Small is the new big
I felt that the letter published last week from Leigh Kealton in which he proposed a co-ordinating group of SMSF owners to represent that group against the weight of professional managers is something that needs more publicity and support. Company boards are largely not representative of the shareholders and it is company boards that select, and pay at outrageous levels, the managers of these companies which are owned by many, many shareholders. In addition I believe that there are a significant number of small shareholders outside the SMSF section who should be included in such a group organisation. Many ‘small’ shareholders hold portfolios in excess of $1 million and yet have virtually no voice in the management of the companies they invest in. It used to be that small investors bought shares in good, well managed and sound Australian companies as they saw it as a good thing to do as they were in some small way supporting local industry. With all the takeovers and general gambling on the market going on, these sentiments are mostly forgotten but there are quite a lot of us still out there and we are getting harder to please.
I’d like to make a few observations about Bruce’s July 18 article on in-specie transfers. I have made many in-specie transfers and, contrary to what Bruce writes, the share registry does not take any notice of the date of transfer listed on the off-market transfer form. When they send out the holding statement, it has the date when they processed the transaction. If the processing date is three months later, then that's what their system records. Any major timing discrepancy should prompt a ‘please explain’ from the ATO. Secondly, if you are using a broker to implement the off-market transfer, I can't imagine they would allow you to say you made the actual transaction months ago. Consequently, you probably have to do it yourself, which means you have to write to your broker and ask them to transfer the shares from broker sponsored to issuer sponsored. And then back again once the transfer is completed. Why not ban off-market transfers made by issuer sponsors but allow those made by brokers (with the ATO setting rules that the brokers must adhere to)? Thirdly, there are two types of off-market transfer. The first type is a non-concessional contribution where no money changes hands. The other is a buy/sell transaction, not a contribution, and money does change hands. I can see that contributions can be falsified but in the case of transactions, it should be relatively easy for the ATO to set some fair rules about the paperwork. All in all, my suspicion is that this practice is not widely being abused, and the whole thing is a beat-up by the share registry offices who don't like the hassle of dealing with the general public. Has anyone seen any statistics on this? I doubt it.
Longer-term super heroics
Bruce Brammall’s article about SMSF performance over the last year misses one point that he sees as a given. Why choose 12 months as the unit of measurement of performance? The great benefit of SMSFs is you do not have the institutional imperative to report every 12 months. Long-term wealth accumulation can take a long-term view. SMSFs that continue to buy straw hats in winter (i.e. Australian stocks) may well prove to be outperformers in the long-term timeframe that super should be looked at. And yet Bruce would have sacked us all as trustees for missing the index in one year.
Personally I am loving the opportunity to buy quality stocks at reasonable prices – my only hope is the market will go lower.
To read this week’s letters, click here