Monday, October 27, 2008

A small personal note about company shares

I gather that for most employed people the financial crisis has had negligible effects. I am however one of the investor class. As a retired man, I live almost entirely on the proceeds of my stockmarket investments. And about half of those investments are in Australian bank stocks. So I am in big trouble, right?

Not at all. One reason why I invested heavily in banks was that Australian banks had big meltdowns at the time of the Hawke/Keating deregulation a couple of decades ago. Most of the State banks went broke and even Westpac (then the biggest bank) tottered a bit. And that all happened because of incautious lending to the "entrepreneurs" of the day. So I figured that the banks had learned their lesson and were not likely to risk any recurrence of that. And I was right. The Australian banks are in good shape. They were and are still making profits and sub-prime loans have not been a significant problem in Australia. The bank share prices are way down but as long as the dividends keep coming, why should I worry about that? The new high is always higher than the old high so the share prices will bounce back in due course.

And September/October is dividend time so I have had a good cash inflow recently. I like to keep a fair bit of cash on hand to fund the various gifts and donations that I give out from time to time. My own needs are minimal. I mostly give direct to the intended beneficiary. Giving to charitable organizations usually just supports a herd of parasites. Most of what you give to Big Charity pays for "administration". The only exceptions I make are that I do give to the Salvation Army and to Legacy (an organization that looks after the wives and children of military men who did not come home). The fact that I have some army background is probably sufficient explanation for the latter and it explains a lot of the former too. Many old soldiers will tell you how good the Sallies have been in wartime. And I do have a soft spot for real Christians.

Even so, I recently found that I did have about $10,000 that I had no obvious use for so I BOUGHT SOME MORE SHARES. Why everybody is not doing so rather escapes me. Prices are very rarely as low as they are at the moment. It is a great time to buy cheap.

All of which, in my view, shows one benefit of managing your own money rather than giving it to someone else to manage. I can ride out the share price downturn because I don't need to sell anything. But superannuation funds and the like are always having to sell in order to fulfill their obligations to people who have reached retiring age. So they are selling at a huge loss, which drags down the funds available to everybody on their books. Not smart!

So my recommendation is just buy blue-chip stocks in your own name as a way of saving for retirement. 

Saturday, October 18, 2008

Four stray thoughts from a quiet Sunday morning

1). It seems that the Gramscian surge through the educational system has left young Americans with virtually no knowledge of the foundation of their country. So it is only the old guys these days that know anything about that. I wonder if even the old guys know enough, however. How many people know, for instance, how "created equal" got into the Declaration of Independence? It sounds emabarrassingly socialist, does it not? And how come Jefferson, who admired Christ but didn't think Christ was God (which makes me a Jeffersonian, I guess) put something so religious into the Declaration? Did Jefferson just have a brainwave one day, write it all down and everyone promptly said "Great"?

I think you can guess the answer. The Declaration was the endpoint of a LOT of debate and controversy. The original draft had "born free" where Jefferson put "created equal". So why the change? "Born free" sounds a heap better to me: Conservative rather than socialist. The Jeffersonian version was in fact a stroke of genius. The slave States would NOT allow "born free", as that would be a clear condemnation of their own practices. So a compromise would have to be found that kept the South onside. Various clumsy compromise wordings were tried but Jefferson's version was greeted as a triumph. It was vague enough to suit everybody and sounded really good.

One book that gives a very detailed account, with documentation, of the whole pre-Declaration discussions is Slave Nation but the authors are Left-leaning so they get carried away in the end and claim that the revolution was fought to defend slavery! Balance seems to be just too hard for Leftists. The fact that a right to "liberty" was included in the next sentence of the Declaration doesn't seem to give them any trouble at all. It didn't give the slaveowners any trouble either. Strange company they find themselves in.

2). I am amazed that so many stockmarket investors are being so foolish at the moment. Selling when the market is way down is just about the most foolish thing imaginable. Yet people seem to be doing it in droves. My portfolio is down by a third in value but if I had any loose cash I would be buying now, not selling. The new high is always higher than the old high. You just have to be a bit patient. And my dividends are still coming in much as usual so why should I worry?

3). Australian banks have been only marginally affected by the financial crisis. Australia has a large minority population too but most of ours are Han Chinese. And I doubt that any Chinese has ever walked away from a mortgage. They just work harder. I am a great fan of the Han! My son has similar views -- as you will see from the photo of him below:

OK. I guess it is a bit gratuitous to put up a picture of my son but if a father cannot be proud of his son, it's not much of a life, is it?

4). Did you know that there are no Chinese in China (sort of)? "China" means the land of the Chin and the Chin dynasty is long gone. Chinese usually refer to their country as "The middle kingdom" and the majority race in China is the Han (Yes. China has minorities too). But you find Han people throughout Asia: Thailand, Malaysia etc. There are even Chinese restaurants in India! I went to one there once.

Monday, October 6, 2008

Maureen's birthday

A small and informal lunch yesterday at Ken's place for the occasion. We have had so many big family occasions (at which the women do most of the work) in recent times that Maureen wanted something very low-key for her birthday. So it was a "bring your own lunch" occasion. Present were Ken, Maureen, Paul, Sue, Jenny, Joe and myself.

Sue brought along for her lunch a meat pie with peas and mashed potatoes. Despite her being statuesque and 6' tall, she is a quarter Filipino in ancestry -- but her choice of lunch revealed that she is also 100% Australian. Perhaps it is only her exceptionally pleasant nature that is her Filipino heritage.

The birthday cake was a Pavolva with lots of fruit on top which went down very well. Sad that it is only in Australia that the virtues of Pavlova are well-known.

We talked mainly about the stockmarket. Paul is selling all his real estate with the intention of putting the money into shares -- as shares are very cheap at the moment. I think that is a very wise move but since I suggested it, I would, wouldn't I?