Share manipulation behind Borussia Dortmund bombs

German police say that letters left near the bomb attack of the Borussia Dortmund football team bus implicating ISIS were planted to try to divert from the attacker. A man has been accused of trying to drive the share price of the team down.

Another reason why not to rush to conclusions over incidents when first reported.

BBC: Borussia Dortmund bombs: ‘Speculator’ charged with bus attack

Police in Germany have charged a man suspected of being behind an attack on the Borussia Dortmund team bus.

Rather than having links to radical Islamism, he was a market trader hoping to make money if the price of shares in the team fell, prosecutors say.

The 28-year-old, identified only as Sergej W, was staying in the team’s hotel in a room overlooking the street where the explosion took place.

Police were originally treating the blast as a terrorist attack after letters were found near the site of the attack indicating links to so-called Islamic State (IS). They arrested a 25-year-old Iraqi “with Islamist links” the day afterwards.

However, the following week, investigators cast “significant doubt” on jihadist motivations being behind it.

They said letters found at the scene may have been an attempt to trick people into thinking there was an Islamist motive.

In a statement on Friday (in German), the German federal prosecutor’s office said the 28-year-old, who has German and Russian nationality, had been charged with attempted murder. He was arrested early on Friday near Tübingen in Baden-Wuerttemberg in south-west Germany.

The suspect had allegedly bought options to short-sell 15,000 shares of stock – reportedly priced at €78,000 (£65,000; $83,600) – in Borussia Dortmund. He would have profited from falling share prices after the attack.

Borussia Dortmund’s stock did drop from €5.738 to a low of €5.421 after the attack. Having recovered slightly it slid again after the team was eliminated from the Champions League.

Bizarre. That doesn’t seem like a lot of money considering the risks.

Twyford and Little hammered from all sides

Andrew Little has endorsed the awful data analysis of Auckland house sales that was promoted by Phil Twyford over the weekend.

He has modified Twyfords statements that Labour would ban foreign buyers.

Twyford on The Nation:

We would ban foreign buyers from buying New Zealand houses, end of story.

We’re going to ban foreign buyers.

Little says they would ban foreigners from buying existing houses but they would be able to buy sections and build on them.

Auckland’s problem is a shortage of land available to build on, therefore pushing up land values, so it’s hard to see that helping much if at all.

Data analyst Rob Salmond tried to defend his work at Public Address: House-buying patterns in Auckland

Data Analyst Keith Ng slammed Salmond, also at Public address: My last name sounds Chinese

The Labour leaning blog has strong criticism of Labour playing a hamfisted race card and Ng continues to slam Labour in social media.

And it continues with another post at PA, by Tze Ming Mok: Identification strategy: Now it’s personal

The real question is what did the Labour Party think it was doing taking this public.  If they just fucked up, so far so familiar. If they did this on purpose for well-calculated reasons – and it works – we Chinese-sounding named people are in way more trouble in New Zealand than we ever thought we would be again.

The second comment on that thread is from Stephen Judd:

I just wrote and cancelled my regular donation to the party with the message that it can restart when we have three clear months without race-baiting or hippy punching.

As someone who belongs to another ethnic minority where people stereotype about money and leap to conclusions based on names, this shit makes my skin crawl.

Political messaging is different from rational discourse over policy and you don’t get a pass for Bayesian inference when there’s a thick layer of racist implication on top.

Salmond has had another go at defending himself, this time on his own blog, Polity: (I can’t load it at the moment, must be busy).

Meanwhile in the other fairly Labour leaning blog, The Standard, some of the troops are doing their best to defend their cause:

Anthony Robins: Auckland property buyers

The big story this morning is Labour’s analysis of Auckland property purchase data.

Greg Presland: International investment in Auckland housing

Phil Twyford’s recent announcement on Auckland’s housing crisis raises important issues concerning the inflow of overseas capital into our housing market.  But should it have depersonalised the argument?

Too late for depersonalisation now. That was yesterday, and Little has endorsed the personalisation (or the targeting of Chines) today.

Te Reo Putake: China Crisis

Good on Labour for saying what needed to be said. Can they, the Greens and NZ First save the next generation of Kiwis from being tenants in our own land?

Includes Bonus Seinfeld reference!

Te Reo Putake: Twyford Responds

Labour’s Housing Spokesperson Phil Twyford responds to accusations of racism and points to the way forward. The Labour Party will limit foreign speculation, build affordable houses and replenish the State Housing stock.

But there’s an onslaught of criticism of Twyford, Labour and Little in all of those.

If Labour get this off-side with their own side of the spectrum it would appear to be a major own goal.

This looks like the first big mistake and misjudgement by Andrew Little.

He didn’t look flash with his handling of the Northland by election but that situation was mainly dumped on him by Winston Peters.

But this has been entirely of Labour’s own doing, it seems like a planned strategy.

Perhaps a sign of how badly they misjudged on this is Peters is endorsing what they have done.

Some might think this is a good sign for a left wing coalition plus NZ First – but Green and Mana supporters have reacted in horror at Labour’s race bashing.

And all this is without even looking to the centre and right for their reaction.

This has happened half way through the Roy Morgan July polling period. Labour may be hoping the bulk of the polling was already done.

It may or may not be a disastrous way for Little to emerge from the political doldrums, but it surely makes his hill quite a bit harder to climb now.

Improving tax compliance on capital gains

In the past Labour MPs have repeatedly claimed and implied that property speculators don’t have to pay tax on capital gains. A year ago then leader David Cunliffe and finance spokesperson David Parker both pushed this fallacy. From Cunliffe and Parker repeat claims on property speculation:

David Cunliffe in a speech to Young Labour:

We have too many children who are getting sick because they live in cold, damp, cramped houses with black mould growing up the walls. Sometimes owned by speculators who just push the rent up while getting rich on tax-free capital gains.

David Parker on The Nation:

“You need to tax the speculators….capital gains tax”
“Loan to valuation ratios would not be needed if they were taxing speculators and building affordable homes.”
“National Party, despite the fact that we had 40 percent house inflation, they’re not doing anything about it. Not taxing speculators…”

Presuming they must have known that IRD does pursue compliance on taxing the capital gains of speculators this looked dishonest.

It’s good to see that Andrew Little seems to be either more informed or more honest. He recently suggesting that the Reserve Bank target speculators as reported in Focus on spec buyers: Little

 Mr Little said the Government must take action on property speculators who were damaging the housing market.

Mr Little is known to not favour the introduction of a capital gains tax, something Labour had campaigned on in the last two elections and lost.

Mr Little said there were several options the Government could take to prevent property speculators building up large housing portfolios and pushing up house prices.

First home buyers, or those who wanted a rental property for retirement, were being shut out of the market by lending restrictions that should be targeted at property speculators who sometimes owned 10 to 20 houses and sat on them, he said.

”The solution needs to focus on Auckland. There is no point in a family trying to buy a house in Wanganui, where prices are dropping, being subject to lending restrictions designed to lower house price inflation.”

Another solution could be those buying multiple properties needing a higher level of equity for subsequent purchases, he said.

But the most important action was to build more houses to increase supply.

He’s on the same page as National in seeing the need to increase the supply of houses. And I’d expect him to agree with Bill English in his approach in IRD to clamp down on speculators.

Finance Minister Bill English yesterday rejected calls by the Reserve Bank to remove tax incentives for investment housing, which the bank has blamed for rising house prices in Auckland. But he said there was an ongoing discussion about whether the Inland Revenue Department could be doing more to enforce existing rules on property trading.

Mr English said there was already a tax in place for people who bought property with the aim of reselling it.

And with real estate agents and buyers reporting high levels of trading activity in Auckland, “there is a question of whether that should give rise to further enforcement activity”.

Speculators are already taxed, when the IRD can determine that they have been speculating.

At present, speculators have to declare that they are buying a house with the intention of reselling it. They are then taxed on the sale.

The IRD scrutinises property transaction records to make sure people are complying with this rule. In particular, it looks at how quickly a house is sold and the number of houses a person is selling.

Figures released by the IRD showed that $52.4 million was collected in 2013/2014 from speculators or traders – either from one-off speculative transactions or patterns of dealing. This figure is expected to increase in 2014/15. The IRD has already collected $63.2 million.

So IRD are addressing speculation and their tax take is increasing.

Any potential changes to the IRD’s resources would be announced as part of the Budget on May 15.

That suggests that the rules are seen as sufficient but that more resources may be provided to improve compliance with tax on capital gains when speculating.

Labour policies could help property speculators

Labour’s monetary and tax policies could benefit property speculators in several ways, despite continued claims by leader David Cunliffe and finance spokesperson David Parker that under National speculators are not taxed (they are taxed, see Property speculators are taxed).

Cunliffe “Speculators…getting rich on tax-free capital gains”.

Parker: ““National Party, despite the fact that we had 40 percent house inflation, they’re not doing anything about it. Not taxing speculators…”.

Reducing lending rates, exempting family homes from Capital Gains Tax and lower rates of CGT could all benefit property speculators by reducing their costs and tax.

Reduced lending rates

In Labour’s Monetary Policy Upgrade announced yesterday they said they would allow for increasing Kiwisaver contributions to help keep the official cash rate (and lending rates) lower.

Give the Bank a new tool to adjust universal KiwiSaver savings rates as an alternative to raising interest rates. This would mean Kiwis would pay money to their retirement savings instead of higher mortgage payments to overseas banks.

Property speculators who borrow money to fund their property developments and house purchases will benefit from lower interest rates.

Family home exempt CGT

In his policy speech yesterday yesterday David Parker reiterated that family homes would be exempt CGT.

Our capital gains tax pushes against the tax bias which currently encourages capital into the speculative sector at the cost of the productive sector.

In addition to improving the economy, this will make the tax system fairer, and will take pressure off house prices.

As in most other countries, it will not cover owner occupied homes. The family home will be exempted.

A common way of property speculating and dealing is to purchase a home and live in it (as a family home), do it up, then sell it to benefit from a capital gain.

In Mistaking property dealing for property investment Inland Revenue make it clear that currently purchasing a ‘family home’ with the intention of reselling it is speculating and is taxable.

Some property buyers refer to a “buy and flick” strategy. This approach is most likely to mean you are a property speculator or dealer for tax purposes.

If one of your reasons for buying a property is to resell it, whether you live in it or rent it out, you’re speculating in property and your profit is likely to be taxable.

Labour would appear to exempt this type of speculating from CGT.

Reduced CGT rate

Inland Revenue state:

Dealers and speculators must pay income tax on any gain they make from reselling their property.

If that is replaced by a Capital Gains Tax it could reduce the rate they are taxed. Labour’s proposed CGT rate is 15%.

Income tax rates for individuals (excluding ACC Earner Premium):

  • up to $14,000 10.5 cents
  • from $14,001 to $48,000 17.5 cents
  • from $48,001 to $70,000 30 cents
  • $70,001 and over 33 cents

Any earnings at all (not just from property speculating) over 14,000 are currently taxed at a higher rate than the proposed CGT.

Note: it’s not clear exactly how Labour would handle these situations. Their monetary policy and CGT could be modified with exceptions and additional requirements.