98% top US economists disagree @NZSuperFund strategy @VernonSmall @JordNZ

image

There is always one. Liran Einav had to be the only economist out of 100 or so top American and European economists who disagreed with the proposition that:

In general, absent any inside information, an equity investor can expect to do better by choosing a well-diversified, low-cost index fund than by picking a few stocks.

The New Zealand Superannuation Fund’s policy of active investing has one supporter out of 100 surveyed by the Initiative for Global Markets. I suppose it is better than none.

The chief executive of the fund quibbles by claiming there is a 3rd way between active and passive investing but there is not as William Sharp explained in his timeless 1991 article, The Arithmetic of Active Management:

    • A passive investor always holds every security from the market, with each represented in the same manner as in the market. Thus if security X represents 3 per cent of the value of the securities in the market, a passive investor’s portfolio will have 3 per cent of its value invested in X. Equivalently, a passive manager will hold the same percentage of the total outstanding amount of each security in the market2.
    • An active investor is one who is not passive. His or her portfolio will differ from that of the passive managers at some or all times. Because active managers usually act on perceptions of mispricing, and because such misperceptions change relatively frequently, such managers tend to trade fairly frequently — hence the term “active.”

An active fund is a fund that is not a passive fund. If you do not own a balanced portfolio of every security in the market, you are an active investor.

The majority of the New Zealand Superannuation fund is passively invested but some of it is not. It is invested in dogs like KiwiBank, in Z service stations and even in some bad Portuguese loans.

It’s "threadbare" to question @NZSuperFund’s investment strategy @TaxpayersUnion

It’s "threadbare" to question @NZSuperFund’s investment strategy @TaxpayersUnion

Letter to @DomPost on @NZSuperfund performance @Taxpayersunion https://t.co/MgUwqwn29I pic.twitter.com/wxo6F1zZn5 — Jim Rose (@JimRose69872629) March 18, 2017 There really is an issue on which economists are unanimous, a big issue to boot. Source: Diversified Investing | IGM Forum. Actively-managed mutual funds … Continue reading

Rate this:

How much is Working for Families per year?

The last Labour Government so hated tax cuts that it would not call its family tax credit a family tax credit. For those on the minimum wage, it could increase your income by 1/3rd. Oddly enough, because of abatement rates of 22.5% after $36,000, two minimum wage earners do not get much at all.

working for families

Shouldn’t @NZSuperfund be funded by earmarked taxes? @TaxpayersUnion

Pre-funding of New Zealand’s old age pension obligations requires contributions to the New Zealand Superannuation Fund now, higher taxes now in return for lower taxes later through the joys of compounding of the returns on the investments. If that is so, when the contributions are not made, the $3 billion in annual taxes should not be collected.

image

Source: Andrew Coleman, PAYGO vs SAYGO: Prefunding Government-provided Pensions, Motu Economics and Public Policy 26 Oct 2010.

There should be a separate New Zealand superannuation fund contribution levy that should lapse when contributions are suspended, as they were from 2009, and the pay-outs start after 2036? Otherwise, taxpayers will never see the promised lower taxes in the future. Never?

image

Source: Andrew Coleman Mandatory retirement income schemes, saving incentives, and KiwiSaver at http://www.treasury.govt.nz/publications/reviews-consultation/savingsworkinggroup/pdfs/swg-b-m-mris-24dec10.pdf 

Constitutional political economy matters despite the reluctance of most who specialise in Social Security reform to think about that backend public choice risk. Unless there is iron-clad guarantee of lower taxes in the future, the whole deal about pre-funding superannuation pay-outs is a con.

That politicians can pass a law in 2003 to pre-fund old-age pensions 40 years hence and expect the politicians of 2036 and onwards to honour the deal with tax cuts is politically naive.

How much will Morgan’s capital tax cost you?

  Average house value January 2017

Morgan capital tax 6% return

Morgan capital tax 3.5% return

New Zealand

$631,302

$11,363

$6,629

Main Urban Areas

$754,572

$13,582

$7,923

Auckland Area

$1,047,699

$18,859

$11,001

Wellington Area

$582,322

$10,482

$6,114

Far North District

$389,811

$7,017

$4,093

Whangarei District

$463,319

$8,340

$4,865

Kaipara District

$463,896

$8,350

$4,871

Rodney District

$933,456

$16,802

$9,801

Rodney – Hibiscus Coast

$908,966

$16,361

$9,544

Rodney – North

$961,450

$17,306

$10,095

North Shore City

$1,214,291

$21,857

$12,750

North Shore – Coastal

$1,387,368

$24,973

$14,567

North Shore – Onewa

$971,364

$17,485

$10,199

North Shore – North Harbour

$1,189,924

$21,419

$12,494

Waitakere City

$836,574

$15,058

$8,784

Auckland City

$1,225,096

$22,052

$12,864

Auckland City – Central

$1,065,420

$19,178

$11,187

Auckland_City – East

$1,532,815

$27,591

$16,095

Auckland City – South

$1,107,912

$19,942

$11,633

Auckland City – Islands

$1,036,288

$18,653

$10,881

Manukau City

$901,422

$16,226

$9,465

Manukau – East

$1,158,197

$20,848

$12,161

Manukau – Central

$686,567

$12,358

$7,209

Manukau – North West

$781,110

$14,060

$8,202

Papakura District

$684,172

$12,315

$7,184

Franklin District

$660,557

$11,890

$6,936

Thames-Coromandel District

$645,780

$11,624

$6,781

Hauraki District

$359,520

$6,471

$3,775

Waikato District

$441,525

$7,947

$4,636

Matamata-Piako District

$398,682

$7,176

$4,186

Hamilton City

$531,337

$9,564

$5,579

Hamilton – North East

$678,886

$12,220

$7,128

Hamilton – Central & North West

$489,611

$8,813

$5,141

Hamilton – South East

$482,333

$8,682

$5,064

Hamilton – South West

$466,235

$8,392

$4,895

Waipa District

$490,723

$8,833

$5,153

Otorohanga District

$243,964

$4,391

$2,562

South Waikato District

$188,852

$3,399

$1,983

Waitomo District

$172,405

$3,103

$1,810

Taupo District

$418,130

$7,526

$4,390

Western Bay of Plenty District

$575,089

$10,352

$6,038

Tauranga City

$672,752

$12,110

$7,064

Rotorua District

$379,865

$6,838

$3,989

Whakatane District

$380,691

$6,852

$3,997

Kawerau District

$177,183

$3,189

$1,860

Opotiki District

$248,261

$4,469

$2,607

Gisborne District

$271,632

$4,889

$2,852

Wairoa District

$161,966

$2,915

$1,701

Hastings District

$392,182

$7,059

$4,118

Napier City

$419,099

$7,544

$4,401

Central Hawkes Bay District

$253,787

$4,568

$2,665

New Plymouth District

$415,761

$7,484

$4,365

Stratford District

$234,372

$4,219

$2,461

South Taranaki District

$198,934

$3,581

$2,089

Ruapehu District

$156,971

$2,825

$1,648

Whanganui District

$207,752

$3,740

$2,181

Rangitikei District

$163,111

$2,936

$1,713

Manawatu District

$289,350

$5,208

$3,038

Palmerston North City

$348,581

$6,274

$3,660

Tararua District

$163,877

$2,950

$1,721

Horowhenua District

$258,047

$4,645

$2,709

Kapiti Coast District

$482,723

$8,689

$5,069

Porirua City

$484,164

$8,715

$5,084

Upper Hutt City

$433,538

$7,804

$4,552

Lower Hutt City

$482,632

$8,687

$5,068

Wellington City

$702,081

$12,637

$7,372

Wellington – Central & South

$703,433

$12,662

$7,386

Wellington – East

$753,259

$13,559

$7,909

Wellington – North

$627,791

$11,300

$6,592

Wellington – West

$808,685

$14,556

$8,491

Masterton District

$276,020

$4,968

$2,898

Carterton District

$321,476

$5,787

$3,375

South Wairarapa District

$370,839

$6,675

$3,894

Tasman District

$498,111

$8,966

$5,230

Nelson City

$508,343

$9,150

$5,338

Marlborough District

$423,753

$7,628

$4,449

Kaikoura District

$398,058

$7,165

$4,180

Buller District

$183,573

$3,304

$1,928

Grey District

$211,780

$3,812

$2,224

Westland District

$234,405

$4,219

$2,461

Hurunui District

$378,276

$6,809

$3,972

Waimakariri District

$434,854

$7,827

$4,566

Christchurch City

$497,539

$8,956

$5,224

Christchurch – East

$371,157

$6,681

$3,897

Christchurch – Hills

$667,077

$12,007

$7,004

Christchurch – Central & North

$588,632

$10,595

$6,181

Christchurch – Southwest

$477,247

$8,590

$5,011

Christchurch – Banks Peninsula

$514,403

$9,259

$5,401

Selwyn District

$547,094

$9,848

$5,744

Ashburton District

$348,788

$6,278

$3,662

Timaru District

$335,449

$6,038

$3,522

MacKenzie District

$420,915

$7,576

$4,420

Waimate District

$229,085

$4,124

$2,405

Waitaki District

$260,433

$4,688

$2,735

Central Otago District

$411,111

$7,400

$4,317

Queenstown-Lakes District

$1,032,560

$18,586

$10,842

Dunedin City

$359,055

$6,463

$3,770

Dunedin – Central & North

$372,295

$6,701

$3,909

Dunedin – Peninsular & Coastal

$320,180

$5,763

$3,362

Dunedin – South

$342,080

$6,157

$3,592

Dunedin – Taieri

$375,669

$6,762

$3,945

Clutha District

$190,208

$3,424

$1,997

Southland District

$236,549

$4,258

$2,484

Gore District

$200,826

$3,615

$2,109

Invercargill City

$239,252

$4,307

$2,512

Liability is 6 percent of your capital equity which is then taxed at 30%. The return is assumed to be equal to the long-term bond rate for the last 10 years. That was 6% when Morgan wrote his book in 2011; that average long-term rate is about 3% now. I used his 2011 assumptions.

Lucky bastards, grizzling about #safespaces all the way to their 100th birthday

Theimage