As we noted last week, it’s been a rough time for shareholders, with March ending up a shocker in a number of major markets around the world. Donald Trump’s recklessness and chaos, and the uncertainty that creates, has been weighing heavily on investor sentiment, particularly with a trade war looming ever larger.
In Australia, however, investors have had something else to contend with. And by investors, we mean all of us — since everyone with a superannuation account is affected. At the end of the March quarter last Thursday the ASX 200 finished at a level lower than it was at the end of the March quarters in 2017 and 2016. Much of the blame rests with the big four banks, which have seen tens of billions of dollars value evaporate as their shares have slid significantly in the last year: 16% for the CBA; 14.9% for NAB, 16.4% for ANZ and 18.8% for Westpac in the past year. Losses in the March quarter alone have ranged by 3.6% to 10%. The loss of value for the big four for the past year is more than $63 billion — with nearly half, or more than $28 billion disappearing in the March quarter.
All despite some of the best business conditions ever recorded in Australia and a jobs boom.
The vast loss of value is a case of chickens coming home to roost after years of ripping off customers, inappropriate loan practices, rorting key market interest rates and enabling money-laundering. And that was before the royal commission discovered whole new areas of misconduct: apparent fraud in lending for home loans, credit cards and personal loans, lending to criminals, lending to people with no incomes, selling products people couldn’t use. What will we discover when the commission resumes hearings next week?
The people responsible for this are the bank boards, governments and their regulatory arms. The boards presided over rotten cultures, deliberate gouging, flawed remuneration and incentive practices and a willingness to turn a blind eye to whatever gained market share. But governments and the Australian Securities and Investments Commission allowed it all to happen. ASIC sat on its hands during the worst excesses, and didn’t even warn customers that they were at risk of being preyed on by dodgy financial advisers and predatory lenders. It happened under both sides — remember, Labor only came late to the idea of a royal commission into the banks, although it was Tony Abbott who ripped tens of millions out of the ASIC budget, and who tried to reverse the Future of Financial Advice (FOFA) reforms that imposed greater regulatory requirements on financial planners.
The approach of the banks and of the Abbott and Turnbull governments has been to try to keep the mess hidden for as long as possible, and hope that various measures — the bank super profits tax, the regular parliamentary inquiry appearances, new compensation bodies — would hold off the inevitable. All that did was delay the day of reckoning. Or, as it has turned out so far for bank investors — 365 days of reckoning and plenty more to come.
A considerable number of factors are at play in respect of asset valuation, (superannuation) fund management, negative gearing and the like; none of which have been treated with any rigor in this article.
Taking one (representative) sentence (fifth para.) “But governments and the Australian Securities and Investments Commission allowed it all to happen. ASIC sat on its hands during the worst excesses, and didn’t even warn customers that they were at risk of being preyed on by dodgy financial advisers and predatory lenders.” may well be the case but no mention has been made of the greedy bastards that were either misled or possibly victims of fraud or victims of “pie in the sky” and, frankly, have only themselves to blame in pursuit of their own avarice. On the one hand the public is entitled to rely upon the advice of “professional” people (especially if the advice is sought as a fee for service in the first place) but, as an aside, scams ONLY work on fundamentally dishonest people.
Then this gem stands “all alone” : “All despite some of the best business conditions ever recorded in Australia and a jobs boom.” The statement makes no attempt to consider the value of the assets in question, five years ago, at the beginning. Flicking through the business press a few analysists did make mention of overvalued assets (e.g. commercial property and houses) by as much as 30%.
The major problem for capitalism, as a mode of production, is that the players are maxed-out (hence the compliance of the workforce; France will come around). As the late Hitchen’s might have put it “there is no one left to lend to”.
Let’s not complicate things Kyle . . .
Banks and banking are protected financial entities. Run by bastards. Everyone knows this. When bank behaviours go so wrong that even the highest of political elites are literally “forced” to act then; and only then, must washing be hung out for all to see. But . . .
Everyone knows that a sacrificial lamb won’t cut it. So, a senior or senior heads (if it is really, really on the nose) must depart; not in a hurry, not without recompence . . . calm, measured, a touch even of grace. Thankful, that they had been trusted to contribute many administrative and visional ‘things” to the financial success of Australian banking . . . over the term of their long and successful tenures.
After all Kyle, everyone knows . . . banking is not a business understood; even should not be understood; by those who’s life long graft, sweat and tears in trust, form the foundations of every banking career. Including, the soon to be honoured and thanked; for their remarkable contribution over endless years.
We wish them well . . . or we should wish them well. For they surely will reflect on a marvellous and munificent ‘innings’
“scams ONLY work on fundamentally dishonest people”
Really?
That’s an awfully big call – any evidence to back it up?
M
Yes – as a matter of fact – yes. Perhaps I ought to have included ning-nongs too but ning-nongs can be dishonest also. As an aside most readers will acknowledge that
I do not make statements that are unsupported and I don’t mind being asked for
evidence.
You may remember the film “The Sting” (1974). The material for the film came from research and autobiography. “Stinging” attained its zenith just prior to WWI and was confined to the mirror image hockey stick from Chicago to down the east coast.
Most scammers did not consider themselves criminal; just high class con-men and by no
means the same thing. The practice possessed its own rather comprehensive jargon including
reference to the scams. The “mark”, for example, was the victim.
With reference to autobiography of a 1910s, 20s or 30s scammers the “marks” possessed particular characteristics. Firstly, they liked company and didn’t mind blabbing to strangers making all kinds of admissions and declarations. Secondly (related to the first) they typically expressed surprise and glee when it was disclosed that the new friend (the “plant”) was also staying at the same hotel. Thirdly, the “mark” was somewhat gullible but influenced by “personality” of the “plant”. Fourthly, a quick business deal “you supply the cash and I will supply the … whatever” found favour with the mark. Very little coercion, if any, was required. Then, of course, it goes downhill from there.
In fact most former plants declared that they gave up on a “mark” if the mark did not share much about themselves or were disinclined to discuss personal business “to mutual advantage” or was evasive in regard to accommodation etc. Of course, the plant, on a ship or wherever moved onto the next likely mark.
In more contemporary settings, there are the courts. Those who have fleeced pensioners, for example, have offered returns of up to 25%; say 10 to 25 %. For a number of months the scammers paid the pensioners X% : 10 < X < 20 (many from the money borrowed) and then fled. Point made? I can find some current cases that contain a good deal of detail.
Time for state banks run by public servants
Agree 100%.
The state banks were perfectly suited to the average citizens needs for many decades until the advent of the “greed is good” 80s when they fell, one by one, due to sheer grasping avarice.
SBSA and SBV went bust don’t forget…
… as stated, because they fell for the noxious neolib nostrums.
Yes the government and the regulator are mostly to blame for the robber banks and their culture of unbridled greed to the detriment of Australia’s citizens.
But it is becoming fairly obvious that at the end of the day those responsible will walk away from this scandal smelling of roses. Nobody will wear the blame, nobody will be held accountable and all of those who made millions from straight out fraud will, as they say, be laughing all the way to the Bank.
That’s the way justice works for the top echelon, the rich and famous and corrupt governments.
Justice is seen by many as the innocent peoples illness. And in most cases it is a cancer worse than the sickness they were supposed to cure.
Funny how it is alright to have a bank super profits tax, but not a mining super profits tax.
Whether it is banks, miners, megacorps or the mudorc evading tax, the best solution is the one applied to most workers, PAYE.
Tax turnover.
Simples.