Eureka Correspondence

Mining the hunt for yield, ETFs and withholding tax, the next global correction.

Mining the hunt for yield

I enjoyed Tim Treadgold’s article, Mining the hunt for yield. Other possibilities are NZ Oil & Gas and Senex Energy Ltd, both profitable oil producers. Unfortunately it seems Senex’s chief executive believes shareholders don’t need dividends, despite the company being debt free and profit-making. N.Z. Oil & Gas does pay a regular dividend (unfortunately not franked for Australians).

Name withheld

ETFs and withholding tax

I was interested to read Alan’s comments on Europe in his weekend briefing, Kohler’s Week: Banks & the yield curve, China’s Plenary, The Debt Ceiling, Europe & ETFs, Say Cheese but I resent paying US withholding tax (even at a reduced rate) on a European-focused ETF.

GK

Editor’s response: Thanks for your letter. The iShares Europe ETF is currently the only European-focused ETF listed on the ASX. The reason the US withholding tax applies is because the primary listing is on the NYSE. You can reduce the withholding tax payable from 30% to 15% by filling out a W-8BEN form, which you can download from Computershare’s website. Depending on your individual circumstances, you may then be able to claim back the 15% tax paid at the end of the financial year.

The next global correction

I find it amusing that commentary on US debt and EU woes doesn’t project the most likely scenario, i.e. when these flaws finally produce catastrophic failure.

Perhaps this is because it’s better for consumer confidence to pretend that the collapse won’t happen. I’ve noticed a lot of commentators talking up the bull run in the Australian stock market but with the global economy in such poor shape investing in any listed company, irrespective of the underlying fundamentals of the business, is like gambling in a casino. I’d like to see some more insight on how the next global correction plays out. Governments throwing money at the problem can’t be the answer. The weaknesses should be eliminated rather than supported.

JD

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