A court in the State of Florida, US, has recently issued a judgement in relation to a money laundering case. The money laundering aspects are not relevant to this post – instead, what is interesting is how the judge viewed bitcoin.

Bitcoin is relevant to the case since that is how the allegedly fraudulent transactions were being conducted. The full judgement is available here http://www.miamiherald.com/latest-news/article91701087.ece/BINARY/Read%20the%20ruling%20(.PDF)

The judge ruled that bitcoin is not money, and hence any prohibitions on money transactions, such as might include money laundering, could not apply to bitcoin. The judge said that while bitcoin had some attributes in common with what we commonly refer to as money, it differs in “many important aspects.” Continue reading →

The volatility from #Brexit continues on financial markets. But it is worth placing that volatility in context.

This chart (source: Google Finance) shows the British pound against the US dollar over the last 6 months. The pound has dropped dramatically in the last few days. Although, the level it was at immediately prior to the Brexit vote was the highest it had been in the prior six months.

This next chart (source: News Limited) shows the UK equity index, the FTSE 100, again over the last six months.

Then the US equity index the S&P500 is in this chart (source: News Limited)

Volatile, yes. Markets always are.

The Federal Government’s proposed budget for 2016/17 contained a significant number of changes to be made to superannuation laws. Overall, superannuation has been made less flexible and tax incentives have been reduced. That, in conjunction with a proposed legislated ‘purpose of superannuation’ that is insipid, suggests that the Government has downgraded the importance of superannuation in retirement incomes policy in Australia.

The reduction in flexibility is casued by a tightening of the annual limits on contributions. Contributions from year to year have varying levels of disutility for a saver. When incomes struggle to meet living expenses, housing costs, education costs, savings are minimal or non-existent. When the pressure of expenses eases, people are more able to save, typically when they are aged 45 and above during their peak earning years prior to retirement. Savings are adjusted in accordance with the disutility associated with them. The new limits will inhibit savings because they fail to recognise this point.

The proposed limit to savings of $1.6m is causing a lot of anger among today’s retirees and near-retirees. At current interest rates, $1.6m will not generate a particularly lavish lifestyle. But for future retirees that have been constrained by the new lower annual caps on contributions, I suspect the $1.6m limit is beyond reach anyway.

The Government has messed around with the rules, upset a lot of people with the retrospectivity of the changes and made administration more complex. The best next step would be to admit the total failing of Government regulated savings. Abolish the compulsory Superannuation Guarantee, make all investment earnings tax free (within super), remove super contributions as a deductible expense and tax all benefits as income.

The broad-based US index S&P500 is up 60% over the last 10 years. Bearing in mind that dividends are not included and that inflation has been low, you might think a passive investor in US equities would be somewhat relieved. Especially when compared to some other markets: the UK FTSE100 and the Australian ASX200 are both at virtually the same level as they were 10 years ago.

Source: Google Finance

I had a good laugh this week at the story that was picked up by an investment management industry newsletter. An investment management company calling itself Australian Ethical reportedly said it would decarbonise its portfolio by 2050. Citing the urgent need to do something to prevent catastrophic climate change, the team at Australian Ethical is really getting into gear. Urgently. When I have something urgent to do, my timetable for getting it done often extends into the 2060s, so 2050 clearly reflects the degree of urgency this team really has.

Put aside for a moment that climate alarmists have been warning for at least 15 years that unless action was taken in the next 5 years, it would be too late. Continue reading →

Joshua Slocum, famous for being the first sailor to single-handedly sail around the world (in the late 19th century) wrote of the slow but gradual progress his yacht, Spray, made up the east Australian coast. He referred to Spray ‘nibbling away at the miles.’

In a modern day version of slow but purposeful progress, the Commissioner of the Royal Commission into Trade Union Governance and Corruption has delivered his own version of nibbling away at the rorts. Justice Dyson Heydon AC, QC, delivered his report to the Governor-General on 28th December 2015. An odd day, perhaps, given that most Australians prefer to be at the beach at this time, or sailing the east Australian coast, and paying attention to a weighty report that carries 79 recommendations for law reform is not so easy. Nonetheless, the GG is made of sterner stuff and the report is now available to the public. One of the recommendations (#51) gives the Government the necessary ammunition to kill off what has been an unconscionable restriction on employee freedom of choice for the last twenty years.  Continue reading →

Most Australian super schemes provide benefits to members or their dependants on disablement or death. Typically, the cost of that insurance is deducted from the accumulated balances of the members. Those insurance costs are now rising rapidly almost across the board. Increases of 50% to 100% are common.

As a result, fund members will see large increases in the amount deducted from their balances to pay for the insurance. As a sad indictment on the engagement of members in their schemes and benefits, many fund members do not even know that they are insured.

The reason for the premium increases is clear – claims are higher than premiums collected. Continue reading →