Thanks Harry The largest public superannuation fund is the Future Fund with over $150 billion in assets and still underfunded. Your proposal may have merit because the Future Fund has not paid a pension since inception and is unlikely to until it exceeds $200 billion. The taxpayer is paying defined benefit pensions for Commonwealth Public servants whom were in these unfunded schemes prior to 2004. The tax payer has s getting very little for this obligation and the actuaries have never correctly forecast the liability - at least publicly! Thus, the requirement for the Future Fund to invest in essential public infrastructure to make them happen without the need to draw from foreign capital seems worthy of debate. $30 billion would build a lot of infrastructure! Many thanks John Abernethy

On Australia: Lacking vision not capital -

Well written Gopi. I think your article highlights the fact that some managers of capital - particularly bond managers in Europe - have lost their perspective and probably their integrity. The pricing of bonds and the decision to buy bonds on behalf of clients seems driven by market observation of price rather than being based on fundamental valuation or risk analysis. It is the fundamental understanding of required return against risk that stands human beings apart from computers. Thus, when asset managers solely focus on price signals then they are appropriately replaced by computers. Today, as your article intimates, many bonds and corporate debt securities are bought by managers with other peoples capital, that they would not dare buy for their mother let alone themselves.

On The bizarre world of negative interest rates -

Thank you for the comments. As a hedge I am seeing some merit in holding gold as a proxy to negative yielding bonds. It seems to me that something that may make or lose value (gold) is a better option than something that is guaranteed to lose value if held to maturity. I think that is the key to understanding bonds and their owners. I think it is clear that the buyers of long duration bonds or negative yielding bonds do not intend to own them until maturity. It is a participation in the ultimate ponzie scheme that is controlled by central banks undertaking QE. As for the beneficiaries ( assets) when this unwinds? I am not sure what the beneficiary will be although the focus of QE in a bond correction may be transferred to using QE to stabilize other assets. This will not play out in a text book or predictable fashion. Regards JA

On Bonds in a bind -

Hi Harry I think you are asking - how will Central banks bail out bond holders in a recession? The answer is that they are doing it now, every day, and I predict that QE in Europe, Japan and soon the US will endure in some form for as long as you can see into the future. Cheers JA

On Bonds in a bind -

Thanks Mark McLaughlan Your comments reiterate my view that a National Retirement and Taxation Policy has to be set with the principles and objectives documented. Again your comment notes that changes have consequences. Thus with no clear objective imbedded in a National Policy you get the consequences of which you complain. Regards JA

On Frankly annoying -

To Shaun Quinn Thank you for your comment. I am saying in the article that the change is unfair given: 1. It could have achieved a fairer outcome if a Reasonable Benefit Limit was introduced; and 2. The proposed change addresses a clear problem but in a superficial and seemingly intentionally limited or biased way. I reiterate that changes are needed to the Retirement/ Taxation policy settings of Australia. I am not convinced that franking is a great policy and the majority of OECD Countries don't think it is either. Get the policy agreed and documented first before making changes. Then ensure that subsequent changes meet the test of improving the policy outcome fairly and consistently. Regards JA

On Frankly annoying -

RE Ben Low’s comments. My view is very clear and it resonates through my article. Australia needs to develop a National Retirement Policy by which future changes can be assessed as to whether they enhance the policy or not. Whether franking does or does not survive such an enquiry should be decided by intelligent and ethical people and adopted by Parliament. Clearly therefore I am seeking the best Retirement Policy for Australian and it has nothing to do with a pecuniary interest.

On Frankly annoying -

Re Andy Brown’s commentary I have the following comments: 1) I don’t accept your comment re interest rates. “Real” interest rates are much more relevant than nominal interest rates. As you are aware the inflation of today is substantially less than 20 and 30 years ago and the market has adjusted; 2) I identified where the excess claiming of franking credits is. It is easy to fix and a reasonable benefit limit would be for the better; 3) The comment re inheritance tax needs a fuller analysis. However, I think that you and other commentary (Kerry Henry) need to acknowledge that SMSFs are principally trying to manage a capital and income base to ensure they can live comfortably in retirement and fund their own needs for aged care or disability care. The cost of entry into aged and disability care is between $300k and $500k today. It will be substantially higher in the future. Retirees have a legitimate concern regarding this cost/risk and they do not want to default into a public aged care system because they have run out of retirement capital. Please consider this issue properly as very few people move from retirement straight to death! 4) The claim that my comment re GST was mischievous is not supported by any clarification. Why?

On Frankly annoying -

Re Stephen Turners question or comment - "John, would be good to elaborate how you would personally be impacted by the franking credit changes? As the head of a relatively high yielding etf surely you would also have a pretty significant COI that would need to be disclosed?" - At present I am personally not affected as my super fund is in accumulation mode. My private family investment company is a long term investment company with a franking credit reserve. My future retirement plans - based on the law of over 20 years will have to be adjusted like hundreds of thousands of other retirees or those approaching self funded retirement. Many of Clime's direct clients will be seeking advice on the restructuring of their portfolio and personal affairs to adapt to the new rules. - Clime is not a ETF. Clime Capital (ASX code CAM) is a listed investment company. I am not sure it is a significant COI (depending on your definition) but to try to allay your concerns, the CAM board, like all LICs will have to review their structure if the franking rules change as proposed by the ALP. The conversion to a ETF or listed trust will have to be considered. If CAM did change its structure, the ALP policy will cause a cost to be born by our shareholders (conversion to trust) and then a significant loss of taxation revenue to the Government as distributions will be made pre-tax. If the major part of the LIC industry did this, driven by fiduciary duty, I am sure you can understand the consequences. Regards JA

On Frankly annoying -

Thank you to everybody for your comments. Re Andrews questions my views are this: 1. The developed world has entered - so long as current Monetary Policies endure - a Japanese type cycle of long meandering growth punctuated by mild downturns. 2. The forgiveness of government debt will occur via the extension of the maturity profile of the bonds held by Central Banks. 3. The creation of an inflationary cycle could really only emanate from China given that it has substantially contributed to the deflation cycle that we are in - i.e. through trade replacement of developed world manufacturing bases. The world needs a new coordinated monetary policy to reverse/replace the coordinated monetary policy that has been adopted since the GFC. As for Australia - we are stuck in the cross currents! Regards John Abernethy

On 13 charts that show just how insane monetary policy really is -

Thank you to everybody who have written following my article and thank you Livewire for publishing it. I note some of the comments question my view of the affect on the vote in Wentworth of Dr Phelps franking and superannuation policy. That's interesting and of course it is all conjecture. However, the fact remains that 11% of the vote shifted from the left to the middle in a bi-election dominated by a anti government vote. So these votes either shifted due to some policy announcements or as some replies noted - the electorate is simply protesting against the major political parties. It seems that a whole range of issues had an affect.

On Bad news for Labor's franking credit policy -