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Just because you're at the Treasury doesn't mean you have to count or anything...

Here's a link to a Forbes.com story. The best bit has to be this:

"In fact, some of the most basic details, including the $700 billion figure Treasury would use to buy up bad debt, are fuzzy.

"It's not based on any particular data point," a Treasury spokeswoman told Forbes.com Tuesday. "We just wanted to choose a really large number."


News Review

The credit crunch and drastic measures associated with it are being given plenty of column inches - so much that I feel no great desire to add to them. We have everything from beginners guides to the 'end of capitalism' type BS that is so common. There is a good taste of that stuff - and the case for the defence - over here.

Also much in the news is the Fonterra timeline and whether they could / should have done more. The self-obsession of Kiwis with the brand of Fonterra and possible associated damage appears quite misplaced - a good troll through google should show anyone in about 5 minutes. Americans, though, feel the bigger problem with Fonterra is not what's happening in China, but how the industry is structured, which is seen as anti-competitive. Whether you think this recent court ruling opens up Fonterra enough to the winds of the free market... is probably a good test of how 'dry' you are economically. Link. It has been raised as a reason to exclude milk from a possible FTA with the US. As our largest company, this is important.

Speaking of the US. Financial markets are now solidly behind Barack Obama. In fact, so are all the polls. McCain's stunt of 'suspending' his campaign to deal with the financial crisis has not played well - yet - and the Palin bounce has long since faded. RCP has the stats.

The election is another favourite, and trying to find a financial angle, we're focusing on i-predict. Concerned about it's ability to reflect accurately what is going I was interested to see this on Kiwiblog which shows the movements with news announcements, including commentary. It helps to know you can check in with a market that is reacting almost in real time if you can't wait for the latest poll result.

The Financial Advisers Act - now it's no longer a bill hopefully we can ditch all the fabulous puns - has lot's of us working on channel impacts. It's second order impacts that we will only be able to assess as the regulations come out, and we see how they are managed. But before we get there, it's worth noting that companies got almost everything they wanted - qualifying entities, classes of advisers, and so on. The economic value of certain channels will be preserved, and the industry will continue toshift to more corporate structures as a result of the rising fixed costs. It's not radical, but it is change.


Anyone with an interest in both markets and politics will find i-predict worth a look. You can buy and sell futures with a number of different outcomes. In the US such markets have proved very effective prediction tools. Here in NZ where they are new, and our markets are notoriously small and illiquid they are yet to prove themselves. Check them out over here. Link.

FAB is passed

My predictive skills are clearly in need of repair - as I had written that I doubted this bill would become law before the election. Well done to Lianne Dalziell for making this Law. It has had a long and rocky road. Although, it has enjoyed broad cross-party support and controversy has largely been of the helpful kind: pretty much every commentator has been focused on how to make it work, not how to kill it. Even a large majority of participants in the process have been focused on consumer interests first, and industry and adviser interests after that.

A celebratory post, with a flavour consistent with this being the middle of an election campaign, is over at Goodreturns. Link.

Inputs versus Outputs and Medical Claims

Politicians always say pretty much what they want to in order to get their way, as anyone with ears to hear and the misfortune to be close to a radio, or television during news broadcasts recently will know.

One common cry, whatever the problem, is that the solution is 'more money'. Health care poor? more money. Education poor? More money. Only government doesn't have any money of its own. It only has whatever it has taken from you and I.

It has to be said that spending more is often required. But obviously, also, it is not not always the case.

An individual in poor health often needs to spend less on food, booze, and fags and get out and do some wholesome - free - exercise.

Spending on healthcare has been rising a lot over the last ten years - but the number of people on sickness benefits has sharply increased. In the US there is concern that the rate of prescriptions and their fulfilment is falling - and this must mean people will be sicker - but, they didn't get a lot better when the rate rose dramatically. Not all inputs have a direct relationship on outputs.

Of course, insurers see this all the time with medical claims. Magically treatment for an insured person is usually more expensive than for an uninsured person. In a further interesting development, drug purchasing agencies are teaming up with more innovative drug companies to pay on performance of drugs - not merely for pills bought. Wouldn't it be nice if we could introduce that thinking into some other areas?

Cash crunches closer to home

While the troubles that brought low Lehman Brothers, Northern Rock, and others in the last few months continue it's worth pondering the personal finance implications. A similarity in many of the bailouts has been the repetition of the explanation that '...there are plenty of assets just a temporary need for cash...' Of course this is only part of the story. There are usually plenty of assets that either cannot be readily turned into cash, or they could be - only at bargain basement prices. That's the reason why holding investments on your accounts at market prices, not book prices, is considered the more realistic approach.

But we digress.

You may not be Lehman Brothers (but take a look outside for two fetching secretaries, and a massive Lincoln Town Car just in case) but you could suffer from the same problems. Especially if you are one of the more than 100,000 people who became a landlord over the last few years, expecting the triple miracles of inlfation, immigration, and insane regulations to make your mouldering pile of pine and plaster to yield incredible riches.

But you may have behaved even less wisely. Perhaps you didn't even by a house, just a couple of cars, lots of whiteware, and a new bathroom. All on the marvellous news that your house had more than doubled in value and heck - your income was rising nicely. But the tide has turned against you, not long after you increased the home loan, up went mortgage rates, fuel prices, food, school fees, local authority rates, tax on petrol, you name it, it went up - except for your income. Overtime became a thing of the past.

So if you're looking to avoid the consequences of such a crunch, remember, cash is king. That's why certain kinds of savings are better than others right now. As almost any Lehman Brothers executive could tell you, liquidity is what's needed. So stop shopping, defer major purchases, have a trademe sales binge, cancel subscriptions, ditch one of the cars, downsize the other, take in a boarder, switch to house brands, even - if you have room, refinance credit card debt into your home loan, then cut up the cards - do anything to increase cashlfow, and do it now, before it's too late, oh, and do not do KiwiSaver!