Wry & Dry

Australian investors love Trump. CGT up? Tsar Trump blinks first.

Good grief.  It took Valentine's Day for Wry & Dry to realise that there was a big lurv-in going on around him.  

The ASX is up over 10% since Donald Trump was elected Tsar Of All Americans.  Australian investors must love him.  See later for W&D's deep analysis.  

ASX love

The ASX surrounded by Tsar Trump's lurv

And just below for a shallower analysis... 

Roses are red/ Nepal is quite hilly/ The share market's rising/ But it's getting quite silly. 

Meanwhile, readers will be aware that the economically-illiterate-but-keen-to-get-a-headline Senate Cross Benchers have scuttled the government's latest plan (Plan M) to reduce the exploding welfare bill to a manageable level.  Plan M is a bit complex, but in the end South Australian Senator Xenephon, having previously supported most of the measures, said that Plan M would 'hurt families' and therefore he wouldn't support it.  

Instead he said that he would support an increase in the Medicare Levy, seeming to forget that such a move would also 'hurt families.'  Sigh.

The government is somewhat keen for Australia to retain its AAA credit rating.  And so is overturning rocks in the Desert of Possibility to see what can be found underneath.  A rock marked CGT was, in fact, overturned.  W&D was there with his box Brownie to capture the event:

Image result for image overturning rocks

Treasurer Jim Morrison overturning a rock marked GST to see if there was a policy under it

And so, unimpeded by logic or denials, the rumour of a CGT increase or broadening raced around the cold halls of Parliament House.  Apparently PM Turnbull won't rule it out.  But won't rule it in.  Well, he's a politician after all. 

Meanwhile, on the other side of the House, William Shorten has his own troubles.  Increasingly resembling an emperor with no clothes (that should really be 'without any clothes', but sometimes W&D needs to be immersed in the vulgar), his renewable energy target of 50% by 2030 is causing him some trouble.  

Image result for image emperor with no clothes

Left to right: Mark Butler, Chris Bowen, Joel Fitzgibbon, Tony Burke, Jim Chalmers and William Shorten.

Most thinking Australians know that the Labor 50% RET is there just to try and win back, or prevent the increase in, Green votes in the inner-city electorates of Melbourne and Sydney.  But blackouts in South Australia, the absence of any costings by Labor, increasing complaints about the increasing price of household electricity and how the 50% RET might actually work have caused a spaghetti of contradictory statements from Energy spokesman Mark Butler, Treasury spokesman Chris Bowen and Leader William Shorten.  

Always quick to spot when the arrows from the circling Indians are getting closer, W&D forecasts that the Labor party will find a way this weekend to pragmatically back-down or announce an alternative policy.

Someone who has yet to spot the arrows blocking out the sun is transfer-cash-out-of-the-country-quickly politician, Clive Palmer.  The former wannabee PM is in the Federal Court over the bankruptcy of his collapsed Queensland nickel company, QNI.  Mr Palmer instructed QNI's Chief Financial Officer to funnel $43m from QNI's bank account to:

  1. Palmer's other companies;
  2. Palmer himself;
  3. his Bulgarian father-in-law;
  4. foreign woman #1; and
  5. foreign woman #2

This has all of the makings of a James Bond movie.  W&D is imagining James Bond in the lobby of a dingy hotel in Sofia, watching Mr Palmer.  Mr Palmer would be trying to look unrecognisable in a white dinner jacket, hidden behind large sunglasses, and furtively passing to his dinner-suited father-in-law (accompanied by Foreign Woman #1 in a glamorous dinner gown) a brown paper bag.  And then Foreign Woman #2 .. oh, never mind.

W&D is not suggesting that the transfers were anything but legal. But notes that Mr Palmer's wife, Anna was a director of two of Mr Palmer's companies, and under cross-examination she had difficulty remembering details of deals undertaken and of which she approved two days before QNI sacked 237 employees.  W&D guess is that it is hard to read the tea leaves when the sun is blocked by the arrows [1].

The inevitable (to Wry & Dry's mind) collapse of the Greek economy into the Aegean, which last week was financial-global headlines, has been swept under that broad obscurer of reality, the political carpet.

But W&D has lifted the dusty edge of the carpet to reveal that Eurozone finance ministers will miss next week's deadline for agreeing with the IMF about terms of a release in July of €7 billion of bailout funds.  The IMF wants, among other things, significant debt foregiveness before any release of more dosh.  This will get messy, because, for no other reason, than the Dutch (who wouldn't put their hand in their collective pockets for as much a €1 for the Greeks) and French (increasingly supporting a should-we-stay-in-the-eurozone policy of the far-right party) are soon to go to the polls.

W&D will keep readers close to the keyhole.

Meanwhile, Tsar Trump had a phone conversation with the Emperor of China, Mr Xi.  It was all about, more or less, China's earnest desire for the world to recognise its 'One China' policy.  On 11 December, soon-to-be Tsar Trump said that he wouldn't be bound by a One China policy.  Earlier this week, on his phone call, he back-tracked and agreed to honour his country’s long-standing 'One-China policy', according to the White House.

It said Mr Trump made this commitment “at the request of President Xi”.  China regards the policy - which it interprets as confirming its sovereign claim to Taiwan - as the basis for its relationship with the United States.

Mr Xi had refused to talk to Mr Trump until the American president committed himself to it.  Tsar Trump blinked first.

As the Economist magazine succinctly put it: "To China’s government, this is likely to confirm that its preferred method of diplomacy works: that of issuing non-negotiable demands and repeating them until other countries fold. China is also likely to see Mr Trump’s about-turn as a sign of American weakness."

The interesting outcome of this very clear display of American weakness is to now watch for more subtle geo-political moves from China.  And the unsubtle ones from Tsar Vlad.

It's a short W&D this week, to balance last week's magnum opus.  So readers will just need to peruse the following piece about the rise of the ASX by 10% since Tsar Trump was elected, before clicking onto Investment Matters, to see how clients' companies are going this profit reporting season.

And before that, of course, Miscellany.  To soothe your troubled mind. 

[1] As recorded at the Battle of Thermopylae:

Persian: A thousand nations of the Persian empire will descend upon you. Our arrows will blot out the sun!

Spartan: Then we will fight in the shade

W&D has, to save readers the trouble, calculated how many arrows this would take i.e. how much of the sky something takes up from the reference point of the ground; consider this:

A = 2arctan(d/2D), where d is the actual diameter of the object and D is the distance to the object. For the sun, we have: A = 2arctan(1.4 * 109 meters/(2 * 1.5 * 1011 meters)) = 9.33 * 10-3 radians.

Let's say a (thick-ish) arrow is 2 cm across and they're shot 100 meters into the air.

A(arrow) = 2arctan(0.02 meters/2 * 100 meters) = 2 * 10-4 radians.

Thus, to match the diameter of the sun (not blocking it out yet), you need 47 arrows. Squaring half of this and multiplying it by pi (the area of a circle), you get 1735 arrows.

So 1735 arrows.