Forum Archive Index - August 2000

[Murray & Terrene Heenan <heenan@istnet.net.au>]

Hello from Oz,

I have been lurking for quite a while and this is my first post, mainly
because I have found this particular thread very interesting. I feel
compelled to add my tuppence worth. 

I do not believe the dividend v. retaining profits for growth argument to
have much validity when it comes to looking for reasons for the malaise
that is NZ and the NZ sharemarket in particular. As the thread heading
suggests, the “big picture” is much more than about individual companies
dividend policies. 

I think Brian has come closest with his hyothesis that it is about
optimism/pessimism issues. After all, as someone wiser than I has
suggested, company market caps through their share prices, are like
beautiful women, meaning that everything depends on the perceptions of the
beholder.  

But why are the perceptions in and of NZ so low?  

I suggest that most of the reason is political. And I do not mean because
of the party in power. I know many kiwis are presently bleating about the
lean to the left being adopted by the party presently in power.......but
most do not appreciate that the NZ Labour party’s philosophy is
considerably to the right of the Lib/Nat coalition in Oz.
 
What I am talking about is the unicameral system of parliamentary democracy
in NZ, which allows a strong faction of a cabinet to run the country as a
virtual
dictatorship. There are no checks and balances in place to curb the abuse
of power. About the only thing I ever agreed with Jim Bolger on is NZ’s
need for an upper house!! 

>From the days of Rob Muldoon there have been many bad decisions by NZ
governments enacted by cabinet decree, and the level playing field has been
a complete myth with the goalposts forever shifting. 
 
This creates a climate for business and investment (be it local or
international) that might not be totally untenable, but certainly ensures
that return on capital must be higher (and therefore share prices lower) to
allow for the risk that the rules of the game are liable to change at any
time. 

Perversely, political inaction has also been a problem. Example:
governments of the western world virtually all loosened their money supply
after the 1987 crash to limit the damage.....unfortunately NZ did not and
the index went from approx 3900 to below 1200 in the ensuing 3 years. Those
figures from memory but I think I have them correct.  Just a little bit of
political commonsense would have limited the disaster that is still being
felt.
 
Some may think the above is drawing a pretty long bow, but I have been a
politics watcher, and a sharemarket investor for many years, and I believe
it to be true.
 
For the record, I relocated to Perth WA nearly 4 years ago where I am just
one of 50,000 plus ex-pat kiwis living in this paradise. I still have some
minor NZ sharemarket investments, and I still own a house in a SI rural
town that has virtually halved in value since I left. 

I must say that each time I visit NZ, I feel a little like RIL, but
hopefully without the vitriole. 
Cheers
Murray   



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