Sunday, 29 May 2011

Privatisation flop

It seems that privatisation lucky streak of PO-led government has come to an end or has just been suspended for a while. A bit of a pity, given that from 2006 to early 2009 privatisation proceedings resembled an obstacle course. Privatisation through stock exchange was brought to a halt in 2006 when PiS-led government took over and wasted several chances to sell stakes in state-owned firms above their intrinsic value (rampant bull market allowed for it). Then came the bear market of 2007-2009, when it was hard to sell anything to private investors and when market made it hard for private investors to make profits on IPOs.

The tide has turned in 2009, with the comeback of upbeat market sentiment. In the first half of 2009 the government finalised the privatisation of Coal Mine Bogdanka, one of the best-run and most profitable coal mines in Poland. IPO price was considerably low, as the bull market starting in February 2009 was still in teething phase and market participants were still wary of relapse of bear market. The government sold shares in Bogdanka for 48.00 PLN per share, while the open price on flotation day was 56.10 PLN - investors who had subscribed for the stocks could reap a profit of 17% right away or wait until October 2010 for a tender offer, under which a Czech company wanted to buy up shares of Bogdanka at the price over two times higher than IPO one. Those who earned the most on the transactions are future pensioners, as key buyers were Polish pension funds. This means that the Company is still state-owned as assets in pension funds are not owned by members of pension funds, but by the state. In the meantime the state sold (to itself, with intermediation of expensive financial instututions) another stake in Bogdanka, on 9 March 2010, for 70.50 PLN per share.

2010 saw three spectalular privatisations.

PZU was floated on Warsaw Stock Exchange on 12 May 2010. The IPO price was 312.50 PLN per share, when the market opened, stocks were traded for 349 PLN, the same day market closed at around 360 PLN. Investors, including me, enjoyed returns of 12 - 16%. This was the first privatisation run as part of 'civic shareholding' (akcjonariat obywatelski) programme. Number of stocks for which a single investor could subscribe was capped at 30 (what gave an equivalent of circa 10,000 PLN) and stocks were sold with modest discount, to let ordinary people earn. PZU IPO, mostly after years of squabbling with Eureko was perceived as a great success. Currently PZU stocks cost around 390 PLN

Tauron Polska Energia stocks were first traded on 30 June 2010. This time there was a dent on the government's offer. The initial issue price of 6.30 PLN was too high for institutional investors and the stocks were eventually sold for 5.13 PLN. The flotation day was, coincidentally, the day when the biggest market correction in 2010 hit its trough and open price was no higher and no lower than 5.13 PLN. Profits weren't reaped, but according to analysts' valuations the Company was much undervalued. I also bought these shares in IPO and first quotations were a big let-down for me. My exit strategy was to buy up some more stocks, if the price went down and I followed out my plan. A few months later Tauron stock began to increase in price and within six months fetched a return of 35%. Patience was rewarded. In 2011 the price dropped, I began selling and buying back stocks with a view to earn more. Currently Tauron stocks are traded for around 6.60 PLN, not much below their ever-time high of 6.92 PLN from 17 December 2010 when they were becoming a component of WIG20.

Warsaw Stock Exchange went public in November 2010. IPO price was 43.00 PLN and was deemed to be overvalued. Despite this, demand on WSE shares was record-high and with open price on 9 November 2010 at 50.75 profits for a private investor reached 18%. Not bad. I didn't subscribe, as I thought the price was too high and I was wrong. Since then WSE stock price hit its low of around 44 PLN and high of 54 PLN and still seems to me overvalued. But after all this means the government has made a good deal on behalf of taxpayers. Currenly you can buy one share of WSE for around 52 PLN.

Over 2010 the PO-led government has established an excellent track record in terms of privatisation through stock exchange. But one success following another increases risk of complacency and hubris. Perils wait just round the corner and treasury minister Aleksander Grad had to learn a hard lesson this year.

One of two big IPO planned for 2011 were Bank BGŻ and Jastrzębska Spółka Węglowa. The former has already been floated, the latter is due to become public in July.

First step of Bank BGŻ hapless IPO was its issue price of 90 PLN, with P/E at 34x. Such high price-earnings ratio implied the bank was much overvalued. Demand from private investors was not as high as in any of three big offers in 2010, but was high enough to cover the whole tranche of stocks earmarked for them. Investment and pension funds categorically refused to buy BGŻ stocks at such sky-high price and as a result the issue price had to be brought down to 60 PLN, much closer to the intrinsic value of these shares. The state had planned to raise 1.44 billion PLN from sale of 37% stake in BGŻ, but eventually it had to make do with 344 million PLN from sale of 12% of shares. Minister Grad now waits until the bank's value gets higher (this may take some time) and thinks hard how to bend over backwards to meet privatisation proceeds targets for 2011. In the meantime it was revealed that some time ago Rabobank, the majority shareholder of BGŻ offered the state 74 PLN for one share of BGŻ - 14 PLN per share more than the market wanted to pay, plus savings on IPO costs. The Polish adage saying that "an avaricious man loses twice" proved right. Shares of BGŻ were floated last Friday. Individual investors could subscribe for 120 shares for 90 PLN each, and eventually were assigned 20 shares per 60 PLN each. With opening price of 62.50 PLN one could earn 50 PLN minus transaction costs and capital gains tax. Lovely... I still hold 20 shares, my strategy on what to do with those security is rather unclear, but today as I was passing by a BGŻ branch I felt like an owner.

Despite this I'm looking forward to next IPO of Jatrzębska Spółka Węglowa, which may be hampered by demands of brazen trade unionists (read spongers) from the Company. May those deals be brought off wisely - I make this wish both as a taxpayer and as an investor, or to make no bones, a speculator.

Sunday, 22 May 2011

In praise of free speech.

Six o'clock in the morning. Functionaries of Internal Security Agency break down the door and trespass onto a flat inhabited by 25-year-old chap. Are we back in 2006 or 2007 when various people were arrested in the spotlight (some of them have never been proven guilty and acquited)? No, we are in luminuous times when enlighted Civic Platform is in power and civic freedoms are thriving. This statement was borne out on Tuesday when a guy who ran site had his computer forfeited by secret services, just because he had run a website on which he had ridiculed president Komorowski.

From 2005 several websites were set up with just one goal - to make laugh of late president Kaczynski and his brother who wielded power as prime minister. Politicians of PiS and believers of the sturdy party expressed their outrage at the fact ordinary people wanted to make fun of clunky twins. Usually the key explanation was that all those people couldn't do it off their own bat and must have been inspired by an overarching, invisible force, called the System.

Times have changed. Since the Smolensk disaster it is no longer passe to admit to support Jaroslaw Kaczynski and his party. A group of people who declare they used to be drowned out for years can easily have their say. Antykomor was created in that time, in the surge of anti-PO movement. He did what many people had done during president Kaczynski's term. Let's face it - the current and the previous president have both been mediocre and no wonder such websites spring up. It is quite natural in the civic society, in which people have to have a right to give vent to their emotions.

I first heard about the site after its closure, so google cache memory was my only source of information on the content of I have to say I didn't find anything what would justify stepping into Antykomor's author's flat early in the morning, maybe except one photomontage on which the president appears to be compelling a drunk girl to do him a blow job.

This one was below the belt, but the guy should be wise enough to know there are boundaries that must not be overstepped. This still doesn't justify the forfeiture of computer, he could only be requested to delete offensive content and materials he hadn't had copyrights to.

Officiousness is worse than fascism. After the hapless action PiS scores another point and PO slides down on a slippery slope it has been for months of its feckless rule. Who the hell hatched the idea of detaining author of such website? It is absolutely normal in mature democracies that some people are dissatisfied with the politicians in charge of their countries and ridicule them. Think about all mockery at Nicholas Sarkozy, George W. Bush or Barack Obama. I think the article 135, paragraph 2 of Polish penal code which defines punishment for insulting the president (up to 3 years of imprisonment) should be overruled. Why should a president enjoy any special protection? He indeed is a symbol and deserves respect, but other people also deserve respect. So what's the difference between liability for insulting a president and insulting a prime minister. Should only the former be punished? Wasn't the legislator a bit ticklish? Isn't the situation in Poland ludicrous - people who accuse state officials of high treason and felonies go unpunished and the guy who pokes fun at president's numerous missteps has to play host to Internal Security Agents?

I was okay with making fun of president Kaczynski and I am okay with ridiculing president Komorowski (he gives us ample reasons for doing so) and I will be okay if any other president is mocked at, of course within reason, what means with offensive remarks, insults and lies. I was counting down days till the end of Lech Kaczynski's presidency, so why not do same with Komorowski?

Thursday, 19 May 2011

Judgement day coming soon

An odd posting on a working day, prompted by the news about the upcoming worldwide disaster due this Saturday. We have survived many ends of the world, for the past few years there haven't been many such events. The most popular until now was the Mayan date of the last day, 21 December 2012, but recently it has been superseded by the closer one, 21 May 2011, as predicted by weird broadcaster and preacher Harold Camping, aged 89. The Family Radio he runs unremittingly spreads the news about the imminent judgement day and those prophecies have also reached Poland. The nearest billboard informing about the event can be found in Warszawa Jeziorki, near ul. Karczunkowska.

It says the Bible certifies it and we should cry out to God for mercy. For some of us it's too late...

I actually thought the news about such rare events as ends of the world are niche products for bored to death geeks, but the reality has taken me aback. Not only tabloids such as Fakt and Super Express informed about the event, but the sensation was also picked up up by System-controlled TVN24 and Gazeta Wyborcza... Moreover I heard people discussing the issue at work (another upside of open plans) and in a train. Two days ago I logged in to facebook and was hit by a question...

Finding myself totally unable to plump for any option I didn't tick any way of spending the time left until the end of the world.

Whenever I hear about such self-styled prophets, I ask myself what will they say, if nothing happens. Family Radio provides me with the answer...

What if May 21 ends and nothing occurs?
The Biblical evidence is too overwhelming and specific to be wrong. Christ's people can look with great confidence to this date because God promises His "beloved" He will not come upon them as a thief in the night.
God in His mercy has revealed the vital information needed to know the day. Judgment Day on May 21, 2011 will occur because the bible declares it. Anyone whom God has not saved will arrive at that day with no hope for salvation. God warns simply the "door will be shut."

I'm looking forward to seeing what they say when indeed nothing occurs. I've come up with a few versions:
a) someone tampered with the calendar and 21 May 2011 was not 21 May 2011,
b) the God gave us another chance,
c) we have made a minor error in our calculations, but beware, because the end is nigh.

Now a simple explanation why there should be no end of the world on Saturday. The end of the world will hit out of the blue, not when people expect it.

At the end of the day, whenever I hear such prophecies I'm afraid one day the mechanism of self-fulfilling prophecy may work. An idiot may try to fulfil the destiny, press some red button, launch a nuclear missile or do something equally dangerous...

Beware... of false prophets...

Sunday, 15 May 2011


My paternal grandfather turns 85 this Tuesday. Maybe it's not yet a grand old age (although far longer than average lifespan), but there's a chance that he makes it to the next round, 90th, anniversary. He'd been in a very good health until the age of 80, then he had several attacks of epilepsy and some other problems with general health. This year, after passing out unexpectedly he spent a few days in a hospital. He still cleans up the house and does the shopping, mentally he's fit enough to do the household chores unaided.

His birthday made me think a bit of the determinants of length of a human life. I've even drawn up a short list of factors.

1. Genes - probably the most meaningful factor. Length of our life, no accidents permitting is written in the genes at the moment of birth. Some are predestined to live 90 years, some have to die 25 years earlier. Genes of longevity may be passed on to next generations. In my family the fateful age was 87. Three out of seven of my great-grandparents, whose dates of deaths are known, died aged 87, my maternal grandfather also passed away aged 87 (he had predicted it seven years earlier...).

2. Resilience - stronger people, who don't give up, bear up what fate brings should live longer.

3. Temper - patient, kind-hearted, joyful people are more likely to live longer than aggressive and hot-tempered ones.

4. Social activities - the more friends you have, the better your relationships with your family are, the more time you spend with other people (nad enjoy it), the longer you should stay on this earth.

5. Sport - people who do some sports and have a daily, or at least weekly dose of physical exercise, should stay fit longer and hence the probability that they die from heart attack should decrease...

6. Train your brain - I'm not sure if it can extend life, but for sure if brainteasers, crosswords and books keep you company, risk of senility in the old age should go down.

7. Stress - here the correlation is negative. The more stressful life you lead, the shorter might it be...

8. Happiness - works just as in the case of social activities.

9. Place of residence - generally refers to factors other than listed above. On where you live depends how well-equipped hospitals are, how well-trained doctors are and how easy access to medicines is.

10. Wealth - sadly. Well-off people can afford to undergo costly therapies that can save their or their relatives' lives. Not everyone can.

11. Awareness of health - look at the example of breast cancer prevention. Those women who suffer from it usually were oblivious of the possibility to have their breast examined each three years or were afraid of the very examination. Results are dire.

12. Smoking, drinking, other addictions - it is said that each smoked cigarette shortens your life by 18 minutes. I've never had a cigarette in my mouth in my life but I still wonder how long would live those people who died aged over 100 and smoked several cigarettes a day over decades. In small doses alcohol also should not hamper one's health.

Anything to add to that list?

Actually if the factors above were that very crucial, my paternal grandparents, both aged 85, married to each other for over 62 years, would not be predestined to live that long. So is everything written in the genes? Or somewhere else?

At the very end of this short (again, but easier to digest) post a small reflection. It is said, in the context of imminent collapse of pension systems, that people will live longer and longer. Is it so certain. "Live fast, die young" - look at young yuppies who break their backs to make roaring careers and make lots money and ask yourself, if they'll be able to carry on like this for 40 years. Imagine a man working 60 hours a week for four decades when he retires in his sixties. What will be left? Who will be left?

Provocative paragraph, but if it's a bit controversial, it suits the blog very well :)

Sunday, 8 May 2011

Taxation and justice - again

Prompted by yesterday's discussion with a fellow blogger on the donation tax, I settled on revisiting the topic of justice in taxation, once brought up here... This time the aspect of effectiveness will not be touched upon, but instead I will try to focus on justice.

From my short research done while cycling around I conclude there are four main bases of taxation.

1. The mere being or existence, as in the case of poll tax. The concept can be traced back to middle ages and assumes that everyone should pay the same amount of tax, regardless of their income and wealth. Today this form of taxation is generally deemed to be unfair, as people's and entities' ability to bear the burden of taxation varies, depending on their income or wealth, and is hardly ever used by local or state governments to raise revenues.

2. Consumption, with the most popular VAT. I have to say I would struggle to provide you with a rationale of this form of taxation, but it surely can be categorised as an effective way of collecting money, as value added tax, or sales tax is hard to avoid. When it comes to justice, here it is quite possible to adjust the tax rate to taxpayers' ability to pay taxes to their capacity to bear tax burdens. Basic goods, such as bread, diary products, medicines, utility services can be taxed at lower rate, while cars, petrol, foreign trips and other luxurious goods can be taxed at the higher rate, as their consumers can afford to spend more on them. The state can tamper with VAT rates to affect the structure of consumption, e.g. merit goods may have a low tax rate levied, while demerit goods will have not only higher VAT rate, but also another tax, especially for sinners, imposed. The tool is effective and no wonder Polish government, when at a pinch, decided to raise VAT rather than income taxes.

3. Wealth. I don't even know if there is a Polish equivalent of 'wealth tax', as this tax does not function in Poland at all. This form gives much room for tax avoidance, as the wealthiest people would move their assets to tax havens. The concept behind this is that the well-off should somehow share their wealth with the poorer. I am generally against it, as people should be taxed as they are coming into wealth, not as they are already wealthy. A proper property tax is not used in Poland. I would be glad to see it levied, as it would bring prices on property market into balance. Prices would surely fall and better reflect real values or properties.

4. Income. The broadest issue, so I'll take the liberty of omitting corporate taxes and focus on four forms of personal taxes.

A) Personal income tax. It is generally accepted that flat and progressive taxes are said to be most fair. Tax rates and brackets are supplemented with tax deductibes items and tax allowances. My own take on the best personal tax system has been laid out in the post linked at the beginning and has not changed since then.

B) Capital gains tax. Is a standard in all civilised countries. There have been proposals to scrap it in Poland, as when it had been introduced in 2001 it had been meant to be a temporary measure to bring people on spending in economic slowdown, then in stayed on. My sense of justice incites me to a strong disapproval when I hear proposals to lift it; for two reasons. Firstly, I live in an area when lots of ex-farmers sold their plots of land for millions of zlotys in 1990s and 2000s and now they don't have to go to work every day and toil away nine hours a day as I do, but they sit on their arses and live off interest of the money their got from selling the land. If my work was taxed and their income not, that would be despicable. Secondly, I am a stock market speculator. With a bit of knowledge and luck it might be a great way to earn (or lose) quickly a lot of money without much effort. I would be a slap on the faces of all hard-working people, if I and the likes of me didn't have to pay tax on our 'murky dealings'. The main argument agianst capital gains tax is that it creates a 'double taxation', which is wrong, because you once earn some money and you pay income tax, then you invest that money and pay tax only on the interest or gains you earn.

C) Inheritance tax. The government of Law and Justice lifted this form of tax for the closest relatives of the deceased. From my point of view, this wasn't a fairly good decision. An inheritance is a windfall, your wealth increases, although you usually haven't put any effort into working for it. Therefore I think this tax should be levied even on the closest relatives, but they should pay a lower rate than people who have been bequeathed something by a person from outside their family.

D) Donation tax. If you are given some money, property or anything that has a significant value for free, this is also a windfall. As in the case of inheritance tax, this is also a form of coming into some wealth without making an effort. In Poland closest relatives are also exempted from donation tax payments. It is not fair actually, often children get money, flats or cars from their parents, but they haven't contributed to creation of such wealth. This means children form well-off families are better-off in comparison to those who have to accumulate their wealth on their own. Thank God donations from third parties are taxed, but taxation rates are in Poland lower or similar to the ones on income taxes. In my opinion they should be higher, as those who put effort into coming into wealth, should be tax at lower rates than ones who simply get the money.

Voices of disagreement are strongly encouraged! Nothing does as good as exchange of opinions!

Sunday, 1 May 2011

“Blasphemies” on beatification day

The word in the post title to be taken with a pinch of salt, but this piece is an attempt to swim against the tide on a day when events in Rome make almost all headlines in Poland and only some abroad.

Brits had their day of celebrations on Friday, when the royal wedding took place, Poles are having their day today, when John Paul II, the Pope they love(d) is officially declared blessed. Both events spurred a sort of craze in both nations, although much different they were, due to different character of events, in both countries there are people who have not been afflicted with it.

The beatification gives rise to some discussions about self-censorship. In Poland it is not officially forbidden to criticise the late Pope, but journalists somehow tend to refrain from it. In the week preceding the beatification New York Times published an article in which it explored all pros and cons of the decision to beatify Karol Wojtyła very short after his death and called into question whether he deserved to be beatified at all.

Pope’s critics, usually from outside the Catholic Church, come up with two reasons why John Paul II does not deserve to be declared blessed.
Firstly, for not moving the Church with the times. I actually do not understand this argument. The Church is an independent organisation, membership to which is not obligatory, those who want to join it and stay in have to accept the rules it sets. The Church is an exclusive, religious organisation and hence its rules should be strict to allow it to maintain its authority. And after all, John Paul II changed many papal customs, Catholic Church has been moving with the times, but has always lagged behind it.
Secondly, for covering-up sexual child abuse scandals. And here opponents score a point. Some say the Pope actually did not know much about the abuse cases as flow of information was filtered by the bishops from his administration. Nonetheless, this problem properly. It is not fair, given that all people should be equal before law. Secular paedophiles appear before courts, are sentenced, then go to jail and their “atonement”, meted out by fellow prisoners is anything but pleasant. Priests guilty of child abuse have usually been protected within the Church…

Leaving aside the controversial topics, let’s move on to more down-to-earth issues. I, as an unreligious, have not been made ponder upon the very Karol Wojtyła, but upon his teachings, heritage Catholics all over the world had received from him, but not surely taken it in…

Now what do we have left in Poland? 40% of people regularly going to church on Sundays? Unreflective religiousness, meaning people practise because they have been taught to practise, not necessarily out of a deeper need? Drunk driving? Tax evasion (which is a form of theft)? Illegally made out sick leaves for healthy people that costs Polish state and employers millions of zlotys every months? Mistrust? Envy? Hostility? Malice? People who can’t see further than the end of their own nose? Aggression in public life and between common people? Claims of moral superiority made by the most ardent Catholics? Accusing fellow men of treason without any substantial evidence?

Overwhelming hypocrisy, the biggest cancer of Polish Catholicism? Once some old ladies cross the doorstep of their church they backbite their neighbours. Once some men step out of the same church they go to a nearby inn, knock back a few bottles of beer, sit behind the wheel and drive home. Youngsters declare they love John Paul II and then go for a party, put on condoms and shag one another? Am I exaggerating? No, I have seen each of the situations described above at least once in my life…

More and more it occurs to me that, to paraphrase a popular quotation from Polish film “Kiler”, Polacy zrobili sobie z dziesięciu przykazań spółkę z ograniczoną odpowiedzialnością (Poles have made the Decalogue a limited partnership). OK, they may go by the rules set by the Church and the Pope who is in charge of it, but only to the extent to which it is convenient for them. They are Catholics, they have some rules to follow, but when it comes to pre-marital sex, or use of contraception techniques, the same rules are somehow waived. Isn’t it peculiar?

Religion, in Poland particularly bound with Polishness in the history, is now, owing to the past, treated instrumentally. A good Pole and a god patriot should, according to old beliefs, be a catholic. Last August, prompted by my colleague (a practising, yet very moderate Catholic) I mused about what John Paul II felt when he watched goings-on outside the presidential palace in August 2010? What did the late Pope feel when religious symbols when used for strictly political ends? What does the now Blessed Karol Wojtyła feel when he looks from above on politicians who cite his teachings to prove their moral superiority and then violently attack their political opponents, not without resorting to lies and manipulations?

My counter-point is that you don’t have to be religious to be a decent man. If we can draw any lesson from this day, do commemorate Pope in a different way than it has been done. Heritage of John Paul II should not consists in monuments, roundabouts named after him or carpets with his face weaved on them and sold during harvest festivals. Real heritage consists in following the most universal teachings in every day lives.

Pay taxes, don’t shirk work, have courage to admit you were wrong and make up for it, help your fellow men in need, be honest, reliable, dependable, keep your promises, have respect for other people, keep calm, take care of public goods, don’t sponge on the state (= on fellow taxpayers), be fair, always tell the truth, take responsibility for your deeds, don’t take credit for other people’s merits… The list could be much longer, but… I am asking too much??? If all people acted like this, life would be much, much better…

And now what is left? Quite often still anger and shame