Stock gains are just super

The CEOs, fund managers, superannuation/pension salesmen, directors and many others who get "performance" bonuses and fees for "adding value" are just plum delighted with the marvelous rise of the Australian stock market.

Backed by the unabated demand of China and India for Australian resources, and the clever management and productivity of Australian business, the Australian stock market, measured by the S&PASX200, started the calendar year 2006 at 4760 and finished at 5670, putting on a whopping 19.1% increase in "value".

At merchant banks, super funds, brokerages and other financial institutions, champaigne corks were popped, new cars bought, girlfriends befriended, houses upgraded and life was just super. In executive offices and board rooms, "well done" was heard and more bonus checks passed around.

But was it management or financial "value adding" that did the job or something else?

Maybe the rising tide was nothing more than a ratcheting up of prices for the same old pig-in-a-poke that got the market up so high. Maybe it was a concious diversion of savings from mattresses to the stock market by a government bent on privatising retirement with mandatory "contributions" to the finance sector that "added the value".

Recall that one of the most prevalent explanations offered for the ever rising commodity and stock markets in recent times has been "liquidity" and "the weight of money".

Maybe it was just a coincidence that the 19.1% rise in the stock market happened at the same time that the assets in super funds rose 19.2%.

Super tops $1 trillion by Geoffrey Newman

Crocodile Tears