Chris Lee & Partners Ltd

Taking Stock 27 November 2025

James Lee writes:

‘‘If you are not sure, sell half.’’

I used to work with someone I respected immensely who had two rules. One was that if you didn’t have conviction, or you were no longer sure, you should take some action, as the simple process of taking action would provide you with new information.

Do you have something better to buy? Are you worried that markets will not keep going? Even if later you bought the same asset back, you would have avoided the worst response, which is being paralysed when things get hard.

So at the end of every year I find it useful to stop and take action, weigh up the year that has been, and consider the year ahead.  The simple process of doing so helps me frame my decisions for the year to come.

In my experience, at this time of year Institutions avoid taking new risks. As they manage the year-end process, some reduce risk, and most go away over Christmas and come back with a new perspective on the year, when the noise has died down.

Therefore, I try to do my thinking now, in case the environment changes.

Looking at 2025 we were focused on a few key themes that would be front and centre of most investors’ minds.

The AI Capital Expenditure (Capex) cycle - would it continue or would the eventual need for value creation from investors give it pause?

The interest rate cycle - how quickly would it turn?

Bitcoin - would the adoption curve continue to support it becoming a real asset class?

Economic cycle - with unemployment increasing, would the consumer stop spending?

Geopolitics - war, tariffs, Trump. How was that going to play out?

After pondering I found many of these things were not easy to answer because, being frank, some things are unforecastable. When that doubt occurs, the question becomes how much risk is the market already pricing in and then, risk adjusted what is the right decision – buy, sell or hold.

Given markets were near all-time highs, and these questions felt difficult to forecast, a 5-10% return was probably going to be a good result.  You should take the right amount of risk to achieve that.

As at today what has happened?

Gold is up 50%

Bitcoin is down 13%

The S&P500 (the US market) is up 10%, (largely driven by Google up 50% and Nvidia up 35%)

The NZX50 Gross is up 2%

ANZ and WBC, the boring old banks, are up 25%

On top of that, volatility is very high. At its worst the markets are down 20% and at their best up 16%.

Therefore, for a 5-10% type year, I would argue that global equity investing wasn’t worth the risk in 2025, and if it wasn’t for Nvidia and Google it would have been a pretty miserable year for most fund managers and investors who took the risk.

What drove that?

The AI capex cycle entered a phase where people started talking about bubbles. Well over $500 billion was invested last year, and trillions more promised in the coming years.  All were funded through capital allocation, not expenses. Capital expenditure from the seven largest technology companies alone exceeded $300bn, and that is before we look at how much x-AI, Open AI and the like raised to develop their models.

What occurred towards the end of the cycle was the circular nature of commitments, with Nvidia investing in partnerships that then purchased Nvidia chips. This raises a fair question about whether there is genuine economic return, and how long the hardware will remain useful. There is nothing inherently wrong with the model, although it does show that only a narrow pool of investors is willing to fund this level of capital expenditure.

I think this last gasp of capital investment is spooking the market, as the main players in this space are the same five names - Open AI, Nvidia, Oracle, MGX and Soft Bank, and they have finite funds to invest.

Interest rates fell pretty much like everyone thought they would. On balance the US fell less and NZ fell more, but everyone got the direction right, so what that meant was interest rate sensitive stocks as a collective didn’t really move a lot, because the market expected that outcome.

Bitcoin - for 12 years bitcoin has been touted as digital currency.  In 2025 the world gave up on that: A - because currency is already digital, B - because it is too volatile and C - the transaction fees are way too high.  In 2025 bitcoin tried to be digital gold. It failed that test as well.

Governments collectively hold around US$4 trillion in gold. By contrast, only a handful of countries including the United States, China and Germany have any meaningful bitcoin holdings, and even these remain modest at roughly US$45 billion in total. Bitcoin is a long way from being a digital equivalent of gold. At best it still operates as a gauge of risk appetite, and at present it shows little correlation to anything beyond online enthusiasm.

The economic cycle - Unemployment has increased globally, with software, manufacturing, retail, and construction jobs down.  NZ entered into a recession and some economists would argue that the US didn’t grow if you excluded data centre investment.  This overall wasn’t a surprise.

Geopolitics - Enough said. 2025 was like watching my four-year-old play politics with friends at kindy. For those who want some fun, watch Trump Without Trump on social media.

Summing up 2025

2025 was always going to be tough, and a 5-10% return was going to be a good year. On balance it turned out to be a harder year than we thought, with higher volatility. But all of that was masked by the AI Investment cycle holding up both the markets and the US economy. That investment cycle was led by a small group of interrelated companies chasing the dream of genuine artificial intelligence.

As we head into 2026 it’s hard to see how it will be any easier. There are four key questions that we should be asking on a regular basis next year:

How will a cornered animal behave?

We are watching a set of highly volatile leaders engage in high-stakes poker, where logic and emotion often part ways. Whether it is ending wars, threatening new ones, escalating trade disputes, deploying the national guard, or edging towards another government shutdown, it is difficult to predict the next move from the world’s largest economy.

The real question is how these leaders will react when the weaknesses in their economies become harder for their own populations to ignore next year. Will the response be sensible or insane?

Gold investors will follow this.

Will Open AI have any problems raising capital?

Today a small group of investors is pouring billions into making AI a reality, either through data centres, model training or investment in products.  Last year $500 billion-plus was invested. Next year is going to be greater. If at any stage one of the AI companies struggles to raise capital to fund the pursuit of artificial intelligence, then I would expect them all to slow down.

Today Meta, Google, Open AI, xAi, Amazon and Microsoft are all pouring billions into AI.

If Open AI solves artificial intelligence, and regulation doesn’t lead to slower adoption, then maybe the market keeps on going, but as at today what evidence do we have that is happening?

Is it genius or insanity?

For five years, Michael Saylor and his US company MicroStrategy preached to everyone who would listen that bitcoin was an asset, and they needed to buy it. His model was to raise capital to buy bitcoin. In 2025 his stock price has fallen 40% so he now raises debt or offers dividend-paying shares to buy bitcoin.  His theory is that bitcoin will always go up 30% so he can borrow at 10% to buy something that goes up 30%.  Today his leverage ratio is 10-15% but what happens if bitcoin doesn’t go up? MicroStrategy and copycat companies have accumulated 1 million bitcoin using this strategy, but with bitcoin down 13% and Saylor’s obligations now heading towards $1b a year, his is a very high-risk strategy.  I would expect next year the bears to become very vocal on MicroStrategy and therefore bitcoin.

Bitcoin has failed to be a digital currency, and this year has failed to be digital gold. Bitcoin hasn’t become a good proxy on risk. The Nasdaq was up 10% vs Bitcoin down 13%. It remains one the greatest trading assets available because it is driven purely on sentiment. It has zero fundamental drivers. It is just a proxy on global emotion.

As the pension funds and endowment funds finally start to buy, the question must be asked: Has the dumb money finally turned up? Is that why the original investors in bitcoin seem to be selling out?

A crack in bitcoin would impact retail sentiment negatively for stocks, so you can’ t afford to ignore Michael Saylor in 2026. I watch for Saylor quotes, looking for signs of stress, albeit some of his comments make him sound insane, so it’s hard work.

Will NZ recover first because we went into recession first?

Lower rates, record dairy prices, Fonterra payouts, increased investment from the fast-track processes, foreign investors leading to a rebound in housing, even a half decent summer, may produce, finally, a number of potentially positive drivers for the NZ economy.

The last reporting season saw more companies surprise on the positive than miss on the negative, suggesting we have passed the bottom in terms of sentiment.

On the other side of the ledger, increased unemployment in the US, tariffs leading to inflation, and spiralling debt and healthcare costs in the US, beg the question: Will they impact the US consumer? Remember, the US consumer is responsible for more than 25% (some say 30%) of ALL consumption globally for a population equating to circa 4% of the world population.

If US consumers crack, that would have global ramifications. That said, interest rates still have room to go lower in the US which would likely protect this very important part of the world economy.

If you compared the two situations, the NZ economy is likely to begin its recovery in 2026, as the market was flat for 2025 and expectations aren’t high.

Compare this to the US economy, which has more potential to show cracks, the market is already 10% higher than a year ago and currently the market remains very optimistic.

My risk tolerance would make that a simple decision.

Summing up what 2026 could look like

The risks that geopolitics, the AI super cycle, and the US economy all have nothing go wrong, given they are all priced for perfection, makes the risk-free assessment hard to swallow. On balance the notion NZ will be in a better space is easier to believe.

To me it seems likely that 2026 will have more volatility than 2025 and that 5-10% would be another pretty good year, so building a low-risk way to earn that will be my primary focus for me and our company. I think geopolitics will still create volatility in gold but its price has already factored in increased geopolitical risk.

While there are many people calling the US market a bubble, on the other side of the debate some commentators highlight that some of these companies are growing at a rate that suggests the market could carry on. I don’t think that is easy to assess. I do however think the risk return isn’t weighed in investors’ favour, but equally if there are four things that we are watching on the negative, there are two things I am watching on the positive that could change this.

Energy and portability of energy

The average household, once it combines heating, transport and electricity bills, will find that somewhere between 5% and 10% of their income is spent on energy.  The cost of gas and huge energy requirements for data centres has been increasing energy prices since 2020.  So, when we look at areas that could provide relief long term (not short term) the opportunities relate to the capture and storage of energy.

Battery technology - currently there are lots of advances in battery technology. If the world can solve high density safe batteries that extend current range by 2-3 times, then it would be a new world - flying cars, drones at scale, who knows what else? - but the market would rally.

Fusion - Fusion energy is the idea that you can cause very light atoms to join (fuse) through extreme heat, and this creates more energy than is used in creating the heat.  You contain this energy within a giant magnetic field so it doesn’t expire and continuously feed it new atoms to make it a sustainable energy source like the sun.

There are many people trying to solve the fusion equation. Two companies have advanced projects that in 2026 we should watch. While neither will produce energy this year, they have important milestones to gauge as this technology would literally change the world. It would not be the free energy of science fiction, as the capital cost would be very high to begin with, but it would dramatically lower energy costs, allowing households of the future to spend elsewhere.

Bringing this all together

2025 was a tough year to get right, 2026 isn’t looking any easier. It is not doom and gloom by any stretch of the imagination, rather another year where 5-10% returns on a risk adjusted basis would be acceptable, given there are so many things around the world that can go wrong.

It isn’t sensible advice to parrot the notion that markets always go up, or just hold on in the expectation that investing is a long-term journey, sometimes requiring you to accept the slow road. Today Warren Buffett has $380bn in cash-like assets - that is 31% of his portfolio.  Therefore, you are in good company if you accept that it is pretty hard to see low-risk opportunities in the market.

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Kiwibank Tier 2 Note Offer

Kiwibank has announced that it is considering an offer of Tier 2 Notes, which will carry an investment grade credit rating.

The notes have a final maturity date of 12 March 2036 but are likely to be repaid at the first reset date on 12 March 2031. Similar notes from major banks, including Kiwibank, are typically repaid on the reset date.

Based on current conditions, we expect an interest rate above 4.50 percent. Investors are unlikely to be charged brokerage, as Kiwibank is expected to cover these costs.

Further details will be released later this month.

If you would like to be added to the list for this offer, pending further details, please email us with your CSN and an indicative investment amount, and we will contact you once the details are confirmed.

We are expecting this issue to open on 1 December, with payment due around 10 December.

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Travel

5 December – Christchurch – Chris Lee

8 December – Christchurch – Chris Lee

James Lee

Chairman

Chris Lee & Partners Ltd

Taking Stock 20 November 2025

IF Chris Luxon’s theory, that you measure progress by the increases in consumption and credit card use, can be assessed next year as succeeding, then within a few months the Reserve Bank would have a new mindset.

Countries like the UK, USA, Australia and New Zealand seem certain that a better life follows constant increases in consumption and the use of debt. I am not so sure.

Economic activity lifts in such times. Jobs follow. Don’t worry about stupid destructive consumption (amphetamines) or debt (borrowing for holidays in Paris), we are told.

This is relevant to our clients, because if consumption rises in coming months the Reserve Bank will be looking to reverse, or at least pause, interest rate reductions.

Perhaps this implies that, by 2027, deposit rates, bond yields and mortgage rates will have reached their nadir, and will be ready to rise.

If we are to have 12 or more months of watching rates fall, that might be why the latest Kiwibank subordinated (Tier II) notes are in such demand.

Kiwibank is to offer a note, likely to be repaid (at Kiwibank’s option) in 2031. It will pay interest at a rate of perhaps 4.75% and will be tradeable. The issue will likely open on 1 Dec.

Kiwibank is likely to pay the transaction cost. The security will have a credit rating of investment grade.

My guess is that demand will swamp the size of the offer, possibly limited to $300 million (including over-subscriptions). No similar security currently matches the predicted yield.

For Kiwibank, this will be a much cheaper source of money than raising funds from its shareholders. Equity is expensive and possibly unavailable, anyway.

If the Reserve Bank reduces the overnight cash rate again this month, there would be further falls in bank deposit rates, and bond yields.

It is somewhat ironic that long-term, high-quality corporate bond rates often yield less than the rates offered by the US, UK and NZ government bonds of 10 years or more.

Very clearly, investors in 10-year securities believe rates will reach higher levels well before the next decade.

Kiwibank’s need to grow, to be effective competition to the Australian banks, is obvious.

Its market share is low.  Politicians seem wary of listing some of its shares on the NZX, fearing widespread voter anger. Internal forum groups matter more than optimal solutions.

Kiwibank seems unaware of the opportunity to convert to a much better NZ bank by listing some of its shares and buying SBS, TSB and Heartland Bank, all of which could fit neatly into Kiwibank’s range of products, greatly enhancing its profitability and market share. Even the Cooperative Bank might be a credible acquisition.

If only Kiwibank had better owners!

Yet I applaud the effort made by Kiwibank’s people who have made a decent purse from a sow’s aural organs.

When the commercially goofy politician, the late Jim Anderton, 30 years ago proposed a government-owned bank, his helpers made countless errors that seem destined to constrain Kiwibank to the equivalent of the old Public Service Investment Society (now the Cooperative Bank) or the Post Office Savings Bank (now integrated into ANZ).

Kiwibank started its public visibility in the counters of the drab NZ Post Offices. Its staff were kind but novices. Its services were more suited to Russia than NZ.

It happily marketed itself as a bank for social welfare beneficiaries, meaning average deposits were extremely low, and loan applications were often from the desperate people that private banks avoid.

Enter an excellent charismatic CEO, Sam Knowles, son of the admired economist Bernie Knowles, his dad an old timer with an understanding of most sectors of society.

Sam Knowles provided panache, confidence, kindness and patience, gradually converting Anderton’s naïve plans into a vision that staff, customers and, eventually, politicians could understand and improve.

He attracted a group of bank executives that understood the international language of bankers.

Kiwibank shifted from impersonal, far from confidential, Post Office counters to much more edifying premises, and it introduced modern products like credit cards, with the features that attracted a wider range of clients.

It bought and sold (profitably) Gareth Morgan’s wealth management business, further lifting its profile with a wider range of customers.

It has regularly found solutions to the constraints placed on it by its political owners, raising quasi capital with notes made complex because of its ownership structure.

All of this has enabled Kiwibank today to issue a complicated tier two note at a rate that will be sought by institutions and wealthy investors. In practice, it is likely to be seen as a five-year note, paying a respectable rate, easy to trade.

Of course, Knowles has long gone, but the late Anderton, were he able to, should be tipping his hat to Knowles, who translated Anderton’s woolly idea into something that has served hundreds of thousands of New Zealanders.

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IF Knowles knew how to combine banking knowledge with social services, he would contrast strikingly with Patrick James, the idiot who has cost naïve lenders billions of dollars, in America.

Any regular readers might recall that Taking Stock recently discussed First Brands, a huge American auto parts company built on the equivalent of a tidal sand bank by James.

Exploiting the greed and stupidity of modern American money lenders, Patrick James raised around $12 billion of debt, claiming company stock and receivables would secure these loans.

Taking Stock noted how James refused to allow lenders to audit his claimed stock levels, and how he double pledged receivables to raise cash flow that “disappeared”.

We now know some detail, after the receivers arrived and appointed a new CEO and a new Chief Financial Officer (CFO).

In court (in the USA) last week, the new CEO and CFO described what they had found in First Brands, that led to the showering of loans (other people’s money) on First Brands, without even elementary due diligence.

The disgraced previous leader had: -

1. Falsified invoices and then sold these faux “receivables” to factoring companies. (Factoring companies buy invoices at a discount, effectively providing cash for a future receivable.)

2. He had then duplicated and triplicated the faux invoices and sold the copies of the phonies to private credit companies and other factoring companies, thus raising money against the security of very thin air.

3. The new CFO had uncovered instructions from James to the previous CFO, demanding that $700 million of company funds be paid to James personally, enabling him to shift this overseas, and then transfer the money into cubby holes that currently have not been traced. He issued this instruction in the days leading up to the company’s collapse.

I will put to one side the crimes of James and his dishonest team.

To me, the most concerning issue is the blind eyes of his bankers, who must surely have observed the transfer of the money to James.

The “don’t want to know” attitude of those who bought the false invoices is staggering. One bank CEO described First Brands as a cockroach. One hopes the world is not about to watch an infestation.

Though it is decades ago, I still recall easily the efforts we made to validate invoices when factoring was popular in NZ in the 1980s, and when money lenders did not receive bonuses.

At the very least, one contacted the name on the invoice and asked for confirmation of the details, and on delivery of the service billed by invoice.

It is staggering that auditors – a big-time international accounting group – found nothing to stop a clean audit report of First Brands. One wonders what the audit fee might have been.

It is evidence of abject stupidity that these types of deals are not the subject of credit rating agency reports.

It is astonishing that banks, private credit companies, and factoring companies would allow First Brands to barricade the warehouses, denying inspection of the assets when lenders arrived.

All of this points to quite appalling lending standards, exactly of the type of “liar loan” that preceded the global financial crisis, and exactly of the type that evolves when the lending focus is on short term money lending (faux) profits that feed quite socially destructive “bonuses”.

If the USA had morality or ethics in its White House, I would expect the American constitution to demand a display of leadership that would address these signs of decay.

The word “if” seems to begin to explain the problem.

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THIS banking behaviour in the USA was similar to the behaviour recognised in Australia during that dreadful period that led to a commission of enquiry, just a few years ago.

The New Zealander, Ralph Norris, was cheered on by our media for his success in obtaining the A$7 million top job at the Commonwealth Bank of Australia (CBA), which owns the ASB in NZ.

Norris will be remembered as the chairman of Fletchers when it made the most obvious error of appointing Mark Adamson as CEO, leading to a period when Fletchers was all but destroyed, Adamson, demonstrably, an utterly unsuitable leader, yet one who “moved on” with multi-million farewell gifts.

Norris was CEO of CBA when the commission of enquiry discovered the termites in Australia’s banking structures, many of the quite dreadful practices stemming from sales targets, rather than sustainable practices or client service. Customers had become victims because of the CBA’s greed and poor leadership. The banks’ leadership was ridiculed by the commission of enquiry.

The other main banks were not exactly cleared of ugly cheating, and just recently the ANZ was fined $240 million for some behaviour that reflected very poorly on its leadership and governance in Australia.

Well, here is the good news that the American bankers of First Brands should file away.

The ANZ board in Australia this month cancelled executive bonuses in Australia and backdated the cancellation to the escrowed bonuses that had been accrued, but not paid, for some previous executives.

The ANZ executives in New Zealand, who had not replicated that behaviour, received their bonuses in full.

Somebody, somewhere, is learning.

The ANZ in NZ has had some hopeless directors and at least one hopeless CEO in NZ, entitlement dominating as it did in the years that led up to the collapse of the BNZ 28 years ago.

Taking Stock has previously recorded its opinion of many bank directors, often, it seemed, appointed for political reasons rather than relevant experience, strategic thinking and commitment to sustainable practices.

I have described banks internationally as having a foreign exchange traders’ mentality, which is an eon away from the mentality that bred trust in customers, and sustainability in leadership standards.

I am therefore delighted to record that the ANZ decision to cancel bonuses is refreshing and admirable.

May this mindset permeate banking leadership, indefinitely.

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Kiwibank Tier 2 Note Offer

Kiwibank has announced that it is considering an offer of up to $200 million of Tier 2 Notes, which will carry an investment grade credit rating.

The notes have a final maturity date of 12 March 2036 but are likely to be repaid at the first reset date on 12 March 2031. Similar notes from major banks, including Kiwibank, are typically repaid on the reset date.

Based on current conditions, we expect an interest rate of around 4.75 percent. Investors are unlikely to be charged brokerage, as Kiwibank is expected to cover these costs. Final details will be confirmed later this month.

If you would like to be added to the list for this offer, pending further details, please email us with your CSN and an indicative investment amount, and we will contact you once the details are confirmed.

We are expecting this issue to open on 1 December, with payment due around 10 December.

_ _ _ _ _ _ _ _ _ _ _

Travel

5 December – Christchurch – Chris Lee

8 December – Christchurch – Chris Lee

Chris Lee & Partners Ltd

Taking Stock 13 November 2025

THE concept of a new NZX-listed company buying key infrastructure with a high level of debt and just 20% equity, offering a dividend return of “the bond rate, plus inflation plus a margin” had an unquestioning welcome by the media.

The KiwiSaver salesman, Sam Stubbs, rightly holds the unofficial title of the country’s most prolific financial market salesman, following the retirement of Doug Somers-Edgar and Carmel Fisher.

He fronted the media with his idea, which might have some merit.

Perhaps trained by his current wife, a former reporter, Stubbs is by some distance the salesman offered the most media attention, helping him to drive his Simplicity fund to around seven per cent of the KiwiSaver market. One must applaud his success with the media.

He has regularly used this media access to champion the use of KiwiSaver money to fund social programmes, like low-cost housing. He has promoted the now sidelined idea of KiwiSaver money being used to buy opaque, private assets, and last week he moved on to the idea of buying Crown and council assets in an entity to be listed on the NZX. I applaud his energy.

Beside him at the presentation was the equally pleasant and media-savvy private sector economist, Shamubeel Eaqub, who now works for Stubbs at Simplicity.

And beside them was the just as likeable, but genuinely credible Rob Everett, a former CEO of the Financial Markets Authority and later the NZ Growth Fund. He now chairs Stubb’s KiwiSaver group. Everett has a genuine background in markets, and is not a salesman.

It is easy to see why their presentation would be unquestioned by the media. I cannot think of any financial market trio more skilled with charming the media, thus being given a clear path to discuss their idea, without comment from real fund managers or analysts.

To be fair, Everett was close to silent. Stubbs dwelled on the line that because of the funding link to KiwiSaver, and the intended exclusion of foreign investors, the proposed infrastructure listed fund would not feel like a sale of the country’s essential assets.

Eaqub, with no investment history, but a pleasant left-wing economist, focussed on the proposed fund’s remarkable ambition to deliver a dividend return of bond rate, plus inflation, plus a margin.

If we take his formula seriously, we would expect a dividend of, say, 3.5% (bond rate), 2.5% (inflation) and 0.75% (margin), meaning a gross dividend of 6.75%, a number that would indeed attract other KiwiSaver money. Add 2% for costs, and the gross return from low-risk assets would be 8.75%, until bond rates and inflation rise.

The talk of a debt/equity ratio of $4 (debt) to $1 (equity) implies bankers would charge marginal rates, and allow such high debt levels, because of the certainty of the income produced by the assets.

Stubbs’ trio referenced a sewage plant in Selwyn (Christchurch) which the fund could theoretically buy, enabling Selwyn to cater for its population growth by selling its current plant, using the funds to build another. I am unsure why such a plant would sell at a yield exceeding 8%, and unsure why traditional buyers would not enter the auction, offering to buy at a lower yield.

I inferred that Stubbs’ idea was to raise the debt and/or some equity from many KiwiSaver funds, which would assess the proposed infrastructure fund as being similar in creditworthiness to government or local authority stock.

The assets bought would then charge the users (councils, the Crown, etc.) a price that allowed the fund to pay its costs (say 2%) and meet its promise of a gross dividend of 6.75%, nett around 4.50%.

If inflation and bond rates rise, as I expect, the asset sale might have to produce a nett 10% yield. There would be many wanting to attend an auction with that sort of yield on offer.

Currently government-guaranteed $100,000 deposits in finance companies, Gold Band perhaps the most credible operator, yield 5.5-6%, meaning an 8% - 10% yield on an essential council asset somewhat stretches my imagination.

It is surely this aspect of Stubbs’ plan that deserves scrutiny.

How could a saver in his index-based KiwiSaver products believe the return for risk ratio was credible? If such an infrastructure fund returned 4%, then surely the investor would want to see the asset appreciate each year. Ask Macquarie about its “success” with Thames Water!

Infrastructure depreciates. It eventually needs replacing. Ownership accepts such an inconvenience. A big part of New Zealand’s current problems has resulted from the failure of governments and local authorities to silo the necessary replacement funds.

Conversely, why would a government or council sell a key asset at a yield that accommodated the formula Eaqub discussed – bond rate, plus inflation, plus a margin?

Governments and councils can arrange long-term debt around 4%.

But the question inexplicably not considered by the complaisant daily media was, what rights do investors have, when they invest in Stubbs’ funds? Do they give him autonomy in deciding what to do with their savings?

Are they expecting his fund to match an index? Are they accepting that he, plus his unpaid voluntary work force, can use client money to meet his social investment agenda? Is this not a misuse of someone’s savings, unless they specifically authorise such a use?

One of his endeavours is to produce low-cost social housing, an objective many welcome.

Now we read of a plan to free up money for councils and governments, so they can redeploy capital in new infrastructure.

Would they sell assets at 8% - 10% yields? Really?

Would not other potential buyers compete with bids at lower yields if the asset was really comparable with government stock, or (absurdly) government-guaranteed finance company deposits?

Sam Stubbs is a trader, a salesman, and is brilliant at developing relationships with the media. 

He may harbour an ambition to be a politician, perhaps for Labour, perhaps in the area of economic development. Is he confused about the licence he has in dealing with savings?

He would undoubtedly be telegenic and gain high ratings, if his end game is a leadership role in politics.

His idea of a new listed company buying critical infrastructure at 8%-10% yields sounds exciting. It needs to be scrutinised and challenged if necessary.

I would be furious if any public asset, like a road, a sewage plant, a school, a hospital or a stadium, was sold at a yield anywhere near 10%, when borrowing rates are 4%.

I hope analysts are given media space to discuss his idea.

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WHEN a minority opposes a proposed project, passions run high.

Santana’s proposed mine in Bendigo, near Cromwell, will not be advanced on the outcome of a popularity poll. Were that the determinant, the mining would already be underway, as the informal evidence displays the vast majority in Central Otago who value the economic benefits. (One radio station poll says 85% favour the project.)

A panel with balance and wisdom will adjudicate the consent for the mine based on science, measuring risk versus return.

Given the growing numbers who support the project, it is understandable that opponents increasingly display angst.

Last week’s Taking Stock displayed disrespect for those who frame their judgement with lies, a sign of anger overcoming evidence.

Faux claims that economic benefits would primarily go to Australia, or that the company has no experienced miners, or that Santana had not engaged with all relevant parties, were deserving of disparagement. Those sort of claims attract headlines, but the real substance of the debate will not be built on such nonsense.

The local opposition seems to have at least two concerns that science will discuss. It will be the issues that determine the fate of the consent application.

One claim is that a massive earthquake, stronger than the rupture of the Southern Alps, may arrive any day.

Another is that the mine might allow arsenic-laden soil and dust to poison waterways.

The earthquakes will need to be addressed as a potential, but utterly unpredictable, event.

Any structure that would store poisons, like a tailings dam, would have to be built to survive a massive quake.

Arsenic is omnipresent in Central Otago, a gold-bearing area, arsenic being present in soil in the area of mineralised rock.

Central Otago private bores must always be monitored for arsenic, as recommended by the council for many years, unrelated to Santana Minerals. Currently the bore owners pay for such inspection.

Santana will need to demonstrate that its mine will not be causing higher arsenic levels to become a health hazard. These real issues are no reason for anger or disrespect.

Some remain interested in whether dust, carrying arsenic, might reach sensitive areas. The Santana consent application must address these issues.

Science will prevail. Evidence will be submitted. Risk will be measured.

Dispassionate Fast-track panellists will review this sort of evidence.

Passion brings colour, and headlines, but if anonymously displayed, or driven just to get attention, is unlikely to impress anyone. How it must frustrate those sincere opponents to see their case sabotaged by others who frame their opposition with lies.

One issue that will also be determined by science is the danger of dust.

Sprinkling systems generally control dust near mines that are regulated. In times of winds and dry conditions, sprinklers busily settle any dust.

Last week Taking Stock discussed dust without mentioning how ash from eruptions, toxic particles from nuclear explosions (Chernobyl) or desert storms in places like the Sahara, can carry the particles for great distances.

One correspondent noted that over centuries fine particles have built hills in New Zealand, many miles away.

Of course, the ash from the eruptions that created Lake Taupo thousands of years ago reached a height in the stratosphere that blocked sunlight out, in China. That ash travelled!

Dust, driven by wind, is another issue. It does not get propelled into the stratosphere.

No doubt Santana’s consent application will seek to demonstrate the improbability of Bendigo’s soils sending dust any great distance or causing any concern.

I repeat my view; read the evidence, ignore the emotion.

If a mine at Bendigo was indeed a threat to Central Otago life, it would quite rightly not be consented.

If any threats can be addressed carefully and methodically, then even if the mitigation is expensive, the appropriate response should be defined.

Santana expects to open a multi-decade project that would typically anchor employment and wealth in the area, and would inevitably draw to the area fund managers, analysts, investors, and, most of all, tourists.

It expects to do this without poisoning anything or anybody. I will learn more when I read the consent application.

People with knowledge of particular issues will read the consent application with great interest, I assume.

Passion may have to be subordinated behind evidence-based information.

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THE future leader of the NZ First party, Shane Jones, does not need my help in getting his views into an open arena, but a recent coverage of a short speech he made deserves discussion, even if his message was sharp.

Jones spoke about the role of koha in applications for new projects subject to Fast-track approval and was most specific about the role of koha within an OceanaGold application to extend its mining area.

In naming organisations that seek koha he emphasised that the law would be changed to exclude from the consenting process any party seeking such rewards.

I recall a consent some years ago that sought the support of a large unlisted company, which had some influence because of its size.

The applicant was told to issue 10% of its shares to the unlisted company, in return for its support. If not, expect a very unhelpful approach to be taken by the scorned party.

The shares were not issued. The result was rugged opposition. Hypocrisy was in play; bribery or blackmail.

In my opinion it is not inappropriate for an interested party to make a credible request for sponsorship. For example, a donation to buy a defibrillator is a credible request for a community service provider.

Money for support is a different proposition.

Jones often wins my admiration for his willingness to discuss in public what others may discuss but only behind closed doors.

The consenting process for applications to begin a project must not be decided or delayed by bribery.

New Zealand is not in South America, Eastern Europe, or Asia (or the USA).

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Kiwibank Tier 2 Note Offer

Kiwibank has announced that it is considering an offer of up to $200 million of Tier 2 Notes, which will carry an investment-grade credit rating.

The notes are highly likely to be repaid on the first reset date, 12 March 2031, ahead of their final maturity on 12 March 2036. Kiwibank and other banks have typically repaid similar notes at the first reset date.

Based on current market conditions, we anticipate an interest rate of around 4.75%. Investors will likely not be charged brokerage on this new issue, as Kiwibank is expected to cover these costs. Both the final rate and brokerage details will be confirmed later this month.

If you would like to be placed on the list for this offer pending further details, please email us with your CSN and an indicative amount.

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Travel

14 November – New Plymouth – David Colman

Chris Lee

Chris Lee & Partners Ltd

Taking Stock 6 November 2025

BECAUSE it is so relevant to the country’s plan to reignite growth, wealth and employment, Taking Stock has frequently discussed the new Fast-track approval system for ambitious projects.

We are about to witness how the Fast-track process can be competently administered within the context of our government’s aspirations, responding to the fine-tuning that was signalled this week.

Now that the “poster boy” for the process, the Santana Minerals gold mine plan, has submitted its consent application, two important steps will be taken, the first being a 15-working-day decision on whether the application is “complete”.

It then goes to the Fast-track panel for a decision within six months, the legal amendments proposed this week designed to eliminate spurious or time-wasting games from those not relevant to the process. In particular, it will curtail silly use of judicial reviews, limiting that process to matters of law, not opinion.

So we will see how the process itself avoids being misused by meaningless activists, perhaps seeking attention, career advancement, or simply displaying anti-growth opinion.

Conversely we shall also see the opinion of competent people displaying their suggestions on how to include their research in mitigation of any environmental issues. These people will not be spouting nonsense, with fear-inducing speeches about poisoning Central Otago or reshaping “pristine” (barren) valleys on private land.

Secondly we shall learn about the scale and economic benefits of a project, and read the science, produced at a cost of multiple millions, published by independent environmental consultants with obvious relevant credentials, in Santana’s epic application.

All of this will soon be visible, publicised by Fast-track on its website. This should happen this month. Already granted, this week, is a 30-year mining permit, a useful affirmation of the project’s potential value to the country.

But for one minute, put aside the weighing of environmental reshaping and the dollars that would flow.

Reading the 9400-page report would require a longer period of concentration than most people would allocate to any report. However, there is sure to be carefully legally crafted summaries of the issues and the intended solutions, covering a range of subjects that might arise. Those summaries deserve to be read, when the application is published.

The worst of the silly billies will have been making idiotic claims, suggesting noise, dust, traffic movement, visibility, incompetent engineering, inexperience, and disruptions to birds, skinks, snails, moths, gorse and heather will create a disaster for Central Otago. There will always be those attention-seekers who believe the first step to Hollywood is streaking at a rugby test.

Amongst other things, they claim the tourism sector will be sabotaged and that vineyards within the Central Otago area will be poisoned by arsenic or cyanide. They should read the science.

When the consent is published, all bar the nuttiest will see that the distant valley being mined will be taking the scientific action to avoid any real, or unlikely, potential consequences.

Frankly, I am unsure why any publicly-funded organisation would employ activists so willing to fire their shots without first identifying a real target. Worse, some such activism comes under the cloak of academic doctrine, disguising their opinions with fake science or faux knowledge.

Of course internet platforms, inadequately monitored, allow such activists to fire off their volleys - anonymity permitted - resulting in many people, including the author of this newsletter, to be defamed by those anonymous litterers, dumpers of their rubbish in public spaces.

The media, television and some daily papers being the worst examples, have sought audiences by publishing wild views. One paper, the Otago Daily Times, allowed a sad reporter to impose her uninformed opinion. Whatever happened to the days when newspapers filtered out the often childish and uninformed opinions of reporters? Bylines do not solve this. They may even encourage it, as I have previously noticed. One suspects such reporters seek out the most colourful people to be a part of the reporter’s campaign.

In 2024, preparing for an address in Cromwell on the history of gold mining there, I read the newspapers that survived there in the 1860s. There were no bylines, no opinion other than in the editorial, and useful information was provided in detail, right down to the daily highlights of those who were panning for gold. I wish those old standards still prevailed. Newspapers were filled with news, not opinion.

Recently the fine actor Sam Neill allowed himself to be quoted on a subject on which he either had no apparent knowledge, or he was having a senior moment.

Neill is a good bloke. I am personally aware, through my extended family, of how he has befriended and helped young NZ actors who are knocking on the door of the best funded movies and TV series, internationally.

Neill is clearly a nice man and a good actor.

He is also a vineyard owner and property developer, on an industrial scale.

He is not a scientist.

He permitted a reporter to quote him, recording his fear that dust containing arsenic from the Dunstan Ranges might poison Central Otago’s waterways, dust airborne for many kilometres.

He should first have consulted those with knowledge.

The tens of thousands of hectares of the Dunstan Ranges that surround the proposed Santana mine for centuries have been covered in arsenic-rich soil. Some of that arsenic - very tiny, irrelevant portions - filters from the hundreds of square kilometres of soil, into waterways. It always has and it always will. The levels that reach water are relevant to nobody. The water remains potable and is regularly tested.

If you have rock amidst earthquake-prone ranges, the rock may be gold-bearing. Mineralised rock is covered by soil that contains arsenic, throughout the whole of the Dunstan Ranges.

Indeed geologists, such as the two wonderful veterans who created the Santana Project, Kim Bunting and Warren Batt, measure arsenic anomalies in the soil, especially in the areas where old tailings indicate that the miners in the 1860s had discovered gold. Tailings plus higher arsenic levels in the soil lead to digging and maybe drilling rigs, hopefully leading to discovery and later wealth creation.

Neill claimed that the dust from Santana’s mine would fly away and “poison” rivers, the nearest some six kilometres away.

Here’s another fact: dust does not transport arsenic or any other natural element six kilometres to any river.

Extremely high winds, picking up dust in extremely dry conditions, might enable dust to fly for a few hundred metres. Gravity then prevails.

When high winds are mixed with dry conditions, every regulated mine in a developed country engages with its sprinkling system, making potential dust revert to wet soil. That may be an unnecessary precaution, but micro-regulations are what make mines take extreme precautions.

Neill needs to spend more time reading the scientific research.

Just two other anecdotes remind me about the power of high winds.

In 1961, aged 11, I attended the All Blacks vs France rugby test at Athletic Park. The game was played in a hurricane southerly. The greatest All Blacks kicker of a ball was Don Clarke - a legend.

In that game, into the wind, he resorted to place kicking when kicking for the touchline from penalties, a sight I have never seen since in the adult game. It was the only way to avoid the ball being blown backwards. The wind that day was of biblical ferocity.

At one stage, the wind stripped off the scarves and hats of hundreds of spectators, including mine. The clothing disappeared north, carried by the southerly hurricane. The game commentator, Winston McCarthy, told the crowd to look for their garments in Wellington Harbour, some five kilometres away.

In truth, they were found in various gardens a few hundred yards away and probably ended up in a school fair, on sale for a shilling a piece.

The second anecdote is of the sand on the beach opposite our family house. In occasional howling gales, sand is blown along the beach and sometimes over the road, giving me window-cleaning opportunities. My proficiency provides a possible option for my next life.

Four kilometres further inland is Coastlands Shopping Town. It has never received sand from the beach in its nearly 60-year life.

Sand and dust are lifted and transported by strong winds, but not six kilometres.

The published Santana consent application will reveal just how intensely the output of the production plant is cleansed, with the by-products stored, and how fastidiously the tailings are processed in a tailings lake, heavily fortified.

For example, the tailings lake has to be engineered to withstand a one-in-ten-thousand years event. It is easy to imagine the steel and concrete expense of such engineering.

The rupture of the Southern Alps is characterised as a one-in-two-thousand-year event.

Much of the activist nonsense barely merits comment but what does deserve rebuke is the utterly false (published anonymously) claims that the Santana team has no mining experience. That statement was simply a malicious lie. The team collectively has mined for hundreds of years.

Furthermore, activists knew of that vast experience when the claim was made. Yet still they repeated this nonsense.

Equally as idiotic is the claim repeated recently in the Otago Daily Times, that the “real” money from the project will go to Australia. That is simply a lie.

I suppose if you exclude corporate tax (roughly $150m-200m per year), PAYE tax from 340 (plus) employees, and GST generated, and ignored the dividends paid to around 20,000 NZ shareholders, then the moronic comment might not define the commentator as either ignorant or malicious. The “real money” stays in NZ at a ratio of about 4:1.

As a matter of passing relevance, the share trading platform Sharesies has more than 15,000 mostly young Santana investors in its nominee account. If the project succeeds that investment would inspire them.

If this NZ mine is sending the “real money” to Australia, there must be a wicked fairy down there producing university professors with mystical powers that enable the claim that the “real money” is not helping New Zealand.

The Santana press release on the progress of the consent application has not been published by those media companies whose editors allow their reporters to prioritise uninformed opinion over undeniable science.

I urge people wanting the facts to read the independent research of science before forming an opinion on the merit of the project.

For clarity I disclose my family owns a small share of the project, less than 2%.

I see the project for its potential successes as follows:

- Creating 340 sustainable jobs, indirectly probably 1,000 jobs, in an area not blessed with high-earning jobs. Average pay will exceed $100,000. If industry norms are achieved, around half the jobs will go to iwi.

- Creating around $2 billion of revenue for the government over 10-13 years, with potential to far exceed this; more discovery, higher grades, gold price rises are possible.

- Generate wealth for the NZ shareholders who exceed 15,000 people.

- Create growth in and around Cromwell, Wanaka, Arrowtown, Clyde and Alexandra, affecting housing, schools, retail, engineering and council revenue.

- Create a long-term tourism asset. Mines interest far more people than the anti-mining group understands. What was once the world’s biggest copper mine, long closed (1970s), near Vancouver, is an immensely profitable tourism site, one that I visited with pleasure, along with hundreds of others. It attracts hundreds of tourists every day.

- Improve, not degrade, the eventual landscape as the company makes good on its promise to create new and better facilities – cycle tracks, roads etc.

In my view NZ cannot ignore the closing down of major companies, in areas like forestry, hospitality and retail. It needs new companies, like Santana, in which NZ and international investors have put up north of $100 million of risk capital to seek economic growth and profits (after paying tax).

Redistributing existing wealth never can meet the growing costs of matching social service with demand, nor can redistribution provide wealth for infrastructural repair and creation, let alone offset the losses to our potential able workers through modern ailments like toxic drug usage, depriving our country of tens of thousands of previously useful contributors.

The Santana Minerals project is one, I hope of many, that would produce growth in jobs, wages and tax revenues.  If gold remains at its current value, the project will generate annual pre-tax profits of around half a billion dollars, making it comfortably within the top 20, maybe top 10, businesses in New Zealand.  For Cromwell it will be a drawcard.

The Government clearly shares my logic.

Hopefully the opponents will read the science in the consent application and be intellectually honest enough to switch camps.  Should I hold my breath while awaiting such a switch?

I greatly admire the Santana CEO Damian Spring for his polite response to unruly dissidents. As you might expect from an engineer he simply sticks to the facts.

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THE Financial Markets Authority deserves a high mark, but not an A+ rating, for its condemnation of various accountants and lawyers who have falsely certified that novice investors can be described as “wholesale”, “experienced” or “eligible” when clearly those investors are not.

This is a highly relevant and commendable regulator’s response to understand how those investors unwisely invested in unregulated financial projects, based on projections that were not overseen and, usually, not credible. Investments in such ventures is legally limited to wholesale, experienced or eligible investors.

For example, a couple who had just sold a grocery shop for a million found it easy to find an accountant or lawyer who would certify that the grocer was “experienced” in investing, even if the grocer had never previously invested in anything other than the shop’s stock.

This dishonest certification has led to utterly inappropriate investing, resulting in horrid losses.

The combination of no knowledge, no advice and no regulatory protection produces risk and plays into the hands of high-risk-taking entrepreneurs, usually seeking other people’s money to take on improbable property ventures.  Some of the entrepreneurs are simply inept, others are crooks, relics of court cases.

The FMA has identified about 30 accountants and lawyers who have behaved poorly, signing off certificates without adequate questioning of the investor.

I expect most, if not all, would have had a relationship with the entrepreneur and were helping him/her to raise money. I doubt that fees would have been irrelevant.

Many will have charged a “certificator’s fee” paid by the entrepreneur.  I am not sure how that certification avoids the definition of “fraud”.

The South Island has a history of quite rotten entrepreneurs linking with such “professionals” to avoid the disclosure requirements of a full, regulator-approved investment document.

So, too, does Auckland where hundreds of millions have been written off at the cost of the unprotected investors.

The FMA would receive an A+ rating if it named those careless or greedy accountants and lawyers.  They deserve to be named.

One dreadful fund attracted more than 100 naïve investors with virtually every one certified as “eligible” by the same so-called professional.

If I had the names, you would read them here.  Sadly, I do not.

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Travel

12 November – Levin – David Colman

13 November – Whanganui – David Colman

14 November – New Plymouth – David Colman

Chris Lee & Partners Ltd