I am intrigued by some early responses to ‘Making Pensions Work’ I have received on this blog and have read in some (typically abusive) commentary on the right wing blogosphere to which I do not link.
Without exception the commentary ducks the issue, which I find fascinating. The key issues that raises are:
OK, so, here\’s one of those \”right wing blogosphere\” things to which he will not link.
One quite gorgeous part:
c. I’m promoting a massive private equity bonanza. No I’m not. I’m promoting investment in new economic activity. The fact that those making this comment think this only arises through private equity venture capital investment is itself significant: they’re saying in effect that the larger quoted companies in the UK are actually unrelated in terms of their capital funding to the stock markets that supposedly serve their needs but which in reality act as casinos for speculation. And anyway, much of this money will go into government bonds and related products. So this is wrong.
No, really, having insisted that pensions must be invested only in the building of new productive capacity he\’s now saying that buying gilts to fund outreach diversity advisors qualifies.
Anyway, up to you, have a look at the two posts and see whether you think he\’s answered my \”typically abusive\” commentary.
Update: just spotted this as well.
b. The rate of return is not so bad. What? 1%
This in response to this:
This is simply nonsense.
As data published by the organisation promoting the City of London,
TheCityUK, showsxviii, the ten year rate of return on investment in UK stock markets was an average
loss of 2% per annum over the first decade of the twenty first century. This was also the global
average rate of return on shares in that decade.
Yes, it’s the dividend yield. Which, at least at some points for FTSE has been 3%. You know, enough to take total returns to equity positive?
They refer (again) to here. Where those promoters of the City of London give us the index returns for the major stock markets. That is, they give us the capital return (or loss) on holding shares. So, what is not included in their number then?
Finally, we have an admission from Ritchie that he\’s made an error. A silly one too, one which someone with any knowledge of finance would have spotted when it was first mentioned over a drink, let alone when written down.
And I am accused of ducking the issue?
(Do note that he\’s not had the time to alter the original document yet.)
BTW, anyone want to tell us what the real yield to maturity (we need to maturity because Richard is telling us that we really should be having those nasty second hand markets you know) on gilts has been for the last 10, 20, 30 years?