Wry & Dry

The Pain in Spain. May on the ropes. Olympic gold...bars

May on the ropes

It's weird, sometimes, what it is that finally causes a leader to DCM.  Often it is a well planned coup (Rudd).  Or a falling-on-the-sword (Cameron).  Or not declaring a political gift (O'Farrell).  Or just inconveniently drowning (Holt).

Wry & Dry senses that it will be UK PM Teresa May's epitaph that it was a coughing fit that sealed her fate.  Already looking like a 'roo in the headlights from seemingly lingeringly managing the UK's biggest quagmire (Brexit) since the economic disasters of the 1970s; the poor lass was about to give the keynote speech at her party's annual conference when she suffered a coughing fit.  And she looked shambolic and weak.

The speech was labelled a 'disaster'.  

And now the sharks are circling the boat.

Olympic gold... bars

W&D is always careful when joining the dots.  And so draws no conclusion from the fact that the man who ran the Rio Olympics, Carlos Nuzman, president of the Brazilian Olympic Committee (COB) and honorary International Olympic Committee (IOC) member, has been arrested. 

Apparently, he deposited 16 one kg gold bars at a Swiss bank, the source of which he couldn't explain.

Nice work.  If you can get it.

Cartoon Rio gold

Catalonia: the Pain in Spain

Ah, self-determination.  Clearly taking the lead from the Western Australian Liberal Party [1], the government of the region of Catalonia (top right-hand corner of Spain, centred around Barcelona) decided it wishes to make its own arrangements.  And be a sovereign nation, independent of Spain.  So it arranged a referendum, which was declared unconstitutional but went ahead anyway last Sunday (47% of eligible voters voted, 90% of whom voted to secede).

The vote was unconstitutional for no other reason than Spain's post-fascist (1978) constitution invests sovereignty in all the Spanish people and that constitution was endorsed by the people of Catalonia.  Conclusion: all the people of Spain would need to vote on Catalonia's wish to be independent.  And that just ain't gonna happen.  

But Wry & Dry, as ever asking the tough questions, asks what if it did?  Could Catalonia survive as an independent nation?

The initial answer is probably.  Consider the following:

  • Catalonia is certainly rich compared with other parts of Spain
  • It is home to just 16% of the Spanish population, but 19% of its GDP
  • 18 million of Spain's 75 million tourists chose Catalonia as their primary destination last year
  • Barcelona is one of the EU's top 20 ports by weight of goods handled
  • Catalans pay more in taxes than is spent on their region

And the Catalan government owes €77 billion at the last count or 35% of Catalonia's GDP.  Which is better than Australia's ratio of 41%. 

But add on Catalan's share (population basis?) of Spain's net debt (€60 billion); defence costs, social security, other government infrastructure and the situation becomes less clear. 

However, all of this is theoretical. 

Even if Catalonia announced UDI (Universal Declaration of Independence) - currently threatened by its leader, Carles Puigdemont - Madrid would simply shut down government in Catalonia.  Readers will be aware of Article 155 of the Spanish constitution that would allow Madrid to seize control of Catalan. 

Look at it this way: Catalans cannot secede without affecting Spanish citizens in Castile or Andalusia.  This is why countries have a constitution, i.e. the document that reconciles these competing nationalisms.

Readers will recall the words of George Orwell, who fought in Catalonia (Republican side) during the Spanish civil war.  “All nationalists have the power of not seeing resemblances between similar sets of facts. A British Tory will defend self-determination in Europe and oppose it in India with no feeling of inconsistency.”

And there is no way that Catalonia would be able to join the EU.  Not only do EU countries not like regions becoming independent, there is a simple stumbling block.

All EU members must agree to new members.  Including Spain. 

By the way, always remembering the exhortation to "follow the money", the second-largest bank based in Catalonia, Banco de Sabadell, decided last night to move its legal headquarters out of the region (to Alicante, further down the coast, in Valencia).   

Imagine Don Quixote and Sancha Panza having a quarrel...

Cartoon Spain

Tsar Trump's tax changes: "Just ain't gonna happen." 

Tsar Trump trumpeted his 7-page tax reform proposal last week.  Worthy folk are running their eyes over the assumptions, outcomes, winners (everybody), losers (nobody), etc.

They are wasting their time.

W&D has researched the historical calendar of US tax reform.  Work with W&D on this, it is illuminating.

Firstly, there is virtually no chance of getting the basic tax cuts through in 2017.  The House has only 36 more sitting days and the Senate 44.  There are more pressing matters, such as, hello, passing the budget or agreeing on a new debt ceiling.  

Secondly, as for tax reform, the last time major tax reform was carried out in the Yoo Ess Aye was more than 30 years ago.  Let W&D chart the progress for Readers:

1.  January 1984:   President Ronald Reagan announced a tax reform plan to Congress.

2.  May 1985, Reagan formally introduced his tax reform proposal with bi-partisan support

3.  September 1985, the House began drafting a tax bill.

4.  October 1985, the first vote in the House is taken and the horse trading begins.

5.  December 1985, a House bill is finally approved and the debate begins in the Senate.

6.  June 1986, the Senate approves its version of the bill

7.  July 1986, members of the House and the Senate begin conferencing to write the final version of the bill.

8.  September 1986, the House and the Senate submit final approval of the tax reform bill to Reagan.

9.  October 1986, President Reagan signs the bill into law.

That was over two and a half years of process.  And with bi-partisan support of both parties and with a popular president.

So what chance Tsar Trump with a Congress that has a contentious majority in the House with firm partisan opposition from the Democrats and a slim majority in the Senate?  And with a somewhat unpopular president.

And in 2018 there are mid-term elections.

Tax reform in W&D's lifetime? 


Tax cuts Trump

Spot the irony

In 2006 the government of South Australia gave $250,000 to a company called Plastics Granular Services Pty Ltd and another $250,000 to a consortium the recycling company partly owned.  The funds were to assist in the development of plastics' recycling.

In November 2015 the company received another $100,000 from the government, to "create jobs in the state's clean low-carbon economy."

In March 2017, the company received another $300,000 from the government, to "create more jobs and opportunities for South Australians."

In June 2017, the company went into liquidation.  Thirty-five jobs were lost.  

The company said that the increased price of electricity had crippled its business. 

Cartoon SA irony

Spot the idiocy

W&D presents the below chart without further comment.  Other than to note that the US Congress offerings "its thoughts and prayers" but not much else.



US shootings 

SMSF audit fees: how much are you playing?

Well, most Readers wouldn't know.  And so, in the interests of information, W&D present the below chart (sourced from the ATO).  Which shows a range of annual fees for an SMSF audit and what percentage of all SMSFs fall in that range.  Note that the data is for audit fees, not accounting fees.  Accounting fees are a separate, and more expensive, kettle of fish.

SMSF audit fees2

An SMSF audit is required by the ATO and is separate from the preparation of an SMSF's annual accounts.  In W&D's experience, around $500 is about right for the cost of a straightforward SMSF.  Straightforward means that all or most of the fund's assets' values are securities the prices of which are electronically, independently and readily available; there are not any internal structures within the SMSF; and that the fund meets its compliance obligations. 

Audit fees may increase because of the new superannuation regulations, especially for funds in pension phase with member accounts of more than $1.6m.

But don't get W&D started on accountant's fees for SMSFs.

CBA: still in the news

The CBA has announced its new long-term incentive scheme for senior executives. Under the scheme, 75% of the possible bonus is awarded for 'Total Shareholder Return'.  TSR is essentially share-price growth including dividends, measured against a peer group of the 20 largest companies on the ASX, excluding resource companies [2]

W&D considers this bonus objective as lunacy.     

Readers will know the old saw, "Show me the incentive and I will show you the behaviour."  The incentive will be to maximise shareholders returns in the short-term.  The TSR measure is over four years, only just enough time to see the start of benefits from investing in year one.  And not invest for the future.  

The banks, and other large companies, especially Telstra, have been enhancing their short-term returns by paying out most of their profits in dividends and not re-investing profits in their businesses. Of course, paying out a lot in dividends means the TSR goes up, as dividends go up. 

But without reinvestment, future profits will not be as great.  Telstra woke up to this fact recently, slashing its dividend and reinvesting the dosh.

Hitherto, the banks have shunned significantly investing in their businesses.  And CBA, by hanging on to the primacy of TSR as a key measure of short-term success has missed an opportunity to reshape its business.


The 2017 Nobel Prize in Medicine went to three Americans for their discovery of the gene that controls our internal body clock i.e. circadian rhythm.  Apparently, we sleep at night for a reason.  Although circadian rhythm is a concept unknown to W&D's children.  

Cartoon Nobel prize

Unintended consequences:  Between  200 and 300 Turkish Airline pilots have been forced to leave the airline, to rejoin the Turkish air force.  President Erdogan's purge of the military after last year's failed coup created a shortage of pilots of F-16 and F-4 pilots.  Some 600 combat pilots were dismissed or arrested.  

And, to soothe your troubled mind...  


Last words...

"Gun laws don't matter when someone has that kind of mentality." 

-   Don Turner, president of the Nevada Firearms Coalition, responding to the Las Vegas massacre.

The Nevada Firearms Coalition website urges visitors to, "Don't wait, join today! Membership is less than a box of ammo!" 

First Samuel client events calendar

See below       
Chief Investment Officer Dinners
Invitations Sent
Tue-10-Oct Centenove, Kew FULL
Wed-11-Oct Donovans, St Kilda Lunch & Dinner (FULL)
Wed-25-Oct Quaff, Toorak Spaces
Tue-14-Nov Centenove, Kew FULL
Wed-22-Nov Donovans, St Kilda Lunch & Dinner (FULL)
Tue-28-Nov Elyros, Camberwell Filling 
Wed-29-Nov Bottega, Melbourne CBD Filling
Tue-24-Oct Stillwater at Crittenden Estate Spaces 

Some lightly salted absurdities from all over...

At the extreme left-hand end of the Bell Curve

Alan McCarty, 35, lost a child custody court ruling in Florida.  And so phoned 911 (the US equivalent to 000) to report a crime "that was about to happen."  McCarty tells the dispatcher he has a gun pointed at the Volusia County Courthouse and demands that Judge Stasia Warren, who ruled against him, be brought out so he can “execute” her and that his kids be given to him. 

McCarty called from his home phone.  Whilst he was on the phone, making four calls to 911, police traced the call.


He separately had been charged with making threats against his ex-wife and her children and breaching a no-contact order.   

Guess the outcome

Catt Gallinger, 24, wanted some serious body art.  So she decided to have the sclera (the white of the eye) of her right eye tattooed purple.  And so she went to her local 'body modification artist' (not tattoo artist) to get the art done.  What happens next:

a.  The art was magnificent, her green eyes matched beautifully with the purple;

b.  She chickened out at the last moment; 

c.  The body modification artist said that purple didn't suit her and used orange instead; or

d.  The work was a disaster.  Her eye oozes purple ink, the eye is badly swollen and she is almost blind.

Close.  But no cigar.  The correct answer is d.  According to Gallinger, the artist did not dilute the ink, injected too much of it into her eye, and did not have enough injection sites on her eyeball.   


Bonus:  the body modification artist was Catt's boyfriend at the time of the art.  Even when her eye started leaking purple ink she didn't think anything was wrong.  The 24-year-old model said she didn't question it because her (now) ex-boyfriend told her it was normal. He also allegedly said that it's not odd for the eye to swell up to a massive size. And then he broke up with her.  And then Catt thought that something might be wrong.     

But wait, there's more: She already has 25 tattoos on her body, and has undergone another procedure to split her tongue to make it appear forked. 

Oh, dear. 

"But, Officer, ..." 

A man was discovered breaking a security tag from a bottle of Jack Daniels whiskey at a Safeway supermarket in Oaklands, California.  Police were called and he was arrested. 

On searching his home, police found 152 bottles of Jack Daniels whiskey.  He claimed he found them.



Have a wry and dry weekend



[1]  Which at its last State conference voted to consider a form of tax independence within the Commonwealth.  Or somesuch nonsense.

[2]  Given the general incompetence of most of the Twenty Leaders (the share-price of only six of which has outperformed inflation in the last 15 years), it's not a really challenging peer group.