Wry & Dry

A wall, a wall, my kingdom for a wall. China's long game: Taiwan invasion. A super farce.

Happy New Year!

W&D returned from a gentle summer, soaked with 2007 Perrier-Jouët Belle Époque, to find the W&D in-tray overflowing like Archimedes' bathtub [1].   

So, Readers will commence 2019 with a Bumper Issue, led by W&D's in-tray's four largest items and spiced with cartoonist Patrick Cook's irreverence.

1.  "A wall, a wall, my kingdom for a wall"

Readers will see similarity between Richard III ("a horse, a horse, my kingdom for a horse"[2]) and I-Wanna-Wall-Trump.    

W&D can understand the problem: there are some 12 million undocumented immigrants in the Yoo Ess Ay.  And, sure, every country should efficaciously control its own borders.  But the Yoo Ess Ay does not.  And over 90% of the 12 million didn't arrive by walking or driving across the US-Mexican border.  They overstayed their visas.   

But if a politician has two alternatives, one paperwork, the other brickwork e.g:

a)  "we will track down and expel those who overstay their visas"; or

b)  "we will build a massive wall to keep illegals immigrants out in the first place,"

which do Readers think will win more votes?

So, not surprisingly, I-Wanna-Wall-Trump chose b).  But there is another alternative:

Cartoon trump and wall minefield

Just kiddin'.

But here's the mystery.  He didn't include what would have then been an unnoticeable allocation of $5.2 billion to build The Wall in his much lauded (by him) 2017 $1.1 trillion tax cuts' budget.  And so to fill his major campaign promise (remember that the next US Presidential election is next year), he ended 2018 refusing to sign ongoing budget legislation unless the House (of Representatives) agreed to allocate $5.2 billion for The Wall. 

But Democrat Leader of the House, the testiculated Nancy Pelosi, played hardball, so to speak, and refused to negotiate.  Predictably, the US federal government then ran out of cash, causing some 800,000 government workers to lose their monthly pay cheques.  Just as planes were about to fall out of the sky for want of air traffic controllers, I-Wanna-Wall-Trump blinked.   

No mistake, this is a major setback for I-Wanna-Wall-Trump.  He now has to rely on satisfactorily ending the Sino-US trade war to regain credibility. Hmm.

If the Democrats get their act together (always a risky proposition) and nominate a decent presidential candidate, W&D suggests that Readers have just seen I-Wanna-Wall-Trump's Bosworth Field.  

2.  Superannuation farce continues

The Banking Royal Commission (recommendations to be released on Monday afternoon; be excited!) lifted the lid on the "rent-seekers and ticket-clippers in the superannuation system", as the soon-to-retire Federal Minister Kelly O'Dwyer prosaically put it.  She might have pointed out that government of which she is a member actively supported many of those very rent-seekers and ticket-clippers. 

Cartoon banks this little piggie

But she didn't.

Predictably, a rush of expert bodies presented their view of Superannuation Utopia.  One was the Productivity Commission.   

W&D normally has a high opinion of the PC.  But not with this doozey.  The aim was to steer investors away from 'under performing funds' by having ten 'best in show' superannuation funds, into which superannuation contributions would flow from those folk who don't, won't or cannot choose their own fund ('default' investors).

Err, what is an 'under performing fund'?  Under perform the average?  Well, by definition 50% will under perform the average [3].  Cut out the bottom 50% and then the rest will soon be divided into over- and under-performing.  Cut out those 50% that under perform.  And so on.  Until there is one fund left.  Perfect.   

W&D suggests, as others have, a better way: the use of the Future Fund (which is partially the superannuation fund for some public servants).    

Predictably, the industry funds howled at the possibility of losing their monopoly over default investors. 

Cartoon no ticket no franking

But Readers know that the large industry funds have good investment performance not because they are better investors.  It is a mystery to W&D why no-one has pointed this out.  Industry funds perform well because they have low fees, economies of scale and guaranteed cash flows that assist in the generation of higher returns.

So why not have a government sponsored superannuation fund that is unrelated to the industrial relations system that has the advantages of those very same factors?

Anyway, all of this is moot.  The Government won't do anything seemingly innovative. 

Cartoon MPS we never have trouble...

And the Opposition won't do anything to upset the vested interests of its supporter base.

3.  China's long game

All the current and exploding fuss about Chinese espionage and Huawei (the Chinese technology company that has been charged with all sorts of nasty deeds by US authorities) misses the point.

Work with W&D on this.

Readers will recall how Otto von Bismarck, that astute creator of the original united Germany (1871), used external threats to play to latent nationalism and thereby achieve internal political success.  Tsar Putin annexing Crimea (2014) is a more recent example of a despot using international adventurism to play to latent nationalism and boost domestic political standing.

Well, consider China and Emperor Xi Jinping.  And join the following dots:  

Firstly, Emperor Xi wants his place in history.  Every despot does.

Secondly, Readers will know of the crackdown in China on freedoms (media, travel, etc); the increase in personal surveillance and the encouragement of reporting of 'disloyal' activity.  Add the slowing economy and massive demographic pressure (births in 2018 dropped to their lowest level since 1961; 2 million less than in 2017) and there seems to be a recipe for unhappiness for the average Chinese Joe.

Thirdly, Readers would have noted with a little alarm Emperor Xi's comments in mid-January that Taiwan's reunification with China 'is inevitable'.  He said that China will not renounce the option of military force to achieve its objective.

Fourthly, China has already moved to literally wipe Taiwan off the map.  For example, it has ordered airlines that fly to China to remove any reference to Taiwan on maps and flight schedules (e.g. flights go to: Taipei, China; not: Taipei, Taiwan).

W&D conclusion?  China will invade Taiwan. 

Cartoon cant invade Taiwan

Or, as Emperor Xi will put it, will re-unify Taiwan with China. 

Emperor Xi wants his place in history.  And domestic prestige.  The invasion of Taiwan would achieve both goals.

And the world will watch.

4.  Brexit is not the main EU game

Whilst the knowing world (where the knowing world = N - [Yoo Ess Ay + green voters]) is having conniptions about Brexit negotiations, W&D is calm.  It will be what it will be.  

And, as W&D has said all along: there are bigger things for the EU to worry about.  Eastern Europe.

The truculent and ego-maniacal President of the EU Commission (effectively its CEO), Jean-Claude Juncker, is seeing Eastern EU drift away.  On his watch.

The theme is this: in Poland, Hungary, Romania and Bulgaria the sovereignty won back from the Soviets has been lost to Brussels. 

Cartoon Russia EU tyranny

Sure, there are winners: the urban elites.  But the brighter young move west, to find work to support their families.  The villages are de-populating.  The unskilled suburban worker is unemployed.  The rural worker struggles to make 'an investible surplus'.

This is the breeding ground of populism.  But this is not the so-called populism of Trump.  Or of Brexit.  Or of the yellow-jackets in France.  But a cruder populism. 

At its simplest, it is about bread on your table when others have plenty.  And when this happens, the old prejudices come out.  Readers have seen the increasing anti-semitism, worsening economic conditions and increasing inequality.

The political leaders of Europe abdicated to Juncker the power to shape the EU.  Sadly, it is Juncker's European ideal (and that of Western Europe's elite) that is being shaped. 

Readers should watch the space to the east of the Iron Curtain. 

And W&D ponders whether this demonstrator knows who Juncker is. 

 Pulling out doesnt work

One demonstrator thought that the UK pulling out of Europe wouldn't work

2019 - the year to remember the ...

600th of Ferdinand Magellan leaving Spain with an objective of circumnavigating the globe.  But Ferdinand didn't make it - he was actually killed in the Philippines, but one of his ships (and the remnants of the crew) did.

230th of the first classification of known elements into gases, metals, non-metals, etc, by French noblemanperson Antione Lavoisier.  But Lavoisier wasn't appreciated by revolutionary France: he was guillotined for tax fraud in 1794. 

200th of the invention of the stethoscope, by René Laennec, a French physician.  The device's initial principal use was in the detection of tuberculosis.  Laennec died of ... tuberculosis.

75th of the D-Day landing of allied troop on the beaches of France: the beginning of the end of the Second World War.  And there wasn't a Private Ryan to be saved.

70th of the founding of Communist rule in China.  Sigh.

50th of the first steps taken by man on the moon.  The first words of that man, Neil Armstrong, were not "one small step ..." but actually "good luck, Mr Gorski" [4].

And most importantly ...

50th of Woodstock, the famous rock festival, held in upstate New York [5].  But "if you remember the 60s, you weren't there". 

Cartoon D Day Woodstock

And Woodstock is coming back.  It will be in mid-August.  And once again in upstate New York.  Readers are urged to get their tickets early.

Thinking of 'ardship ...

W&D feels as though he is a man of the people.  And so is pleased to advise Readers that Rolls-Royce Motor Cars Limited set an all-time high in sales and profitability in 2018.  It sold as many as 4,107 cars.  The highest selling motor of the luxury car maker, now owned by BMW, was an SUV.  The SUV is called The Cullinan, named for the largest rough diamond ever found [6].

And that is about how much it costs to buy one of these beasts.  W&D is still negotiating with Mrs W&D.       

Snippets from all over 

1.  Australia a world power

Australia is one of the ten most powerful nations in the world.  The Henry Jackson Society in the UK says that Australia is even more politically powerful than Russia because it is a 'hemispheric power', within the southern hemisphere.  

W&D comments: W&D would look at the world from side on. And then see who else is in Australia's hemisphere.  Now, let's see, err, China, Japan, South Korea, India.  Perhaps not so powerful.       

2.  Shoot your way out

Venezuela's economic chaos has slid into political chaos that would do credit to the last days of the great Roman empire.  Not that Venezuela was ever great at producing anything, except a bikini of beauty pageant winners [7].  The incumbent President, the awful and corrupt Mr Maduro, now finds himself facing a self-proclaimed President, the popular Mr Guaido.  Mr Maduro has one thing going for him: the army.  The army controls key parts of the economy, including oil, mining and food distribution.   

W&D comments: You can vote your way into socialism, but you have to shoot your way out of it. 

3.  Down at the car wash

Apple, a maker of mobile phones and other can't-do-without devices, has posted its first September quarter decline in revenue and profit for more than a decade.

W&D comments:  Apple's market capitalisation hit $1 trillion in October.  A nano second later it started falling, and is now $780 billion.  Have Readers seen 'peak mobile phone'?

4.  They the people ...

... of the UK don't really know what the 'Northern Irish backstop' is.  Well, almost.  Some 43% of Brits (according to YouGov) don't know what the single largest Brexit negotiating problem is.

W&D comments: Sigh.  But W&D is curious, if there is a backstop, there must be a frontstop?  Where is it?

Tool of the Week 

Podium finish goes to ... Lily D'Ambrosio, the Energy Minister in the Peoples' Popular Revolutionary Socialist State of Victoria.  The good minister said last Friday, just as the temperature in Melbourne was close to 45 degrees, that "(power) blackouts are something that will absolutely not be a feature of today, or a possibility."

Two hours later the lights went out.

Sigh. 

Deepak, W&D's Uber driver ...

... was this morning talking about stock markets.  "I'm confused about what the investment media mean when they say '"New York closed up 10 points".  Is New York the name of a stock exchange?  Is this the same as the US stock market.  What's going on?"

"Firstly, Happy New Year, even though it's now February," replied W&D.  "Secondly, most people don't realise that there are at least 13 securities' exchanges in the US.  The main ones are the stately New York Stock Exchange, the world's largest, and with about 22% US market share; Nasdaq with 19.5% and then a big gap to CBOE (Chicago Board Option Exchange) BZX Exchange and then NYSE Amex (formerly the American Stock Exchange).

"So what is the difference?" asked a confused looking Deepak.

"Simply, and generally speaking," W&D patiently began, "NYSE lists industrial companies; Nasdaq has a technology focus; BZX for exchange traded funds and NYSE Amex for small and micro cap stocks."

"Now I am confused," responded a meek Deepak.

"The easiest way to think about it is that the US stock market is essentially the largest 500 companies listed on the combined NYSE, Nasdaq and BZX stock exchanges.  Most are listed on the NYSE, such as Berkshire Hathaway, Alibaba, Exxon and JP Morgan Chase.  But some very large ones are listed on Nasdaq, such as Apple, Google and Microsoft.  It's a sort of an agglomerative thing."

"Oh, I get it," responded Deepak brightly.  "And so those 500 companies are the same as used in the S&P 500 Index."

"Exactly," concluded W&D.  "Now, more importantly, how did Boxing Day go, with Anjali's mother and cousins at the cricket?  Did you have, err, personal time with Anjali?"

"No," responded W&D grumpily.  "It was a disaster."

"How so?  It seemed like the perfect plan."

"I had to go to the cricket as well.  And leave Anjali at home.  Her mother insisted I take her and her nephews and nieces.  She said they all might get lost in the crowds.  Huh, as if anyone could not find the MCG with 70,000 people going there.  I'm not sure my MSB will be solved for months."  

"A fateful conclusion," said W&D optimistically as he unbuckled his seat belt.  "Don't despair.  Anjali will be feeling the same, I'm sure." 

Deepak's gloom deepened.  "Wrong.  That was my last chance, if you could call it that.  My daughter is due on the fifteenth of February, two weeks away.  Anjali is thinking of one thing, and that's not me."

"Ah, I see," observed W&D as he strode off.  "I had forgotten how advanced she was.  Well, then, now's the time to think above your waist and think of your upcoming daughter.  Well, at least until she becomes a teenager.  That's when daddy's angel becomes the devil incarnate."

Deepak's jaw dropped.  

And, to soothe your troubled mind...  

Miscellany 

Last words ...

"When elected [Clive Palmer's] United Australia Party will ban unsolicited text messages which Labor and Liberal have allowed.”

 -  Unsolicited text message sent out by Clive Palmer's United Australia Party.

Sadly, Mr Palmer will not understand the irony of it all.

First Samuel client events calendar

Events for 2019

Special CIO Client Forum - 26th February 2019
Leonda, Hawthorn

Invitations to clients have been sent

Contact Jess at responses@firstsamuel.com.au to RSVP


Some lightly salted absurdities from all over ...

At the extreme left-hand end of the Bell Curve

Readers will be aware that the city of Flint in Michigan, Yoo Ess Ay was found to have water pipes that were made of lead.  But the local council's records are incomplete and inaccurate as to which homes had lead pipes.  So volunteer nerds developed an AI algorithm that predicted the location of lead pipes.  The council liked the idea, which worked as it had a 70% success rate.  Lead pipes were speedily replaced.

But the councilors decided they didn't trust AI.  And so gave a $5m contract to a national engineering firm to 'accelerate' the programme.  The success rate hit ... 15%.

(The Atlantic)  

Guess what happened next?

A female jogger was attacked in a park by a Rottweiler.  She defended herself using pepper spray.  The dog ran off.  The next day, the jogger was jogging through the same park at about the same time.  What happens next??

a.  The jogger made it through without incident; 

b.  The female owner of the Rottweiler appeared and apologised for the attack made by her dog;

c.  The Rottweiler appeared, but fearing another pepper-spray defence, kept its distance; or

d.  The female owner of the Rottweiler appeared and tackled the jogger, punched her several times, knocking the jogger to the ground.  And, in the end, bit the jogger.       

Close.  But no cigar.  d. is correct.  The dog owner was arrested and faces felony charges for battery, false imprisonment, and robbery.  

(buzzfeed)

Not quite man bites dog.  

Unlikely

Cheers

Anthony

[1]  Archimedes (c. 287-c. 212 BC) was asked to determine whether metals other than gold were in King Hiero's crown.  While getting into his bath, he noticed that the level of the water in the tub rose, and realised the submerged crown would displace an amount of water equal to its own volume. By dividing the mass of the crown by the volume of water displaced, the density of the crown could be obtained. This density would be lower than that of gold if cheaper and less dense metals had been added. As it turned out. The fate of the dishonest goldsmith is not known.

[2]  Shakespeare: Richard III, Act-V, Scene-IV. Richard, the hunchbacked villainous king had his horse killed from under him in the Battle of Bosworth Field (the final battle of the War of the Roses). He was slain and succeeded by his enemy, Henry VII (father of Henry VIII).  The play opens with those most famous lines:

"Now is the winter of our discontent/
Made glorious summer by this sun of York..." 

Richard III's skeleton was found in 2012, when a car park in Leicester was dug up.  The veracity of the find was confirmed by matrilineal (i.e. the maternal line) mitochondrial DNA evidence given by a 16th-generation great-niece.  His remains were reburied in Leicester Cathedral.

[3]  Actually, not quite.  50% will under perform the 'median'.  But for the sake of simplicity, W&D will assume average equals median.

[4]  When he was a child, Neil Armstrong was playing baseball with his brother in the backyard. His brother hit the ball in front of his neighbors’ bedroom window. The neighbours were Mr. and Mrs. Gorski. As he leaned down to pick up the ball, he heard Mrs. Gorski shouting at Mr. Gorski, “Oral ***? You’ll get oral *** when the kid next door walks on the moon!”  Mr Gorski died before Armstrong walked on the moon.

[5]  But it wasn't the first. Older readers will remember Monterey Pop Festival in 1967.  And that Eric Burdon, Simon & Garfunkel, Canned Heat, Country Joe, Steve Miller Band, Byrds, Booker T, Otis Reading, The Who, Grateful Dead, Jimi Hendrix, Scott McKenzie (one-hit wonder) and the Mamas and Papas played, to name a few.

[6]  It weighed 3,106.75 carats (621.35 g) and discovered at the Premier No. 2 mine in Cullinan, South Africa in 1905. It was named after Thomas Cullinan, the mine's chairman. Cullinan produced stones of various cuts and sizes, the largest of which is the Great Star of Africa, and at 530.4 carats (106.08 g) it is the largest clear cut diamond in the world. 

[7]  Venezuela is by far the most successful country at producing winners of beauty contests, winning seven Miss Universe (US based), six Miss World (UK), eight Miss International (Japan) and two Miss Earth (Philippines government) titles.  Next highest is Philippines (15 titles).  Australia has had six winners.