Monday, June 25, 2012

They're Not As Dumb AS FF Thought - Updated....

Why are new Zealanders so dumb that they fall for this sort of crap?


Fortunately New Zealand cockies are not so dumb.  They just voted in favour of the scheme called TAF.

Shareholders had until yesterday to vote over the controversial Trading Among Farmers proposal, which would see dairy farmers able to buy and sell co-op shares among themselves, rather than through Fonterra, as they must at present.

The so-called expert doesn't provide any evidence as to the method by which suppliers to Fonterra might trade shares BETWEEN THEMSELVES will result in overseas ownership of shares.  Nor does he provide any serious evidence as to why that might be a bad thing.  Perhaps he's a card carrying member of Winston First.

You'd think it's the end of the world if a bit of profit is remitted overseas.

Does anyone pause just long enough to ask:
"Why does the profit go overseas?"

If they did, they might find out some poor bastard overseas delivered something of value in return for his measly little bit of profit.  And in return for Fonterra's use of his capital, he receives a dividend - NOT profit.

Profit is retained by the business to fund capital expansion.

He delivered his capital.  Capital which the dumbarse New Zealanders happen not to have available.


Dairy farmer Jones has a ten million dollar enterprise in which he holds $1.0m worth of Fonterra shares.   He owes $2.0m to ANZ and is paying 8.0% interest.

He sells $500k worth of shares to Ishtak Goldstein of New York and pays down $500k worth of his ANA loan, saving interest of $40k which otherwise would have gone to an overseas owned bank.  Our mate Ishtak gets annual dividends of say 4.5% from Fonterra which amounts to $22.5k.

As a result, retained in the hands a NZ farmer is a net $17.5k of profit which, without the sale of shares, would have been remitted overseas.

What is it that the dumbarse from Federated Farmers doesn’t understand?

(Phew!!!!!!  That's a change from American politics but not as entertaining.)


JC said...

"Why does the profit go overseas?"

It doesn't because its useless outside NZ.

Think about it.. an overseas investor puts a dollar into a NZ business.. and he makes a $1 profit. So he cashes it and takes it back to the US and goes into a cafe, plonks down his NZ$ and asks for a coffee, and the waiter says "What is this shit.. its worthless and not legal tender.. fuck off!"

The overseas investor has just learned his first lesson about taking "profits offshore".. his NZ dollar buys precisely nothing unless he flies back to NZ and buys his cup of coffee *here*.

And thats the way it works, profits made in NZ are made in NZ dollars and can only be used to buy NZ goods and services.. the profit is not lost to NZ.. it is recycled here and only here.


Anonymous said...

That 'measly little bit of profit' for the foreign owner costs NZ roughly 3/4 of our current account deficit. That's right, most of the (mis)balance of trade is dividends being repatriated offshore.

'Profit is retained by the business to fund capital expansion.'
Not the profit that gets paid out in the form of dividends. The irony of this post being you criticising journalistic understanding of business is delightful.

Oh, JC, yeh, NZ currency itself doesn't vanish offshore, but once we run up enough debt, you try trading currency with anyone. And if you can't, then we will be unable to buy needed imports, like medicines.

Chris said...

The so called expert was voted out of office as Federated Farmers Dairy Chair last year, and now he has a grudge to share.
he is just a farmer like many others of us.