Wry & Dry

World gone mad? CBA Fire & Fury. It's getting expensive out there.

World gone mad

Wry & Dry is normally quite chipper by the time Friday comes around.  There's the satisfaction of another week spent contemplating the smaller issues of life; a prospective hot date with Mrs W&D; time to be spent with the sprogs over the weekend and the chance of a MFC victory.

But this was never going to be a good week.  And it got worse.  

It started with the eruption of localised neo-Nazi-ism in the US, and that exacerbated by a craven Tsar Trump.  And of lesser impact, but still significant, and on the other side of the lunar landscape, is the local council-led rise of anti-Australia Day movement, with the bizarre 'Invasion Day' moniker.  Good grief, as well as historically inaccuracy, there's the ongoing victim-identity problem.  And who would have wanted the French here, first, anyway?  Oh, dear.

And then the gap gets wider with the confirmation of Pauline Hanson's single-digit IQ in the Senate yesterday.  

Burka mocking me

She may have felt uncomfortable in the all black.  But W&D suspects that she would have preferred to Keep Knowingly Komfortable in all white, with a pointed hat.

Overlay all of this with the politician's dual-citizenship fiasco sinking further into Monty Pythonesque farce as Senator Xenephon's allegiance is now suspect because his father is a Cypriot and Cyprus was a British crown colony when Xenophon was born.   Add another terrorist attack in Europe (but, sshhh, don't say who)...

Spain

 

...and the only succour for W&D is the news that Melbourne retains its place as the world's 'most liveable city'.  

The Ashes Test series cannot come quickly enough.  

Fire & Fury at CBA

W&D reckons that Tsar Trump should sic [1] CBA Chairman Catherine Livingstone onto the North Koreans.

After the Fire & Fury, she caused in the CBA Very Senior Executives' Dining Room, even North Korea's President Kim Jong Un would be quaking in his sand pit.

Not only has the CBA's CEO been given the DCM [2] (not quite, but he's on the way), the fiscal pain inflicted by Ms Livingstone upon CBA senior executives associated with the Austrac scandal is massive: CEO Ian Narev loses $4.8m; David Craig $2.6m, Annabel Spring $1.8m and wannabee next CEO Matt Comyn also $1.8m.   And there are others losing $1m +.  And that's just the start.

This is shrewd work from Ms Livingstone.  The market, government, ASIC, APRA, RBA, AFP and even the ABC all wanted a head on a spike on the city wall.  And they got one.

CBA the take

However, the shrewdness is not the head on the spike.  It is in the long game.  Eventually, Austrac's case against CBA for all of the dodgy cash management via CBA's state-of-the-art-and-so-helpful-to-money-launderers-ATMs will come to a penalty of $N, where N is a very large number.  N will either be negotiated or decided by the Federal Court.  Ms Livingstone can say, hand on heart, that significant punishment has already been meted out to the relevant perps.  And so why should shareholder's suffer?

The answer is, quite obviously, that the CBA broke so many laws and regulations that a substantial penalty must be imposed upon it.  The international banking community has seen massive fines imposed upon American and European banks for breaches of local Austrac-type laws.  It wouldn't send the right message if Australia were to be soft on perpetrators.

But Ms Livingstone's Fire & Fury actions might save the CBA some millions.  But maybe not.  W&D still has a $1 billion penalty in mind.  But that may be wishful thinking.

W&D idea of the week

W&D has the ideal solution to this dual citizenship issue.  Get North Korea to unilaterally confer un-revokable citizenship on all Australian federal politicians.  Thus disqualifying them all from holding office.  

And then let the public service run the country.  They couldn't do any worse.

CEO remuneration.  Downhill skiing?

W&D almost choked on his organic Bircher muesli when he read in the Spencer Street Soviet [3] of the plaudits heaped upon the soon-to-be-not-coming-Monday CBA CEO, Ian Narev.  

If ever there was a time for a bank to make money, it's been over the past five years.  In fact, a bank CEO should have been fired for not making vaaaast amounts.

Consider that share-markets dipped in 2011 as investors feared another financial crisis arising from European sovereign debt issues, i.e. Greece. When ECB chief teller Mario Draghi promised to do “whatever it takes” in the summer of 2012 and the US resolved its fiscal cliff in January 2013, the anxiety subsided.  The markets recovered, confidence returned and the upswing began.

A new CBA CEO would find the global winds at his back as he settled into the top chair.

But wait, there's more!  Consider these:

  • Interest rates moved to record lows: Australians borrowed with their ears pinned well back, to record levels: the more companies and people borrow the more money banks make
  • Lending default rates were at record lows; boosting profitability
  • Regulators continued their lenient capital requirements
  • The economy continued to grow steadily, no recession in sight

It's rather like the massive profits the mining companies made in the commodities boom.  For example, the CEO of BHP just had to sit back and count that cash coming in.  And from his compensation as well.  (In fact, the then CEO of BHP wasted billions chasing untenable transactions and pushing up expenses).

Common sense would suggest that the plaudits (and bonuses) should go for good and sensible management when times are tough. Not in boom times.

Mr Narev, like Mr Kloppers (BHP), was a downhill skier. 

Polly follies

The Australian government has descended to the level of immediate post-war Italy.  It's not the fact that Deputy PM has been found out to be both a New Zilander and a dinkum Aussie.  But the farcical response from the government.

Deputy Liberal Party Leader Julie Bishop is now a short-priced favourite to win the W&D 2017 award in the category of I've Made A Laughing Stock of Myself.  She suggested that William Shorten made treasonous comments and threatened to downgrade relations with New Ziland, just because the unearthing of Barnaby's duality was sourced over the ditch.

Oh dear.

Ms Bishop has always been a political lightweight but puts on a good show of muscularity because of her stern countenance and power dressing.  But this week's performance highlights she is made not of teak but of balsa.

Every political party in power needs a behind the scenes strong-arm person (aka head-kicker) to control the backbenchers.  This should be her role.  However, she is more comfortable flying around the world, first-class, and talking to leaders of second-power countries about third-rate issues than keeping party discipline. 

Never send to know for whom the bell tolls... 

Qantas: nice image.  Pity it's already out there.

First Samuel website: 1st July 2017:

First Samuel hero

Qantas e-marketing campaign: 15-Aug-17:

Qantas hero

So, help W&D out, somebody.  Qantas is an airline? Yes?  No?  And the ad is for life insurance.

Go figure.

Speaking of airlines...

W&D recently noted that Italian flag carrier Alitalia was in the hands of administrators.  Gulf airline Etihad bought into Alitalia some years ago and invested billions.  To little effect: intransigent trade unions didn't allow Etihad to undertake productivity changes that other airlines have had in place for years.

Well, it seems as though the genius (the CEO) who decided on the Alitalia investment has egg on his face, again.  Actually, it doesn't matter, because he quit in July.  

Etihad bought into Air Berlin in 2011.  And it's been losing money ever since.  In 2016 it lost €782m!  This week, Etihad pulled the pin.  And Air Berlin filed for bankruptcy.  

But in fairness to the now ex-CEO, he did make some successful minority investments, Virgin Australia being one of them; as well as Air Serbia and Jet Airways (India).

And Etihad has deep pockets.  It is owned by Abu Dhabi, one of the emirates of the UAE.  The UAE's greatest resource lies underneath the sand. 

W&D doesn't want to alarm Readers.  But...

...the good folk at minor New York investment bank, Goldman Sachs, have assessed the 'valuation' of major investment markets (i.e. how expensive or inexpensive, compared to the last 10 years).  

Goldman Sachs valuation percentiles

Look at the data in the red box.  The share-market indices are:

  • S&P500   USA
  • Stoxx      Europe
  • MXAPJ     Asia Pacific excluding Japan
  • Topix       Japan
  • MSCI EM  Emerging Markets

Only Topix (Japan) is fair value.  And if the ASX200 were on the list it would be at least in the 85th percentile.

Notably, First Samuel investors have share portfolios very different to the ASX200. 

Most fatuous headline of the week goes to...

...the Australian Financial Review, on Wednesday.

The headline said it all: "Australian National University plunges in world rankings for 2017."

Indeed it did.  From 77th to 97th, according to one survey: the Academic Ranking of World Universities (also called the Shanghai rankings).

Well, let W&D give you the whisper.  That ranking is not worth a pile of beans to the average student.  Or even the above-average student.  Or even the exceptionally well above-average student.

The Shanghai rankings are based entirely on research outcomes, including the number of Nobel Prize winners. 

Now, it's been a number of decades since W&D attended the Notting Hill Hotel Monash University.   And then he couldn't recall anyone wanting to win a Nobel Prize.  Or even go on to further research.  The aim was to get a degree or two.  And then go out and get a job in a world that was real.

And research amongst W&D's many children and their many friends suggests that the world hasn't changed too much.  Except that today's students seem assured that they will get a very well paid and ideal job in a location they enjoy, working with people they like.

By the way, University of Melbourne came in as Australia's top university, according to the Shanghai rankings, at #39.

W&D is keen to advise Readers that the more broadly based ranking by the Times Higher Education Supplement has ANU at 47th globally.  And Melbourne at 33rd.  This is more reflective of a usual student's assessment.

But wait there's more.  The QS World University Rankings has ANU at 20.  And Melbourne at 41.

No matter, within a nano-second of the Shanghai Rankings being released, university Vice-Chancellors had the begging bowls out for more research funds from we-the-taxpayer.  Help W&D out with this.  They want we-the-taxpayer to pay them more so that they can enhance their status in global rankings.

Academic egos are perhaps third only to those of politicians and journalists.

Elsewhere:  on the one hand...

...NAB's latest business survey states that the business sector continues to enjoy 'buoyant conditions'.  And ANZ's job ads survey shows the highest reading since 2011.  Gotta like that.

But out in the 'burbs, it's a different story.  Consumer confidence dipped again, according to the Westpac-Melbourne Institute: for the ninth consecutive month pessimists outnumbered optimists, the weakest succession since 2008.

W&D suggests the drifting political ship called Government is the problem, underlying the check-the-box answers of housing affordability, interest rates, etc.

And...

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

 

[1]  "Sic, 'em" is a peculiar Australian phrase, similar to set a dog onto an intruder.  That is, one might say, "Sic, 'em, Fido."   "Sic 'em, Rex" was made famous in Australia as an ad for Antz Pantz women's knickers, where Rex was an echidna.  Alert to Reader sensitivity, W&D will say no more, except to refer readers to the Interweb for viewing three classic ads.

[2]  Don't Come Monday.

[3]  The Melbourne Age, a centre-left tabloid, much favoured by the smashed-avocado-on-wholemeal classes.  W&D reads it only for the sporting items.