Posts by Gareth Ward
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I'm interested as to why everyone believes they shut down the Internet to quell internal organisation, as opposed to shutting down a coalface news source to the external world?
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NO. In fact, that's the most deceptive part of the argument.
Let's say borrowing costs 5%, current SOEs return 7%. Let's say the government is faced with a project that's expected to return 6.5%. Should they a) sell current SOEs to fund this project, b) borrow, or c) not do it at all?
Think carefully about it.YES! It is fucking crazy (if I may quote you) to assume that because an asset presents you with a theoretical rate of return slightly higher than the cost of new debt that you would fully debt fund it (especially when said return is only last years, and said debt cost is only what it is currently). If I may ask you to think carefully about it - what if public debt was running at 200% of GDP? I know of no business or government that simply keeps leveraging up and up solely because each new project has a slightly better rate of return than the initial interest cost of the new debt. Outside of private equity funds circa 2007, nobody is comfortable running something so massively leveraged because it can turn against you so quickly. I also think it's appropriate for the Government to discuss with society what levels of investment they should hold on their behalf.
However, I think we're in agreement here, as we're talking theoreticals above. This boils down to "is the Government running at a level of debt that is unsustainable and it's therefore unable to extend that leverage further, even for net positive paper returns". I agree that we aren't - our debt problem is loaded in the private sector, and they're going to have to get the money from somewhere to buy into this share float, so you're debt problem doesn't really go anywhere. And the giving up of the dividend return from these assets is something that seems to be largely ignored (the Herald's "Guide To" today seems to completely miss it). I'm just a little frustrated by the general lack of reasoned and specific critique's of this stuff (yours excepted).
But I'm also not that fussed about SOE's remaining in Government control at a lower equity stake. I'd perhaps be happier to have a single power company fully Govt owned and the rest sold down almost entirely - I like the Kiwibank model because to me it says "we're happy to let the market do what it wants, we're just one player in that, but we're representing our 'shareholders' interests, which I'm afraid aren't purely profit-driven and the other players in the market have to live with that because it's now just part of the competitive landscape". A single Govt owned power company that could operate at appropriate levels of profit, investment and therefore pricing would be a useful brake on the rest of the industry - if not, then we'd all just end up buying power through the Govt one. That would require a slight watering down of the SOE model though I suspect (to allow for some execution of Govt policy as the shareholder)
I'd much rather we focussed on the fact that neither major party is willing to actually spend within their income and THAT'S why we're seeing a debt problem - if Labour could man up and suggest honestly taxing people at a level commensurate for their spending desires, and/or National could do the same and properly communicate all the things we can't have if we don't what to pay much in tax then we'd be able to have slightly "clearer" discussions around asset investment without the need to fund ongoing operational deficits muddying the waters. -
Plus I suspect that they'll play some tricky buggers as to where exactly the money goes - it's really all just varying sources of income that you can claim independently go to certain things. It's the whole "spending that goes into the Super Fund is all debt but other spending comes from tax" spurious argument again.
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Alex if he intends to use the proceeds on schools and roads then yes I agree - those aren't the same thing at all.
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Please just remember everyone that Key has explicitly said he'll sell these assets and only buy others with the proceeds. There is still arguments against that, but we aren't just getting rid of assets here, we're swapping them.
Possibly the best argument against is that we aren't increasing assets here, but capping our asset investment
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On damn iPhone so will come back with some more substance later (because I genuinely appreciate the intelligent debate Keith) but in short you seem to be mixing arguments.
Key isn't advocating selling the house to go mortgage free - he's advocating selling the house because you want another one but don't want to go further into debt. So this analogy seems a little off the point, but your points about choosing to invest in monopolies etc deserves some more discussion. -
This logic tells us to sell assets to avoid debt, even when it's unprofitable
I don't believe the logic says that - because the counter would be that you're arguing a Government should continue to issue debt to buy more and more profitable private companies.
There's a variety of reasons why a society would choose to own assets collectively through it's Government, and I think it's quite correct for a Government to choose which assets it owns within an overall total constraint. If, for example, the cash from 49% of Meridian Energy was invested in, say, a national fibre network or another asset that will not only earn dividends but could also lead to broader societal outcomes then that seems pretty important to me and a better deployment of constrained capital. Continuing to be invested in assets simply because that's the way it's always been is really poor governance of both the financial and political variety.** Don't take this as a necessary endorsement of the national fibre investment but I'm sure you follow the point. And yes, I'm arguing for a move from one asset to another - not using the cash for operational spending.
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A kg a week for a home machine! I'm glad you werent shaking so much as to be unable to type that post :)
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+1000 on Janelle Monae - I presume you've seen "that" Letterman performance from a year or so ago but I really hoped that would kick her into something huge. She actually pulled off getting caped. And with the marketing and hype backing of Puff Daddy I thought it might get big, but I wonder if he doesn't know what to do with actual bona fide talent.
And re the libraries, my wife commented the other day that Supercitae has at least bought in the ability to request any book from any library in the whole region for, i believe, nought paid.
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As you say Russell, some troubling points for an analyst to be making - he correctly notes that Starbucks had to shutter about 1,000 (!) stores out the back of the recession, but they aren't really reopening those, anywhere.
And their earnings appreciation is actually largely being driven from their strategic plans to push more branded product through channels OTHER than their own store (e.g. instant coffee out of supermarkets).
The push into China and India is so obvious that it's not really an amazement to the market.