Financial analysts of the world unite

I know that some of you cannot go to the link which is behind the paywall, but in this case you might think about ways to read the whole article. Head off to some coffee shop or the local library. Perhaps even shell out the $3.00. But this is what you should read, which comes with a title that provides you with little sense of what comes next: Piano’s not the key to wealth. I might also mention that the article might also depress you unless you are in on the scam scheme yourself.

The best pianists, for all their thousands of hours of practice and performances, will earn crumbs compared to even second-tier fund managers. The salaries of the best doctors and barristers’ incomes are dwarfed those of money managers.

That’s because they are labourers, and labour is relatively cheap. Siphoning off a portion of capital income is real money.

And in no country is this truer than Australia, where regulation ensures $30bn flows into superannuation accounts every three months. Indeed, whoever wins the federal election will supercharge that flow as the compulsory rate of saving cranks up to 12 per cent by the mid-2020s. Labor, in one of the greatest transfers of wealth ever, wants a 15 per cent rate.

All this and more are from Adam Creighton’s visit to Omaha to listen to Warren Buffett and discuss money management with a number of the 18,000 who showed up to listen to what he had to say. There is then also this:

In advice to budding financiers, Buffett revealed the second and main swing favour of asset management: don’t become a good analyst, be a salesman. At 1.5 per cent a year, you’ll quickly be rich. The wonders of pay based on percentages can’t be oversold, especially in a world where financial assets are swelling faster than inflation and the population together. Managing $1bn entails no more labour than $10m but, for a fee of 1 per cent a year, the pay differs.

The best pianists, for all their thousands of hours of practice and performances, will earn crumbs compared to even second-tier fund managers. The salaries of the best doctors and barristers’ incomes are dwarfed those of money managers.

That’s because they are labourers, and labour is relatively cheap. Siphoning off a portion of capital income is real money.

And in no country is this truer than Australia, where regulation ensures $30bn flows into superannuation accounts every three months. Indeed, whoever wins the federal election will supercharge that flow as the compulsory rate of saving cranks up to 12 per cent by the mid-2020s. Labor, in one of the greatest transfers of wealth ever, wants a 15 per cent rate.

As wages stagnate and asset prices soar, the division of jobs between those who rely on wages and those whose “wages” entail a hefty chunk of capital income raises questions about the fairness of the tax system.

I’m as against Labor’s proposed interference in childcare wages as the next furious pundit. It is already a bottomless pit of public spending and any extra will be hoovered up by childcare centres. The proposal does nothing to unbutton the straitjacket on workers’ productivity imposed by Labor’s “quality framework”, which mandated maximum child-to-carer ratios among other feel-good imposts that abolished affordable childcare.

The last paras:

Regulation tends to benefit the better off, as it did in Omaha, where low-income Uber and Lyft drivers did a roaring trade. But too bad for them a federal rule in response to Nebraska floods outlawed “gouging” of consumers in emergencies. Without surge pricing, Omaha’s rich visitors enjoyed cheap $US7 rides between high-end hotels and bars.

“Why are you poorer than Warren?” Munger [the $2 billion dollar man] was asked.

“Well, why was Albert Einstein so much poorer than me?” he mused, after a long pause. Becoming a scientist is also a bad idea.

You have now read around a third, so you can decide whether to spend the $3. Nevertheless, it might be the best career advice you ever get. Still, I would rather be Albert Einstein than Warren Buffett, but that’s just me.

This entry was posted in Australian Story, Economics and economy. Bookmark the permalink.

17 Responses to Financial analysts of the world unite

  1. I wonder how much better a life these millionaires and billionaires actually live?

  2. Jock

    And just recall that the fees earned by managers in the States are way less than the gougers here.

  3. Bruce of Newcastle

    Shelling out $3 on a The Australian newspaper story is the definition of financial ignorance.
    You will not learn the best investment strategies from The Australian.
    Superannuation is like a honeypot which the bears all know about.
    It’s only a matter of time before they raid it.

  4. EJ.

    And in no country is this truer than Australia, where regulation ensures $30bn flows into superannuation accounts every three months. Indeed, whoever wins the federal election will supercharge that flow as the compulsory rate of saving cranks up to 12 per cent by the mid-2020s. Labor, in one of the greatest transfers of wealth ever, wants a 15 per cent rate.

    Industry super funds will love this…Just got this bulletin today from HIA…

    F O R I M M E D I A T E R E L E A S E

    Annual Leave Loading and Superannuation
    Members are advised that there has been a recent change to the approach taken by the ATO to the treatment of annual leave loading for the purposes of the calculation of superannuation. This change means that employers may need to provide written evidence of the purpose of annual leave loading. What is annual leave loading? Most Modern Awards include provisions for the payment of annual leave loading. This is generally an additional payment of 17.5% provided to an employee on top of their base rate of pay during periods of annual leave. The Building, Joinery and Timber awards all include annual leave loading provisions. Payment of superannuation on annual leave loading Historically employers have not made superannuation contributions in respect of annual leave loading entitlements. This was because the loading was to compensate for the lost opportunity to work overtime and thereby not treated as Ordinary Time Earnings (OTE). Recently t he ATO ‘revised’ t heir posit ion resulting in annual leave loading payment s being treated as OTE and therefore subject to superannuation guarantee contributions. Next steps? The ATO has agreed not to allocate any compliance resources to scrutinise the purpose for which annual leave loading was paid historically. Importantly, this is only where:
    • The employer self-assessed that the annual leave loading was not OTE, with the reasonable position that their annual leave loading was for a notional loss of opportunity to work overtime; and
    • There is no evidence that is less than 5 years old (the statutory period employers are expected to keep records relating to their superannuation guarantee affairs) that could suggest that the entitlement was for something other than overtime.
    Going forward employers need to satisfy the ATO that the annual leave loading is ‘demonstrably referrable’ to a lost opportunity to work overtime by written evidence such as a documented employment policy that clarifies its reason and “reflects the mutual understanding of both parties to the agreement that gives rise to the entitlement”. HIA is seeking advice from the ATO to clarify the details in respect of ‘wr it ten evidence’ and will keep members informed.
    HIA members can contact HI A’ s Workplace Advisors in your region on 1300 650 620 for more information or email [email protected]

  5. MPH

    The only way to win the game is to get out of it. Make sure your identity is built on more than relative financial metrics

  6. Rob MW

    If everybody became fund managers there’s a pretty good chance that eating something might become a problem, or building and repairing something might also be a problem to say nothing of spending a life time producing absolutely nothing, except maybe producing more of what can never be fed.

    Speculating to make your money on perishable commodities is not and never has been any form production, other than trees to make waste paper.

  7. Fred

    I know that some of you cannot go to the link which is behind the paywall, but in this case you might think about ways to read the whole article. Head off to some coffee shop or the local library. Perhaps even shell out the $3.00.

    No need, just search for the article in google, delete your cache, then follow the link.

    C’mon people, its not that hard!

  8. Insert witty name here...

    Beyond your accountant, financial services people are mostly just Economic Vampires. Creating faux new ways to relieve people of their savings for no benefit to the person so relieved.

  9. Suburban Boy

    “As wages stagnate and asset prices soar …”

    Property prices are well down and shares have been pretty flat. So could Adam please tell us which asset classes are soaring?

  10. Kingsley

    What interests me is why haven’t the huge profits been competed out? Especially from non compulsory inflows. Also seems the huge profits manifest in every nation. As the above says even average or dud fund managers make huge money

  11. Mitchell Porter

    Two questions then: Is there something immoral taking place here? And if so, what can be done about it?

  12. min

    Steve ,a friend has researched what will happen to franking credits in industry funds . Chris Kenny picked up on it in today’s Australian. Would you comment on the information because it will be an argument against Shorten and Bowens plans to get at our money. apologies I cannot send article to you.

  13. Old School Conservative

    Thanks EJ for that update.

    Ross “lefty” Gittins nails Annual Leave Loading:

    The Whitlam government’s second key economic action was to pile on top of high inflation huge additional costs to employers through equal pay, a fourth week of annual leave, a 17.5 per cent annual leave loading and much else.

    The “logic” of A.L.L. (to compensate for the lost opportunity to work overtime) was a smoke screen for Whitlam and Cameron saying thanks to the wukkers for electing them after 23 years in the wilderness.
    Whatever the ATO says today about ordinary times earnings is just piling obfuscation on top of pretence.

  14. Squirrel

    “The best pianists, for all their thousands of hours of practice and performances, will earn crumbs compared to even second-tier fund managers.”

    A particularly ironic comparison, given that so many fund-managers are more like pianola players – busily pedalling and peddling away in a group-thinking bubble, where so many seem to speak and think (presumably) in cliches.

    The saddest thing of all is that if we didn’t have this gigantic racket, a good number of these people might otherwise have found their way into genuinely productive and socially useful careers. Their houses and cars mightn’t have been as flash, but they may well have had more fulfilling lives.

  15. Chris M

    I would rather be Albert Einstein than Warren Buffett

    He (Buffett) is really big on baby killing. Especially he likes to pay to abort black babies. Like Qantas some of these big corporations appear to distain darkies and instead love them some gaaz. Very creepy.

  16. Peter Greagg

    Half of what Adam Creighton writes is stupidity on stilts.
    Thankfully, this column is pretty good.

  17. Bar Beach Swimmer

    Fred
    #3006804, posted on May 7, 2019 at 2:55 pm
    I know that some of you cannot go to the link which is behind the paywall, but in this case you might think about ways to read the whole article. Head off to some coffee shop or the local library. Perhaps even shell out the $3.00.

    No need, just search for the article in google, delete your cache, then follow the link.

    C’mon people, its not that hard!

    Fred, I used to able to do that but, for some reason, I can’t anymore. Thoughts?

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.