On Intellectual Property Rights and copyright...

To all of those who believe that it is their right to steal, take, or copy the work of others there are a couple examples in the news (well, came into my ambit) in the past two days.

First was an article in AP magazine. Oh, you will find this on the 'net but it is a real live paper type version that I have borrowed from the library.

It concerns an English photographer who saw one of his images being used in a magazine and he new darned well that he had not given permission for its use. He enquired and found that the "right" had been purchased from Flikr.

So, there is the first warning. If you are using Flikr for image storage, their "Terms and Conditions" retain the right to use any image and to sell that right to others. It does not limit the "owners" right in any way, but the "owner" does not retain a sole right to his IP.

All of that is quite legal, proper and above board. But how many really sit and read all of the fine print?

The second centres on a young(ish) guy from down south a-ways. Known as "the nek minit" man. He made a quick video which went viral, making "nek minit" the latest in inter-galactic patois.

He has been selling t's with "Nek Minit" on the front in Wellington, proceeds going to his work in reducing bullying in schools. He has (apparently) a detailed and intimate knowledge of that subject. Just down the road, one of the national shop chains in selling t's with "Nek Minute" on the front, proceeds to the chain and an Australian t maker.

There is another NZ company which has registered "Nek Minit" as a trademark. As of last night they had agreed to sell those rights to the man provided he comes up with the cost (a couple of hundred) to reimburse the cost.

Bernard Whimp is NOT a leech -

Investors are being warned of a fresh round of "shocker" low-ball share offers from companies linked to trader Bernard Whimp.

TrustPower and DNZ Property Fund are warning shareholders off yesterday's unsolicited offers, which are being investigated by the Securities Commission.

In two-page letters, TrustPower and DNZ shareholders are being offered above-market prices for their shares but in the fine print are told they will be paid off over 10 years. They miss out on dividends that would be paid out over that time.

...

Carrington Securities LP - which bought 2.2 million shares off DNZ shareholders below market price last August, is targeting TrustPower shareholders this time. Energy Securities LP targeted seven large companies shortly after Christmas and is now writing to DNZ shareholders.

TrustPower spokesman Graeme Purches said the offer was a "shocker".

"The worst case scenario is he purchases shares worth $7.17 for $9.40, pays the first instalment of 92c, and then Carrington gets wound up leaving the sellers with the loss of $6.25 per share and no future income from those shares," he said.

I will be blunt.

Bernard Whimp is NOT a leech.

Bernard Whimp is a lamprey eel.

The business of jargon -

Just occasionally, there is the small piece on radio that really grabs the old funny bone and gives it a good tweak.

Yesterday, as I was driving through a fantastically first-rate funday morning (on my way to throwing things at the sky) was just such an instance.

Mediawatch has been running an occasional about reporting standards (as distinct from the direct critique of current event reportage) and language. Yesterday morning was one – concentrating on the use of “going forward”. Now reporters are not the most guilty here. It is without doubt the “mot d’an” if not “mot du decade” in business and politic speak.

The term is totally meaningless. It has nothing whatever to do other than to fill a sentence with two more unnecessary words or to detract from the import of what is being said.

Listen to Mediawatch’s piece and I hope that they have included in the MP3 the Irish writer’s version and interpretation of “going forward”.

Listening to that at 100kph is NOT safe driving.

How the banking system works... 2

Courtesy of todays Sunday Star Times we have yet another example of the BSC (Banking System Crisis, or is it really BS Crisis?) and the kind of operation being run by many of the banking institutions.

AN ELDERLY grandmother with no known assets or income was lent $4 million by a mortgage fund company chaired by former prime minister Jim Bolger a transaction now under investigation by the Serious Fraud Office.

Mortgage documents obtained by the Sunday Star-Times show that Trustees Executors, a trust company chaired by Bolger, advanced $4m to Maria de Magalhaes, a 73-year-old Portuguese speaker originally from Mozambique, who was only in the country on a visitor's visa.

After explaining that the $4M loan is part of a total of $33M lent to a “property developer”, SST comes up with this very brief paragraph.

Sources dealing with the fallout of the saga say it raises serious questions about the lending practices of Trustee Executors. The money was part of the $242m Tower MortgagePlus fund, administered by Trustees Executors and frozen last April. More than 5000 investors had savings tied up in the "low-risk" fund, of which about 40% has been returned.

For more on the Tower saga, you can read up here, but the primary statements are –

Tower said the NZ$242 million TOWER Mortgage Plus fund, which is owned and issued by Trustees Executors, will shut after a surge in redemption requests and a jump in the proportion of mortgages in arrears to 9.1 per cent.

The Trustees Executors-owned 1st Mortgage Fund, branded TOWER Mortgage Plus, was being wound up, Tower Investments Chief Executive Sam Stubbs said. The fund lent on a diversified portfolio of residential and commercial first mortgages and was no longer relevant given heavy competition from banks, Stubbs said.

“Given heavy competition from banks”? Given that it seems over 13% of their total assets have gone down just one drain, I would hold little hope for a good part of the remainder.

But that is not the major point...

The bulk of the investments in the Fund (in TMP) were in the “low risk fund”. Let’s just think about that for a moment.

I have my super (401k equivalent) in a “cash and low risk” category. From that I expect to earn no more than about 3% nett of tax in a good year. On the other side of the ledger, I don’t expect to earn less than 1% nett of tax in a bad year.

It seems that if the same expectations apply to TMP, we can start with a mortgage interest rate of (say) 7%. Take out “expenses and administration” at 0.5% (not unreasonable for keeping a computer account straight). Take out tax at 35% and we get 4.5% ROI. So the bank is paying me 3% for their “good year”. Who is getting the other 1.5%??

The same calculation from a savings bank interest rate of 5% (not too high for a good year) we get a ROI of 3.2%; very much in line with the actual return.

So, there is a matter of Trust involved here.

Personally, I do not think that the investment policies of TMP and many of the other superannuation and unit investment funds have ever been any different. What is going to emerge from the ashes of TMP will be some very questionable investment decisions by all manner of people from Board on downward. Investment decisions that are all driven by the pursuit of personal wealth, rather than the benefit of the investors for whom they are purportedly supposed to be acting. High returns for the Company, means high bonuses at the end of the year....

And, I most sincerely hope, there will be some very high heads in many of the other "investment funds" who will losing significant amounts of sleep over the next few months until they are sure that their own patchs are cleaned and seemingly kosher. The shredders will be running...

Taste and propriety and the law

This has been bubbling through the local media for some months now. It centres on one man - an self-promoted "pornographer", his annual trade fair and the proting "street parade" otherwise known as "Boobs on Bikes".

The City Fathers (or perhaps that should now be "Mothers") have gotten themselves painted into the corner marked "Moralism and Propriety". Nothing wrong with that, I hear you say and I might agree.

Granny Herald reports this morning that the City Mothers do not have the right to stop the "BoB" parade.

Judge Nicola Mathers yesterday dismissed Auckland City Council's case for a court injunction to stop pornographer Steve Crow holding the event.
...
Judge Mathers said it was not a court of morals and it was her job to stick to the law.

The case boiled down to a new council bylaw and a council decision to turn down a permit for the parade on the grounds it was "offensive".

Judge Mathers said she took into account the attitude of the police in not opposing the parade, the lack of any public disorder and the fact 80,000 to 100,000 had voted with their feet and watched the parade.

"[That] leads me to the view that the bylaw is uncertain and or unreasonable in the way it refers to offensive," she said.

That's right, the ruling against the City Mothers was made by a woman.

It is not the ruling that is the problem here, nor is it the parade itself (I will NOT be going BTW - it is not one bit a probligo thing; tasteless in my opinion).

There is a forked tongue in here. There are two standards being applied.

The leading light against the parade is one Cathy Casey.

I wonder if she would support women breastfeeding their babies in a cafe or restaurant as fervently as she opposes the BoB parade?

On the principles of greed...

The first rumbles were back in May 2005, prompting the probligo to put this out.

Now at that time, and the reason for selecting “Four Prominent Bastards”, the big fear back then was the impact of Freddie Mac (yes I mis-typed “Mae” at the end) on the investment community, and the likelihood of the collapse of both Freddie and Fannie.

Then in December last it was raised again, following the Bush “rescue plan”.

Now as I understand it, the idea of the rescue plan was to “support” those who were in danger of default on their loan, with the intent of protecting the investments made to Freddie Mac and Fannie Mae.

But in fact, the malaise runs much deeper, as can be seen in this country.

In the increasing “investment products” of recent times come the “Portfolio Investment Entity” (PIE). Now these little sweeties for the hopeful rich are the product of a tax law change effective 1 October last year. Essentially they differ from the more traditional Unit Investment Funds in that the capital gain in a PIE is not taxed, whereas the capital gain is a fundamental of the UIF and hence is taxable as “income”. From Herald –

What is PIE?
A PIE (Portfolio Investment Entity) is a tax effective managed fund. They range from "on-call" cash management accounts to funds that invest in assets such as fixed interest, property and shares. PIEs do not tax capital gains on New Zealand and most Australian shares (as is the case with conventional managed funds), and tax on income from New Zealand dividends and cash investments is capped at 33 per cent (falling to 30 per cent on 1 April), or 19.5 per cent if that is your marginal tax rate.
This means that by investing in a PIE, effectively investors receive more interest. If a return of 10 per cent is taxed at 39 per cent, the tax-paid return is 6.1 per cent. If that same return is taxed at 33 per cent, the tax paid return is 6.7 per cent.

So, what is the connect between Freddie, Fannie and PIE? In very large part it is the nature of the backing investment for the deposit to the fund. I invest $100k in a PIE at 9% interest. The PIE invests my money in suitable securities that will cover the 9% interest plus a suitable “administrative income” (which I would pay as part of the cost of belonging to the UIF). So, it has led to promotions like the following –

What is it called and what sort of savings product is it?
UDC Finance's Term Maximiser Fund is a managed fund under the new portfolio investment entity (PIE) tax rules.

What is the company behind it?
UDC is a subsidiary of the ANZ National Bank. It is New Zealand's largest finance company, and lends solely on plant and machinery.

Who is the target market?
UDC says it suits people in retirement, nearing retirement or saving for a particular goal.

What return does it offer?
Its opening rate is 9 per cent annually, with interest paid quarterly. For investors on a 39 per cent marginal tax rate, this is the equivalent of 10.68 per cent under the PIE regime.

...and so on

How strong a stomach do you need for it?
Mild. This term fund doesn't have a Standard & Poor's rating. However it invests in UDC's debentures, which have an investment grade AA rating from Standard & Poor's.

OK!! Now that really is interesting; for this reason. I found this Mary Holm column dating from 2003 while looking for (confirmation bias warning) the line of connection between the various elements that need to be covered.

Q. Re borrowing at 6.1 per cent and investing at 8.28 per cent - interesting opinion from you in last week's column, in that you seem to be advising us to pay scant attention to 23 of the Herald's 24 investment adverts!

However, Mary, please don't resign on principle, as we always enjoy your words of wisdom.

On a more serious note, we would appreciate your comments on our approach to offerings with G6 ratings.

We're in our late 70s, with well over half a million in savings etc.

About 50 per cent is in Kiwi Bonds, 40 per cent is in the main banks, and 10 per cent is in G6-type investments.

Those include $50,000 in capital secured deposits with Capital & Merchant, covered by Lloyds of London Mortgage Indemnity and Mortgage Impairment Insurance Policies.

We two antiques hope you will advise us. Stay young!


A. I'm trying to. But then I get letters like yours that seem to imply that I should write with half an eye on the advertisers. That's enough to age any journo! Seriously, though - and not because of any pressure from anyone - I'm not dismissing investment in higher-interest products.

But they are considerably riskier than banks. Go in with eyes open.

For the benefit of those who don't know what a G6 rating is, Bondwatch is a service which rates finance company investments - from G1, safest, to G8, riskiest.

Of a G6 rating, Bondwatch says: "Ability to meet current obligations dependent upon favourable economic and/or business conditions. Concerns about security over the longer term."

I should add, though, that your Capital & Merchant capital secured deposits pay lower interest than the "investment deposits" discussed last week. So they are almost certainly somewhat safer.
...

As I said last week, I know little about the company. But I wouldn't put that much in any single company of that type.

Sure, the wording about Lloyds, insurance and so on sounds comforting. But I don't know what it means. Do you?

Too often, when things have gone wrong with similar investments in the past, words like that - along with "secured" and "guaranteed" - didn't amount to much.

Sage advice, especially when lined up against the findings of the various Receivers and Liquidators appointed to the failures in the “investment industry”.

But the link I wanted is proving elusive. At least one of the failed investment companies was in fact fronting for another, parent company, and the investments of the funds received were almost exclusively in that parent company. The specific example I was seeking was a company seeking investments in NZ, offering interest at 8% interest plus. The investments were passed to the parent, an Australian property development company which had several times (as I hear it) been running very close to the wind with marginal developments in Queensland and NSW. The Receiver, appointed during last year, has announced that investors will get back only 40% of their investments and likely less than that.

Now the link between Mary Holm’s article, failed investment companies, through to Freddie Mac and Fanny Mae, and finally to PIEs is the nature of the backing investment to my money. Go back to the Herald article that defines PIE and you will see that they are “funds that invest in assets such as fixed interest, property and shares.” And the question has to be asked “What fixed interest, property and shares?” In the case of Freddie Mac and Fannie Mae it is becoming clear that they were being regarded as lenders of last resort; they picked up loans which no one else was prepared to take on board, but which had in some way (second, third and fourth mortgages perhaps?) been secured against property.

At this point one has to wonder just what manner of need or desire would have prompted a person to take out secured borrowing against their property. Was it for the initial property purchase? Or was taken out subequently as security for the purchase of a car, or boat, or holiday? Even worse, was the secured borrowing taken as a margin investment in an opportunity that offered a higher rate of return; borrow at 8% and invest at 10%.

So, a bank holds a “fixed interest” paper with the property as security in the form of a second or third mortgage. The true property value might cover 105% of the first mortgage. What a risk if the second mortgage defaults! Particularly if the second mortgage is for 20% of the property value! The borrower might well be able to cover the repayment at present but come two or three years’ time things can change dramatically. So the bank hedges its risk by selling the mortgage paper to one of its personal investment arms – the PIE system – or Freddie or Fanny.

Without belabouring that any further, there is another solution. Perhaps the loss from the failed “investment” should head in the other direction; not to the mum and dad investor at the bottom of the PIE, but to the originator of the investment paper, the ones who (please pardon the pun here) are holding the crust.

If a bank, or finance house, has made a bad investment that is where the risk should return. It should not (as has been the case thus far) be the mum and dad investors who have been (quite unknowingly) sold a PIEce of worthless paper.

If a retailer has sold a $5000 plasma screen to a family with an annual income of $30,000 then it is that retailer who accepts the loss when the HP falls over. That gives the retailer some specific rights, and he also takes the very specific risk of the failure. If the HP is factored to a finance house, that is done most oftenly “with recourse”.

I will leave that thought hanging. It gives good indication of the failings I see in Freddie and Fannie. It gives a good lead to what I see as the solution for their failing. From Forbes –

NEW YORK (Thomson Financial) - U.S. stocks fell further Friday after U.S. Treasury Secretary Henry Paulson indicated that a bailout of troubled mortgage giants Fannie Mae and Freddie Mac was not on the horizon.

...

'Today, our primary focus is supporting Fannie Mae and Freddie Mac in their current form as they carry out their important mission,' Paulson said in a written statement. 'We appreciate Congress' important efforts to complete legislation that will help promote confidence in these companies.'

Fannie Mae was last down 43% at $7.55 and Freddie Mac was shedding 47% at $4.27, paring earlier losses to $6.68 and to $3.89, respectively.

And in the matter of "greed", Al the Old Whig I think it was put out the idea some while back that "greed is good". Al, I agree. But at some point one has to accept the inevitable bout of indigestion.

Who remembers the "cigarette cards"?

Thanks to this morning's Herald, here is the 21st Century version -

A snack food promotion accused of encouraging children to eat the equivalent of more than a kilogram of fat has been stung by the Advertising Standards Authority.

The authority upheld a complaint by the Ministry of Health that Bluebird Foods' "Rugby Superstars" promotion encouraged excessive consumption of a treat food, and used famous rugby players to gain a high level of appeal to children.

The complaint said that to collect all 50 cards, people would have to buy at least 50, but probably more than 80, chip packets - with a combined fat content of more than 1kg.
...
In its reply to the ministry's complaint, Bluebird said the promotion was a "short-term competitive marketing strategy designed to encourage a person to select one brand of snackfood over another".

Yeah, well to me that response indicates that the intent was to encourage consumption of those 50 or 80 bags of chips in a short space of time. The great pity is that it probably would succeed.

"Chippies" are not a "snack food". They are a carefully crafted concoction of starches, fats and salt designed to encourage increasing consumption at maximum profit and minimum food value.

The perils of investment -

One of the pebbles I tossed into the pool the other day was the latest economic directive from GBW to give some relief to those affected by the sub-prime mortgage financing debacle in the US.

Well, it has been little different here in NZ. As far back as March, commentators were pointing to direct impact on the investment markets and the “supermarket variety” finance houses that were soliciting investments at that time.

A private equity failure is inevitable and one bad deal could be enough to wipe significant value off New Zealand markets, says leading investment manager Arcus.
Arcus - which manages $5 billion in New Zealanders' savings - says the local sharemarket's record highs were substantially driven by the prospect of merger and acquisition activity. If such a merger was to fail, this would create uncertainty and sharemarket volatility.
"It is inevitable that at some stage, a private equity company will encounter difficulties," the company said in its quarterly investment strategy update yesterday.

In the broader definition of “private equity company” – as investor of funds “on behalf of” – must be the finance company. These range from the company that provides mortgage funds to home-buyers to the kind of persistent advertisers on tv who will lend anyone money irrespective of financial status or ability to repay. As a point of comparison this is NZ’s version of the sub-prime market that has been somewhat shaky in the US of recent times starting with the Federal bailout of Freddie Mac and Fannie Mae.

Investors should be heartened by the performance of major finance companies over the past year, and the string of 13 failures in the sector over the last 18 months is a "purging in the process of a return to health," says KPMG.
...
The failures have to date, put close to $1.5 billion in New Zealanders' savings at risk, with the latest - Capital + Merchant Finance - placed in receivership last Thursday, after KPMG finished its report.
Boyce said while the aggregate results were solid the overall picture was one of "a continued slowdown in asset and earnings growth with the deterioration in credit quality measures suggesting the favourable credit environment enjoyed by the sector since 2000 has ended".

(Empahsis mine)

Now I think that $1.5 billion of private individuals’ savings is a fair amount in any books. It doesn’t quite rank with Enron, agreed, and there are 13 different and unrelated companies involved. But when you factor in that a government guarantee for that amount would cost $333 per person then the value starts to be significant.

As I have said in the item on IRD taking a gander into property trading as a taxable activity, all of those who lost money in these companies have made assumptions, listened to advice with their confirmation bias at full volume, or in the saddest cases been given plain wrong advice.

It is that last group that the regulators are rightfully concentrating on. The “financial adviser” who has a lucrative commission agreement with a finance house MUST be prepared to back his advice with a good share of the risk.

But the mere fact that someone might lose money from taking an investment risk does not in any way mean that the government should step in and guarantee that investment.

PRESIDENT George W. Bush has rolled out multiple measures aimed at preventing borrowers with sub-prime adjustable-rate mortgages from entering foreclosure, but he also blasted Congress for not doing more to help.

"There is no perfect solution," he said. "The home owners deserve our help. The steps I've outlined today are a sensible response to a serious challenge."

The plan seeks to combat a rising tide of foreclosures by making it easier for lenders to freeze the "starter" interest rate for certain borrowers for five years. The initiative includes an agreement, brokered by Bush administration officials, between the loan servicers who would administer a rate freeze and the investors to whom the mortgage debt has been sold.

The agreement sets conditions under which rates on certain loans could be temporarily frozen. It isn't binding, but because it hasthe support of major investors, it is expected to give loan servicers much more flexibility to quickly rework some loans and direct other borrowers toward refinancings.

Now let's just think for a moment what that means. The government is providing controls "...aimed at preventing borrowers with sub-prime adjustable-rate mortgages from entering foreclosure...". In other words, those making the investments are protected from the failure of the borrowers. So, it must be asked, who really benefits?

I submit that it is those who own and invest in the lenders.

Mr Bush said a rise in foreclosures would have a "negative" impact on the economy.

"Yet one reason for confidence is that the downturn in housing comes against the backdrop of solid fundamentals in other areas, including low inflation, a healthy job market, record-high exports," he said. But with close to 2 million sub-prime ARMs scheduled to reset higher by the end of 2009, Mr Bush said initiatives were needed to address such a broad potential problem.

and again -

The big sticking point in the negotiations was getting investors who had purchased the mortgages after they were bundled into securities to agree to accept lower interest payments. Critics have said that even with a deal, there are likely to be lawsuits. But officials representing major players in the mortgage industry said they believed the plan would withstand any legal challenges and would help at-risk home owners avoid defaulting on their mortgages.

...and crying all the way to the bank.

There is little difference here in NZ.

ONE of the major economic growth drivers of the past ten years started with the "get rich quick" seminars that were all the rage (and still are too judging by my mail) back then. "Protect your future by investing in the property market". Highly geared property purchases became all the rage. In the past three years or so 100% mortgages have become commonplace. My daughter and s-i-l have a house in Paraparaumu that they would not otherwise be able to afford.

There has been much talk in the past couple years of the "property market bubble", and when it was likely to "burst". Don't look now, folks but at the moment I think I would prefer to have my money in the bank. That raises the question of "Which one?"

CITIGROUP faces a crisis of investor confidence as one of the world's top ratings agencies warns that up to $US65 billion ($A73 billion) in debt issued by the world's biggest bank is at threat from the US subprime crisis.

Moody's Investors Service said at the weekend that it had either cut or was reviewing its evaluation on debt issued by structured investment vehicles (SIVs) controlled by Citigroup.

Essentially, SIV's are exactly the same as the investment vehicles used by the likes of Capital+Merchant Finance. I suspect that the PIE's being offered by the likes of Rabobank in NZ are little different.

Moody's said in a statement that it had observed "material declines in market value" across SIV holdings during a broad review of dozens of SIVs run by a number of banks.

Since November 7, Moody's has reviewed 20 SIVs worth about $US130 billion associated with various lenders. It has cut its rating on $US14 billion worth of debt, placed $US105 billion of debt on review for a downgrade, and confirmed the ratings on $US11 billion.

And are those scary numbers or what...

Oh DEAR!! How sad...

...never mind.

Amongst all of the bad news stories over the past few months for local investors comes this little piece –

The country's top 1000 property speculators are being targeted in an Inland Revenue crackdown on unpaid taxes.
As part of the campaign, IRD staff are visiting real estate agents with warnings that sales and purchase information would have to be disclosed if requested.

In this year's budget, the IRD got an extra $14.6 million to target tax evasion in the property market.

A Wellington real estate firm, which declined to be named, said it was dismayed that a recent IRD visit warned of possible sales and purchase auditing.

"At the end of the day it shows they can come in here and do anything," an agent said.
IRD assurance group manager Martin Scott said its visits to real estate offices included a presentation on the obligations involved in property transactions.

The 1000 people identified with extremely high numbers of property transactions would be contacted to see if they would make "voluntary disclosures" about their tax returns.

"Some people have a belief you don't have to pay taxes on housing profits but depending on the purchaser's intent it could be taxable."

He declined to say how IRD identified property profiteers but said it used audit powers that required "third parties" such as real estate agents to disclose information about their clients.

"Yes, we do have powers to request information but at this stage these visits [to agents] are more about where we are going and what to expect from us. We would give them [agents] scenarios on what we would consider taxable and what we wouldn't."

By making voluntary disclosures people could limit or avoid penalties, Scott said.
"We are not trying to trap people. We are working to ensure that people have the information they need to do the right thing."

It is not as if the action was being taken without warning. The start came from the last Budget, with some $14 million being set aside for the purpose. It is not as if there has been any retrospective law change; the tax law being used has been largely unchanged since I did the tax law part of my professional qualifications in 1980.

Interesting too that the real estate boys are crying “Foul!”. I suspect that a good number of them will be among the people who will be getting “please explain” letters from IRD. The “invasion of privacy” argument is a total crock. All of the property transactions are a matter of public record through LINZ. It would not be difficult (or expensive) for IRD to tap into that source of information.

Essentially, the tax law distinguishes between trading as a business (which is subject to the tax laws) and the level of “trading” that a person might undertake in the normal course of living. There have been similar “attacks” from time to time in the past. First to come to mind is the people who were trading in motor vehicles; the guys who might buy a car from the local car fair in Paeroa and then sell at a profit the following weekend in Auckland. Good business, but that is what it is. It is not a hobby.

What the IRD is saying, what the law has always said, is that trading through perhaps four or five properties in a year and living in none of them is not necessarily a hobby or incidental transactions. There might even be no “intent” (as Rodney describes it). The fact that there has been both volume of trading and profit made is sufficient for IRD to get interested.

So Rodney Hide is quite wrong when he says, "The IRD has come up with new and novel ideas that have just tipped people over.” Rodney, there are a lot of people out there who have made assumptions, listened to advice with their confirmation bias at full volume, or in the saddest cases been given plain wrong advice. Some of those people might even be the mates who are getting in your ear.

UPDATE -

And just to add to their woes...

A mini-boom is about to hit the property market, giving buyers a chance to bag bargains and make money as the market corrects.

That's the advice from Martin Evans, president of the New Zealand Property Investors Federation.

And, according to test-cricketer-turned-mortgage-broker Adam Parore, more deals are likely to come on to the market as homeowners, who have enjoyed low fixed rates for years, have to contend with the current high interest rates.

The Herald on Sunday's search of Trade Me's property website found dozens of properties already going below valuation.

Evans said: "The values have dropped and people are becoming more realistic. The cycle has gone over the top and is on its way back down again."

Interpretation -

Now that the market has topped, I want out and I want to sell to you so that you cop the loss instead of me.

Give us this day our daily bread...

Small item that caught my ear (and I have no idea why this was on the radio news) the other night concerns one Dr Raj Patel and the "theories" behind supermarkets.

Rather than just link through to all that he has written, let me put this in my own words...

Patel starts with the idea that "Supermarkets sell those products that are the cheapest and highest margin." Nothing wrong with that the Capitalists would sy, and I agree. "Therefore the range of products on sale is determined by their relative profitability and not by the needs or desires of the customer." Returning to Patel, he contends that we humans are wired to desire foods containing sugar, fat and salt - HFSS's as he terms them.

How does this work?

Take a small family business I worked for some years back. It no longer exists. The boss sold out I believe but he might also have gone to Florida seeking eternal redemption with the Scientologists. Anyhoo we sold "bulk food" to the supermarkets. These are products intended for the customer to weigh out and pack for themselves as much as they require instead of having to buy 500gm, or 6 x 30 gram packs... Top of the company's range by volume - out of some 85 available - was blanched roast salted peanuts. Probably one of the more "unhealthy" of the products we sold. High oil content (we used canola oil), high fat content (from the peanuts as well), and very high salt content. The supermarkets used this as a loss leader (one of them) for about four weeks every three months. There was no debate on our price, we were told - not asked. On one occasion, in one of his more shitty moods, the boss refused to supply at the markets price and got his answer about ten minutes later - "take your fittings out by tomorrow night, we will make arrangements for a new supplier". It took about three months to get that market back into our order books.

But the point behind that little tale is the fact that we were a "health(y) food" company. Because of the nature and business of our customers, one of the highest volume lines was also one of the most unhealthy.

OK, now for a personal observation. It came to my notice during my 14 weeks off work. In all, that resulted in at least ten major shopping trips to the supermarket with the CofE (Chancellor of the Exchequer). Now I am the first to give credit; apart from the odd small item like a bar of chocolate or suchlike the CofE is not given to impulse purchasing. She carries a very detailed list, fully costed, and prices get checked at the time she is selecting what she wants. She really is very good at it. (I hope that Lucy would approve). There were a couple times where I went on my own with this very important task but that is a different story.

What is an interesting way of passing the time in the supermarket is through observation. Take note of anyone that goes past; their trolley contents, age, sex, children if any, but try to get a feel for the relationship between purchases and people.

What I noted -

Younger mothers, with kids under ten buy the most. The ratio of convenience foods (frozen pre-prepared, pre-cooked etc) to fresh produce is fairly high.

Young people, say the under-30s are usually small shoppers. I suspect this is one of perhaps three or four trips to the market this week.

Middle aged - those with no kids about indicating probably teenagers at home - seem to buy the most convenience foods and least fresh produce.

Late middle age and elderly seem to be the ones who buy least convenience foods and most fresh produce. Is this the result of tradition and culture or a matter of economic necessity? In our case it is preference, probably driven by family tradition.

The presence of children with the shopping expedition seems to result in a much higher purchase of the junk food lines - crisps and chips, sweets and soft drinks. The worst of the HFSS's.

Worst of the lot? Obvious grandparents with grandchildren in tow.

On a wider scale, the statistics that appear from time to time in the news hereabouts (and I have no reason to doubt that is the same the whole world over) indicates that lower income people are more likely to purchase more HFSS's than fresh produce.

One of the more interesting ones in recent times gave the average travel distances home to nearest takeaway outlet for various suburbs in Auckland. Furthest (greatest distance from home to a takeaway) were in the more affluent suburbs. One can argue that this is the result of rich people being willing to travel further to buy Big Macs, Fried Chicken or whatever. But in fact it seems that the demand is unable to support more outlets. Contrast this with the "poorer" parts of town. Travel distance home to outlet can be as small as 1/4 of that travelled in a "rich" area. Is this because of the cost of travel? No, it seems that people will buy the family dinner on the way home from work, or will give the eldest the money to buy dinner at McDs or BK or whereever.

The distance function is the result of the demand for the product, not the cost of travel.

So we end up with a quiet revolution from Detroit Free Press

And yet Americans in general and Michiganders in particular spend a lot more time hunting bushytails than grouse, largely because while most grouse hunting is confined to the state's northern forests far from where most hunters live, squirrels can be found everywhere.

In anticipation of telephone calls and e-mails from the uninitiated, let's say right off the bat that the primary reason to hunt squirrels is that they are delicious. Truthfully, I'd rather have a Brunswick stew or one of my friend Craig Porter's fantastic squirrel pies than grouse breasts or a venison roast.

Squirrels are incomparably tastier than supermarket chicken, beef or pork that may have been raised under questionable circumstances and took weeks or months to get to the consumer.

To which I might add that I have never tried kiore (the Pacific rat), or dog, both considered delicacies by the Maori in pre-European times. I have tried huhu - a grub not unlike the Aussies witchetty and it tastes like peanut butter which has been soaked in wood. Regretfully though, most of the wild food is getting difficult to find due to poisoning programmes for possum and rabbits, the commercialisation of deer. Pig are getting hunted out and hard to find. Goat is now farmed - had goat stew a couple weeks back and it were very good.


To return to the top, an article from Britain's "Independant"

Should we be worried about the power of supermarkets?

Yes...

* Their dominance is killing the diversity of the high street

* Suppliers are being bled dry by their cost-cutting demands

* They have the power to dictate to the consumer

No...

* They are powerful because they provide the best deal for the public

* Many investigations have failed to find any wrongdoing

* Competition between chains ensures a good deal for consumers

... and our government is adding folic acid to all bread to prevent birth defects. About 15 of them a year.

Sir James Fletcher; Nic Nobilo

During the past weeks, NZ has seen the deaths of two of our greater "captains of industry".

From NZHerald -

Sir James Fletcher

Tributes poured in yesterday for construction giant Sir James Fletcher, 92, and leading winemaker Nick Nobilo, 94.

Both died peacefully in Auckland overnight on Wednesday.

Sir James was remembered as a visionary and "absolute gentleman" by business leaders, industrialists, politicians and figures in the art and sports worlds.

Known as Jim to his friends, he became managing director of the newly created Fletcher Holdings in 1942, at age 28.

He went on to create a business empire that included major stakes in New Zealand's first steel mill and the Tasman Pulp and Paper Mill at Kawerau.

Fletcher Challenge was New Zealand's largest listed company until Telecom listed in the 1990s.

...John Hart, who was employee relations director at Fletcher Challenge, said Sir James was hugely respected by employees, trade unions, suppliers and customers.

"He was universally accepted as a very humble and a real gentleman, but obviously a great business visionary," he said.

"We have lost probably one of the best industrialist role models that we could ever have had."

Nic Nobilo

Mr Nobilo, a Croatian immigrant who founded Nobilo wines after arriving in New Zealand in the 1940s, was praised for creating an innovative company that is now the country's second-largest winery.

New Zealand Winegrowers chief executive Philip Gregan said he left an impressive legacy by building Nobilo into a company that led "the revolution in table wine" in the 1960s and 70s.

George Fistonich of Villa Maria wines said Mr Nobilo was an innovator who was also deeply proud of his culture and had supported his three sons in the wine industry.