Eureka Correspondence

Defending super, copper's decline, unlisted investments, ANZ Capital notes.

Defending super

I refer to the letter from Chris Miller, 26/3/2014, in response to the article "Treasury's Attack on Super". I think we are all aware of the Australian community's tax obligation to help fund the enormous and growing expenditures of all levels of government. He, or she, however, asks the question as to why a SMSF should be exempt from paying further income tax.

The writer, in my view, is ignoring a vital fact. The so called income flowing from such funds should be more correctly described as "drawings", upon which income tax has already been paid, albeit sometimes, (and not always),at a concessional rate. My wife and I are self-funded retires. That's right, we are living from our superannuation SAVINGS, responsibly accumulated over a long and measured working life. If the writer is true to his/her word they would no doubt have no objection to paying an equivalent level of tax when drawing THEIR savings from their favoured financial institution or even an ATM.

And please don't get cranky about such a proposal, after all, it would be all in the name of a "fairer society". The writer’s suggestion reminds me very much of desperate and short-sighted governments, many of which we have witnessed in this country.

AK

Copper’s steady decline

Recently I looked at a copper price graph in USD which shows a constant price decline since March 2011. I would be interested on the Eureka team view.
Name withheld

Tim Treadgold’s response: Copper has been affected by a triple whammy comprising rising production worldwide, Chinese “financing” manipulation which has seen copper used as collateral for bank loans in its shadow banking sector, and now a slowdown in demand from the Chinese construction and manufacturing sector. The Chinese factors, particularly the crackdown on shadow banking and bank debt quality, is a major factor for copper falling behind other materials in the base metal complex which includes nickel (which has started to rise) and aluminium (which could also be starting a move up).

Copper, however, seems likely to remain subdued as it battles headwinds, but will recover when the supply/demand equation moves back into balance. As a long-term prospect copper remains the best of metals because it has so many uses, the average grade of freshly-mined material is falling (which means the cost of production is rising) and big mining companies appear to be far more disciplined when it comes to developing new mines.

Unlisted investments

Alan mentioned unlisted investments in his Saturday newsletter. Are you able to provide some examples of these and where they might be sourced?

JG

Editor’s response: Thanks for your letter. Unlisted investments are any investments that aren’t traded on an exchange and can cover every asset class, from property to over-the-counter bonds to collectibles such as coins (you can see a video about investing in stamps and coins here).

But be warned: unlisted investments are generally more illiquid than listed investments and can be riskier as they may not have met the requirements to list on an exchange. For example, to list on the ASX a company’s requirements include a minimum number of investors and the need to pass profits and asset tests.

ANZ Capital notes

In the article about bonds The $6000 diversified bond portfolio Philip Bayley listed ANZPD on top of the list. They seem to be about to expire in June from my enquiries and the replacement ANZPE offers 4.186%. Is this correct?
Tom Vichta

Editor’s response: Thanks for your query. According to ANZ’s capital notes prospectus in February, ANZPD has a perpetual term, subject to mandatory conversion into ordinary shares after around 10 years (the hybrid security was issued in August last year). ANZPD has a margin of 3.4% above the variable 180-day bank bill rate, while ANZPE has a margin of 3.25% above the variable 180-day bank bill rate.