Wry & Dry

Trump plays into Xi's hands. Banks & ethics. Mea culpa.

It's a bumper issue this week as a lot is happening.  And next week is Easter, so there will be no Wry & Dry. 

Tsar Trump throttles his own share-market rally.  And plays into Xi's hands.

Readers will have woken to the news that Tsar Trump has again shot himself in his now sieve-like foot.  

And announced that the US will impose 25% tariffs on $60 billion of annual imports from China.  This is about one third of China's exports to the US.  Not surprisingly, this raised fears of a trade-war.

Stock markets don't seem to mind fighting-wars.  But trade-wars are a different kettle of fish.  The Dow fell by almost 3% on the news.  Wry & Dry see three angles on this:

1.  Markets

The US stock market has had a good year.  In fact a good run since the end of the GFC.  In those nine years, the S&P500 has risen 13.8% p.a. (versus the ASX' 10.9% p.a.).  It is over-valued.  And so any announcement that is vaguely negative will cause nerves.  Even after last night's fall, it is still up 9.1% FYTD (the ASX is about the same, depending on the market this afternoon).

The effect on Australia and the ASX remains to be seen.  The Australian economy may benefit from Trump's moves.  And the ASX is not as over-valued as the US market.

2.  Which tariffs?

Trump will announce the list of products to be protected within 15 days.  But at the same time as he turned fire on China, his administration offered trade protection on previously announced steel and aluminium tariffs to EU, Brazil, Argentina, South Korea and ... Australia.

3.  WTF?

Trump is stupid.  W&D considers that confronting, for example, Tsar Vlad/ Russia on almost anything will give Russia pause.  The Russians will push and push until someone pushes back.  The Chinese are different.  Not only because of their significantly better economic bargaining position, but also because they are smarter and more subtle than Trump.  Tsar Vlad is an in-your-face bully and thief.  Emperor Xi is a pick-pocket.

Tsar Trump would have done better to focus on IP theft, rather than on a meaningless trade balance deficit. 

China IP theft

And to adopt a quieter approach that elicited real concessions.  A public slug-fest will delight the Chinese. 

Two matters.

Firstly, China will respond with counter-measures that will hurt specific sectors of the US.  And not just in terms of tariffs, but in not further opening up various domestic markets.  W&D hastens to add that for all of Xi's bluster and comments on favouring free trade, China's economic agenda hasn't and doesn't include substantial free-market reforms. 

Secondly, Xi is as much an economic nationalist as Trump.  But Trump’s big, very public challenge presents Xi with a stage-perfect opportunity to show himself an inveterate defender of Chinese interests, standing up to yet another Western bully.

He can do so while being fairly confident of outlasting Trump.  Xi is now China’s president for life.  Trump has midterm elections looming just months from now. 

Myer: so mean

Readers will be aware that department store Myer is in a spot of bother.  To put in mildly.  Its share price has fallen from the 2009 Jennifer Hawkins-driven float price of $4.10 to $0.39.  That's a 92% fall in price.  The ASX has risen 122% over same period.

The CEO recently got the DCM, after three warnings of profit downgrades and a vociferous campaign by major shareholder Solly Lew.  And was replaced by the Chairman Garry Hounsell.

Acting CEO and (now) Executive Chairman Hounsell made two stupendous announcements at Myer's half-yearly profit briefing this week.

Firstly, "I may not be one of the world's great retailers, but I know how to make money."

Secondly, and clearly following on from the first, that he was paying himself $83,333 per month for his new role.  That sum almost has a certain annualised mathematical roundness to it.  To save Readers the trouble of reaching for the calculator, W&D can advise that's annual dosh of $999,996.

Myer 1.00

W&D thinks that meaness has set in at Myer.  What not pay the man a round $1m per annum, so he can boast about it to his mates?

W&D hopes that Jennifer Hawkins didn't take her fee in Myer shares..

Batman - mea culpa

How to explain W&D getting the election outcome in Batman so wrong?  With as much humility that W&D can muster, W&D admits that when writing of two identities (the Greens and Bill Shorten) that he truly feels should be consigned to history, he allowed emotion to get the better of him.  And he ignored some important matters.

And in so doing, W&D reminds Readers that victory has many parents.  But defeat is an orphan.

Factors claiming a role in victory or being blamed for defeat include Bill Shorten, the suitability of the Labor candidate and the Catholic Education Office (all for victory); sabotage by Greens' members and Joe The Cameraman [1] (all defeat).

Shorten catholics retirees

W&D suggests something a little more basic, that he didn't pick up.  The previous member for Batman, the Labor Party apparatchik David Feeney, was parachuted from the Senate into the seat on the retirement of Martin Ferguson.  Feeney was an accident prone, party machine man with little interest in the grass roots of Batman.  Labor voters deserted him at the last election and voted Green, to put the Greens in a next-election winning position.  But with Feeney getting the DCM from the High Court and being replaced by a more traditional and grass-rootish sort of person, those Labor voters swung away from their flirtation with the Greens and swung back to Labor.

Of course, the Greens missed a golden opportunity to win the seat, focussing on a coal mine that was in Queensland, not Northcote. 

Russia

As exclusively predicted by W&D, Tsar Vlad won the election to be the next President of Russia.  Not that an election mattered.  Readers will know that it's all a veneer, to give Tsar Vlad an element of legitimacy.  He got about 70% of the vote, with about a 70% turnout.

Consider that in the global ranking of press freedom, Russia is ranked 148th out of 180 countries.  And in the corruption index, it is ranked 135th.  So elections don't matter.

What does matter is Tsar Vlad has a quest for some sort of greatness.  There is no sign that he wishes wealth or prosperity for his citizens.  Or that he has an altruistic instinct to do good in the world. 

Like Tsar Trump, his American counterpart, he sees greatness simply.  It's Make Russia Great Again.  And in two simple ways.

Firstly, the collective wealth of the people.  As long as altogether the country is wealthier, it doesn't matter that the top few get most of the prosperity and that there are beggars on the streets (metaphorically).  Individual human rights count for nothing.  Part of this is the projection of wealth e.g. the Sochi Winter Olympics and this years' World Cup (for soccer).  But these are nothing more than 21st-century versions of Potemkin villages [2].

Secondly, the projection of power.  Readers will be well aware of the massive military build-up, annexation of Crimea, pot stirring in Eastern Ukraine, military participation in the Syrian conflict, cyber espionage and assassinations of might-be-disloyal Russians living abroad.  All these are part of a plan to enhance abroad the prestige and power of Russia. 

It will take a different sort of Tsar Vlad to turn around the Russian economy.  Otherwise, eventually the stoic, long-suffering Russian people may decide that collective wealth and projections of power are no substitute for food on the table. 

South Australia - the lights are back on

The adventurous South Australian Labor government is gone.  To the surprise of no-one.   What was a surprise was the complete eclipse of that self-indulgent, narcissistic ex-Senator, Nick Xenophon.  The fence-sitter's party (SA Best) didn't win a seat, as the voters finally woke up to the fact that the Coodabeen Emperor had no clothes.  Xenophon finds himself down at Centrelink. 

Xenephon is the classic Millennial politician (not that he is a millennial in the true sense), inasmuch when there is failure it is someone else's fault.  He plays the role of victim soooo well.   

And he says that he is done with politics.  W&D doesn't believe him.   

Like the ageing Californian Governor Jerry Brown (governor 1975 to 1983, and then who made a comeback at aged 73 in 2011). Xenephon will rise like a phoenix.  And a pain in the ... oh, never mind.

Banking Royal Commission gives like the Magic Pudding

The Banks' Pillory, aka the Banking Royal Commission, continues to provide rich entertainment.  As well as some serious W&D reflections.

Banks pillory

The first two weeks should have removed any doubt that this Royal Commission was long overdue.  The protective no-scrutiny wall around the banks was built by the RBA and Treasury (ostensibly to ensure their survival from a nuclear attack from North Korea) and encouraged a little by the Rudd/ Gillard/ Rudd governments and a lot by the Liberal governments of Howard, Abbott and Turnbull.  

Those Liberal governments mistakenly applied the old saw of "my enemy's enemy is my friend" to the banks.  The government has always had an ideological issue with industry superannuation funds.  And, understandably so for a number of reasons.  The industry funds' enemy was and is the banks.  The banks' distribution networks, through the branches and existing bank account holders, naturally truncated the growth of industry funds.  Of course, the industry funds also had their guaranteed source of inflows from the then requirement of workers in an industry having to place their superannuation contributions with the industry superannuation fund of that industry. 

So, the Liberal government had the banks as their friend.  This 'friendship' blinded those governments to the problems of banks.  And so, whilst there were piecemeal (and non-public) enquiries into certain banking practices, there was nothing to look at the banks as a whole.

The banks marched through the GFC unscathed on the back of government guarantees that somehow emboldened the banks even further to line their own pockets and those of the executives.

The massive pay packages given to the senior executives of the banks was commonly understood to be because of excellent management.

The reality, as W&D has argued for years, was that the banks took advantage of the explicit and implicit government guarantee, the lowering of interest rates and the booming economy to gouge every possible cent from every possible customer.  There was no management excellence in this, just the ability to incentivise those down the line so that the loans were made, the insurance policies written, the credit card limits boosted, the second home bought, etc.

The banks allowed their technology to stagnate, their service levels to drop and any vestige of ethical behaviour to be shredded.  And to obtain a return on equity to be the second highest in the banking world (after Canadian banks).

And the chickens will come home to roost.  The Royal Commission is now showing the broader public what thieves the banks have been, often with the complicity/ indifference of ASIC.

For the next few months, the excoriation of banking executives will continue.  There will be plenty of contrition.  But for many, it's too late.

W&D awaits most keenly for the final recommendations of the Royal Commission.  But the well-paid bonuses have been paid.  The thieves have scarpered. 

Banks the far Q

Banks place customers on the far queue

Deepak, W&D's Uber driver, was talking about...

...Facebook.  "What's going on?" he asked.  "The share-price has dropped almost 10% this week.  And I own a lot of shares."

"Well," W&D responded, "it seems as though data from over 50 million Facebook users has been harvested, possibly without their consent, or knowledge by the data analytics company, Cambridge Analytica.  By the way, Cambridge Analytica has nothing to do with Cambridge University.  Or a research business.  It's an adverting agency."

W&D continued to explain: "The resulting public outcry has caused a fear of regulatory restrictions on Facebook.  And possibly other social media companies such as Google."

"Oh, dear," said Deepak, with a worried look.  "Anjali has always said that the government would restrict what these companies do.  And it looks like she's right.  But will the share price recover?"

"Certainly," said W&D, allaying Deepak's concerns.  "The social media companies will make lots of friendly noises about upgrading security, caring about their customers, and so on.  But little will be done."

"Why will little be done?" Deepak looked puzzled.

"You've got to get with the programme, Deepak," W&D retorted.  "People shouldn't be under any illusions about the motives of these companies.  The don't give a tinker's cuss about their users.  Or what you and I might call ethics.  No more than do Australian banks.  And remember this latest so-called security breach by Facebook is nothing of the sort."

"What!  You mean it's something else."  Deepak looked horrified, expecting that a nasty, covert person or company associated with a modern day SPECTRE or KAOS [3] was involved."

"Facebook makes money by selling personal data and advertising."  W&D was working himself up.  "This 'data-breach' should more accurately be called 'Facebook's business model'.  This is what they do."

Facebook

Deepak looked aghast.  "How unethical."

"Sure," W&D summarised.  "But that is what Facebook users agree to when they sign up."  

"Do you have a Facebook account?" Deepak asked.

"No," W&D calmly responded, not admitting that he didn't know how to work the app.  "Life is short.  I've better things to do than read what a friend did over his vacation." 

"Well, I was going to the Maldives." said Deepak.  "But after what you told me about the Chinese, Anjali and I won't be going.  And will not have any Facebook photos."

"Very wise," W&D muttered as he got out of the Deepak's car. "Remember Big Brother is watching.  Especially if you have a Facebook account."

Bestride the sporting world

Readers will know that W&D has a great interest in sport.  Well, some sports.  The sound of willow against leather is only matched by the bubbly tinkle of 2007 Perrier-Jouët Belle Époque finding its way into W&D's Waterford.

But as to sounds of a fiscal character, the tinkle of dosh finding its way into the coffers of sporting administrators is massive.  Over $1.5 billion in the five major sports in 2017.  And, aided by the willingness of sports-mad folk in Melbourne to turn up to the gladiatorial MCG, the Australian Football League (i.e. Australian rules football, not soccer) bestrides the Australian sporting scene like a colossus.

AFL dominates

The drawing power of the AFL is matched by its net profit of $45m.  But Cricket Australia led the profit stakes with $50m in the bank (but that is before David Warner's slice), a profit margin of 16%.  Rugby League lost $4m, perhaps mostly to lawyers' fees.

M. Macron: on the right track

But the 2007 Perrier-Jouët Belle Époque is unlikely to be opened by the French rail workers.  M. Macron, the centrist French President, has decided to undertake what no French president has ever done: take on the French railway unions and win.

The battle is actually wider than against the rail workers, as M Macron wishes to cut the waste, over manning and generous benefits of public sector workers across France.  Railway workers have long enjoyed expansive benefits, including generous pensions and, for some employees, the option of retirement at age 52, a full decade before the official retirement age of 62.

And yesterday saw the first day of massive strikes against the government, with rail unions announcing strikes two days out of every five.  This could be messy.

But Macron is equal to the task of responding to hecklers.  He was challenged by a 32-year old rail worker at a country fair.

"How old are you?  Thirty-two.  I am the grandson of a railway worker.  You do not work as hard as my grandfather."[4]

And, to soothe your troubled mind...  

Miscellany 

Last words...

"Oh Cory. What an utter, total pathetic failure you have once again proven to be. Barely margin of error. Where are all those millions of [Andrew] Bolt @SkyNews viewers?" 

-   Mark, Textor, senior Liberal pollster in a tweet to Senator Bernardi, who defected from the Liberals to establish his new party.  Bernadi's party scored just 3.1% of the vote in Saturday's S.A. state election.

Readers will recall that Senator Cory Bernardi, soon after being re-elected for the Liberal Party at the last election, quit the party and formed Australian Conservatives. Thus ensuring six years of handsomely paid employment to work for a party that he wasn't elected to serve.  Australian Conservatives, which took over Family First last year, had its voted fall by three percentage points more than Family First scored at the last SA election

First Samuel client events calendar

Date 

Description

Details

2018 Events  (Invitations not yet sent)

Tue-29-May-18

Eat Street - food & wine fest

Sofitel

Wed-18-Jul-18

NGV Winter Masterpieces Exhibition

Masterworks from Moma (New York)

NGV

Tue-14-Aug-18

Forum - guest speaker TBA

Leonda

Some lightly salted absurdities from all over...

At the extreme left-hand end of the Bell Curve

Lizabeth Ildefonso, 46, from Riverhead, New York, entered what she thought was a fast food drive-thru, and tried to place an order for a “bacon, egg and cheese sandwich.” 

Unfortunately, she had driven along a road that led to the local jail and she pulled up to the jail's security booth.  The arresting sheriff, Deputy Yvonne Decaro, became suspicious when Lizabeth became insistent about really wanting breakfast.  And noticed the white powder residue on her upper lip.

Driving whilst impaired by drugs, driving whilst unlicensed, etc.

(Pix) 

Guess what happened next

Terrence Jones, 31, and Kendrick Jones, 37, both of a little town in Texas, went to the Golden Corral (their local bar) to celebrate their grandmother's birthday.  Someone at the bar made a comment about Terrence's haircut.  What happened next?

a.  Terrence ignored the comment and went on to greet his grandmother;

b.  Terrence turned and saw his cousin Joe, and laughed and they both went on to greet their grandmother;

c.  Terrence is deaf and didn't hear the comment; or

d.  Terrence and Kendrick turned around and almost beat the life out of the commentator, in front of grandma.    

Close.  But no cigar.  The brothers got stuck into the commentator.  The commentator's mates came to his rescue.  Then the chairs started flying.  And there's vision of it all right here. 

Terrance was arrested and charged with battery, disorderly conduct and mob action, with violation of persons and property. Kendrick was charged with aggravated battery, assault, disorderly conduct and mob action, with violation to persons and property.  They were both transported to the Peoria County Jail.

(Journal Star)

No news on grandma.  

Aw, shucks, it's 32 months late and cost $12.9b, but what the heck, it's only an aircraft carrier.  So let's...

...build two more.

The US Navy has just paid $12.9 billion for the most expensive ship ever built.  The USS Gerald R. Ford is a nuclear-powered aircraft 'super carrier' that displaces over 100,000 tones and is over 330 metres long.

And so the Navy thinks it can make savings by ordering two more.

(Virginia Pilot) 

There will eventually be five of these 'Ford' class super carriers.

Have a wry and dry weekend.  And remember that Christ's death was for you. 

Anthony

[1]  Joe the Cameraman took the rap for Shane Warne's petulant outburst in a test match, that was picked-up by the stump microphone.  Bowler Scott Muller was having a bad game, and when his throw from the boundary went well astray, Warne said, "Can't bowl, can't throw."  Joe the Cameraman has moved into the lexicon as an anonymous person who is blamed for the actions of someone else.  The actual cameraman was Joe Previtera, who manned a camera at the southern end of Bellerive Oval.

[2]  A Potemkin Village is any construction (literal or figurative) built solely to deceive others into thinking that a situation is better than it really is. The term comes from the fake portable villages built solely to impress Empress Catherine II by her former lover Grigory Potemkin during her journey to Crimea in 1787. 

[3]  Respectively: Special Executive for Counterintelligence, Terrorism, Revenge and Extortion (from the 2015 James Bond movie) and KAOS (not an acronym), from the television series Get Smart. 

[4]  Whilst M. Macron's grandfather was certainly French, his grandmother was English: Jacqueline Robertson's father was a butcher from Bristol.