Wry & Dry

The dogs bark.... Art of the non-deal. Who champions SMSFs?

W&D travelling

W&D is travelling for the next three weeks.  Visiting the UK and nearby parts to get the scoop on Brexit, the EU, Italy, China, etc.  Readers will have to wait until 5th October for the full story.  Be excited!  Investment Matters, W&D's sister and that somewhat more intelligent publication will continue.

In the meantime, some reflections for Readers to ponder.

The dogs bark...

... but the caravan moves on, as W&D was reminded by an astute observer of life.

The Banking Royal Commission has a long way to go.  But no mistake, the banking executives who lined up at the RC and grovellingly and abjectly apologised for outrageous behavior and promised never to do it again will do it again.  In some other form.

Regulations and promises of good behavior will change little.  Until a government (a) changes the structure of the banking system and (b) encourages more competition we, the customer, will suffer.   But the glossy ads will return.

The Australian government has new leaders and a new look this week.  But is this lipstick on a pig?

Behind closed doors the fracas continues.  Any bets on how long before Tony Abbott unlocks his cobwebbed brain and opens his capacious mouth with an unhelpful comment?

rooster on hill

W&D thought that the UK government's self-destructive in-fighting over the terms of Brexit would be a bonus for the UK Labour Party.  But Jezza Corbyn never fails to miss an opportunity to miss an opportunity.

And now a senior and veteran Labour MP has very publicly quit the party because of Corbyn's antisemitism.  Rather like Bill Shorten in Australia, Teresa May just has to sit back and watch.

Not even his death could bring Tarzan Trump to praise the life and work of John McCain.  McCain, former presidential candidate, war veteran and maverick Senator was one of the few Republicans who stood up to Tarzan Trump and called-out his idiocy on many matters.     

Tarzan Trump continues to play life and government as a zero-sum game.  He only wins if some else loses.  It won't be politics or economics or a judge & jury that causes Trump to fall, it will somehow be a trifling want of grace.  

Art of the non-deal

Readers will know that Tarzan Trump, in an earlier life, wrote a book titled The Art of the Deal.  Well, actually, he got journalist Tony Schwartz to write it for him. 

Anyhow, W&D now expects Tarzan Trump to write a squeal: The Art of the Non-Deal.  Because his photo-opportunity announcements of deals have turned out to be non-deals.  Readers might consider the following:

Exhibit One:  US-Mexico trade agreement (to partly replace NAFTA):  "This is a tremendous thing...  It's an incredible deal for both parties.  I will terminate the existing deal..."

Reality:  Sorry, not much changes; some jobs in the auto and steel industries maybe more secure.  And as it's a variation on NAFTA, Canada would have to agree.  And so would Congress.

Exhibit Two: North Korea dismantling nuclear weapons. "There is no longer a nuclear threat from North Korea."

Reality: Sorry, Kim Jong-Un agreed to no such thing.  The only agreement was to talk.  And in any case, he has sat on his hands ever since.

Exhibit Three:  Abolition of Obama's Affordable Health Care Act.  A triumphal ceremony was held in the White House when it was passed by the House.

Reality:  Sorry, the repeal legislation has died in the Senate.

And so it goes on.  Aside from tax-cuts, the Tarzan Trump success cupboard is bare. 

But the photo album is full. 

trump deal

Tsar Putin's popularity plummets

It will come as no surprise to Readers that, in the end, it is demographics that determine political outcomes.

Tsar Putin has had to raise Russia's retirement age.  He announced it would increase to 65 from 60 for men and to 63 from 55 for women.  A massive outcry has led him to backtrack - just a little - with women's retirement age now being 60. 

(W&D considers that he and his advisors fully predicted the outcry and planned the extra increase (7 years) for women, knowing that they would need to concede (bring it back to 5 years) after the inevitable protests).

The question is: how will Tsar Putin re-establish his popularity rating.  See the chart.  Perhaps invade Ukraine? Or a Baltic state?

Chart showing how President Putin's approval rating has fared. It was boosted by Russia's annexing of Crimea in 2014 but has slumped in recent weeks over a controversial policy to raise the retirement age

But, back to the pension-age increase.  Readers will know that Russian men have a life expectancy of 66.  With a pension age of 65, that's just one year to enjoy the pension. 

Open the Stolly, Ivan!

putin approval

Superannuation - to whom does the government listen?

Clearly, size doesn't matter.

Self Managed Superannuation Funds are the largest slice of the superannuation pie (as at 30-Jun-18), according to APRA.  (APRA is good at adding up, if not much else, so Readers can rely on the data).

Superannuation pie


But of the four big superannuation sectors, it has the least influence on government.  Notwithstanding the abject, lamentable, disappointing, corrupting, [insert your adjective here], etc, behavior of the banks, the Retail sector will always have the ear of a Liberal government.

This is a function of (a) the plethora of well-paid bank lobbyists running around Parliament House in Canberra; and (b) the fact that the banking sector is not the Industry Fund sector.  As W&D has previously pointed out, the government fell for the old 'my enemy's enemy is my friend' trap.  Their enemy is the Industry Superannuation Funds.  The Industry Funds' enemy is the banks.  And so the government decided that the banks were its best friend.

Well, the Banking Royal Commission has shown, and streamed live, the folly of that view.  How embarrassing.

Industry Funds and the Labor Party are joined at the hip.  And with the Industry Funds, broadly, escaping the ire of the RC, the Labor Party will keep the relationship close. 

Of course, the Public sector funds never have to worry - they essentially define their own benefits and structures at the expense of we-the-taxpayer. 

So the largest, but most fragmented superannuation sector, SMSFs, is at the mercy of the government.  And with a change of government will suffer.  The new government will champion SMSFs competitive and ideological enemy: Industry Funds. 

SMSFs: A success story to be crippled by regulation.  A cow to be milked.

Be afraid.               


Snippets from all over 

1.  US economy grows 

US economic growth was stronger in the June quarter than expected, rising at an annual rate of 4.2%.

W&D comments:  Ah, yes, good news.  But watch for further interest rate rises.  This will further damage emerging economies (see below). 

2.  China: two-child policy OTD

Emperor Xi Jinping isn't happy with the success of China's two-child-max policy, which came into effect in 2015.  In 2017 the total fertility rate was just 1.6 children per woman, well below the replacement rate of 2.1.  He now wants to consider no-max-child policy.  

W&D comments:  Too late buddy.  But he will try: punishments for couples who don't have children?  

3.  Toyuber 

Toyota, a somewhat large motor vehicle manufacturer, will invest US$500m in Uber to jointly develop self-driving cars.

W&D comments:  Uber self-driving cars?  What about Deepak?  

4.  Size doesn't matter

Future Fund [1] Chairmanperson Peter Costello this week reported the FY-18 performance of the $146 billion fund.  The Fund has a significant advantage because of its scale: the means to invest in projects, private equity, etc, and the ability to command low fees from its managers.

The FY-18 return was a, err, modest 9.3%.

W&D comments:  In modest years it is always best to focus on long-term returns.   

First Samuel v Future Fund3


future funds

5.  Argentina raises interest rates to 60%

Readers might be grumpy that Westpac has raised home loan rates by 0.14% points to a little over 5%.  Consider Argentina, where the central bank has just raised interest rates by 15% points to 60%.  Ouch!

W&D comments:  This is déjà vu all over again [2].  Readers will remember 1997, when the US raised interest rates and the Asian contagion occurred.  But they were sort-of-robust economies.  Argentina is just an ongoing basket case.  And watch out for more trouble in Turkey and South Africa.

Tool of the Week 

Podium finish goes to ... Chicago's Cardinal Cupich, when speaking on US television about the explosive allegations of a former high-ranking church official who claims the Pope knew about charges of sexual misconduct against an American cardinal.

"The Pope has a bigger agenda," Cardinal Cupich said. "He's got to get on with other things, of talking about the environment and protecting migrants and carrying on the work of the church. We're not going to go down a rabbit hole on this." 

Circle the wagons.

Deepak, W&D's Uber driver, was wanting to...

... talk about Apple.  "I read that Mr Buffett has bought even more shares in Apple, saying its iPhone is 'enormously underpriced'," he asked. "What's going on?"

"Well," replied W&D as he buckled up his seat belt, "The Sage of Omaha is often cited as the smartest investor on the planet.  I doubt that, but there is merit in listening to what he says."

"So, should I buy shares in Apple?  Anjali at least has heard of Apple.  She bought the iPhoneX when it came out," Deepak said, proudly. "And is Apple's share-price rising?"

"Apple was the first company to reach one trillion dollars market capitalisation, on the first of August.  Its share price was then $207.  It's now gone past $223."

"Wow," responded a wide-eyed Deepak.  "Does Mr Buffett know something that we don't?"

"I doubt it," responded W&D carefully.  "Apple has an annual product-upgrade launch every year, normally in September.  And on 12th September the technology world expects Apple to unveil a bumper collection of upgrades.  Expect fancier iPhones, iPad and iWatches."

"How does Apple do it?  Will it ever run out of new ideas?"

W&D laughed.  "Innovation gets faster and faster. In the June quarter, Apple spent $5.3 billion on capital expenditure.  Expect something exciting.  Apple is always investing for the future.  Speaking of future, how is yours, after Anjali found out about your Bitcoin investment?"

Deepak's look of excitement dropped. "I'm back in the spare bedroom. I think she doesn't love me any more."   

"A fatal conclusion," replied W&D, as he stepped from Deepak's car.  "Of course she loves you.  She just wants you to be sensible with your investments.  And withdrawal of privileges is the only way she knows to get you to listen."

"Well it's working," gloomed Deepak to a receding W&D.

"Don't be glum," paused W&D.  "Lift your form.  Buy some flowers.  It always works.  You'll be back in clover in no time." 

Deepak's smile returned. 

And, to soothe your troubled mind...  


Last words...

"Last year, if you recall, the foreign secretary then, Boris, um, Boris, Boris Johnson . . . yeah bicycle guy — that one! Boris Johnson was here.”

 -  Uhuru Kenyatta, President of Kenya (where else?), to Teresa May, UK Prime minister, at an official event to welcome the latter. 

Boris Johnson, former foreign secretary, who called himself a 'bicycle guy', often insulted African nations. Mrs May allowed herself a wry smile as the president eventually “remembered” the name of her former cabinet…   

First Samuel client events calendar




2018 Events  


Chief Investment Officer Dinners

FY-18 was a Year of Harvest and Sowing Seeds for the Next Five Years

Invitations have been sent


Some lightly salted absurdities from all over ...

At the extreme left-hand end of the Bell Curve

A vehicle owner from Brooklyn, New York left her car parked in what had recently become a bike lane.  She justified her action because her car space (outside her home) predated the bike lane.  It was "grandfathered" to her.


But the parking inspector didn't agree:



Guess what happened next?

Fred and Mavis (not their real names) were going to get married.  And they priced their wedding and honeymoon at $60,000.  And so did what any modern couple would do.  They asked all the invited guests to chip in a mere $1,500 each.  What happened next?

a.  They raised the $60,000 from the 40 guests;

b.  They got close, but settled for a cheaper wedding and honeymoon;

c.  They got the $60,000, cancelled the wedding and ran off with the dosh; or

d.  Just eight guests accepted.  And the wedding was called off.       

Close.  But no cigar.  d. is correct.  In a torrent of rage, the bride sent a Facebook posting to, well, the world, calling off the wedding. 


Bonus: if you want to read the full Bridezilla rant, go to (offensive language warning) this website

Hungry and no cash?

35-year-old Kenneth Ray Couch, from Kentucky, was hungry.  But didn't have any cash.  So he faked a heart attack and when the ambulance arrived at the hospital, he jumped out and casually walked to the cafeteria and grabbed something to eat.

While he was enjoying his food, officers from the Knox County Sheriff's Office arrived and took him into custody.  He was charged with a string of offences.  And then the police realised that he was wanted in another county of Kentucky for burglary, fraud, etc. 




Have a Wry & Dry weekend. 



[1]  The Future Fund was established by Costello when he was Federal Treasurer to partly pay for the unfunded superannuation liabilities of some parts of the Commonwealth Public Service. Some people heroically call it a sovereign wealth fund: it's nothing of the sort.  It's effectively a defined benefit superannuation fund with liabilities that exceed its assets.  Weirdly, the government brings the assets onto its balance sheet, but not the liabilities. 

[2]  Legendary New York Yankee coach Yogi Berra (the inspiration for the Yogi Bear cartoon character) was famous not only for his baseball but also his Yogi-isms: e.g.

  • It's deja vu all over again
  • You can observe a lot by watching
  • Nobody goes there any more. It's too crowded.