Letters: Buying gold, Data 3 and more super comments

Buying gold

Following on from Monday's article by Adam Carr, Why gold won’t fold anytime soon, I am wondering if Adam or any of your other commentators/analysts can provide further information on the best way to invest in gold? Would it be through direct stocks like Newcrest or maybe EFTs or EFCs?

D Stuart

Editor’s response: Caleb Samson wrote recently on the different options for investing in gold, and the various pros and cons of each, which may be helpful to you.

How about DTL?

As a fan of Roger Montgomery's approach to investing, I was interested in Roger's summary of where he perceived value in the IT sector. I also wondered why Roger had ignored Data 3 (DTL). I note that Skaffold has downgraded DTL from A1 to B1, although other than a downturn in profits, I am do not understand the reason for the downgrade in quality rather than performance. Is DTL worthy of consideration alongside the companies that were mentioned in the article?

PW

Editor's response: Roger Montgomery got in touch to say he most certainly considers DTL to be a qualifier, and that the list was not meant to be exhaustive.

Warts and all reviews

I have been a subscriber to your publication for some years now, and enjoy the diverse range of opinions which are presented. I believe it is reasonable to state that as a subscriber, I expect that the writers whose contributions you publish would be regarded as experts in their field of expertise. For some time now, I have been concerned that some of your contributors are able to make comments which then prove in hindsight to have been wildly off the mark. I appreciate that their contribution is purely their opinion only, but one is then left wondering just exactly how much expertise these contributors might actually have, or if their contributions are poorly researched articles, or worse still, attempts to grab attention and maybe some possible cheap business.

As an example, in your publication of September 21, 2011, Tom Lovell wrote that if BHP were to fall below the $35 mark, its price would spiral down to $20 according to his technical analysis. I recall shortly after writing this article, Tom moved to "clarify" his comments by then stating that BHP would need to fall below the $35 mark continually for more than a month, for his forecast to become true. Well, here we are a bit over 12 months down the track, and BHP has been trading under $35 for about the past six months, and still no sign of a $20 market price. And this is despite Tom stating in his article "Don't say you have not been warned."

I do not mean to focus purely on Tom Lovell's article, I am sure he meant well, but simply use it as an example because it was one which clearly stuck in my memory; I am sure I can find plenty more expert predictions which were wide of the mark also.

In view of my comments, I put the challenge to Eureka Report to introduce a new section wherein each week you review one contributor’s article from say a year ago, and report on what the outcome has been. That is, a warts and all follow up review. This would demonstrate to subscribers that you are truly a transparent publication, and possibly instill in your contributors that they do have a certain responsibility to carefully analyse and report on their predictions, even though it is still only their opinion.

P Hansen

More super responses

Your article "Super cash grab averted - but don't relax just yet" struck a chord with me as it did with what I presume were most of the 250 respondents.

I am still happily working at age 66 and consider myself lucky to be able to do so. My small company employs 9 (sometimes 12) people so we are all contributing not only to our own individual futures but also the future of Australia.

We have only one (full time employee) under age 50 and all are quite happy to still be contributing.

However, when you read what is happening (and will most likely happen) to our superannuation, it is a very depressing issue. When, as others have done, you start to look at the profligacy of this current government, their biased re-distribution of wealth, the chronic problems in the activities of the Department of Defence, and all of the other adverse fiscal issues created by the Gillard Labor government, you can only wonder and question why you still "put in".

The superannuation is ours! It is what we have been able to scavenge from the streams of revenue corralled by the federal and state governments. Income tax, payroll tax, GST, levies, import duties, licensing fees, stamp duties and so the litany of monetary extraction goes on.

This current Labor government should be re-named the Mosquito Party. No matter where you are or what you are doing they are willing and able to suck out a bit more life-blood. They are impervious to criticism and demonise those who argue against them.

How can you possibly have a government, in the state that we, and the world, are currently in, looking to re-visit the Collins Class submarine debacle? We have as yet unfunded social services being implemented (or being promised for implementation at dates well beyond the life of this current incumbent government – hopefully) that are more important than building yet more wonky submarines with insufficient range and where surfacing is more of a hope than a guaranteed mechanical process.

Rather than squeezing out more money from superannuation (regular payments made into a fund by an employee toward a future pension – a regular payment made during a person's retirement from an investment fund to which that person or their employer has contributed) the government should be fostering superannuation as it relieves them of future (currently mostly unfunded) financial obligations. If properly (realistically) means tested, it takes a load off of the public purse. Those aged over 65 will continue to increase as a percentage of the total population so the more that are self-supporting the better.

I think that the problem is that the government has come to the realisation that as the number of superannuants grows, the tax base (available Mozzy sites) will decrease and compound the current problem.

How can they possibly accept a decreasing taxable base with a growing population who have squirrelled away funds for their retirement (superannuation funds that are, currently, free of tax) but still have a large pool of expectant pensioners. Not being an actuary, I have no idea of where the cross-over point will be when the current generation will be (governments hope that they will be) self-funding in retirement.

I believe that all of us who are, or will be, disadvantaged by Mr Shorten’s future actions (or whoever then holds that position within any government) should set up a website or similar electronically accessible gathering point to register (no charge) and develop an appropriate lobby group.

Pressure is the only moral currency that any government understands. The higher the pressure - the more understanding.

Don't leave your hard-earned superannuation open to pillage by this or any other so inclined political party!

Start generating some pressure!

B Smith

I agree with Nick Sherry that if any superannuation entitlements are to be targeted it should be defined benefit schemes the like of which properly managed listed companies did away with decades ago. In this day and age it is just anomalous that politicians, judges and senior public servants should enjoy unfunded benefits the like of which are not available to the general community. This is particularly the case when all of the above named – judges in particular – would have had the opportunity to accumulate significant superannuation prior to accepting political or judicial office. Moreover, there are now significant career opportunities available to all of ex-politicians, judges and senior public servants, including military personnel.

As a general comment, I am appalled at the suggestion that the current federal government, having virtually thrown money away on schemes such as pink batts and unwanted school halls and which has now incurred additional commitments in the disability, dentistry and education areas, may want elderly Australians, who retired on the basis that there superannuation pension benefits derived from their own savings would be tax free, to provide extra funding.

D Barnett

As a self-funded retiree of 20 years I am disturbed by the opposition by James Kirby and Robert Gottliebsen to necessary changes to the latest tax minimization scheme i.e. SMSF's.

Regrettably Peter Costello's changes in 2005 to eliminate tax on pensions has resulted in an unsustainable budget situation.

As Brian Toohey in the AFR reports, the cost of the age pension will rise from $37 billion in 2012-13 to $45 billion in 2015-16, while the cost of the tax concession on super rises from $32 billion to $45 billion. Hence budget subsidies for retirement incomes will hit $90 billion in 2015-16. This is unsustainable in the long run and benefits mostly the wealthy.

One way, of course, to redress this is to tighten the means test that allows a home-owning couple to have over $1 million in other assets and still get a part age pension with other benefits like the ‘gold’ card that are denied to someone on the minimum wage.

As Ross Garnaut observed: “The virtual exemption from taxation for comfortable old people like me is unsustainable.” Saul Eslake has said that personal tax should vary with income not age. I agree.

As a person whose personal contributions to super were on an after tax basis I must say that I am tired of the whingeing by a number of your correspondents about the restrictions on salary sacrificing. Tough titty!

Robert Gottliebsen clearly lives on another planet if he thinks a retirement income of $80,000 to $100,000 is little short of penury. If they own their own home such sums give people of moderate tastes a reasonable life.

Robert also has a shot at defined benefit pensions in the Public Service.

Firstly, such schemes were closed around 1990 which means those pensioners are rapidly dying out. Secondly recipients of these pensions pay tax at their marginal rate. Thirdly, such pensions are indexed at the CPI rate unlike age pensions. Lastly, my shareholder's report from Fairfax refers to defined benefit pension schemes. I understand the Robert was a Fairfax journalist in a past life so presumably benefited from such an arrangement.

Finally Eureka Report should realize that not all subscribers are SMSF adherents. We are not interested in the latest tax dodge like avoiding capital gains tax on property within an SMSF. We are interested in how to invest safely and morally if there is such a world. Roger Montgomery and John Abernethy are the worthwhile contributors; the rest are often just floss.

I Morphett

I read with great interest the comments by the team regarding the continued government meddling with our superannuation. It is as plain as the nose on your face that this situation will continue and given the past record of governments will get worse. I believe we should establish a lobby group for SMSFs centred around the Eureka members and supported by your team. This group would then at least provide a consistent and growing voice and would not be conflicted by the presence of large retail super funds or industry funds. Perhaps you could raise this proposal in your weekly newsletter to determine if there is significant support.

K MacKenzie

Robert Gottliebsen, I and many like me have worked for 40-plus years in the public service and of course at one stage you could only join a defined benefit super scheme and how sensible has that turned out to be? After having to endure the butt of jokes of the smart money set during the various booms over the years (they become invisible during the busts) now we have the likes of you typecasting us as the new villains. Bit rich Bob.

Warren Buffett would be proud of our long term risk-averse investment strategy.

Name withheld

We recently organised an SMSF account as the industry funds were going backwards, and find the SMSF process daunting. We are not fluent enough in the banter to represent our view to government and applaud your rallying cry. I urge you to demonstrate the cost of industry funds and determine their value-add to the economy as my feeling is their use of money is not very productive to our economy as a whole.

From an SMSF point of view it is apparent that the government, having made a rash statement about a surplus, is looking for a quick grab to bolster their credibility. This short term view is at odds with the 20 to 30 year planning that goes into saving for retirement based on the best long-term ideas of how to do it. If they get credibility for achieving a surplus at the cost of super and the baby boomers then Labor will be guaranteed out of office for ten years plus.

J Manton

Well done Eureka for your part of helping that superannuation retains the 'sole purpose test'. Confidence in the system has been eroded with continual rule changes that are purely aimed at balancing the government budget.

Superannuation was introduced to relieve the government from the burden of retirement funding not to balance general government expenditure. There was period when confidence in super was growing rapidly - this period is well past. Financial advisers would serve clients best by advising to limit the amount locked away in super, and being the subject to whims of the government of the day, a proposition that does not provide a good medium term outcome for Australia. And yes the so-called industry groups do not represent the individuals superannuation matters whether public offer or DIY.

Name withheld

I have noticed your recent comments on superannuation a topic that is of concern to me but I feel there are several issues that have not been covered yet.

1. Why do certain Public Servants/Politicians receive a contribution of I think it is 15.4% yet all the others of the workforce receive 9%? Does not principle and logic say that this should be reduced to 12% as proposed. But this does not seem to be out in the open? One can only wonder why?

2. Should we be raising the retiring age? I think so because when it was set in 1909 life expectancy was ???

3. If as our demographers tell us our workforce will reduce in years ahead to support our current ageing population, where is the discussion on the effect of this on asset values which may be needed to redeem funds. I have yet to see any discussion about this.

4. Surely it is proper that any discussion of changes to super should clearly illustrate its effects on all sections of the community (v from politicians to public servants down to the person working on the factory floor. Not these banal expressions of our leaders who are very well protected.

5. I am naive enough to hope that my super will provide me with sufficient income to provide for my life without asking the taxpayers to pay for a pension.

6. I believe that many of the "schemes" that have developed are more "business" than superannuation. Logically the day I die should be the end of my super as that was the intent.

7. Another issue is that the medicare levy is not applied to super which is an age when my need is the greatest.

8. Perhaps there is a good argument for the annuity use of super for all.

So you can see I am a very dissatisfied member of the community. Please attempt to show all the issues of the privileged and the not privileged in this issue

J Church

Recent RMBS?

I would be interested to know how RMBS have performed over the last 18 months rather than during the GFC. Our real estate markets were still rising or at least stagnated during the GFC. This has not been the case in the last 18 months with substantial falls from the peak in some areas.

Name withheld

Brevity plea

I am a keen reader of the Eureka Report. My background is not financial nor detailed analysis, so I appreciate particularly the articles that are two pages or less. If the author cannot get their message across in that allocation, it is usually not understandable to your audience of my background. Certainly my ability to understand their argument or logic has long gone. You may find that many others share this preference. Two pages or less !!!

D Hillis

Applying the data

It never ceases to amaze me how everyone supports their argument with statistics but there is no consistency in the data. I refer to Carr on housing where he says that average household income is $90,000 and average mortgage $200,000. This may reflect downtown Sydney but nowhere in Queensland so should his argument only apply where the stats quoted apply, rather than across the board?

AF

An underquoting tale

With a 20-year career in real estate in Randwick now thankfully behind me, I wish to both applaud Monique on trying to deal with the subject of underquoting, and help her get her mind around it a bit better. It was the reason I eventually left the business in disgust, after trying to do something about it myself. I eventually ended up on A Current Affair as I made such a fuss about it.

May I politely suggest that it is not the relationship between the agents ‘quote’ and the reserve price that is where the problem exists, although that is the way a buyer would feel.

When the agent is making those initial low quote prices, the vendor does not really know what reserve they will place on their property on their big day and neither does the agent. It all sits squarely on the price the agent has put on his agency agreement as his opinion of a reasonable selling price.

This is where the discrepancy is most telling. The agent tells the vendor too much to get the business, and then is a bit shy to tell the world about his mistake. Follow.

The problem exists because, having (puffed up a BIT to get the listing) the agent finds it much more easy, and an absolutely much more effective and simple way to create buyer interest in a property by lying to people. (They always look directly at their shoes if, at the front door, you look right in their eyes, and ask them what figures they provided in writing to the seller) (I love that question, the agents just hate it.)

I find it both sad and a bit funny that you suggest that “many buyers take the vendors agent at face value”, when agents are out there, lying through their teeth time and time again. Remember, this has been happening just as it is today, even 20 years ago. Do not be too concerned for the buyers, for they are just tomorrow’s sellers, and I truly believe most know all about this little game that gets played at every front door eventually. It is a game.

Just like footy, or more like a dodgy game of two-up, with one lop sided wonky coin that everyone can see. But they still play. They know nothing else. They have been taught to lie.

Appeal to the greed of the market. It is so easy to do, and during my time in the business I saw the idea of (providing a (very conservative) estimate at the front door in a whisper) grow to the wonderful idea of placing estimates on brochures and ads. I used to do the numbers, and they were staggering. 25% was my average discrepancy one month.

Now we have the absurd situation where it is in fact illegal to misrepresent the possible selling price of a property, but it happens at almost every property that is up for auction, and many that are not.

Here is a great example for your readers.

I opened up a home in Randwick with an agency agreement at $1.3 to $1.5 million last year.

My quote was $1.3 million, maybe more, maybe a bit less if we are disappointed. I used 10 comparable sales, gave them all to my intending bidders and interested buyers. I also told them that Japan, Christchurch and Brisbane just happened, and anything could happen by the time it gets to the rooms.

Another agent listed a stunning but undeveloped/unrenovated home in a far nicer spot in Randwick, one of the finest original Italianate homes in the district, sitting right between two other gorgeous homes. I had a look at it before the board went up, and from the outside, I found the home to be in the market at 2.5 million. A bit each way

The other agent knew I had an unrenovated home up. It was really the only other nice big unrenovated home on the market, so I was ambushed. The initial quote for their home was exactly the same as mine. She stole all my interest, (for a short time), and I met many of her interested parties.

Her home sold at auction for $2.7 million. Her initial quote was less than half of the selling price. A blind monkey could have handed out her brochures, and not said anything to anyone, the home would still have sold for a great price as it was a great house not just a good one. An unrenovated mansion on the best street, on 1200 metres, of level land, between two other stunning homes, on a street with stunning homes all the way around it.

Did the agent get it wrong? No way, she did what she was taught. The whole point is do not try too hard to teach anyone but the young, the stupid and the naïve. They will learn quick. The rest know what is going on, and everyone loves it. It is a game.

To finish, do you really think the vendors are not complicit in this game of lowballing?

Come on Monique. They are playing the game too. So please do not just focus your attention on the agents. The vendor, the vendors solicitor, the auctioneer, and the agent all know it is happening, that it creates huge frustration, and supports several small cottage industries like pest and building business, conveyancers, solicitors etc.

Hope you get a different side to the lowballing side of things now. It is a huge issue, it is very sad, very wrong, very willful, well executed, costly, damaging to the eventual sale price quite often, (touting a bargain can quickly lead to in fact convincing the buyer it is not worth more), but until everyone stops asking the question, it will continue. Teach them not to ask Monique, teach them to learn, to do their homework, and teach them to give their properties back to the honest agents out there. And they are there. The good ones are still out there, competing with the con artists.

It all got worse when they stopped paying agents a weekly retainer. Once it was all commission only, the game has attracted a very low calibre of new agent. Desperate times require desperate measures, and we all suffer.

DF

Not bothered

I wouldn't buy James Hardie at half the price. Their utter contempt of retail shareholders, as exemplified by their performance at their offshore AGM, should warn prospective shareholders that this is a company that doesn't want to be bothered with them. We should not be bothered with James Hardie.

S Harvey

In search of an account

I was wondering if one of your columnists would be able to advise if the “old style cash management [ with cheque account]”still survives. I have found that NAB no longer offers this service, instead a straight cash management account which must be linked to a trading account. Bunkum. The cynic knows the reason why.

If such an animal still survives perhaps others would be interested to know also.

J McEwan

Financial planners

Robert Gottliebsen commented recently (in relation to his loss on a hybrid) that paying 0.5%-1% on a portfolio overall was an expensive way to get advice. Could you comment on how one can find good advisors who will bill on an hourly basis? Is it the case that the advisor might only bill less, but after platform costs and brokerage are added, costs will usually amount to about 1% anyway? How about an article on getting advice please?

J Buchanan

Queensland Mines

The Speculator has served us well, and I would appreciate his take on Queensland Mines (QMN). In particular, the activity on White Range which includes Greenmount, Kuridala, McCabe, Young Australian and Vulcan. Price and volume has taken off yesterday.

V Massonic