Labour's Capital Gains tax to impact negatively on house prices

The impact on the economy of a 15% capital gains tax (CGT) proposed by Labour will be huge. Not only will all asset classes be negatively impacted directly but the 15% tax on rental housing will have a direct impact on the selling prices of the family home.

The 15% tax on rental housing will almost immediately affect that sector as shortly after election day investors would want to sell before the CGT is imposed in 2013. It is hard to tell by how much but in a depressed market with increased selling pressure you don't have to be Einstein to figure out it will be substantial negative impact.

The spill-off of that will be pressure from falling rental house values impacting on sellers of private homes. These are of course homes that kiwis generally have their biggest investment in.

Long-term a CGT and its impact on house prices may be debatable in terms of its influence but in the short to medium term it is economics 101 that prices for the family home will fall.

Given a more robust economy, sustainable rising house prices and good demand a CGT may not have been such a bad thing in terms of its economic kick but in the most uncertain economic times since the Great Depression a CGT has the potential to kick-off a major housing sell-off and a consequent drop in house prices.

The fallout from that is obvious. Less confidence in people's personal financial situation and a resultant slowdown in consumer spending and a loss of jobs.

Labour really need to think hard about this if they are lucky enough to gain enough votes on November 26. It may have support from left commentators like Gareth Morgan, Bernard Hickey and the hapless Rod Oram but it is probably more akin to an exercise in economic suicide rather than a good way to raise more taxes - especially given the tough times that we are currently facing and will continue to face for years to come.

Buy Every Bastard Says No - The 42 Below Story, by Geoff Ross & Justine Troy & more @ Fishpond.co.nz

C c c Darren Rickard 2011

Kiwirail Destined for Big Losses

It is not hard to fathom the politics of most individuals, generally we where our politics on our sleeves and express it by what we say and do.

If you wanted to label me, I am more of a libertarian when it comes to life and focus on the freedom of individuals to be able to get on with their lives without the encumbrance of the State intervening which they just love to do. When it comes to business I know that private enterprise does just about everything better than the State.

Other people who come from the left of the political seesaw like to think that the State is all important and should play a big part in business.

This is the case with Rod Oram, a State lover with a green background and a penchant for promoting the State as a vehicle for the advancement of business and the economy as a whole.

We know of course that private business survives in spite of intervention by the State, rather than because of it and the economy would thrive if the State just simply buggered off and left us to build business and therefore the economy as a whole.

Rod's latest wrong headed opinion comes on the back of his push for taxpayer funded Kiwirail to become a player again in the transportation of freight around the country.

"Faster freight? More customers? A $4.6 billion, 10-year investment plan to make KiwiRail self-sustaining? Who would have thought rail had such a future here? Around the world, rail is enjoying a remarkable renaissance thanks to the economic and environmental benefits when services are well run.

The Swiss, for example, are completing a $12b, 57km rail tunnel under the Alps; the Chinese are building 50,000km of new tracks, much of it for 300km/h trains; and Warren Buffett, one of the world's most strategic investors, has bought the US's largest railroad". Rod Oram, Oct 2010

Like most commentators from the left they like to fudge facts and stretch the truth to misinform those who follow them (sustainable ignorance?) so I will set out to put the record straight.

Unlike Rod I have no political bias, my opinion comes from the point of view anchored in fact.

Rail in fact does not enjoy any major success anywhere in the world except for the investment by Warren Buffett who invested in freight carrier Burlington Northern in 2008. This rail company works because it carries bulk freight over long distances in the United States. When replicated in New Zealand this model, while not as successful, is nonetheless the only part of Kiwirail that works. There are certainly no big economic advantages and its environmental benefits, if there are any, are of little consequence to business.

In every part of the world that rail operates it is heavily subsidised in some way by taxpayers and this is no different in New Zealand.

The purchase of Kiwirail by Labour in 2008 and subsequent injections of capital into the company since then have so far cost the taxpayer close to 2 billion dollars and the drain on the taxpayer purse is only going to continue as the business remains State owned. The company is never going to be self sustainable and Mr Oram himself acknowledges it might take 10 years.

Private freight carriers like Mainfreight Ltd [MFT.NZX] carry the nations freight with far more efficiency than State rail ever will and the fact that the taxpayer is subsidising Kiwirail to try and compete on a level footing is an insult to freight carriers who pride themselves on good service and low costs. They are the backbone of our economy and that will never change unless a more left of centre government decides to try harder to put them out of business.

Kiwirail is highly inefficient. It takes substantially longer to get most goods from a to b and in this day and age of "just in time", inventory management they simply cannot cut it.

We need to be realistic about the status of Kiwirail and its position as a credible part of our economy now and in the future. It is a political wish to have it rather than a practical one and therefore its future will be subject to the machinations of politics, left and right.

The only place it really has in our economy is to move bulk goods like logs and coal to ports for export. Any other part of the network is simply a political wishlist that will waste billions of taxpayer dollars into the future as long as it is owned by the taxpayer.

You need to take this into account when reading Rod's wet dream over rail's future in New Zealand.

Disc I own MFT shares in the Share Investor Portfolio

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New From Fishpond



c Share Investor 2010

Another reason to ignore Rod Oram

From Share Investor Blog

Make no mistake Rod Oram is a mad bugger. I loathe his socialistic/political slant on business and economics and quite frankly a third form economics student who is deaf, dumb, blind and insulated from reality with a 100 mile layer of pink batts would know more than him about the subject he thinks he is so proficient at.




The man buys carbon credits to offset his "carbon footprint" for goodness sake!

The reason for my vitriol this time?

His nonsensical piece on National deferring payments into the Cullen Fund in Stuff today.

This master of economic sleight of hand wants our Government to borrow billions to fund pensions:

They are wrong on both points. This is a once-in-a-generation time to be investing, particularly if you are an entity with low debt, secure cashflow and a long-term strategy. The great global economic contraction has savaged prices of shares, property, businesses and other assets. Buyers might have to ride out some short-term corrections but they can reasonably expect handsome long-term gains.

Oram would have us borrow to buy investments? Its a MAD, MAD, MAD MAD ... plan! In these current times debt must be lowered. Oram is 100% correct when he says people should buy assets when they are beaten down in value. I have over the years but not with borrowed money Rodney! Higher debt to fund this scheme will increase interest rates for New Zealand borrowers.

In addition to this Oram is really making a mountain out of a molehill on the decision to defer payments to the scheme. What he fails to mention is that the scheme funds a very tiny portion of what is needed for retirees:

Connecting it with superannuation, though, was entirely political. Even Dr Cullen made clear there was no link to future entitlements and future taxpayers were always going to have to meet 89% of costs.

Bill English’s decision not to borrow for the fund will increase that by just 3%.

Moreover, in national-income terms, Mr English’s decision relates to just 0.2% of GDP from 2030.

It is ridiculous to worry about such a number. The smallest economic shock over the next two decades – positive or negative – could double or eliminate it, as could small productivity changes. Matthew Hooton, NBR 2009.

The vast bulk of retirement funding then will come from the tax base at the time and that is where growing the economy comes in and is clearly vastly more important than taxing workers heavily now to fund such a small addition to retirees income in 20 years time.

The best solution of course is for individuals to save and pay for their own retirement. With a taxpayer funded scheme payments are subject to interference from all political colours and with the tiny contribution from the Cullen Fund that is subject to inefficient bureaucracy and cost and inexperienced individuals investing money on your behalf - something that Rodney skirts over without nary a whisper- there is no guarantee that any money will be there when you retire anyway.

Labour would have deferred payments into the fund. That economic dipstick Michael Cullen designed the fund for such economic circumstances as we are suffering under now.

Oram's columns have been quoted by Labour in Parliament ad nauseum recently so it is clear Labour are taking their playbook from commentators like Oram or vice versa:

Hon PHIL GOFF: It made $1.75 billion. There is nobody in this House who does not understand that the best time to invest funds is when the market is at, or close to, the bottom. By the National Government’s theory, New Zealand homeowners should be selling their house now and buying it back when the prices have risen! That is National’s philosophy. Kiwis know that it makes no financial sense, so why cannot the Prime Minister and the Minister of Finance see that? Parliamentary Budget Debate, May 2009.

It doesn't really make allot of sense now does it? Would you borrow right now to buy shares?

The answer, if you are sane, is a clear NO.

Both Labour and Lefties like Oram are politically motivated and economically illiterate. We cant borrow and hope, we must instead grow the economy and accept personal responsibility for funding our own retirement.

Any other way is dishonest and as history has shown us will fail.

Recent Share Investor Reading

• Danny Diab & Restaurant Brands
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• Analysis - Mainfreight Ltd: FY Profit to 31/03/09

Discuss this topic @ Shareinvestor.net.nz

Related Amazon Reading


Tell 'em "That's MY Money You're Messing With!": Retirement Funding: Untold risk and mismanagement and how to avoid it by Gordon W Bell
Buy new: $21.95 / Used from: $6.50
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c Share Investor & Political Animal  2009

Another reason to ignore Rod Oram

Make no mistake Rod Oram is a mad bugger. I loathe his socialistic/political slant on business and economics and quite frankly a third form economics student who is deaf, dumb, blind and insulated from reality with a 100 mile layer of pink batts would know more than him about the subject he thinks he is so proficient at.




The man buys carbon credits to offset his "carbon footprint" for goodness sake!

The reason for my vitriol this time?

His nonsensical piece on National deferring payments into the Cullen Fund in Stuff today.

This master of economic sleight of hand wants our Government to borrow billions to fund pensions:

They are wrong on both points. This is a once-in-a-generation time to be investing, particularly if you are an entity with low debt, secure cashflow and a long-term strategy. The great global economic contraction has savaged prices of shares, property, businesses and other assets. Buyers might have to ride out some short-term corrections but they can reasonably expect handsome long-term gains.

Oram would have us borrow to buy investments? Its a MAD, MAD, MAD MAD ... plan! In these current times debt must be lowered. Oram is 100% correct when he says people should buy assets when they are beaten down in value. I have over the years but not with borrowed money Rodney! Higher debt to fund this scheme will increase interest rates for New Zealand borrowers.

In addition to this Oram is really making a mountain out of a molehill on the decision to defer payments to the scheme. What he fails to mention is that the scheme funds a very tiny portion of what is needed for retirees:

Connecting it with superannuation, though, was entirely political. Even Dr Cullen made clear there was no link to future entitlements and future taxpayers were always going to have to meet 89% of costs.

Bill English’s decision not to borrow for the fund will increase that by just 3%.

Moreover, in national-income terms, Mr English’s decision relates to just 0.2% of GDP from 2030.

It is ridiculous to worry about such a number. The smallest economic shock over the next two decades – positive or negative – could double or eliminate it, as could small productivity changes. Matthew Hooton, NBR 2009.

The vast bulk of retirement funding then will come from the tax base at the time and that is where growing the economy comes in and is clearly vastly more important than taxing workers heavily now to fund such a small addition to retirees income in 20 years time.

The best solution of course is for individuals to save and pay for their own retirement. With a taxpayer funded scheme payments are subject to interference from all political colours and with the tiny contribution from the Cullen Fund that is subject to inefficient bureaucracy and cost and inexperienced individuals investing money on your behalf - something that Rodney skirts over without nary a whisper- there is no guarantee that any money will be there when you retire anyway.

Labour would have deferred payments into the fund. That economic dipstick Michael Cullen designed the fund for such economic circumstances as we are suffering under now.

Oram's columns have been quoted by Labour in Parliament ad nauseum recently so it is clear Labour are taking their playbook from commentators like Oram or vice versa:

Hon PHIL GOFF: It made $1.75 billion. There is nobody in this House who does not understand that the best time to invest funds is when the market is at, or close to, the bottom. By the National Government’s theory, New Zealand homeowners should be selling their house now and buying it back when the prices have risen! That is National’s philosophy. Kiwis know that it makes no financial sense, so why cannot the Prime Minister and the Minister of Finance see that? Parliamentary Budget Debate, May 2009.

It doesn't really make allot of sense now does it? Would you borrow right now to buy shares?

The answer, if you are sane, is a clear NO.

Both Labour and Lefties like Oram are politically motivated and economically illiterate. We cant borrow and hope, we must instead grow the economy and accept personal responsibility for funding our own retirement.

Any other way is dishonest and as history has shown us will fail.

Recent Share Investor Reading

• Danny Diab & Restaurant Brands
• "Government Motors" unlikely to survive
• Stock of the Week: The Warehouse Group
• Freightway's Capital Raising more of the same crap
• Stockmarket Education: How do you buy shares?
• Analysis - Mainfreight Ltd: FY Profit to 31/03/09

Discuss this topic @ Shareinvestor.net.nz

Related Amazon Reading


Tell 'em "That's MY Money You're Messing With!": Retirement Funding: Untold risk and mismanagement and how to avoid it by Gordon W Bell
Buy new: $21.95 / Used from: $6.50
Usually ships in 24 hours

c Share Investor 2009

Rod Oram: On the Prius to Obscurity

Let me just say that Rod Oram is probably a very nice guy if you get to know him on a personal basis. There my praise for him ends however.

Mr Oram has the distinction of being widely published, I do not. He is influential because of that, I am not.

His business columns are syndicated by the left wing media and snapped up by an unsuspecting and intellectually lazy New Zealand public because the alternative means you have to have the ability to think and reason rather than soak up garbage like a wet liberal sponge.

Because of this and his views about so-called "global warming" he is also a very dangerous person, as are all advocates of GW in all their various political colours and stages of delusion.

The GW agenda is being pushed as a means of control, higher taxes and will be fatal for business and the global economy when emission trading schemes inevitably collapse in a heap of harmless (in terms of the gas not the fallout for the global economy) carbon dioxide.

Last week, evidence of fraud, lies and cover-ups from the GW pushers themselves - via leaked emails and better known as Climategate - was uncovered that should completely blow GW and its followers out of the water but Rod Oram chose to ignore this last Sunday when yet another diatribe from him about GW pushed the line that he keeps trying to sell his readers - that GW is the most important thing since that first atom exploded quite some time ago and you better be on board the GW Prius or by god you will not be the chosen one and you are gonna go straight to hell in your Range Rover Vogue.

In New Zealand NIWA has been fudging figures to suit their purposes and Mr Oram would be aware of this.

Why then does he continue to push this line?

Is he stupid? I don't think so.

Is he ignorant of the facts? Surely he cant be? He has Google on his computer and can read the scientific evidence against GW.

Does he have an agenda? Like most of us, yes he does, but his agenda is hidden under reams of Climate-babble.

But why?

Well, like most other proponents of GW there is a question of dirty filthy capitalistic profit ( Oh you are such a sarcastic bastard Darren! ) One can only imagine then that for Mr Oram it is also about money.

Al Gore, the number one peddler of the GW myth has become very rich from his connection to the GW religion and the conflicted business interests that he invests in.

We know Mr Oram offsets his "Carbon Footprint" by buying carbon credits when he jets off to the next GW conference in Brazil, London or Wairoa and we also know he pushes "Green Technology" and a fancy new way to run the global economy - see "Green Jobs" for an explanation - at every opportunity.

How much money does Mr Oram have invested in the "Green Economy", an "economy" that relies upon the GW machine to continue to function regardless of the fraud on which it is clearly based?

We don't know but I challenge Rod to come clean and let us know in one of his future columns on this topic just what financial interest he has in keeping the GW windmill spinning.

Until then anything he writes should be viewed with a least suspicion and at worst contempt.

I am convinced that contempt is the most appropriate adjective for him and he deserves the obscurity he so clearly craves as the thread continues to unwind on the emperors clothes.


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c Share Investor 2009