The world’s richest and largest Anglican diocese has lost more than $100 million on the sharemarket and is investigating ways to cut programs and ministries across Sydney.
There’s a hostile radio audio story here which calls out the ‘investing’ as gambling (which I don’t absolutely buy), because they geared their investments by borrowing money to invest more, which means you make more when times are good, but lose more when times are bad. They make a couple of references to money changers in the temple, but that’s just a cheap shot imo.
The diocese will go from something like having $30 million to spend on ministry two years ago to $10 million this year, and $5.6 million next year (I think).
The same story gets soft-peddled at Sydneyanglicans.net here, where there seems to be a K-Rudd like determination to not mention the figures involved.
The SMH reporting highlights the generally woeful financial reporting done in the mainstream media (imo), where temporary loses are portrayed as absolute losses (‘the horror!’), with no mention of the fact you may have been making outstanding gains for five years solid prior.
I just hope the diocese didn’t make the true cardinal sin of investing by panicking at the downturn and sell while still down to be ‘more secure’. If anything, now is the time they should be investing more.
All in all though, there are going to be pretty severe cut backs for diocese organisations it seems, so it will be interesting to see how it’s handled and what the response is as jobs are lost etc.
Of course its gambling. Its white collar gambling. Nearly everything in life could be considered gambling that’s why the Bible doesn’t say anything like, ‘Thou shall not gamble’. However the Bible does say not to be greedy. Maybe we are just reaping what we have sowed.
Australia’s largest and wealthiest Anglican diocese has lost more than $100-million on the stock market and is working out which programs will have to be cut or restructured. The Sydney diocese borrowed money to invest and in the good times used the profits to build new churches. But it’s been pummelled by the global financial crisis and now a church board that administers funds is re-assessing whether its financial strategy was appropriate in the first place.
They interviewed Bishop Forsyth (my bold):
MEREDITH GRIFFITHS: In 2002 the Anglican Diocese of Sydney adopted a renewed mission statement aimed at attracting new people to the church.
About the same time, it started borrowing money from the banks to invest in the stock market.
Bishop Rob Forsythe sits on the church’s Glebe Administration Board, and says the money was meant to build new churches and fund new ministries.
MEREDITH GRIFFITHS: Is it appropriate for the Anglican Church to be borrowing money to invest in the stock market?
ROB FORSYTHE: Um, I think so. Certainly from a moral point of view it’s appropriate.
We have in a sense a business arm called the Glebe Administration Board - it owns its own money, of course, it wasn’t just speculating. It was a long-term investor.
MEREDITH GRIFFITHS: Investing the church’s funds is one thing but to actually borrow money to then speculate on the stock exchange - is that just going a step too far?
ROB FORSYTHE: Well, not to speculate, but to increase returns.
Speculation implies a kind of gambling. We’re not into that - in fact, as I said, we’re very long-term.
With hindsight, we did very, very well in our returns to the work of the church from having further monies we’d borrowed. But when the crunch came - and the immensity of the crunch - meant it of course amplified our losses.
The question of what we should have done in the past we’re reviewing. There’s been a major review of the Glebe Administration Board and they’re taking their responsibilities very seriously.
MEREDITH GRIFFITHS: Bishop Forsythe says some areas of the church will now need to start planning for a leaner world.
ROB FORSYTHE: It will not be affecting the parishes, because in the Anglican Church, the parishes are self-sufficient, self-funded, by their own parishioners’ giving, which is a good thing to know.
And there’s much more resources there, than in the middle where I am. (Laughs)
But it will have an impact. It will cut by one half what money we have available for our institutions like our college, our Anglican media, Anglicare, youth work and so forth.
But at the moment, we’re in the big process of working that out.
The 50% cuts have been discussed on Sydneyanglicans.net before in relation to Southern Cross, but sounds like there’s tough time ahead for the organisations involved.
This is the letter that Abp Peter Jensen has sent to parishes :
Archbishop’s letter to churches on the GFC
June 9th, 2009
Following is the text of Sunday’s letter to churches about Sydney Anglicans and the GFC
To All Clergy and Curates-in-Charge
Sydney Anglicans and the GFC
Brothers and Sisters in Christ,
As I write to you I am conscious of the pain that our society and many of you are feeling because of the Global Financial Crisis. When I spoke to Synod last October about “the test of abundance that Australia has undergone and the test of want that may be coming” we were all fearful of what lay ahead.
Now we have begun to experience unemployment at higher levels and it seems from recent reports that New South Wales families are the hardest hit. I am aware that a number of our church members have to deal with the reality of job loss. As I encouraged you then, even more so now, I urge each one of us to uphold those great biblical virtues of faith, hope and love. Let them mark our lives and witness to the society in which we live.
I say this as context for what is the main point of this letter to you. I felt it necessary to write in order that you are able to understand how our own diocese has been impacted by the financial crisis and what we are doing both in response to our situation and to safeguard our ministry into the future.
Firstly, I want you to know that we have suffered very significant losses to our diocesan capital. For several years now we have borrowed money to increase the amount invested. This resulted in greater than average returns. In fact, a special 20 million dollar distribution to help purchase land and build new churches was possible in 2007 because of this.
But in the extraordinary conditions at the end of 2008, as the whole market fell, this strategy also accentuated our losses. As a result, our investments have fallen by more than half and the distribution of money from our investments has been cut by 50%. Ministries which depend on this funding will be severely impacted.
Our investment position is now stable. All bank debt has been repaid, investment risks have been significantly reduced and our liquidity position is very strong.But the losses remain. All these circumstances have been reported during the first part of the year through the proper processes of our diocese, most notably to Standing Committee. Furthermore, a thorough independent review of our investment operations is underway. But now comes the time when hard decisions will have to be made.
Please note that the central funding is only a small proportion of the overall income of the diocese. Your congregation raises its own money to fund local ministry and the money you give to your church is not affected.
The income in question will affect services the diocese provides to your church. Part of it comes from a major fund called the Diocesan Endowment and includes regional grants and top-up funding for bodies such as Youthworks and Moore College. A parallel cutback in allocations from the other major source of central income called the Endowment of the See will affect the Archbishop, Bishops, Archdeacons and regional offices. As a result, a significant restructuring has begun and will continue.
It is a humbling experience. It is a reminder to me and to all of us of our dependence on the Lord in lean times as well as plenty. The Mission Board has already been working to prepare for some tough decisions that our Standing Committee and Synod will have to make. For this reason, I intend to invite all Synod representatives to a series of pre-Synod briefings in August when more detail will be available and opportunity will be given for questions.
What can you do ? Continue to be generous. Show compassion to those struggling with hard times. Please be in prayer for wisdom for the men and women on whom we place the responsibility of Synod membership.
We need to be open about our diocesan finances and what it means for our ministries. But we do not need to be downhearted. The Lord still expects us to be engaged in a great endeavour to reach our cities for Christ and he will supply all our needs. He has his plans and his timing. We must respond in prayer and with expectation that he will work out his purposes through us.
quote from Kevins letter from P Jensen ’ For several years now we have borrowed money to increase the amount invested.’
......I’d say that the fund deserved what they got with a strategy like that. And also exactly the type of stupid strategies that tipped the whole finanial sector over ........clowns at the wheel with no idea.
That last post should read ‘.........of the western world.’
Under Sharia Islamic law, making money from money, such as charging interest, is usury and therefore not permitted.
Sharia law means wealth can only be generated only through legitimate trade and investment in assets.
Something the archbishop and his cronnies could have learnt from I would have said.
So, Michael, now you’re advocating Sharia Law. Veeeery interesting stance that you have now chosen. Have you ever read ALL their Sharia laws ? Especially the ones about stoning and cutting people’s limbs off etc. The main thing that I have learnt from Sharia law is to avoid it.
I don’t think a single comment of a fact constitutes being an advocate of Sharia law. I’ve always considered the stockmarket and how it operates to be an evil device that insulates the owners of these businesses from the nasty things they can do to people without having to look into their eyes. Like gutless bosses who can’t tell their employees they screwed up and misread how much labour they needed.
these types always employ someone to do the dirty work ......is the same with the anonimity of the stock market…...money grubbing creeps in the main.
Sharia law seems to be the only working ‘regulator’ to stop these crimes on certain social groups. I myself wasn’t effected by the crash at all…....I cashed my super out in april 07 on advise of my accountant who is also my cousin.(and a clever bloke)
Was just an observation Kevin ....i think we need to open our eyes to what works and what doesn’t as the one that we have been using is broken you may have noticed.
Kevin and Michael - you should both try to watch the first episode of the current ABC TV series “The Ascent of Money” (it is still available on abc.com.au’s iview platform, but only for another 12 hours).
Apparently the practice of charging interest was morally repugnant in European Christendom up until about the 1500s, so it is not just an lslamic / Sharia issue.
The Bible says not to charge usury, but does that mean any interest at all, or only excess interest? If we would be worse off with no loans at all, and I think we would be, then charging interest at least to CPI levels is entirely right. And probably a little more than that too.
There is a lot of misconceptions about the sharemarket and how our economy works it seems, including in today’s SMH letters (scroll past the first letter).
If long term investing in the sharemarket is “gambling,” then it’s a pretty good bet - over the last century it has survived the Great Depression and two world wars, outperformed just about any other kind of investing, and delivered tremendous returns in recent years.
Driving your car is a “gamble” - you could die, you could kill others. Getting out of bed is a “gamble”. Life involves risk. If the sharemarket is a gamble, then it’s one just about every Australian is doing with their retirement savings, but given the above, it’s a pretty good bet!
You can gamble on the sharemarket by short-term speculating, but that doesn’t mean the sharemarket == gambling. Short term traders (not speculators) also help keep prices relatively fair and the market reasonably efficient. But short term trading is much different to long term investing.
The idea of long term investing, in the most simple terms, is you give your money to publicly listed companies (buying shares) who grow their business with the use of that capital, providing our society with jobs, opportunity and wealth, and the investor is rewarded with higher value shares and sometimes dividend payments.
So, you could argue the church is being more benevolent by having it’s capital at work in our economy (and presumably economies around the world), creating jobs for people, rather than having it sit in a bank doing not much.
But people being people, we have a tremendous negative bias, and when we hear about $100 million losses we freak out. But lost capital is a relative, temporary thing. Remember, huge gains proceeded it, and nobody was freaking out then.
The church, for better or worse, took on additional risk by borrowing against it’s assets (I assume) to invest more in the market, and made a lot of money in the process. This made them more vulnerable to downturns, but the fault isn’t in the strategy per-se, it’s in not having an adequate plan B for inevitable downturns.
Remember for all the “losses” experienced in the market, in Australia the All Ords has “fallen” back to 2005 levels. So comparing to 2005 and now, if you invested solely in the All Ords you haven’t lost anything in absolute terms (leaving aside inflation for the sake of the argument), and are set for more growth in the coming 5-10 years and well beyond.
thanks David ....saw that in nexus or new dawn I think heheheee ......my biggest concern is that Nialls out of Harvard ....where I thought the basic ‘wrong thinking’ in this world financial crash began. Short overview from Niall himself
Looks like SydAng should have invested that money in the bank (Matthew 25:27)...
I see an investment opportunity here Nick ;) Bank Saderat looking to expand
.....good opportunity for the SydAng to extend a hand of friendship in this ‘new world’ of understanding some are trying to achieve and make a killing at the same time.
Well if you look at the parable of the talents, we are supposed to make good use of our money, and earn decent returns on it. Yes it is meant to be primarilly applied spiritually but that’s not the point of my post.
Jesus was impressed by the earnings power of the first two respondents, who made impressive returns - I think they doubled it though we don’t have to take it too literally. The third one, who did nothing (a bit like Sharia law on this in a strict sense) got condemned.
I think that we can combine Jesus’ lesson here with the consistent portfolio management principles. Put some money in shares, put some in interest depending on investor needs. The Anglican Church has a long-term view - just like any other business - so shares is good and despite short-term volatility will provide far superior returns in the long run.
Where I would draw the line is gearing - borrowing to earn more money. In my opinion, and consistent with most of the other opinions on this thread - that would be too risky for the church’s risk profile.
There is a lot of misconceptions about the sharemarket and how our economy works it seems, including in today’s SMH letters (scroll past the first letter).
If long term investing in the sharemarket is “gambling,” then it’s a pretty good bet - over the last century it has survived the Great Depression and two world wars, outperformed just about any other kind of investing, and delivered tremendous returns in recent years.
The church, for better or worse, took on additional risk by borrowing against it’s assets (I assume) to invest more in the market, and made a lot of money in the process. This made them more vulnerable to downturns, but the fault isn’t in the strategy per-se, it’s in not having an adequate plan B for inevitable downturns.
Remember for all the “losses” experienced in the market, in Australia the All Ords has “fallen” back to 2005 levels. So comparing to 2005 and now, if you invested solely in the All Ords you haven’t lost anything in absolute terms (leaving aside inflation for the sake of the argument), and are set for more growth in the coming 5-10 years and well beyond.
I don’t pretend to know anything about what happened with the Diocese’s finances and I agree with everything you say about the stockmarket except I think borrowing money to invest in shares does amount to gambling. I’m not saying that’s necessarily a bad thing-but it does involve risking money in order to get more and having to cover your debt means that the time horizon for the loss or gain to crystallise is shorter than the normal cycles over which you can be reasonably certain the sharemarket will rise in value, hence it’s a gamble.
You’re gambling on the price of the shares rising enough to at least cover the amount you borrowed plus interest. If the shares end up worth more than the principle plus interest at the end of the debt, then “you win” if they’re worth less then “you lose”. Of course it could be argued that borrowing to buy a house or a church is the same, but I’d propose that one buys the house or church to “use” so it has an inherent value to you whilst you’re using it as opposed to shares that you are purchasing purely to make a financial gain.
Yeah I agree it’s taking on more risk, but I think if risk is a spectrum, when does it become gambling per se? Where do you draw the line? It’s a tricky question.
On the one hand, you can take a punt on a horse and it’s a clear gamble. You have no idea what’s going to happen. You can carefully research and follow the form of a horse and make ‘educated’ bets, but most people would still say that’s gambling; but you can carefully research and follow the form of companies and do likewise, and that’s.. ok? Gambling? If it’s “blue chip” stocks (which aren’t actually particularly good investments in terms of growth), does that make it ok?
Or like you say is it a matter of utility - if the ‘thing’ is being used for some purpose other than just making money, maybe that’s ok.
I think people have a problem with the zero-sum idea of the stockmarket (short term trading), ie I win/you lose, whereas long term investment is usually based on real creation of wealth/value (with obvious qualifiers about the US finance “industry”!), where money is put to work so business can do their thing - give people jobs, make stuff, sell services etc.
There’s been some interesting comment threads in blog land too, such as:
- This thread on Craig Schwarze’s blog
- and this thread on Andrew Katay’s blog (senior minister of Christ Church Inner West Anglican) where he has a dig at the SMH, & Jeremy Halcrow and John Sandeman make some good points, and I say (awaiting moderation):
What I don’t get is why aren’t we, as a church, more straight up with the truth? Why are we so insecure about our ‘image’ that we’ve developed this paranoia and reflexive hostility to mainstream news outlets like the SMH?
I think there’s occasionally a level of condescending “We’ll tell you what you need to know, when you need to know it, dear children” (not from AMS staff mind you), and when it’s told, it’s softballed with Christian-ese and neatly explained away. Just have faith. The Lord will provide.
This persecution complex has become so severe that people really do freak out and get riled up over what are, as has been demonstrated here, minor details. Where’s the equal outrage to the meat of the story? I mean, what’s a lazy $100 mil between friends?
It’s a bit sad when such a story breaks, and all that can be said is “Oh no… they got the details wrong!”
Thank God for the media & journos I say – a free (and well resourced) press is what all institutions, and our society, needs.
Of course its gambling. Its white collar gambling. Nearly everything in life could be considered gambling that’s why the Bible doesn’t say anything like, ‘Thou shall not gamble’. However the Bible does say not to be greedy. Maybe we are just reaping what we have sowed.
Only those who don’t know what investment is, it is called gambling.
A true investor know that they are buying a stream of income or a stake of good business.
The market often have “false liquidity”. If you buy a farm, you better buy it when it currently has a draught.
100 million loss is pretty much nothing, if Sydney Anglican has a huge pool of Asset. Without knowing how big the investment pool is, it’s hard to said fund manager had a poor portfolio management skills.
Large leverage is a really danger thing, but very small leverage is no harm at all. Cause sometime it needs liquidity of cash.
So how does everyone feel about their broker short selling .......and do they think it a moral method of making money?
Or does it become morally okay when your portfolio looks like getting a hit?
So who watched the catalyst program this week? ......‘harvard view’ as I said ;)
ONE of Australia’s major banks is planning to introduce “Muslim-friendly” loans that do not charge interest, to comply with Sharia law.
Instead, the National Australia Bank will structure an Islam-approved line of finance to make money from alternative methods.
These include profit-sharing on the transaction, joint-ventures or leasing-type arrangements.
For example, to get round the Islamic ban on usury - or unfair lending - a Muslim mortgage often works by the bank buying the property, then selling it to the customer at a profit, with the customer then repaying the entire sum in instalments.
In this way the profit margin is built in from the start. It also has the advantage of making the loan immune from future interest rate rises.
NAB said the loans, which will start out small, will have to be cleared by a Sharia Advisory Board to ensure they meet strict criteria before they can be made available to the public.
“We are dipping our toe in the water with this scheme and thought we may be able to offer this product in high-density Muslim areas,” said Richard Peters, head of community finance and development at NAB.
“We suspect there is demand out there, but we don’t know how big it is, so we will trial a few products first.”
For the trial’s purposes NAB will pump $15 million from its not-for-profit finance division into the program, which will distribute the funds through various community finance schemes around the country. The bank will monitor the take-up and assess potential demand.
Interest-free loans of up to $1000 will be available to help finance household items, such as washing machines and fridges.
The loans would also be available to non-Muslims.
The news comes just days after federal Assistant Treasurer Chris Bowen said that Australia could exploit international demand for Islamic finance to create more jobs.
It seems like a pretty hokey idea - “In this way the profit margin is built in from the start. It also has the advantage of making the loan immune from future interest rate rises.” and future interest rate falls - the banks aren’t a charity, so we all know how the deck will be stacked :)
There’s some discussion on Craig Shware’s blog about gearing (which is an interesting topic in and of itself), but I thought it would be worth repeating the fact that the losses the diocese has faced are real, not paper losses (edit: on the borrowed amount, I should clarify), as Jeremy mentioned here.
(Reposting my comment..) From my neophyte view, that is really, really bad. When it comes to investing, people become irrational in the face of downturns, and sometimes sell at the bottom of a market, which is when you want to be putting money in (as it’s probably going up from there) not take it out (ie, make paper losses real). The diocese didn’t panic, but due to market conditions it seems whatever mechanism that was in place to force repayment was triggered at or near the bottom, making paper losses real, which is very serious.
The Archbishop wrote:
Our investment position is now stable. All bank debt has been repaid, investment risks have been significantly reduced and our liquidity position is very strong. But the losses remain.
The ‘reduction’ of investment risks is meaningless in this case - they’ve already faced, and had to realise, the worst of it. The reduction in risk is now the risk of gains, if I can put it that way (risk being a two way street) so right now, as I understand it, that’s actually a very bad place to be. Ditto ‘stability’ - it’s irrelevant now (in the short-medium term), the horse has already bolted. It’s like battening down the hatches after the storm has passed.
I had assumed they were paper losses, and had left the diocese with much less to ‘skim off the top’ than normal. I didn’t realise they were forced to sell at such a weak position, ouch. Right now you actually want to be putting money in (with a long term view), but I doubt they’ll have the stomach for that (!).
[null]Does It Mean Anything that a Record Low Are 'Pro-Choice'?New York Times (blog)[{}]Asked to pick one of the two labels applied to the abortion debate, a full 50 percent said they were pro-life, whereas only 41 percent said they were pro-choice, down from the previous low of 42 percent recorded in May of 2009. Republicans are the most ...
[null]Obama vs. Catholics, Catholics vs. ObamaNew York Times (blog)[{}]This would frame the issue as yet another intra-Catholic dispute over sexuality and abortion, rather than an external assault on Catholic religious liberty. Seen in this light, Georgetown University's decision to invite Kathleen Sebelius, ...
[null]Rally fights for abortion law changeThe West Australian[{}]Liberal MP Peter Abetz has spoken out against WA's abortion laws, warning "the womb is most dangerous place for children to be in this State" at a rally last night attended by hundreds of right-to-life campaigners. Addressing the 750-strong rally at ...
RSS Feed