Most people have little idea how the machinery of politics works. We occasionally gain insights when ICAC hears that Gladys Berejiklian threw money at Wagga to help Daryl Maguire, or Christian Porter accepts donations behind a blind trust to fund his legal bills, or Sam Dastyari asks a Chinese donor to pay a travel bill. But nobody explains what a company that donates large amounts to a political party expects or receives in return.

The companies say it's a contribution to the democratic process, but they are not charities, and few shareholders expect them to fund 'democracy'. No, the payment is for access and influence, but there is far more involved than writing one cheque. It's usually a multi-year strategy.

In 2016 (when Firstlinks was Cuffelinks), a leading Canberra lobbyist invited me to a breakfast with a small group of people. Staff who worked for both major political parties would present on who was best-placed to win the next Federal election. Standing around before the discussion started, armed with coffee and croissant, I sidled up to the Managing Director of the company. It went along these lines:

"Can I ask something I have never understood?" I began, leading with my political innocence. "Let's say I become Minister for Infrastructure. I need to learn about my portfolio and the billions of dollars of construction underway and planned, meet my new staff, gain a full debrief. You ask if I will catch up with your client, an investment bank, the next day. I have many other priorities, why should I see you?"

He paused just long enough to show I was about to be taught a lesson.

"Many years ago, when you first gained preselection for your seat, we helped you rally support from party members. We organised fundraisings when nobody knew you, and arranged for senior ministers to attend meetings with local businesses. We provided staff for your office on our payroll, and we have given you advice for years. We supported your move into the ministry. When we call, you will accept any appointment."

Sam Dastyari was a significant Labor Party fundraiser as Secretary and a senator, and he recently told the ABC TV documentary, Big Deal about corporate donations:

"There's no point pussyfooting around on this. You can have as many euphemisms as you want. You can call it donations, you can call it contributing, you can call it participating in democracy. That's all bullshit. This is one thing and one thing only. It's pay-to-play ... how do I get a seat at this table?"

On the other side, former Treasurer of the Federal Liberal Party, Michael Yabsley, writing in The Sydney Morning Herald of 25 November 2021, argued political donations should be capped at $200 each. He said:

"Furphies abound in discussions with political insiders about fundraising—one in particular. We're told that big donations from big organisations—trade unions, public or private companies, industry associations, even some community groups—are essential for democracy to function. Without that money, we are told tearfully, democracy would wither. Bollocks ... We need to make so insignificant the amount of money that can be lawfully donated, it could never be considered an inducement in the often Byzantine, sometimes nefarious world of politics."

Strong words from insiders who know. Bollocks. Pussyfooting. Bullshit. Nefarious. Politics is no longer an exchange of ideas. It has become small targets and 'gotcha' moments. Anthony Albanese dare not utter a policy which will allow Scott Morrison to label something as a new tax, despite our need for revenue to address the massive budget deficit. We now face up to six months of generalisations about 'freedom', 'choice not mandates' and 'who do you trust?'. As Thomas Jefferson said:

"The government you elect is the government you deserve.”

The Australian National University carries out a survey called The Australian Election Study after each Federal election to determine why choices were made, covering policies, parties and leaders. The most recent in 2019 prompted lead researcher Professor Ian McAllister to say:

"I've been studying elections for 40 years, and never have I seen such poor returns for public trust in and satisfaction with democratic institutions." 

The Study includes this chart, showing only one in four people believe politicians can be trusted while three quarters believe that people in government are looking after themselves. What do we think it will look like in 2022?

Michael Yabsley concludes his article by saying of his proposed change:

"That's what I would call a good legacy for our children."

What should future generations inherit? Firstlinks has previously fessed up on the beneficial conditions experienced by Baby Boomers and the difficulties for younger generations in owning their own home. Circumstances in retirement are completely different for renters versus owners. Danielle Wood makes some contentious arguments in the recent John Button Oration, but they are policy issues we should be mature enough to discuss. In 1981, when the Boomer generation was starting families, 67% of 30-year-olds owned their own home, and now it's close to 40%. 

Our Reader Survey on whether investing has fundamentally changed drew over 400 responses, and it's surprising how many believe we are in a new paradigm. We publish a selection of comments on why this time is different ... or not. Then Leisa Bell sifts through the hundreds of pieces of advice for someone starting out on an investing journey and provides the first 100 insights. It's too difficult to time the market and investors should ride out the ups and downs over the long term. As this chart shows, there are always reasons to sell.

Then Callan Maclennan and Michael Malseed take a look at different types of LICs and the pros and cons of the structure. LICs and LITs have become the poor cousins to ETFs in recent years but there are pockets of resilience.

This week, hundreds of thousands of Westpac shareholders received the Westpac buyback offer, and this one is different from other buybacks where taxpayers such as SMSFs in pension mode had an easy decision. As Peter Gardner explains, the merits of this buyback depend on where Westpac sets the discount level.

Still on banks, Hugh Dive has done a deep-dive into 800 pages on bank reports and awards his gold stars based on margins, capital, dividends, loan impairment and earnings growth. The fall in CBA's share price recently has surprised everyone but what does the future hold, especially for those attractive dividends?

As a sign of how much banks have changed, when I worked at Colonial First State (CFS) for a decade until 2012, the CBA connection to financial advisers in Commonwealth Financial Planning (CFP) was considered a major strength. The complete turnaround was confirmed this week. Not only was the sale of 55% of CFS to KKR approved by regulators, but CBA announced it will cease providing financial advice services completely in favour of a referral service to AIA:

“CFP customers with life insurance, superannuation and wealth advice needs ... are being closely supported with a smooth transition to AIA to help manage their ongoing financial planning needs.”

While many retail investors have significantly increased their investment knowledge in recent years, one aspect of portfolio management that they do not perform with the rigour and frequency of institutions is rebalancing a diversified portfolio. Investors are told to 'let your winners run' but what happens when it leads to overweighting? Chamath De Silva shows the benefits.

This week's White Paper from ClearBridge, part of the Franklin Templeton group, looks at the US economy after the coming peak in demand caused by massive levels of official stimulus. Either way, 2021 has been a boom year for IPOs with a lot of company owners cashing in their chips, and the year is far from over.

Two Comments of the Week because we must acknowledge the potential effort of Owen who says he intends to read every edition of Firstlinks to build up his investing knowledge.

"I love that you have an archive. I'm on Edition 5 and aiming to read one a day until I'm caught up. So interesting to read stuff with the benefit of hindsight."

A special prize if he can get through 500 editions by the time he has finished.

We also liked this clever comment by GG on Diana Wagner's piece on company pricing power:

"A very interesting article. Netflix's inflation-proof status is similar to Apple's—if they can keep coming up with new hits/gadgets, they'll ride above it all. Netflix managed to do this coming up with The Crown and Squid Games. An enthralling insight into a bizarre world based on unreality and abhorrence, where only the toughest survive, cruelty does down the rest and the occasional victim comes to a terrible end—while the world looks on in grim fascination and disbelief. And Squid Games is a good show, too."