality though is that Kiwi's (and most of the western world) have pissed their personal household wealth (generated by a second income) against the wall, they are now tied to huge mortgages against properties that in reality should only be worth half of what they owe.

And to cap this all off our household earning potentials have pretty much peaked, unless of course we start working 6 day weeks or 12hr days. Either that or increase the size of our households, ie Kids and grandkids continue to live at home and contribute to the household income.

The glorry days are over people, the banks used your greed and self pride against you (did you really need the extra bedrooms +study +ensuite +3rd bathroom +double lock up garage + 50" LCD TV +++), they now own you and every cent of your disposable income for the next 25-30 yrs. Of course there is an out and thats downsizing your expectations but the penalty will be the financial loss incurred in selling.

Woops bit of a rant, but I'm done now.

Interesting explanation but it doesn't apply to everyone, I wonder how many actual families are in your explained circumstances?
If your analogy is true then why have we not seem a much greater dip in house prices?
Market forces still at play?

[Oscar]

if the Govt. doesn't sell the controlling shares...

The Govt. has annouced its plans in an election year.
Can't say fairer than that.

[NinjaNanna]

Interesting explanation but it doesn't apply to everyone, I wonder how many actual families are in your explained circumstances?
If your analogy is true then why have we not seem a much greater dip in house prices?
Market forces still at play?

I know it doesn't apply to everybody, but it applies to far too many young families. Also it's not soley these young couples that are responsible for pushing up house prices, I think more of that blame lays with Mum and Dad investors, Mum and Dad don't understand productivity but they do understand bricks and mortar, so as the baby boomers kids left home, and they paid off their family home, they now have surplus income to sink into an investment property, demand then increased so prices increased, prices are rising so it must be a good investment, more Mum and Dads jump on the bandwagon, prices keep going up. Desperate to get into their own home (and perhaps with champayne tastes on beer budgets) young couples borrow too much and against both incomes. What Mum and dad have now unwittingly done is doubled their money on an investment property but to get it they've actually taken it directly from their kids and grandkids. The other knock on effect of rising house prices is upwards wage pressure, causing all sorts of other economic pressure.

To me it seems patently stupid for a government to favour residential property investment, in my view they'd be much better off making the family home tax deductable to allow people to pay it off sooner. The sooner its paid the sooner we reduce our national debt and reliance on foriegn lending and the sooner they can put their income toward productive investments.

As for why prices haven't dropped so badly it's partly because market forces are definately still at play, buyers are still willing to mortgage their combined incomes for the next 20-30 yrs, sellers simply won't sell for less than they owe or what their perceived value is, NZ hasn't been too badly affected by unemployment so mortgage foreclosures haven't been as bad as the likes of the US.

Damn another rant ... I really should give it a rest.

[avgas]

NinjaNana.....your almost 100% right.
You had all the parts there, but failed to combine them.
Reason why house prices are up is because now first home buyers are competing with "investors" whom have more than one home and a betting house prices will go up higher than their interest rate.

I agree about the first home being tax deductible, but the money has to come from somewhere so how about increase investment property tax?

Only thing is this once again comes back and bites the baby boomers (whom have the votes) and that government won't be back in again......

The baby boomers have to realize that its their greed (for more than 1 house) which is hurting the younger generation in buying their first home. Greed is a lovely infectious thing - and soon as the younger generation get their first house.......a second one sounds like a great idea as that's what Mum/Dad just did.

Its a bit concerning when the Jones's are your own family.

[Scuba_Steve]

The Govt. has annouced its plans in an election year.
Can't say fairer than that.

its easier to put the stick in an inch at a time than the whole thing at once

[Clockwork]

Speaking as an "almost" baby boomer with disposable income to invest, I'm scared shit-less of investing in the financial markets. I don't really understand it, I have no control over it. It seems to be run by incompetents and sharks and heavily influenced by the reactions of its sheep like investors. The bank pays f'all interest, on my savings, the Government takes it's pound of flesh with the RWT and the capital value is largely eroded by inflation.

Avgas, what would you suggest as an alternative?

[Oscar]

its easier to put the stick in an inch at a time than the whole thing at once

No. It's smarter to sell the bits you don't need, whilst keeping control.

[yachtie10]

NinjaNana.....your almost 100% right.
You had all the parts there, but failed to combine them.
Reason why house prices are up is because now first home buyers are competing with "investors" whom have more than one home and a betting house prices will go up higher than their interest rate.

I agree about the first home being tax deductible, but the money has to come from somewhere so how about increase investment property tax?

Only thing is this once again comes back and bites the baby boomers (whom have the votes) and that government won't be back in again......

The baby boomers have to realize that its their greed (for more than 1 house) which is hurting the younger generation in buying their first home. Greed is a lovely infectious thing - and soon as the younger generation get their first house.......a second one sounds like a great idea as that's what Mum/Dad just did.

Its a bit concerning when the Jones's are your own family.

while yours and NNs points are all good there is a bit that I dont see mentioned anywhere.
There were 2 significant factors that fueled very steep rises in prices of houses.
imigration which has been mentioned many times
but I think one of the stronger factors was tax changes
The labour government brought in a new tax bracket at 39 cents in the dollar
This meant that those on higher incomes could borrow more and write off much more of there interest payments on there personal tax. This made higher prices viable for the investor who had much more tax to pay.

I also find it interesting that people think prices are way overvalued. most houses that i have looked into have barely doubled over the last 15 years. While prices went up too fast I dont hink they are unreasonable now if you are unemotional and buy carefully (this obviously will be different depending on where you buy).

my 2c

[Scuba_Steve]

No. It's smarter to sell the bits you don't need, whilst keeping control.

you sound like you trust them to keep control. I on the other hand don't have such trust in them

[Oscar]

you sound like you trust them to keep control. I on the other hand don't have such trust in them

At least they're annoucing this prior to an election, instead of after.

[NinjaNanna]

Speaking as an "almost" baby boomer with disposable income to invest, I'm scared shit-less of investing in the financial markets. I don't really understand it, I have no control over it. It seems to be run by incompetents and sharks and heavily influenced by the reactions of its sheep like investors. The bank pays f'all interest, on my savings, the Government takes it's pound of flesh with the RWT and the capital value is largely eroded by inflation.

Avgas, what would you suggest as an alternative?

There's the rub isn't it. A few more years and I'll be in the same boat, bucket loads of disposable income that I want to put to work - but where is safe. There is a reason for the phrase, "Safe as Houses".

I don't have a magic bullet, but you know what might be a radical idea, additional tax incentives for Mum and Dad investors to buy the offered shares in SOE's.

Mind you as hypocritical as it is my first investment after the house is paid off will be a second property on acreage somewhere in rural NZ that if the shit hits the fan in the coming years (as I'm prone to believe it will) I'll have a fighting chance of creating a self sufficent life for myself and my family.

Following on from that I'll personally be investing in the food production and distribution industries, there's another 6 billion of us to be born in the next 30-40 yrs and they've got to eat something.

But none of that answers your question does it, how do you tell a good company/investment from a bad one.... I don't know but hopefully by the time I need to I've learnt a few of the fundamentals.