Wry & Dry

It's a Mad... World. ABC... who gives a @%#. Fiscal joy.

W&D returns

Sigh.  W&D goes overseas for three weeks.  And the world goes mad.  Readers will remember the 1963 movie It's a Mad, Mad, Mad, Mad World [1].  Well, that was the world that W&D now sees in Europe and the Yoo Ess Aye.

There are five madness collectives.

[By the way,  W&D reminds Readers that the views herein are his own.  Readers who take offence at political incorrectness or seeming bias - either way - should read no further].

1.  Brexit - be careful for what you wish

Readers will well remember (because they are often reminded) that W&D was one of the few to forecast a successful Brexit vote.  His only ever correct forecast.  And that reflected his self-serving view that in the long-run the UK would be better for being unshackled from the economic and structural patchwork that is the EU.

Readers will be aware of the unfolding fiscal crisis in Italy (where the banks are now virtually uninvestible), the increasing poverty of Greece and Spain, the ongoing Catalonia independence battle, the evolving autocracies in Poland and Hungary, the rise of extreme right-wing parties, etc.  But the Eurocrats still cling desperately to the 'European Project'.  And refuse to countenance any diversion from its core principles. 

By any measure, the 'European Project' has failed.  Other than to provide employment for tens of thousands of Eurocrats and to ensure Germany's economic colossus by an artificially weak currency. 

Punters rightly focus on the fumbling Brexit.  But haven't noticed that the EU is also trying to bring Switzerland (not even in the EU) to heel.  W&D dips his lid to the Swiss who have, over the years, effectively and masterfully negotiated over 120 bilateral deals with the EU.  And then enjoyed all the benefits of being in the EU, without any of the disadvantages.  The Eurocrats finally woke up earlier this year to what the Swiss have done over the past few years.  And pounced on... the Brits.  They were worried that the Brits would wish a deal similar to that which the Swiss have.  The EU was having none of that, and made it clear in negotiations in January.  And now the Eurocrats are trying to unwind some of the deals with Switzerland.

How the broader Brexit will unfold is a mystery.  Not one of the gurus with whom W&D spoke in London would give a clear view.  Other than that:

a.  Boris Johnson, the wannabe PM, is a clown, confuses his own charismatic rhetoric with sensible rhetoric and doesn't have enough votes anyway;

Corbyn and Johnson on soapbox

b.  PM May will almost certainly resign after Brexit is finalised, and will be succeeded by 'the next generation';

c.  Whichever Brexit outcome occurs will be painful in the short-term.

W&D's view is now that of the UK entrepreneur, Sir James Dyson (Dyson vacuum cleaners, etc): the UK should opt for a hard Brexit. 

And just walk away. 

2.  Yoo Ess Aye: what is going on?

W&D's astonishment at this country continues.

The economy is growing at greater than 4%.  Unemployment is at an 18-year low.  Wages are rising.  The stock exchange is at an all-time high.  Consumer confidence is surging.  The Republicans ought to be strolling to an easy victory at the upcoming mid-term elections before a pleased, prosperous and peaceable electorate.

But, and this is a big but, no-one is discussing the economy. 

Either:

Republicans are not getting an opportunity to talk about the remarkable growth rates; or

Democrats are not getting the chance to talk about the fact that the deficit is being doubled and will soon stand at a trillion dollars.

Nor is there much discussion of foreign policy or education or healthcare or any of the bread-and-butter issues that normally decide elections.

Instead, the Yoo Ess Aye is, as someone smarter than W&D put it, convulsed in a clan conflict, in which every totem associated with the other tribe is viciously targeted.

US Supreme court Democrats

The sad thing is, this sort of thinking is coming to A Land Down Under.

3.  UK Labour - prepare for a capital flight, Sterling to crash

W&D is a calm person.  And judges the world and events with a steady gaze.  But his conversations with a number of experts in the UK has led him to be a little rattled.  Readers: Be afraid.  Be very afraid.  

Work with W&D on this.

Essentially, Jezza Corbyn, the Labour Party leader is an empty shell, a foot-soldier fighting yesteryear's ideologies with yesteryear's rhetoric.  And is nothing more than a frontmanperson for John McDonnell, the shadow chancellor (i.e Treasurer).  McDonnell is a serious hard-nut of a socialist.  W&D is not saying that the UK doesn't need an economic overhaul.  But cranking up company tax to 26% from 19%; nationalising water utilities and the railways; scrapping university fees; increasing the highest tax rate to 50%; creating a 'National Investment Bank'; adding four extra public holidays each year; etc, etc, is perhaps moving too far to the left of the oyster fork.

And never stand between a university student and the honey-pot of no tuition fees.  Especially if he/she/other has the vote.

As one insider put it, "If you want to be a serious opposition party, you have to take economic advice from economists - not the Archbishop of Canterbury."  This is not the 'New Labour' of (former PM) Tony Blair, but the Old Labour of Michael Foot (who never got past being Opposition Leader).

Senior businessmenpeople have already made plans for the capital flight and currency collapse that McDonnell has admitted is most likely to occur on a Labour victory.

Notwithstanding the shambolic performance by the Conservatives, Old Labour remains well behind the Conservatives in the polls: Conservatives 42%; Labour 36% [2]. 

4.  Banking Royal Commission - the key point is missed by Commissioner Hayne

Readers by now will have digested the 1,000-page interim report of the Banking Royal Commission.  And noticed that it essentially lambastes the banking, insurance and superannuation industry for 'greed'.  Quite right too.

But, to W&D's mind, the good Commissioner missed a critical point.  The rot/ greed in these organisations started at the top.  The compensation for senior executives was primarily based on a metric called 'Total Shareholder Return' (TSR).  TSR is the sum of share price change and dividends paid in the employing company.

What better way to boost the TSR than to boost profits by whatever means and then payout as much as possible in dividends (and not reinvest in the company).  Investors seeking the higher dividends (especially in a low-interest rate environment) would buy more of the stock, pushing up the share prices even more.  Readers will recall the boom in the price of banking stocks leading to February 2015.  And what has happened since:

Bank stocks TSR

The senior executives did nothing to investigate the source of the profits pouring upwards from the various retail departments, the greed of which the RC Commissioner so aptly described.  Nor did they encourage re-investing in the business.  Hence IT systems that might have identified and tracked some of the litany of errors of which we now know a great deal, suffered from massive under investment.  This week ASIC announced that the banks took more than 4.5 years to identify significant breaches of the law.  And then another 226 days to pay compensation.  Hello.  Hello.  Is anybody there?

W&D points the finger squarely at the CEOs of the banks and insurance companies in those heady years for wilfully lining their own pockets at the expense of their customers and the future shareholders. 

Royal commission banks sofa

But, as W&D has often said, the thieves have already scarpered.  His Honour might have pointed this out.

5.  Our ABC?  

The media loves nothing more than talking about... itself.  And it seems that there has been a bit a kerfuffle about the ABC, that has somehow dominated the media.

W&D cannot understand the fuss.  The ABC started going downhill when it lost the broadcast rights to Test cricket.

And hasn't recovered.  Sell to the highest bidder.

Infrastructure projects - why will it cost more in Victoria?

Victorian Readers will know that there is an election to be held in the state in November.  W&D dips his lid to the incumbent Labor government.  It has released probably the only moderately visionary policy ever made in a state election.  And that is to build an underground railway around Melbourne, of some 90 kilometres, linking 10 existing railway lines and building 5 new stations.  It is planned to take 30 years to build, with a cost unknown, but guessed at $50 billion. 

Exciting stuff.  W&D applauds the spirit of the vision.  It's about time the state government moved on from catching dogs [3] and widening roads to nowhere [4].

As Readers might expect, W&D has been doing some research into similar projects.

Crossrail (but recently named Elizabeth Line, presumably after one of Boris Johnson's former girlfriends) is London's soon to be opened massive railway infrastructure project.  It has taken ten years to finish, the new bit runs for 100 kilometres, and has six vast new stations built, as well as 30 newly upgraded stations.  Its 1,000 tonne, 150 metre-long tunneling machine has been snaking its way through a labyrinth of 45 kilometres of gas mains, river tributaries, building foundations, medieval graveyards and utility pipes under central London.   

So, W&D wishes Readers to compare Crossrail with the Victorian government's mooted project.  Crossrail is significantly more complex, given the amazing intricacy of what lies beneath London.  Time: a touch over ten years.  Cost: about A$28 billion.

Victoria's projected project is smaller and less complex.  Time: 30 years.  Cost: mooted to be about A$50 billion.

Victoria infrastructure CFMEU

W&D is moved to ask: Why longer and more expensive in Victoria?

Snippets from all over 

1.  Fiscal Frydenberg 

New Federal Treasurer Josh Frydenberg couldn't keep the grin from his dial.  Australia's final budget outcome for FY-18 was a deficit of $10.1 billion - the smallest in a decade.  And just 0.6% of GDP.

W&D comments:  Just wait for the first dollar of surplus to occur (maybe this FY?).  And watch the speed with which it will be spent.   

2.  "Alexander the Great was Greek."  "No, he was Macedonian (Republic of)."

Readers will know that the folk of the countries that make up the former Yugoslavia are touchy about, well, anything. Especially at the eastern (right-hand) end.  And so it is with the Macedonia (Republic of).  Macedonia (Republic of) wants to join the EU and NATO.  But Greece, like any member of the EU, has a veto.  Which it exercises because there is a part of north-west Greece also called Macedonia (Province of).  The Greeks say that they are the rightful inheritors of the region from whence came Alexander the Great: Macedonia (Roman Republic of).  And hence to the name 'Macedonia'.  

Macedonia (Republic of) has agreed with Greece that if it (Republic of) changes its name to North Macedonia, then Greece and Macedonia (Province of) will not veto its (Republic of) entry to the EU and NATO.  All that was left was for the folk of Macedonia (Republic of) to agree in a referendum.  Encouragingly, 91% of those who voted agreed.  But only 32% of those who could vote did indeed vote.  Now: back to tribal warfare.

W&D comments:  The Brits stole the top left-hand corner of Australia's flag and made it their own.  And we didn't fuss.  Sigh, Greeks and Macedonians: just do it.  And move on.

3.  NAFTA #2

Tarzan Trump has announced, with amazing fanfare, a new trade agreement between Mexico, Canada and the Yoo Ess Aye, replacing the worthy NAFTA.

W&D comments:  As is his wont, Tarzan Trump creates a crisis and then claims credit for solving it.  For all the fuss, the trade agreement changes amount to little.  But Tarzan Trump got another photo opportunity.  

NAFTA FANTA

4.  Holding interest

The Chief Teller of the Reserve Bank of Australia has decided to leave interest rates unchanged at 1.5%.  

W&D comments:  And US interest rates keep on going up.  This means that the gap between Australia's and the Yoo Ess Aye's official rate (i.e. 0.75% points) is at its widest in 35 years.  As the gap gets wider, so the Australian dollar falls more (down to below 0.71 this morning).  This is rather like an interest cut, without having an interest rate cut.  A weaker currency helps exports and GDP growth.  As long as inflation remains in hand (but note that a weaker currency and higher global oil prices are pushing up petrol prices at the servo), things are moving in the right direction. 

5.  Tesla and CEO Musk pay $20m each...

... and walk away from the US Securities and Exchange Commission's charges.  The charges relate to Musk publicly stating that he had buyers in place to allow him to take Tesla private (i.e. de-list).  He didn't.

W&D comments:  This is laughable.  The share price rally subsequent to the court settlement added US$1.7 billion to Musk's net wealth.  Musk's $20m fine was paid from his piggy bank.

Tool of the Week 

Podium finish goes to ... Justin Welby, Archbishop of the Church of England.  His Grace, in addressing the UK Trade Union Congress (roughly the equivalent of the ACTU), amongst other predictable economic justice outbursts, blasted Amazon Inc, the online retailer worth over US$ one trillion, for unethical practices.  W&D happily agrees with His Grace on the matter of Amazon's aggressive tax management.

Y'see, W&D holds the high moral ground: he doesn't invest in Amazon.  So his conscience is clear.  But the goodly, but perhaps not Godly, C of E does invest in Amazon (via the 'Church Commissioners').  The company is one of its top 20 equity holdings.  Curiously, in a retrospective defence of the Archbishop, the Church Commissioners stated that "we consider aggressive tax-avoidance or abusive tax-arrangements to be both a business risk and an ethical issue. As with other issues, we take the view that it is most effective to be in the room with these companies seeking change as a shareholder."

Which really means, "We will invest in unethical companies that provide a decent investment return and try 'to engage with them' to get them to change their unethical policies."  

In spite of hours spent diligently searching on the interweb (including reading the 84 pages of its Annual Report), W&D could find zero examples of where the C of E or the Church Commissioners had 'engaged' with Amazon.

BTW, is His Grace really supporting those sinners: the tax collectors [5]?

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

... talk about Egypt's new capital city.  "I read that the Egyptians are building a massive and brand new capital city," he asked. "What's going on?"

"Well," replied W&D as he buckled up his seat belt, "You have heard correctly.  They started some three years ago, building this city from scratch."

"So, where is it?  In the middle of nowhere, sort of like Brasilia?"

W&D laughed.  "No, not really.  It's about 45 kilometres east of Cairo, about half way to the Suez Canal."

"What was wrong with Cairo?" asked Deepak curiously.

"Not too much, except that it was horribly crowded, with almost 20 million people.  But the main thing is that Egypt's strongmanperson president Abdel Fattah al-Sisi has been enviously watching the new cities of Dubai, Abu Dhabi and Dohar rise from the desert.  And thinks Egypt can do the same with a new city."

Deepak was horrified.  "What about the character of the old city, the lanes, the temples, the history?"

"Oh, all of that will remain.  Cairo will not be knocked down.  But the as yet un-named new city will have to create its own character.  It will be the world's largest planned city, with a population of over 6.5 million.  I predict a blend of something put together by Queensland's White Shoe Brigade in the 1980s and the Olympic Games precinct of Athens 2004: a sterile, half-filled government zone surrounded by vacant stretches of stalled private developments.  Speaking of private developments, how is Anjali."

"Very excited.  So am I.  Later today she has the 20-week scan.  And it will be confirmed that my child will be a son," he said exultantly.

"A fatal conclusion," observed W&D, as he stepped from Deepak's car.  "We've had this discussion many times.  You should be happy either way."

"I guess I should be happy if it's a girl," admitted Deepak to a receding W&D.

"Of course," paused W&D.  "Remember that it's daughters who look after their fathers in older age.  Think long term." 

Deepak's smile returned. 

And, to soothe your troubled mind...  

Miscellany 

Last words...

"I love that area [Lake Norman, North Carolina, where the recent hurricane swept ashore] - I can't tell you why, but I love that area.”

 -  Donald Trump, President of the Yoo Ess Aye, at a media conference following the hurricane's wrath. 

W&D can tell you why he loves that area.  There happens to be a Trump golf course on Lake Norman's shores.   

First Samuel client events calendar

CHIEF INVESTMENT Officer Dinners 2018

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

**Places are now only available at

Wed-17-Oct   Dinner  Donovans (additional event)

Wed-14-Nov  Lunch    Donovans

Please contact Jess if you haven't already.

Some lightly salted absurdities from all over ...

At the extreme left-hand end of the Bell Curve

A pair of masked marauders broke into a Bronx, New York supermarket through a brick wall in the back of the building, made their way into an office and opened a safe using an oxy-acetylene torch over the weekend in a dramatic heist.

But heat from the oxy-acetylene torch caused much perspiration, so when the safe was cracked, the lads removed their masks.  And looked toward the security camera.    

(NBCnewyork)

Have a squiz: via this website here

Guess what happened next?

A 79-year old hunter from New Hampshire went on a shooting expedition.  And shot a duck.  And his dog wouldn't go into the swamp to collect it.  What did the hunter do?

a.  Sigh, leave the dead duck and go home for a bath and a whiskey;

b.  Get angry, and shoot his dog;

c.  Ignore the dead duck, and kept shooting at more ducks; or

d.  Wade into the swamp and collect the duck himself.       

Close.  But no cigar.  d. is correct.  He was found 33 hours later, alive, but stuck in the mud, submerged up to his neck.   

(www.wcax.com)

Bonus: there was no sign of the duck.  And his dog was gone.

Fitbit captures key evidence 

A 90-year-old California man decided, for whatever reason, to kill his step-daughter.  He carefully arranged everything.  Even a reason why he was in her house that afternoon, when he later said she was just fine.

But security video showed the time that his car was parked in her driveway.  And her Fitbit showed the time she died.  The times were the same.

He was charged with murder.

(foxnews.com)  

Sigh. 

 

Have a Wry & Dry weekend. 

Cheers!

Anthony

[1]  Produced and directed by Stanley Kramer, the madcap farce of movie was a critical and commercial success.  It starred many known comics of the era: Phil Silvers, Jimmy Durante, Sid Caesar, Mickey Rooney, Terry Thomas, Jack Benny, Buster Keaton, Don Knotts, Jerry Lewis and The Three Stooges. As well as Spencer Tracy.

[2]  The UK has a 'first past the post' voting system.  There are preferences, or 'second-rounds.'  A 42-36% polling outcome would see the government returned.

[3]  Actually a role for local government.  But Readers get W&D's point.

[4]  See any major road in a marginal seat.

[5]  See Mark 2:15-16.