AUDIO
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Phillip Jensen speaks on Anger as part of a series on emotions in the Christian life, delivered at the Australia Day Convention 2010
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The hot topic of the day at synod was the Diocesan losses over the past 12 months or so.
The volume and scope of proposed amendments could only have been complete if there was a censure motion for the Governments of the world for allowing the Global Financial Crisis to happen. ☺ At times, that summed up the tone: a human need to point the finger. Indeed, during some speeches you could have been forgiven for forgetting that there was a Global Financial Crisis.
The Archbishop is to be commended for the way in which he managed the discussion, which started when he asked us to pray in pairs. From there it was inevitable that the issues would become confused. There was the interesting suggestion that ‘it was our strategies and not the Global Financial Crisis’ that had caused our losses. Certainly, as has been acknowledged, our losses could have been reduced if we could have moved more quickly – which made it all the more odd that the proposed response was to introduce rules that would slow down our procedures!
There was much talk about ‘gearing’ (a technical term that refers to the borrowing of money to invest). Yes, it accentuated our losses. However, it is just not true to say that gearing resulted in a loss of $160m. The assumption behind this is that one has a crystal ball that tells you when to get out.
The true figure, based on a comparison of the results of an alternative non-geared strategy, is $10m. We have benefited from much, including significant special distributions. And now, under the sovereignty of God those days have gone, at least for the time being.
Yes, members of synod can find it difficult to understand very complex financial matters. I am one for finding the godly experts in whatever field (not just this one) and relying on them. Given limited time and resources, it is just not practical for everyone to be an expert at all things. That’s why God has gifted different people differently.
At the same time, it was sobering to be reminded that synod last year was told that significant losses were being incurred in response to a question from the floor. So, within synod there is expertise to ask such insightful questions.
And maybe synod should censure itself for not acting (not that we could have done much), given the information that was before us.
Finally on this particular issue, the suggestion was made that we must not follow the way of the world as argument for some of the amendments. I could not help thinking how much information we have been provided with – in the report before us, at pre synod briefings, and with the opportunity to ask further questions.
In the end, it was a night of grieving that synod had to have. It was tremendously encouraging that blood did not end up on the floor of synod, and for the manner in which these issues were able to be discussed and debated. It showed me how different to the world we actually are.
it is odd to censure (strongly criticize and disapprove) for the failures yet not censure the same strategy that brought such wealth.
one lesson I learned was the importance of taking the responsibility to understand how these things work whilst also encouraging and trusting the right people to help manage it.
Thanks for your reporting of synod matters.
A question to clarify something in my own mind if I may...
You speak of an alternate strategy which could have been implemented without
gearing, resulting in a loss of only (!) 10m. Is this alternative path calculated from the time when gearing was first implemented, or is it from the point when ideally we would have pulled out of the old strategy? This is an important distinction, especially when some criticism is focused not on gearing as such but of the timing of our 'escape'.
The movers of this amendment acknowledged in the debate that there is no suggestion of impropriety and they agreed that gearing is an acceptable way to enhance returns.
Whilst I'm certain the first point is correct, I don't believe the second point - I believe gearing to be unacceptable and am amazed that Synod should think it acceptable.
The issue concerning gearing is that (bank) loans are taken out for investing in the stock market.
I'm not interested in the point of whether or not there were super profits leading up to the crash or losses subsequent.
I question the appropriateness of gearing and would like to see someone explain the Biblical argument supporting it - I don't believe such an argument exists.
I'm not sure whether the Glebe Admin Board is governed by an Act of Parliament, but reqardless I think it prudent for amendment of regulations to rule out the use of gearing, it is risky and it influences the market in ways that are questionable.
For the record, the PCV trustees are bound by a hundred year old Act of Parliament that forbids bank borrowing, hence, thank God, no gearing.
In my clumsy way, I'm trying to say that there are two timing issues when it comes to 'escape' - when should we have got out of growth assets (sold our shares); and when should we stop gearing (i.e. pay back all borrowed money to the banks). The actual loss was 'caused' by the former. The latter magnified the loss. The GAB did commenced their repayment quite early - in the 9 months to Sept 08, bank debt was reduced from $140 to $83. The real significant loss occurred after that period. That is, they should've reduced all (and not part) of the debt in 2007-08.
What would a wise critic have done without hindsight?
I'll have to do more research to respond to your comments on the restrictions on super funds. If you could point to specific legislation or policy, it would help.
BTW I'm not arguing for gearing. I must say that I wouldn't do it with my own money. But it doesn't follow that it's immoral or unwise. It has more to do with the level of risk acceptance and that fact that I'm content with my lot.
As far as I understand it the other Anglican dioceses, the Catholics and the Uniting Church did not gear their funds and so the initial losses incurred at the outset of the GFC have now largely been recouped in the subsequent market upswing.
True for us as well, at the end of June our funds were 7% down on a year earlier.
The 1890 Presbyterian Trusts Act under which our trustees operate established a common fund, allowing all sorts of investments but no borrowing. It has another feature - the Reserve. All capital gains on the sale of shares, etc are locked into the reserve. However interest on the reserve can be paid out to Committee's in proportion to each Committee's share of the Common Fund along with the interest on Committee funds. (more complicated than this but this is the gist of the thing).
At 30th June 2007 43% of PCV Funds were in the Reserve - fell during 2008, but recovering.
I could quote the interest rates being paid over the past few years, with all the share buy backs and contribution from the Reserve that would make you green with envy.
Those canny Scots were prepared to penalise themselves for future generations.
If there is any interest in the Presbyterian Trusts Act I could ask trustees to send a copy.