Now this is interesting. Peter Dutton, an opposition front-bencher, bought some mining (BHP-Billiton) shares just after the RSPT was announced. The response was ferocious.
Here is Wayne Swan
“You can’t trust a Liberal Party who is out there saying this will ruin the mining sector while one of their most senior frontbenchers is buying shares in BHP,” he said in a statement.
“This proves you just can’t trust anything Mr Abbott and the Liberals say about the economy.
“And it shows why they’re such a serious risk to our economy.
“Mr Abbott and Mr Dutton must now admit this is nothing but a scare campaign which is risking our economy to make a cheap political point.
Here is Julia Gillard
“I’m calling on Mr Dutton to come out of hiding. To explain why he bought these mining shares,” Ms Gillard said today in Queensland.
“To explain why he believes that these mining shares are going to gain in value and particularly to explain how it is that he, his leader Mr Abbott and the Liberal party generally can possibly be taken seriously and viewed as fair dinkum when they’re out trying to tell Australians mining companies are going to be going out of business.”
Here is Paul Howes
One thing that Peter Dutton knew that the rest of the community didn’t know is from the time of buying the shares; the Opposition hadn’t announced their position on the tax.
We hadn’t heard the Opposition Leader’s budget reply speech, and so he clearly knew that the coalition was going to oppose the resources rent tax. The opposition to the resources rent tax did lead to an increase in those share prices including BHP Billiton. That is by definition a form of insider trading.
Nice try, but I doubt opposition policy is price sensitive – unlike, say, government policy. The actual definition of insider trading is here. (As an aside the Collected Works of Henry Manne are now available – he did a lot of the early and still important work on Insider Trading).
Annette Hurley, a very senior government senator, sold some mining shares (Penrice Soda) after the RSPT was announced. To understand the difference between the two consider Senator Hurley’s position (emphasis added).
Senate Legislative and General Purpose Standing: Economics from 28.2.07 to 14.5.09; Economics: Legislation and References Committees from 14.5.09; Rural and Regional Affairs and Transport from 12.2.08 to 5.2.09; Legal and Constitutional Affairs from 17.3.08 to 30.6.08.
She is the senior government senator on the Senate Economics Committee. She knows something about economics – to the extent that this government knows anything about economics.
But now ABC Radio’s PM can reveal that Labor Senator Annette Hurley sold mining company shares the day after the tax was announced.
…
Senator Hurley would not give an interview to PM, but she did say the shares were part of a superannuation trust and she sold them on the advice of her stockbroker because they had a poor profit record.She says the proceeds were then invested in BHP Billiton shares, although she has declined to provide the ABC with a copy of the purchase order.
Not a good look at all. To the extent that anyone had access to price sensitive information it wouldn’t be the opposition. To be fair, given the complete lack of consultation around the RSPT, Hurley almost certainly had no access to price sensitive information either, but her actions are consistent with the view that the RSPT was a tax that would have an adverse impact on mining. At a political level, she does have to do a lot of explaining.
But let’s also step back from the immediate politics and think about the economic incentives our elected representatives face. There is absolutely no financial incentive to grow the economy. Their wages are fixed and are flat rate. A system whereby their total remuneration were somehow linked to economic performance would be an improvement on current practice. As I keep saying, you can’t trust people not motivated by money.
Has the old trope ‘I made an honest mistake’ been used by an MP this week? If the answer is no then the very Honourable Senator Hurley should use it. As BBB tells us MPs try to do the best for the country…and there is nothing wrong with accumulating a little personal wealth along the way.
Sid Vicious
29 Jun 10 at 9:40 am
A system whereby their total remuneration were somehow linked to economic performance would be an improvement on current practice.
Yeah good idea.
Let’s apply Goldman Sachs comp practices to the Parliament.
Because of course politicians already spend far too much time thinking about the effects their policies will have 10 or 20 or 50 years from now.
What we need to do is get pollies focussed on massaging the short term numbers so they can get a quick payoff, and Sinc’s come up with a great plan to do just that.
you can’t trust people not motivated by money
Spot on. I’d trust, say, John Ibrahim or the CEO of Downer EDI before I trusted some loser medico who decided to do pediatrics in the Congo or some dumfuck soldier who volunteered to go to Afghanistan for crappy pay.
Tillman
29 Jun 10 at 9:53 am
The two are in any way comparable.
there are few profitable mining companies.
She got rid of a company that would benefit from the RSPT because it wouldn’t pay it and bought shares in a company that will actually pay it.
Moreover unlike Dutton It is part of a superannuation package.
i would be asking why in the hell she was advised to buy the shares for Superannuation in the first place.
does she understand what Superannuation is all about?
does she understand what type of companies she should be buying for Superannuation purposes.
on this evidence the answers are an unequivocal no.
Butterfield, Bloomfiled & Bishop
29 Jun 10 at 9:58 am
Homer the financial adviser …
jtfsoon
29 Jun 10 at 10:00 am
“you can’t trust people not motivated by money”
At least you know what motivates them. To a point.
“Let’s apply Goldman Sachs comp practices to the Parliament.”
Goldman Sachs were neither ruined*, in need of a bail out nor caused the crisis.
Such a system would need to be very long term and be too complicated to work.
You could pay the RBA based on if 1. there was liquidity and 2. long term inflation was reduced to zero.
A Federal Government only in control of Federal fiscal, tax and regulatory policy?
Too damned complciated.
*”There is no question whatsoever that when you look at totality of the steps that were taken by central banks and government, particularly in 2008, that Goldman Sachs was a beneficiary of this. There’s no doubt whatsoever about that — as was everybody else. I mean, that’s what those extraordinary measures were all about. But again, I’m not suggesting for one minute that Goldman Sachs was not a beneficiary of these initiatives. It was clearly.”
Quoted from a blood sucking Vampire squid banker.
.
29 Jun 10 at 10:03 am
could be worse it could be Statman the statistical guru, yes a lot worse
Butterfield, Bloomfiled & Bishop
29 Jun 10 at 10:05 am
“she sold them on the advice of her stockbroker because they had a poor profit record”
That’s sound advice Homer. Indeed, she should have shorted them, net of optioonality.
.
29 Jun 10 at 10:05 am
selling them was logical, buying them in the first place for Superannuation purposes was illogical.
Butterfield, Bloomfiled & Bishop
29 Jun 10 at 10:08 am
“buying them in the first place for Superannuation purposes was illogical.”
Buying them on expectation of capital gain or dividends is illogical?
.
29 Jun 10 at 10:09 am
“you can’t trust people not motivated by money.”
When I moved suburbs recently my home contents insurance went down, now I realise it’s because I’m no longer living across the road from a seminary.
Steve Edney
29 Jun 10 at 10:13 am
So was it the Robin Hood academy for Friar Tuck proteges?
.
29 Jun 10 at 10:15 am
No, the Seminary of the Good Shepard.
Steve Edney
29 Jun 10 at 10:20 am
Yes and no. The problem is that any metric can only be a proxy of reality and that it is much, much easier to fiddle the metric than to change the underlying system’s performance.
If you think GDP numbers are baked now…
Yet salesmen regularly feature in the lowest positions on trustworthiness surveys.
Jacques Chester
29 Jun 10 at 10:21 am
Homer – that’s not right. You can’t know why she bought the shares.
Sinclair Davidson
29 Jun 10 at 10:21 am
Jacques – above or below politicians?
Sinclair Davidson
29 Jun 10 at 10:22 am
“Yet salesmen regularly feature in the lowest positions on trustworthiness surveys”
I think it’s related to their wares more than their comissions.
You don’t need to cold call people to buy a BMW for example.
.
29 Jun 10 at 10:24 am
“I think it’s related to their wares more than their comissions.”
Or perhaps their manager can trust them to maximise sales, but the people they are selling to can’t trust them to be truthful.
Steve Edney
29 Jun 10 at 10:29 am
What on? Mark-ups or product description?
Everything? LOL
.
29 Jun 10 at 10:34 am
A system whereby their total remuneration were somehow linked to economic performance would be an improvement on current practice.
Yeah good idea.
Let’s apply Goldman Sachs comp practices to the Parliament.
It’s not a bad idea. However nearly all of them would be fired for non performance.
jc
29 Jun 10 at 10:36 am
I think they all shuffle about depending on the survey. It heartens me to see that journalists are in the same quartile.
Steve Edney has made a good distinction of course. But even a sales manager has to worry about funny business.
Jacques Chester
29 Jun 10 at 10:41 am
Of course, another problem is that any such rewards scheme would also become a focus of attention for every pissant rent-seeking special interest group.
Jacques Chester
29 Jun 10 at 10:42 am
Anyone read “Don’t Sign Anything!” by Neil Jenman?
That is a depressing book.
.
29 Jun 10 at 10:43 am
Mark,
you do not buy companies such as these on the expectation of strong rises in profits.
you really shouldn’t have any speculative investment in a superannuation trust or whatever.
Sinkers I never said I knew why she got either got rid of the shares or why she bought the new shares.
I did say it wasn’t comparable to Dutton and it isn’t.
Yet again you are criticising an ALP politician on the wrong grounds.
Butterfield, Bloomfiled & Bishop
29 Jun 10 at 10:43 am
selling them was logical, buying them in the first place for Superannuation purposes was illogical.
Moderartor…
is it possible to institute a minimum IQ level to post comments here … say 50… in which case Homer wouldn’t get through.
jc
29 Jun 10 at 10:44 am
“you do not buy companies such as these on the expectation of strong rises in profits.”
Okay.
“you really shouldn’t have any speculative investment in a superannuation trust or whatever.”
So buying into LNC (Linc Energy) a few years ago was a bad idea?
.
29 Jun 10 at 10:45 am
Sinc
are you violating any ASIC provisions by allowing a clearly unqualified person like Homer to give possibly disastrous investment advice?
jtfsoon
29 Jun 10 at 10:53 am
And throughout this cloud of smoke and mirrors, Swan’s wife is given a free pass for selling her mining shares days before the announcement of the RSPT.
Keith
29 Jun 10 at 10:54 am
Jason, who can understand what Homer is advising?
dover_beach
29 Jun 10 at 10:59 am
We have a let the buyer beware policy here.
Sinclair Davidson
29 Jun 10 at 11:06 am
More to the point, anyone following Homer’s advice deserves what they get.
dover_beach
29 Jun 10 at 11:28 am
And throughout this cloud of smoke and mirrors, Swan’s wife is given a free pass for selling her mining shares days before the announcement of the RSPT.
If this is true she should be prosecuted, because Swan obviously knew about this in advance and acting on that information is definitely insider trading.
Yobbo
29 Jun 10 at 11:32 am
“Spot on. I’d trust, say, John Ibrahim or the CEO of Downer EDI before I trusted some loser medico who decided to do pediatrics in the Congo or some dumfuck soldier who volunteered to go to Afghanistan for crappy pay.”
Tillman, I think you need to update your knowledge of the expenses that soldiers are entitled to do these days. They aren’t earning a six penny per day any more.
boy on a bike
29 Jun 10 at 12:04 pm
http://www.theaustralian.com.au/news/opinion/campaign-gets-down-and-dirty/story-e6frg6zo-1225867462598
Don’t know about prosecution, but there should be an inquiry, not just flat denials.
An inquiry would not suit the all new squeaky clean Gilrud government.
Keith
29 Jun 10 at 12:08 pm
BOAB – pay was a significant factor in WI enlistment.
.
29 Jun 10 at 12:11 pm
Correction.
Kim Swan divested her shares after Wayne had received the Henry report, not “within days of announcement”. OOps.
Keith
29 Jun 10 at 12:12 pm
So why isn’t there an investigation of her disposal?
jc
29 Jun 10 at 1:14 pm
“you really shouldn’t have any speculative investment in a superannuation trust or whatever.”
So Homer is a goldbug then?
You should at least attach some kind of disclaimer to his posts Sinc.
asf
29 Jun 10 at 1:38 pm
let us get serious if it is possible here.
Sinkers claims Hurley is a ‘Senor’ government Senator.
Well no she isn’t. If she was she would be a Cabinet minister.
Insider trading. Well no it was a decision made by Rudd & Swan.
She was making decisions about her superannuation plans. Again vastly different to Dutton.
She gets rid of a company that WOULDN’T pay the RSPT and bought one that WOULD pay the RSPT.
Only a crackpot at Catallaxy would make a stupid claim that this is insider trading.
A more pertinent criticism is that she bought a dog and then got rid of it. Why did she buy it in the first place?
Butterfield, Bloomfiled & Bishop
29 Jun 10 at 3:30 pm
“She gets rid of a company that WOULDN’T pay the RSPT and bought one that WOULD pay the RSPT.”
She shorted a non dividend payer for a dividend payer? That’s a well known strategy – “dogs of the dow”.
Tax policy is simply one input to prices and under the dogs of the dow strategy, secondary to yield.
.
29 Jun 10 at 3:40 pm
sinkers is amusing.He wants a government to grow the economy.
They do because sensibly they ignore his advice.
Presumably the present Government would get a large bonus.
Those Governments that stupidly took Sinkers advice like Ireland etc would not.
Butterfield, Bloomfiled & Bishop
29 Jun 10 at 4:40 pm
Homer,
Rudd’s stimulus should have been zix months earlier if it all. Your criticism of Sinclair is incomplete and divergent.
.
29 Jun 10 at 4:41 pm
If she sold them after the tax was announced – how is it insider trading? Isn’t that exactly what she should have done – hold off until her inside information (new mining tax) was made public?
Fleeced
29 Jun 10 at 6:09 pm
Tillman
“I’d trust, say, John Ibrahim or the CEO of Downer EDI before I trusted some loser medico who decided to do pediatrics in the Congo or some dumfuck soldier who volunteered to go to Afghanistan for crappy pay.”
A “dumfuck” private on increment 4 earns $47,646 plus a service allowance of $11,355 per annum. Whilst in Afghanistan, they also get a $200 per day campaign allowance. Whilst they are overseas, all pay and allowances are tax free. Their living expenses are pretty minimal.
So a “dumfuck” private could go away for 6 months and come home with $65,500 in their pocket.
Not bad if you ask me. And that dumfuck might spend their tour fixing helicopters or setting up satellite transmission systems – something I certainly couldn’t do.
boy on a bike
29 Jun 10 at 8:12 pm