Forum Archive Index - January 2002

["Phil Eriksen" <phil@acepay.co.nz>]

Hi Marilyn,

I don't think a lack of decent investments is the cause of NZ households
poor record of saving.  I suspect most people don't even get far enough in
their thinking to ponder where to invest their savings : the whole concept
of saving is foreign to many.

I remember when I was at school, and at lunch time, everybody would go off
and smoke cigarettes.  If you had a packet of 20 cigarettes, *everybody* was
your friend, and you were very much expected to share.  If you didn't want
to share, you were a "hold out", or "tight".  The basic idea was "it doesn't
matter who has the cigarettes, as long as we all have a smoke".  The result,
however, is that you tried very hard to make sure it wasn't you that had
cigarettes.

I found the same theme in my teens with money - if you had it, it was your
shout.  The whole concept of having money, and not spending it, was seen as
"wrong".  Again, as long as *someone* had money, it didn't really matter if
you didn't, as long as you could get the things you wanted.

In adulthood, alas, things are not different.  It is ok to want "things",
but not ok to want money.  To want or have money, for moneys sake, is seen
as idiotic, or weird.  Certainly people want the things money can buy -
that's why you read a lot more about Eric Watson and his wife, horses,
houses, than you do about, say, a Peter Masfen, with probably more money,
but less flash.

NZ households lack of saving and credit card debt levels can be attributed
to :

(a)   No real enthusiam for the accumulation of money, simply for the sake
of doing it.  Our culture is not one that promotes this.
(b)  An enthusiasm for the things money can buy, but no real interest in
where the money for these things will come from.  "I'll be alright, it's all
good" ,  basically.
(c)   An underlying belief that things will be OK, and you will be looked
after.  In other words, there'll always be *someone* with a packet of
cigarettes.

If you walked up to random people on a sunny Sunday afternoon, and offered
them an investment that was *guaranteed* to return, say, 15% compounding
(lets pretend for a minute such a guarantee is possible) do you really think
you would get many takers, especially amongst the under 40's?  To take
advantage of this wonderful investment, they would want to be investing sums
of money on a regular basis - do you think they would pay off their credit
cards, limit their consumption, and change their priorities, just because of
the return?

Most likely, they would either (a) assume its "dodgy" and that you want to
rip them off or (b) be interested, but not have the discipline required to
exploit the opportunity.  In both cases, they'd then go into the nearest
designer clothing shop, buy overpriced clothes using a credit card that
increases the price drastically, and not feel the slightest bit ripped off!

That is the problem.

Cheers,
Phil


----- Original Message -----
From: "Marilyn Munroe" <who.c@res.co.nz>
To: "Sharechat" <sharechat@sharechat.co.nz>
Sent: 27 January 2002 9:06 AM
Subject: [sharechat] Charles Dickens & Donald Brash


> In his novel David Copperfield. Charles Dickens wrote;
>
> "Annual income twenty pounds, annual expenditure nineteen nineteen six,
> result happiness. Annual income twenty pounds, annual expenditure twenty
> pounds ought and six, result misery."
>
> Donald Brash in his recent speech to the Canterbury Manufacturers
Association
> seems to be saying that the N Z economy is suffering from the negative
aspect
> of "Copperfield Economics", and borrowing from overseas to postpone the
> misery predicted by Copperfield economics.
>
> Dr Brash said that he would be relaxed about this reliance on foreign
capital
> if it generated exceptional economic growth, but this he claimed this was
not
> happening.
>
> He said that the usual suspect, the government, was not to blame, rather
it
> was the poor saving rate of the typical N Z household was responsible.
>
> I argue is that N Z households are poor savers because it pays them not
to.
> If a typical household was to take Dr Brash's advice to hart, where should
> they place these savings;
>
> Purchase managed funds and watch their profits be burned by fees or be
> channelled into funds which are not suitable (Asian funds).
>
> Invest in N Z blue chip stocks such as Air N Z, Brierly, Fletcher
Challenge.
>
> I don't think so, more likely they will buy a boat, or buy a fancier
house.
>
> Until experience proves that investment is something other than slowly
> pissing your money against the wall N Z households will not save.
>
> Boop-boop-de-do Marilyn
>
> P S Another doctor thinks he has the prescription for our saving woes. Dr
> Cullen will take Govt surpluses and invest them for us, to provide for our
> old age (shudder!).
>
>
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