Wry & Dry

CBA's laundrette ATMs. Custer's Last Stand? Tsar Trump's goings.

CBA's Beautiful Laundrette  

CBA's ATMs, it seems, are nothing more than laundromats.  The 'deposit cash here' sign has been skillfully changed to 'launder cash to finance terrorism here'.

Well that's what AUSTRAC says.  This is the one organisation that banks now fear more than ASIC or the Labor Party.  That is, Australian Transaction Reports and Analysis Centre.

The folk at AUSTRAC keep an eye on movements of cash (i.e. notes) in and out of banks.  Financial institutions must report to it any cash movement of $10,000 or more; and of any movement of funds the source or destination of which may be 'suspicious'.  And undertake considerable processes to manage the incidents.  The aim is to track and report on funds that may be used for money laundering or terrorism financing.

And yesterday the CBA, Australia's largest bank, found itself charged with 'serious and systematic' breaches of money laundering and terrorism financing laws involving over 50,000 transactions totalling more than $500 million.  Damningly, six of the breaches involved five individuals that the bank's own systems had identified as being at risk of terrorism financing.

Money laundering 2

Wry & Dry will spare Readers the details of the charges.  But let him give Readers the whisper.  This is serious.  Really serious.

In the past, and to the fury of consumers, and W&D, the banks have got off very lightly when regulatory agencies found they had strayed.  For all the bank financial planning scandals, no responsible executives lost their jobs and the banks kept their licences.  Penalties were laughable.  W&D is in no doubt that smaller fry in the wealth management industry would not have been treated so leniently under similar circumstances.

But this is different.  Maybe.  Earlier this year, the Federal Court fined Tabcorp $45m for 108 breaches of the law under which CBA is being charged.  Apply the same penalty per transaction ($416,700) would mean a fine of $22 billion for the CBA.

But W&D would expect, if the charges are proven, a fine of something less than that.  Maybe $1 billion and heads of responsible executives to roll.  

Two chances.

Custer's Last Stand?

W&D is nothing if not a student of history.  And in searching his addled brain for a historical analogy for the pickle in which Croesus Turnbull now finds himself, W&D tossed a coin between Custer's Last Stand and the Charge of the Light Brigade.

Custer's Last Stand is the more apposite; because Custer didn't survive.   And neither will Turnbull (past the next election).  In the Charge of the Light Brigade, Lord Raglan, who ordered the charge, and Lord Cardigan, who led it, both survived.  [1]  Both were incompetent fools.  Turnbull is not incompetent.

Custer Turnbull

W&D senses that Croesus Turnbull and his government, like Custer and his troops, will be massacred at the next election, because of a blend of factors: disloyalty in the ranks; a united and strategic and tactically superior enemy; and a rolling series of events out of his control. 

Firstly, Readers might already have a sense of where W&D sits on the disloyalty factor.  Much has been penned about Abbott et al.

Secondly, the government's enemy is showing itself to be united and strategically and tactically superior.  

Shorten's shrewd blend of raising increasing inequality between Australians, although now debunked by the latest Gini coefficient analysis [2], with prospective taxation of discretionary trusts caught the government off guard.

W&D supports the taxation of trusts in a sensible form; but combined with a lowering of the highest marginal tax rate.  The Labor party, in advocating both an increase in the highest MTR and the taxation of trusts, is going to strangle many small businesses, for what will turn out to be only a modest revenue gain.  The cynicism of the trust policy is shown by the exemption of farmers from the policy, on the basis that farmers have variable income.  There are other taxation measures available to farmers (e.g. income averaging) to adjust for this.

The embers of the 'marriage equality' issue have been stoked: the Labor policy of denying a referendum has caused extraordinary self-serving and self-destructive action within the government.  Marriage equality is not important: among community and social issues, it ranks 8th as an issue of concern amongst Australians (below: poverty; inequality; crime; domestic violence; child abuse; community violence and drug use) [3].

But it appears likely to fracture the government.  W&D notes the comments of the political journalist, Nikki Savva, who wrote that the government has a choice between "the untenable (stick with the plebiscite to the next election), unsaleable (a postal plebiscite) or unpalatable (free vote) options".

Thirdly, uncontrollable factors (aside from Abbott et al) essentially revolve around the single-digit-IQ Senators.

Custer was a most successful and highly effective cavalry officer, who served with distinction in the American Civil War.  The disaster that befell him [4], an outcome of a chain of decisions, some of which he himself made and many that were out of his control, obscured all of his prior achievements.   

And so it will be with Turnbull.   

Sold gold a good deal?

In a somnolent moment last weekend, W&D was perusing a nationally published broadsheet.  And came across an article excoriating former Treasurer Peter Costello for selling two-thirds of Australia's gold reserves in 1997.

"The decision prompted cries of betrayal from the gold industry and, with the benefit of hindsight, was incredibly poorly timed. Since the sale of 167 tonnes of gold for $2.4 billion, or just over A$400 an ounce, gold in Australian terms has rallied to record highs."

Err, in the twenty years since the sale many investments have rallied to record highs.  But Readers, allow W&D to apply some maths to matter.

So, the gold was sold at AUD400 per ounce ('ounce': such a personable measure of mass, unlike the metronomic 'gram').  Today, the gold price is about AUD1,598 per ounce.  Over twenty years, that is a compound annual growth rate of 7.1%.  

In 1997, the Australian government 10-year bond rate averaged 6.6%.  Investing in those bonds, and then reinvesting at maturity in 2007, also into 10-years bonds, would yield about 6%.  So, an average annual return of about 6.3% (the actual maths aren't that simple, but it will do for now).

IOUs

Investing in gold provided a mere 0.8% premium to investing in government bonds over that period.

But the result, to W&D's mind, is that Costello made a sensible call, because of the considerably reduced risk of the investment.  Gold is a speculative investment, with virtually zero intrinsic value.   Its price is therefore not determined on fundamentals, but on emotion.

Communications 101, Rule #1: Don't get more publicity than your boss

Anthony Scaramucci, Tsar Trump's Communications Director, failed the above rule.  So he got the DCM [5].  And only after 10 days into the gig.

Readers will know that W&D is not one for statistics.  But feels duty bound to keep Readers alert to the goings in Tsar Trump's administration.  The below was correct as at 10am EST, Fri-4-Aug.

  • 31-Jul: Anthony Scaramucci. The director of communications was fired after ten days in the post.
  • 28-Jul: Reince Priebus. Mr Trump’s chief of staff resigned after 189 days.
  • 26-Jul: Michael Short. The assistant press secretary resigned after 187 days.
  • 21-Jul: Sean Spicer. The president’s first press secretary resigned after 183 days.
  • 19-Jul: Walter Shaub. Director of the Office of Government Ethics, resigned after 181 days. He held the post with the previous administration for four year
  • 1-Jun: Robert Iger. A member of the president’s advisory council, resigned after 134 days.
  • 31-May: Elon Musk. A member of the same council, resigned after 133 days.
  • 19-May: KT McFarland. The deputy national security adviser resigned after 118 days.
  • 9-May: James Comey. The director of the FBI was dismissed after 110 days’ serving Mr Trump, plus three years working for President Obama.
  • 30-Mar: Katie Walsh. The deputy chief of staff quit after 70 days.
  • 13-Feb: Michael Flynn. The national security adviser resigned after 23 days.
  • 31-Jan: Sally Yates. The acting attorney-general was dismissed after 11 days, plus two years under President Obama.

Trump employment

Alert Readers will notice that April was a month of employment security in the White House.  W&D is interpreting entrails to look for clues as to why.

Oil uptick

Tsar Trump may like to think that his policies (?) are causing the price of oil to rise.  And thus to assist the US oil industry.

Err, no.

US operators are cutting investment and folk are getting conniptions about Venezuela (world's 11th largest producer).  And there's a nutter in northern Asia itching to park a missile on someone else's front lawn.

So the price of oil (Brent Crude) has risen by 20% since the middle of July.

Oil 2

Weirdly, this may be exactly the commodity price spike that central banks want.

Whaaaat!  Well, work with W&D on this.  The rising price of oil is inflationary.  Central banks want inflation to rise so that they can raise interest rates (and thereby reduce investment speculation).

M. Dragio (ECB chief teller) is probably cheering on demonstrations in Venezuela and other disruptive influences.

Equal pay?

Readers will know that W&D is very keen on equality.  And so was drawn to an article in this week's Economist magazine.  And noting that W&D is certainly not politically correct, he asks that Readers don't throw food.  The data is the data.  That article said:

"The average British woman’s salary is 29% lower than the average man’s. But women make just 1% less than men who work at the same company, at the same level and with the same responsibilities. Across Europe, the gap is similarly small. This is not to say that the labour market is free of sexism. But it suggests that the main problem is not unequal pay for equal work, but that women end up in lower-ranking jobs at lower-paying firms."

 

Equal pay  

The unanswered question is, of course, why do women (in UK, France & Germany, at least), end up in lower ranking jobs at lower paying companies or organisations?

Having bravely provided the above information, W&D will go no further; and allow others to draw their own conclusions. 

Elsewhere

Impoverished Australian test cricketers will now get paid about $1.5m p.a.  On top of what they get from the IPL.  Nice work if you can get it.

Mammoth US on-line retailer, Amazon, will open its first Australian distribution centre in Dandenong South. Victoria.  Mrs W&D is pleased, as delivery times from there to her will be brief.

And here's German Chancellor, Angela Merkel, having an exciting time, on vacation in Italy.  Her happy partner is her husband, Joachin Sauer.  Eponymous? 

 Angela Merkel and her husband Joachim Sauer do not look happy

And...

And in this world of troubles, Miscellany will soothe your troubled mind.     

[1]  The Charge of the Light Brigade was a charge of British light cavalry led by Lord Cardigan against Russian forces during the Battle of Balaclava in 1854, in the Crimean War.  Because of miscommunication in the chain of command, the Light Brigade was sent on a frontal assault against an artillery battery well-prepared with excellent fields of defensive fire.  Although the Light Brigade reached the battery under withering direct fire and scattered some of the gunners, the badly mauled brigade was forced to retreat immediately. Thus, the assault ended with very high British casualties and no gains.  The fiasco of the charge, and in fact of the whole Crimean campaign, led to a parliamentary inquiry.  It can be disclosed that one of W&D's forebears, a trooper in the 17th Lancers, participated in the charge.   He survived.

[2]  The Gini coefficient is a globally recognised measure of equality between residents within a country. Australia's Gini coefficient has remained at about .3 since 2001 according to Household Income and Labour Dynamics in Australia (HILDA) survey.  Zero = perfect equality; 1 = perfect inequality.

[3]  JWS Research, True Issues, July 2017.

[4]  Lieutenant-Colonel George Custer led the US Army's 7th Cavalry Regiment of 208 officers and men against some 1,800 Lakota-Cheyenne Indian warriors in the Battle of Little Big Horn.  Not surprisingly, he and all of his men were massacred.  The battle was part of the American Indian Wars of the 1870s. In 1868, the U.S. government signed the Fort Laramie Treaty of 1868, exempting the Black Hills from all white settlement forever. However, when settlers discovered gold there in 1874, miners swept into the area in a gold rush.  The US government decided to take back the Black Hills (and thus significant gold deposits) and to stop Indian attacks.  The process was to corral all remaining free Plains Indians. In the end, the Indians lost.  

In 1980, in United States v. Sioux Nation of Indians, the Supreme Court of the United States ruled that the Black Hills were illegally taken by the federal government and ordered remuneration of the initial offering price plus interest, nearly $106 million. The Lakota refused the settlement, as they wanted the Black Hills returned to them. The money remains in an interest-bearing account, which, as of 2015, amounts to over $1.2 billion, but the Lakota still refuse to take the money. They believe that accepting the settlement would allow the US government to justify taking ownership of the Black Hills.

Some historians (including George McDonald Fraser) suggest that there was one survivor of Custer's Last Stand, Harry Flashman, a British officer who, for a series of coincidences, found himself in the wrong place at the wrong time.  Flashman, amazingly, also participated in the Charge of the Light Brigade.

[5] DCM: Don't Come Monday.