The story grabbing headlines today not only tell you to be wary about what governments can do to your potential wealth, they also show you why you need to be diversified when investing in stocks. Punting on one company can be fantastic if you get in early at a low share price and the price spikes big time. But most don’t, and sometimes they can fall back to earth.

Want an example? Try Afterpay and Zip.

These guys were hit by new rivals of huge proportions such as PayPal, CBA, Apple and others plus the black cloud of regulation was always coming and is bound to escalate in coming years. Bad CEOs and boards, competition, wars and governments (looking for votes or money) can ruin the share price of a good investment. It’s why I always suggest you have at least 10 companies in your portfolio or even 20, so one badly hit stock won’t ruin your whole return. I also like Exchange Traded Funds (ETFs) that can give you 200 stocks in one trade! That’s mega-diversification you get with investing in the top 200 companies in an S&P/ASX 200 Index, with the likes of IOZ, A200 or STW, which are all buyable from a stockbroker online or with a real-life broker. I call it investing in Australia!

At Budget time, Treasurers look under every rock and down the back of couches to see if there’s spare money hiding there. Because of Covid, Treasurer Jim Chalmers wants to find money without adding to inflation. And oil and gas producers look likely targets to be slugged in the May Budget.

The SMH’s Nick Toscano and Mike Foley have told us about Dr Jim’s likely intentions that are bound to show up on May 9, which of course is Budget night.

They remind us that the gas industry has had numerous government interventions since December, including the following:

1. In December, gas producers copped a temporary cap on domestic gas prices.
2. Many of them have been hit by emission limits for pollution reasons.
3. They look set to be forced to prioritize domestic supply over exports, which is better for the bottom line of these companies.

Dr Jim is looking at the conclusions of a

Treasury report on the $2 billion a year Petroleum Resources Rent Tax (PRRT) that applies to offshore oil and gas projects, to see if these resource producers are ripping us off! A good question has to be this: how are they taxed? On the surface, it looks like a tough tax regime for them, with a 40% tax on profit, but insiders explain that there are generous tax deductions that reduce their overall tax slug.

Liquid and natural gas (LNG) alone is tipped to bring in $91 billion a year from exports, thanks to Putin’s war. This is three times more than 2020-21, but that was a Covid-crushed year.

Meanwhile, gas producers calculate that they’ll give the Federal and State Governments around $9 billion this financial year through corporate income tax, PRRT, state royalties and excise. And the industry says that the harder they’re taxed, the less investing they’ll do.

“The overhaul of the PRRT, which the Parliamentary Budget Office found would increase tax paid by the sector by $94.5 billion over the next decade, including the likelihood that some projects would become financially unviable and cease production,” the SMH reporters revealed. That’s why Dr Jim is very likely to hit oil and gas producers on May 9.

That accepted, when Putin’s war ends and oil and gas prices drop, the government ‘hit’ on these companies should be adjusted or else we’ll see a lot less investment by them. That might suit some political groups like the Greens, but it might mean a lot less export income and government revenue, which could result in higher taxes for ordinary taxpayers.

Economics and finding money for Treasurers and their budgets can be a zero-sum game, and investors can pay the price in lower stock prices and personal wealth.

That’s why I say I like diversification.