....The other Australian wrinkle to the global theme of de-equitisation is the high dividend payout ratio in this country. AMP's Shane Oliver highlighted this recently when he showed that Australia's average payout ratio (dividend as a percentage of earnings) is 64 per cent, compared to a global average of 39 per cent and even less in the US (34 per cent) and Japan (31 per cent).
Oliver says that of the 12.4 per cent average annual return from Australian shares in the 105 years since 1900, just over half has been due to dividends, providing a stable anchor for investment returns. He used the stats to argue that high dividends tend to produce better company returns because they indicate that the reported earnings are real - that is, they have actual cash flow backing them, which Oliver says is especially relevant after Enron and HIH etc.
Anyway, this is really just another manifestation of the capital tussle between owners and managers that we are seeing at present.
Warren Buffett's success over half a century has been built on investing in companies that pay low or no dividends, for two reasons: dividends in the US are taxed and also attract transaction costs when you reinvest them. If you like a company and its management, says Buffett, then you can't do better than leave the money with them rather than take it away and look for something else to invest in.
In their hearts, institutional investors like Shane Oliver's employer no doubt think the cash is better in their hands than in those of overpaid, over-ambitious CEOs.
The trouble is that this is forcing managers to take on more debt. The global trend towards "de-equitisation" we are now seeing has haunting echoes of the great gearing up of the world's balance sheets that occurred during the 1980s, driven by Kohlberg Kravis Roberts, Michael Milken, Alan Bond, Christopher Skase and the rest.
That whooshing sound you can hear is the debt-to-equity pendulum swinging past.