NZX press release: AIA directors recommend shareholders sell

Auckland International Airport directors are split on the merger with CPPIB.
Previously they have been recommending shareholders hold their shares.

Media comment:

Board says sell to Canadians
Directors recommend Canadian bid for Airport

Watch Video: Tony Frankham on why he opposes the bid




AIA, 8.57 am NZ time, AIA board recommends shareholders sell

The directors of Auckland Airport today unanimously recommended that shareholders should sell their shares into the takeover offer from the Canada Pension Plan Investment Board (CPPIB) for $3.6555 per share (less the 5.75 cents per share interim dividend to be paid next month ).

However directors are not unanimous on whether shareholders should vote in favour or against CPPIB acquiring up to 40 per cent of the company.

A majority of the Airport board, comprising Tony Frankham, Keith Turner, Lloyd Morrison, and John Brabazon, are maintaining their recommendation for shareholders to vote against CPPIB acquiring 40 per cent of Auckland Airport as they believe the shares in the company are likely to be worth more longer term without CPPIB involvement.

Two directors, Richard Didsbury and Joan Withers, believe that shareholders should vote in favour of the offer as the price offered by CPPIB is unlikely to be available to shareholders in the foreseeable future.

For the transaction to proceed, the Takeovers Code requires a majority of shareholders who vote to approve CPPIB acquiring a 40 per cent stake. If this approval is not gained, the bid cannot proceed, regardless of the number of shares offered for sale.

Chairman of the board, Tony Frankham, said all the directors had carefully considered whether to revise their advice to shareholders on both elements of the transaction in light of the change in financial markets.

"All directors acknowledge that the market conditions have changed significantly since this bid was announced and this key factor has given rise to the need for directors to update their earlier recommendations.

"We all agree that shareholders would be unwise not to realise part of their holding at the favourable partial offer price if the partial offer receives approval to proceed.

"Each director has also carefully considered a wide range of other relevant factors in reaching their own decision in relation to the "voting" element of this bid.

"Directors who continue to recommend that shareholders should object to the takeover are of the view that the long term value of Auckland Airport has not fundamentally changed.

"They regard Auckland Airport as a strategic asset with long term horizons and consider ownership should not be determined by shorter term market fluctuations.

"They believe that over the longer term the value of Auckland Airport shares is likely to be greater without CPPIB having a 40 per cent stake which gives it effective control."

Mr Frankham said those board members have consistently said that the partial offer does not fully reflect the longer term value of Auckland Airport and despite further presentation from CPPIB do not accept that their introduction as a significant minority shareholder will assist the company in any material manner.

"As a result they maintain their view that, when considered on a longer term basis, on balance the CPPIB partial offer is not in the best interests of shareholders."

He said that Richard Didsbury and Joan Withers believe that the price offered by CPPIB to shareholders for some of their shares is unlikely to be available for the foreseeable future.

"They believe that the partial offer of $3.6555 per share (less the 5.75 cents per share interim dividend to be paid next month) is even more attractive today, at a time when shareholders are faced with uncertain global conditions that may continue for some years to come.

"The impact of those conditions does in their view put downward pressure on the valuation of the company and given global economic conditions, a more favourable offer in all aspects is unlikely to be available to shareholders in the near term.

"Therefore on balance, they feel that the certainty of selling 40 per cent of the company for significantly more than its current trading price outweighs the disadvantages of bringing on board a significant minority shareholder without material aeronautical or tourism connections.

"These directors therefore recommend that shareholders vote to approve the offer and sell their shares".

As already advised, the directors consider it is not possible to identify an appropriate party and present an alternative proposal to shareholders before the expiry of the CPPIB bid period on 13 March.

Mr Frankham said that if the CPPIB bid fails, the board will continue to seek a suitable cornerstone shareholder to take a smaller stake in the company however that process may take some time given the current state of financial markets.

"We envisage that it will continue to be challenging to meet all of the variously stated objectives of shareholders in relation to percentage holding, capital restructuring and non dilution of the Council interests," he said.

- ends -

For further information, please contact:
Lucy Powell
Head of Communications
+64 9 256 8866
+64 21 995 710

Footnote:
Auckland Airport has declared a fully imputed interim dividend of 5.75 cents per share payable on 12 March 2008 to shareholders on the register as at 7 March 2008. As the interim dividend will be paid prior to the close of the CPPIB offer, decreasing the equity value of Auckland Airport by an equivalent amount per share, the offer price will be adjusted in accordance with the terns of the takeover offer by the amount of the interim dividend. Accordingly, the offer price will be reduced by 5.75 cents per share from $3.6555 per share to $3.5980 per share. It is expected that the final dividend will be reduced by an amount of 2.00 cents per share, reflecting the increased interim dividend paid to shareholders now.



Related Share Investor reading

AIA profit stays grounded
Softening opposition to CPPIB bid for AIA
Directors of AIA bribe brokers not to sell
What is Auckland Airport worth to you?
Second bite at AIA by CPPIB might just fly
AIA new directors must focus on shareholders
Auckland Airport merger deal nosedives
The Canadians have landed
AIA incentive scheme must fly out the window
Government market manipulation over AIA/DAE deal
DAE move on AIA: Will it fly?

Disclosure: I own AIA shares


Links c Share Investor 2008

Money Managers Saga- 3 story wrap

Since I have been following this evil genius for years now and reporting on him, I see it only prudent to re-post here 3 stories out over the same weekend.

Incidentally the 2nd story from the Sunday Star Times is about Dougie selling up the company.

A smooth transition of clients money to his back pocket then out the door huh Doug?

You should be in the slammer mate.

c Share Investor 2008



Out of step?

The Dominion Post | Saturday, 23 February 2008

Investors in First Step are getting worried about their money, says Jon Hoyle.

After a year with their savings locked up, investors in Money Managers' former flagship - the Australian unit trusts scheme First Step - are becoming increasingly worried they won't get all their money back.

Some argue Money Managers owner and founder Doug Somers-Edgar should cover any investor losses in the scheme.

The company admits the global credit crunch has affected the cashing-up of First Step's assets.

First Step's trusts were closed in November 2006 with $457 million of 7000 investors' money on the books. Of this amount, $330 million was investor capital and $127 million was in effect accrued interest. By December 2007, $186.5 million had been returned to investors in dribs and drabs, based on how much money, how long and in which trusts they had invested.

Another payment was made last week, but The Dominion Post understands it was $8 million less than the expected $25 million. A Money Managers spokesman said he did not know the latest payout's amount but "could" find out. Follow-up calls were unanswered by press-time.

First Step was launched in 2000, taking advantage of a loophole in Australian and New Zealand tax law. Investors began withdrawing in increasing numbers after Finance Minister Michael Cullen changed tax legislation in 2004.

The Dominion Post has spoken to nine mainly elderly First Step investors either considering or planning to take court action against those involved in the scheme to recover claimed losses. One says he had $15,000 written off in December and predicts he is at risk of losing a further $65,000, the way the funds' liquidation is going.

He said he had tried to get his money out before the funds closed, but after three months of delays, the money was locked in till liquidation could be completed.

David Peach, owner of a public relations company representing Mr Somers-Edgar, said when originally asked about investor losses: "What's been lost? No one knows if there will be losses or not." Long-time First Step critic Chris Lee, a Kapiti Coast financial adviser, was unconvinced. "Read the last accounts. You can't argue that nobody has lost money - that's just horse manure," he said.

In December, the funds' trustee Calibre Asset Services warned that $38 million was unlikely to be returned to investors and a further $109 million was classified as being under "fundamental uncertainty".

In the fundamental uncertainty basket was $79 million owed by Geotherm Group (now in receivership) for the development of a geothermal power plant near Taupo.

Mr Peach said stress on credit markets had had a negative impact on cashing up the trusts' assets as it was more difficult for potential buyers to get capital.

The lawyer for one group of investors, James MacFarlane, said the global credit squeeze or any other "adjusted macroeconomic events are not an effective defence". The money invested in First Step passed through several entities owned or controlled by Mr Somers-Edgar and Aucklanders Russell Tills and Gerald Sidall. Mr Tills and Mr Sidall resigned from companies related to the funds in the months after their closure.

Both Mr Lee and Mr MacFarlane said the profit made on these transactions should be used to cover any investor losses.

One investor noted the NBR Rich List had estimated Mr Somers-Edgar's personal wealth had doubled to $120 million between 2006 and 2007.

All investors spoken to asked that their names not be published, citing fears over possible litigation.

Money Managers has been quick to hit back at critics. In 2005, it and Mr Somers-Edgar sought $500,000 in damages from Mr Lee for articles on his website. The claim was discontinued.

The same year, the Consumers Institute published a report critical of Money Managers and First Step. The institute's then chief executive, David Russell, said Mr Somers-Edgar called for his resignation and then wrote to the institute's board demanding he be sacked.

Lawyers for Money Managers and First Step's (Mauritius-registered) trustee Calibre Asset Services have said they are considering a complaint to the Press Council over a Dominion Post report published this month.

Money Managers has described Mr MacFarlane's talking to the paper about his plans to sue the Money Managers and other parties on behalf of investors in First Step as having a "sinister implication".

Mr Somers-Edgar would not comment when contacted earlier this month. But a statement from Mr Peach attacked Mr MacFarlane for not revealing the identities of those he is acting for, what the claims of action are and when papers will be filed with the court.

Mr Peach said: "If his implication here is some impropriety over management of the funds, then he should employ a lawyer capable of sifting fact from fiction and speculation." He compared Mr MacFarlane's approach to an "American-style touting strategy".

Mr MacFarlane said he would not provide details on causes of action as it would help Money Managers' lawyers prepare their defence, but his clients' cases had been fully analysed and the causes of action clearly identified.

He alleges that Money Managers had run "an elaborate funding, marketing and fiduciary and sales structure to raise funds from non-low-risk investments", which included lending money to companies associated with Mr Somers-Edgar and other principals in First Step. "This operated outside the continuous disclosure and insider trading regimes imposed by the Securities Markets Act," he claims.

He has also suggested Australian regulators have an interest in First Step, though Money Managers has dismissed this.

Mr Peach said all practices relating to First Step had been in accordance with the law and that the majority of investors had made "very good" returns.

A key concern of First Step investors was the degree of related-party lending.

First Step accounts for the 2007 financial year showed significant losses attributed to related-party lending, whereby loans are made between groups and companies that are closely linked. During 2007, the trusts wrote off advances and loans worth $400,000 to Quadrent Finance and $394,000 to CTT Finance Holdings (in receivership).

In 2006, $1.375 million of Quadrent loans were written off.

More than $60 million of loans were made to Club Finance, a used-car loan company. It is half owned by Mr Somers-Edgar.

Last year, Club Finance settled out of court with the Commerce Commission, agreeing to refund $788,000 of redundancy insurance premiums it charged 1500 unemployed borrowers.

Jonathan Glass, an adviser for Gareth Morgan Investments, said related-party lending was considered a high-risk game. It should generally be a red flag for investors looking at investing with any company.

Change afoot at Money Managers

By ROB STOCK - Sunday Star Times | Sunday, 24 February 2008

Money Managers founder Doug Somers-Edgar is selling up, releasing the iron grip he has held over the firm since it was launched in 1986.

The Star-Times understands Somers-Edgar is selling stakes in the financial planning business to Money Managers' chief executive Alasdair Scott, franchisees, and NZ Funds Management owned by long-time Somers-Edgar business associates Gerald Siddall and Russell Tills.

Money Managers' franchisees are telling clients the Money Managers model, involving the marketing of products from related parties, will be watered down, with the firm recommending more products from unrelated companies.

Related parties currently providing products and services to Money Managers include Orange Insurance, Orange Finance, Heritage Trustee Company, Dominion Funds and Matrix Funding Group, all ultimately 100% owned by Somers-Edgar.

Some of these products involved multiple layers of related party connections, such as the First Step products which are now being wound up with some Money Managers' clients facing losses. Money in the trusts was lent to various businesses, including Club Finance (now in receivership), a used-car dealer in South Auckland which Somers-Edgar half-owns.

Because Money Managers is such an effective sales channel, the unrated Orange Finance can offer investors a two-year rate of 8.55%, just 0.1 percentage point higher than a similar investment at the safest New Zealand bank, and 1.45 points less than South Canterbury Finance.

Scott would not confirm details of the deal, which is due to be signed in early March, or whether Somers- Edgar would retain a stake in the business. He said an announcement would be made when it was concluded.

Scott told the Star-Times in August 2006 that he was championing change in the business, although sources within the company say franchisees frustrated by stalled growth at Money Managers have been agitating for change.

On its website, Money Managers claims to have 35,000 clients and $2 billion under advice. They are the same figures Money Managers was giving in mid-2004.

Currently four of the 100 shares in Money Managers are owned by Somers-Edgar in his own name. The other 96 are owned by Edgar Holdings, a company with 30,000 shares, all owned by Somers-Edgar and his wife Anne.

In recent years Somers-Edgar has taken a low-profile role at Money Managers.

He is a polarising figure who grew to fame through tirelessly fronting seminars around the country and self-promotion on radio.

Discussions around the future of the firm include operating a flat-fee model where all commissions on products are rebated entirely to clients.

National Business Review

First Step: Where did the money go?

by Helen Malmgren

	Doug Somers-Edgar

Late last year, a strange thing happened at Money Managers, the financial advisory company owned by Doug Somers-Edgar. One of the company’s franchisees – someone whose entire business consisted of selling Money Manager’s investment products – suddenly went on a campaign against them.

This franchisee was particularly critical about what he called “Money Manager’s latest failure,” the First Step trusts, which have been closed and winding down since December 2006.

He began his campaign by texting at least one reporter at a major newspaper, anonymously. Then he sent letters to media and finance outlets, again anonymously. Then he sent out copies of First Step’s financial statements for 2007 – and that’s when he got a reaction.

A number of news outlets, including NBR , ran stories about how First Step expected to lose about $38 million of investors’ money because of bad debts. About a third of its investors’ original capital, $108 million, was in loans and advances that couldn’t be evaluated because of a “fundamental uncertainty.” About $63 million of investors’ money was in a used-car loan company that was being investigated for possible illegal activities.

The articles all ran in the same week in mid-December, just after investors received a letter from First Step’s trustee confirming the expected loss of the $38 million and the questions about the car loan company.

According to First Step, the franchisee who sent the information to the media has since sold his Money Managers business and moved on. But the revelations about the trusts’ accounts continue to infuriate investors.

“I told them to get stuffed,” said 79-year-old Lindsay Taylor, who together with his wife invested about $270,000 in First Step. Mr Taylor said he’d always thought their money was being invested in property mortgages.

“And they put our money into a finance company lending to unemployed people to buy second-hand cars?” he said. “How many other companies associated with this scheme are screwball?”

Write your own rules

Go to Money Manager’s website and you’ll find a dreamy-looking picture featuring what appears to be the company’s motto: “write your own rules.”

And that’s just about what Mr Somers-Edgar did when he started the First Step trusts.

Unlike most financial investments which advertise their independence and objectivity, First Step was built on a series of inter-related companies and related-party deals which the trusts’ promoters not only disclosed, but used as a selling point to investors.

According to First Step, related-party deals are a means by which the trusts can control projects they’ve lent money to.

The man who would appear to have the most control over First Step’s projects is Mr Somers-Edgar. He’s the sole director and shareholder of Money Managers, the exclusive promoter of the First Step trusts. He’s the sole director and shareholder of Financial Trust Ltd, which administers the trusts and makes decisions about what loans to make with investors’ money. He’s the sole director and shareholder of Matrix Funding Group, which manages the First Step loans.

And, through a series of related-party transactions, he’s a director and shareholder at several businesses that have gotten some of First Step’s biggest loans.

It was a surprise, then, when NBR asked for an interview with Mr Somers-Edgar and was told that “he’s simply not involved in the winding down of the First Step trusts.”

With all of those directorships, shouldn’t Mr Somers-Edgar be involved in the winding down of the First Step trusts? Shouldn’t he be involved in his own companies that owe money to the First Step trusts?

Yes he should be, according to Rob Rendle, senior solicitor at the Companies Office.

Under section 128 of the companies act , Mr Rendle said, “you can’t just walk away and say you don’t know anything about [your company.]” A director “can’t delegate the overarching management function” to someone else.

But it’s easy to see how Mr Somers-Edgar might be tempted to delegate some of his many directors’ roles to someone else. Because at this point, some of the related-party deals he made during First Step’s early days have become sore points for investors during its wind-down.

Take CTT Finance Holdings, the parent company of CTT Financial Services, CTT One, Paragon Factors and Dental Finance. Mr Somers-Edgar is a shareholder in all five of these companies and until 2002 he was also a director of all of them.

In 2004 they all failed, owing about $21 million to the First Step trusts.

By last December, CTT had only paid back about $9.5 million of those loans and appeared to be nearly out of assets.“There will be insufficient funds realized from the receivership to repay the secured debt in full,” wrote CTT’s receiver Murray Allot .

In a written comment, Phil Epps, CEO of the Edgar Family Trust and a key player at First Step, said that First Step investors didn’t lose any money when CTT failed to pay the remaining $11.5 million of its debt to the trusts. Instead, he said, that loss was mostly covered by “retained earnings” that First Step directors might otherwise have taken as dividends.

But that’s not the case with Club Finance, a company which First Step admits will probably cost investors millions.

It wouldn’t be the first scandal for Club Finance, a used-car loan company located in Mt Wellington, Auckland.

In September 2006, the company was the subject of a newspaper article entitled “Solo mum owes $35,260 on $9,000 car .” The article told the story of a young woman with a sick child who’d allegedly been tricked into signing an unfair contract with Club Finance.

In May 2007, the company got more unwanted attention when the Commerce Commission made it repay $788,000 worth of redundancy insurance which it had sold to unemployed car buyers.

One article about the repayments noted that more than half of Club Finance’s customers were unemployed.

Mr Somers-Edgar has been a director and 50 per cent shareholder of Club Finance since it started business in 2003. But when the story about the Commerce Commission broke, representatives of Money Managers told TV reporters he “had nothing to do with the running of the business .”

And today, when it looks like Club Finance won’t be able to repay the $63 million it owes First Step, Mr Somers-Edgar has all the more reason to distance himself from his car finance company.

In a written statement, Mr Somers-Edgar’s spokesman Phil Epps told NBR the accounting firm KordaMentha is now overseeing Club Finance.

He added that “we are in the process of providing further information to the appropriate [regulatory] bodies.”

He also pointed out, somewhat cryptically, that “following the appointment of KordaMentha, [Club Finance’s] managing director and CEO, Philip Markwick, relinquished stewardship” of the company.

Meanwhile, Mr Markwick says he can see which way the wind is blowing.

“They’re looking for someone to blame,” he told NBR, “but there was full disclosure at board meetings, governance meetings and regular meetings with Doug Somers-Edgar.

“I also met informally with Doug on a regular basis, and with Phil Epps.”

Mr Markwick blamed Club Finance’s problems on Mr Somers-Edgar’s decision to cut off its sole source of funding, the First Step trusts.

He also said he made Mr Somers-Edgar “fully aware of the ramifications” of that decision – namely, that it could potentially ruin Club Finance.

Sour deals

Mr Markwick isn’t the only one who’s accused Mr Somers-Edgar’s team of mismanagement.

“I’ve got to get these guys out of our business!” Alistair McLachlan shouted into the phone, when NBR called him about his company Geotherm.

In December 2006, Mr Somers-Edgar’s managing company, Matrix, put Geotherm into receivership after it defaulted on a First Step loan repayment. Two years later, the company still owes First Step investors about $76 million.

When it went into receivership, the company was working on a geothermal energy project near Taupo.

Last June, the receivers reported that while “the only asset realized to date is a motor vehicle sold,” they were “actively pursuing a recapitalization or sale of the company.”

But Mr McLachlan, who was the founder and driving force behind Geotherm, insisted the project had only been “held back” by Matrix.

“Once I can get them out of here, then it’ll go ahead,” he said.

Levels of Risk

According to Mr Epps, the problems with Geotherm and Club Finance are what forced First Step to set aside $38 million for expected losses.

But the question many investors say they want answered is how their money ever got into those deals in the first place.

The First Step trusts were designed and marketed on a graduated-risk model. According to First Step’s investment statement, the highest level of the four trusts would invest in mezzanine finance and subordinated debt projects, “suitable for investors who accept a high degree of credit risk to enhance returns.”

But the statement describes the lowest level trust – the Secured Mortgage Trust – simply as an investment that “include[s] property development loans supported by a first or second mortgage over the development site.”

So why did all four levels of trusts invest in Club Finance’s car loans, Geotherm’s energy project and CTT’s financial services?

According to a public relations representative for First Step, the trusts’ managers invested in those projects to diversify the trusts. He pointed out that, until First Step closed, no investor ever lost money in the trusts.

As for Club Finance, he said, back in 2003 car loans were considered an excellent investment.

Which raises another, more difficult, issue for investors.

As First Step winds down the market is turning sour – and that makes it harder to recover their money.

Just take a look at the property development at 19 Birdwood Crescent in Parnell, which currently owes the First Step trusts about $19 million. The building is complete, the units in it are sold, and the project is simply awaiting paperwork from the council.

Nevertheless, First Step’s administrator has taken the developer to court . Why?

According to the trustee for the project, “the court case is hot wind…They’re taking action to be seen to be doing the right thing for investors.”

When it’s time to repay the loan, it will have to be renegotiated.

“Everyone’s going to get hurt a bit,” he said. “The whole market’s in the same position. It’s a mess.”

Related Share Investor Reading

The "New" Money Manager's Investment Vehicle still tainted by its past
Don't forget Money Managers
Orange Finance collapse should turn investors red, with rage



Related Amazon Reading


Madoff: Corruption, Deceit, and the Making of the World's Most Notorious Ponzi Scheme by Peter Sander
Buy new: $10.17


Links c Share Investor 2007-2009

State backed sub prime mortgages in New Zealand a recipe for disaster

If large banking institutions like Countrywide, Citibank &
Bank of America are affected by todays sub prime mess why
is the New Zealand Labour Government about to embark on
our own sub prime fallout in the future by lending taxpayer
money to individuals to buy houses who wont be able to pay
back the loans?

"government is not the solution to our problem; government is the problem".

Ronald Reagan, Inaugural Address
West Front of the U.S. Capitol
January 20, 1981.


The fuss made last Tuesday over Helen Clark's "state of the nation" address by politicians on the left and their supporters has left me dazed and confused.

There was much talk of the "problems" that must be solved post a 2008 election and also that the Labour Government had worked hard for the last 8 and a half years to solve many of the problems that faced the nation over that time.

Surely if the hard work had been truly fruitful we really wouldn’t be facing any major problems now?

That’s where I got confused, the dazed part came after Helen Clark’s address but more about that below.

Ronnie was and is right, Governments, of all colours, make problems and then politicise these problems in the media when they offer to “fix” them.

Labour though has been the biggest problem maker in this small countries political history.

The most public example of that lately has been the anti graffiti legislation. Something made worse by Labour’s casual attitude to law enforcement and socialist family centered legislation like family group conferences instead of jail time or appropriate punishment are the problem.

The legislation is actually there already, but it is election year and Labour are merely grandstanding for votes.

You can pick through any of the huge problems that this Motley Crewe have either engineered or been responsible for and it is quite clear that Labour cannot “fix” what it has fucked up.

From the crippled health “service”, crumbling education standards, record high crime figures to record numbers of New Zealanders on welfare.

I would like to dig deeper on a future “fix” that Labour seem stuck on.

In Clark’s verbose and unsustainable “address to the nation”, she mentioned the word “sustainable” more than a dozen times, she made a feature of her governments efforts to fix the “housing unaffordability crisis”, whatever the hell that means.

The fact is, houses have always been “unaffordable” but in this day and age it seems unacceptable to those on the left for people to start at the bottom, earn their own money, save for a house and then buy one themselves. Logical isn’t it but it worked for us in a previous less politically correct life.

"The nine most terrifying words in the English language are, 'I'm from the government and I'm here to help".

Ronald Reagan, 1984

Don't worry citizens, Labour is going to help you buy a house, providing taxpayer funded loans or “shared equity” subsidized hand outs to those on “low wages”, in most cases up to 100% of the value of the house!

To fix the “housing unaffordability crises” Labour also propose to build more cheap taxpayer funded homes in increased densities, you know, like the ones they built in the 1930s onwards, the ones that still breed poverty, crime, dependence and hopelessness. Most sensible individuals call those housing developments slums.

Little boxes made of "ticky tacky" should remain as
part of a song or on the monopoly board, not causing
repeated social decay generation infinitum as State
housing always turns out to be.

They will go further than that though. They will force local government to get involved and local housing commissions set up, ones that in the United Kingdom in the past were filled with corruption and favouritism and led to the current social mess they are having. Tower blocks of hell filled with poor dependant UK nationals and disaffected immigrants, some with Koranic scythes to grind.

It’s a fact that slums don’t and never have worked. Labour propose to follow this well worn path of failure, evidenced here and in every other nation. If they did work we wouldn't still have them decades after they were introduced.

You want to know the really funny thing about Labour’s ultimate “solution” to this thing they call a “home unaffordability crisis”?

They helped cause it!

Record high taxes have burdened lower paid workers with low take home wages, while those same record high taxes have funded a government that have spent the proceeds recklessly on social interference and handouts to those undeserved of taxpayer largesse.

Even a third form economics student at the bottom of a class full of deaf and dumb mutes could tell Michael Cullen that his spending was inflationary.

That reckless spending has led to record high mortgage rates, the highest in the “developed world” and increases in local rates, petrol and food prices and all the essentials of life.

Not much left over for mortgage repayments huh Helen and Mike?

I haven even got to the main thrust of this piece though(I’m sure many of you lefties wish you hadn’t read this far-I hope you can grasp what it is I am saying)

By attempting to “fix” this self made “problem” Labour will set up the economy for a fall, one such fall that is having repercussions on us at this present moment.

I’m talking about the sub-prime mess in the United States.

The sub prime fallout was basically caused by defaults in fringe private institutions and Freddie Mac and Fannie May, two state run lenders, lending money to those borrowers in the USA that wouldn’t normally be able to get funding to buy a house.

Surprise, surprise, they eventually couldn’t pay back the loans. Labour propose to State back these same sorts of loans because they are being politically and philosophically motivated to get another 3 years at plundering the treasury benches.

If we in New Zealand are unlucky to get this vermin voted back in again will the same government propose to “fix” our own sub prime fallout when it inevitably happens here and will we forget that they caused the problem in the first place?

I question the veracity and honesty of Labour’s position on this and urge them to seriously rethink a socialist backed dream of all of us owning a state funded house. I question a New Zealand mainstream media, especially the business and finance sector, that would let this lunatic idea go unscrutinised and unaddressed.

Here at Political Animal and Share Investor, we see our job as that of informing readers of things that are not ordinarily looked at or maybe looked at in a deeper or alternative way. A commonsense approach if you like.

Labour’s intention to foist this future “sub prime” housing fallout on Kiwis should be a major concern to all sectors of the economy, from business, to the higher and lower wage earners. It will impact on all of us if their plan gets snowballing.

The push into the Sub Prime lending market in New
Zealand will affect more than house prices, the economy
will be seriously affected when the fallout comes, and it will.

Look around now. The US sub prime fallout is already negatively affecting your share portfolio, your mortgage rates and is having a serious impact on business lending and therefore business and economic growth.

Imagine if you will the direct impact it will have on a small fragile economy like New Zealand.

The word serious would be understatement.

“The best minds are not in government. If any were, business would hire them away”.

“Don't be afraid to see what you see”.

Ronald Reagan

Related Political Animal and Share Investor reading

Political Animal Blog

Labour's Socialist Peril
Labour's State control out of control
Pointing fingers in the playground

Share Investor Blog

Current credit crunch a blessing in disguise
What happened to risk?
Share Investor Friday free for all: Edition 12 - 2nd story "I'll be baacck"


c Political Animal & Share Investor 2008

State backed sub prime mortgages in New Zealand a recipe for disaster

If large banking institutions like Countrywide, Citibank &
Bank of America are affected by todays sub prime mess why
is the New Zealand Labour Government about to embark on
our own sub prime fallout in the future by lending taxpayer
money to individuals to buy houses who wont be able to pay
back the loans?

"government is not the solution to our problem; government is the problem".

Ronald Reagan, Inaugural Address
West Front of the U.S. Capitol
January 20, 1981.


The fuss made last Tuesday over Helen Clark's "state of the nation" address by politicians on the left and their supporters has left me dazed and confused.

There was much talk of the "problems" that must be solved post a 2008 election and also that the Labour Government had worked hard for the last 8 and a half years to solve many of the problems that faced the nation over that time.

Surely if the hard work had been truly fruitful we really wouldn’t be facing any major problems now?

That’s where I got confused, the dazed part came after Helen Clark’s address but more about that below.

Ronnie was and is right, Governments, of all colours, make problems and then politicise these problems in the media when they offer to “fix” them.

Labour though has been the biggest problem maker in this small countries political history.

The most public example of that lately has been the anti graffiti legislation. Something made worse by Labour’s casual attitude to law enforcement and socialist family centered legislation like family group conferences instead of jail time or appropriate punishment are the problem.

The legislation is actually there already, but it is election year and Labour are merely grandstanding for votes.

You can pick through any of the huge problems that this Motley Crewe have either engineered or been responsible for and it is quite clear that Labour cannot “fix” what it has fucked up.

From the crippled health “service”, crumbling education standards, record high crime figures to record numbers of New Zealanders on welfare.

I would like to dig deeper on a future “fix” that Labour seem stuck on.

In Clark’s verbose and unsustainable “address to the nation”, she mentioned the word “sustainable” more than a dozen times, she made a feature of her governments efforts to fix the “housing unaffordability crisis”, whatever the hell that means.

The fact is, houses have always been “unaffordable” but in this day and age it seems unacceptable to those on the left for people to start at the bottom, earn their own money, save for a house and then buy one themselves. Logical isn’t it but it worked for us in a previous less politically correct life.

"The nine most terrifying words in the English language are, 'I'm from the government and I'm here to help".

Ronald Reagan, 1984

Don't worry citizens, Labour is going to help you buy a house, providing taxpayer funded loans or “shared equity” subsidized hand outs to those on “low wages”, in most cases up to 100% of the value of the house!

To fix the “housing unaffordability crises” Labour also propose to build more cheap taxpayer funded homes in increased densities, you know, like the ones they built in the 1930s onwards, the ones that still breed poverty, crime, dependence and hopelessness. Most sensible individuals call those housing developments slums.

Little boxes made of "ticky tacky" should remain as
part of a song or on the monopoly board, not causing
repeated social decay generation infinitum as State
housing always turns out to be.

They will go further than that though. They will force local government to get involved and local housing commissions set up, ones that in the United Kingdom in the past were filled with corruption and favouritism and led to the current social mess they are having. Tower blocks of hell filled with poor dependant UK nationals and disaffected immigrants, some with Koranic scythes to grind.

It’s a fact that slums don’t and never have worked. Labour propose to follow this well worn path of failure, evidenced here and in every other nation. If they did work we wouldn't still have them decades after they were introduced.

You want to know the really funny thing about Labour’s ultimate “solution” to this thing they call a “home unaffordability crisis”?

They helped cause it!

Record high taxes have burdened lower paid workers with low take home wages, while those same record high taxes have funded a government that have spent the proceeds recklessly on social interference and handouts to those undeserved of taxpayer largesse.

Even a third form economics student at the bottom of a class full of deaf and dumb mutes could tell Michael Cullen that his spending was inflationary.

That reckless spending has led to record high mortgage rates, the highest in the “developed world” and increases in local rates, petrol and food prices and all the essentials of life.

Not much left over for mortgage repayments huh Helen and Mike?

I haven even got to the main thrust of this piece though(I’m sure many of you lefties wish you hadn’t read this far-I hope you can grasp what it is I am saying)

By attempting to “fix” this self made “problem” Labour will set up the economy for a fall, one such fall that is having repercussions on us at this present moment.

I’m talking about the sub-prime mess in the United States.

The sub prime fallout was basically caused by defaults in fringe private institutions and Freddie Mac and Fannie May, two state run lenders, lending money to those borrowers in the USA that wouldn’t normally be able to get funding to buy a house.

Surprise, surprise, they eventually couldn’t pay back the loans. Labour propose to State back these same sorts of loans because they are being politically and philosophically motivated to get another 3 years at plundering the treasury benches.

If we in New Zealand are unlucky to get this vermin voted back in again will the same government propose to “fix” our own sub prime fallout when it inevitably happens here and will we forget that they caused the problem in the first place?

I question the veracity and honesty of Labour’s position on this and urge them to seriously rethink a socialist backed dream of all of us owning a state funded house. I question a New Zealand mainstream media, especially the business and finance sector, that would let this lunatic idea go unscrutinised and unaddressed.

Here at Share Investor and Political Animal , we see our job as that of informing readers of things that are not ordinarily looked at or maybe looked at in a deeper or alternative way. A commonsense approach if you like.

Labour’s intention to foist this future “sub prime” housing fallout on Kiwis should be a major concern to all sectors of the economy, from business, to the higher and lower wage earners. It will impact on all of us if their plan gets snowballing.

The push into the Sub Prime lending market in New
Zealand will affect more than house prices, the economy
will be seriously affected when the fallout comes, and it will.

Look around now. The US sub prime fallout is already negatively affecting your share portfolio, your mortgage rates and is having a serious impact on business lending and therefore business and economic growth.

Imagine if you will the direct impact it will have on a small fragile economy like New Zealand.

The word serious would be understatement.

“The best minds are not in government. If any were, business would hire them away”.

“Don't be afraid to see what you see”.

Ronald Reagan

Related Political Animal and Share Investor reading

Share Investor Blog

Current credit crunch a blessing in disguise
What happened to risk?
Share Investor Friday free for all: Edition 12 - 2nd story "I'll be baacck"

Political Animal Blog

Labour's Socialist Peril
Labour's State control out of control
Pointing fingers in the playground


c Political Animal & Share Investor 2008