The prior discussions have got me thinking about the whole sweep of these Listed Investment Companies and have to agree it is a bit of a con job on Australia’s financially naïve.  

The LIC proposition goes something like this: “Hey I am university educated and understand intimately the world of finance (“unlike you, you dumb-ass”. This being the unspoken subtext) and I was very high up at Bumfluff Bank (hey, talk about Macquarie Bank where you were a summer intern, but make sure you get the word Macquarie or UBS in their somewhere) and I can make you lots of money.   I am just so red hot when it comes to making money, hey I will remind you how much money I made when I bought and sold Testicle Corporation and then there was my clever trade Undies Incorporated.   Invest in my fund and I will only charge one percent a year plus an outperformance fee (and if I can get away with it, lets just not mention high water marks)”  

If I can convince Mr and Mrs Public and raise say even $50m, then I lock this away in a 25 year management contract (with myself as manager) at a minimum of 1% pa plus outperformance fees.   So instantaneously I have conjured out of thin air a gross fee amount in  constant dollars of $12.5m    Of course there are expenses associated with running the fund: meeting with company CEOs for coffee and lunches and a nice comfy chair to plant my arse in.

(Hey you don’t expect me to do any real work do you, like picking fruit, working on building site or even licking stamps at the Post Office?  Mate, what do you take me for, a bloody fruitcake?)

And my further promise to you as your LIC fund manager:

•  I will talk in a deep baritone voice and if I use any words or more than six letters, explain them to you.
• Wear a suit at appropriate times and go fashionably tie-less when the occasion calls for it.
• Employ women and prominently parade them at AGMs and shareholder updates. Same goes for any non-Caucasian.
• Make sure any trendy social causes or charities are given prominence. (Hey, what is the point of doing societal good if you can’t brag about it?)
• Will be very solicitous and treat with reverence any dopey questions any of you mug shareholder pluck up the courage to ask.
• Will in the course of any presentation tell at least one humorous anecdote, enough to have you and the assembled audience tittering.
• show lots of upward sloping graphs, and point to at least two examples of how clever my buys and sells have been. 
• In doing the above I will always include one trade that went wrong. Hey I am only human and in this identified trade I only lost you 28 cents. This is because I am so clever I diversify my investments.    (Just because at the end of the year the LIC share price is down 20% is nothing to be concerned with)
• This, hand on my heart I will guarantee to you.  (memo to myself: I am just a wonderful human being. FIGJAM).

Now, ask yourself if the high property prices in the better suburbs of Sydney and rural idyls of the Hunter Valley and Bowral are not in part the result of these suited scamsters.   Ask if you have been complicit in it all by buying into the scam story?  

Further just imagine you had a rental property say in Sydney and Melbourne. It is likely worth say $1m and imagine if the real estate agent said to you: “hey I will manage it for you for 1% pa of the asset value and how about a percentage any uplift in property value”.

 Well you would rightly tell him to go f$%# his fist. 

So why do so many otherwise sensible Australians fall for the great LIC con job?

(I am going to cop hell over this. Its the end of the week and I just can’t take any more financial BS)