Wry & Dry

More front than Myers... BRIC-à-brac. Khemlani's ghost

More front than Myers

Consider this: if a sitting Australian Prime Minister lost 26 seats in a federal election, it is unlikely that he/ she would announce the result as "a tremendous success".  Yet that is what Tarzan Trump has just done in the US mid-term elections.  And shouted it from the rooftops.

Cartoon Trump celebrating you just fired

Especially as TT said that Tuesday’s mid-term elections were a referendum on himself (“put me on the ballot paper”).  The Republicans (his party) got blown out of the water in the House, losing between 26 and 33 seats, and its majority, to the circling Democrats.  

"Tremendous success"? Readers might ask how does that work?  Well, simply, for two reasons. 

Firstly, the President’s party invariably gets mauled in mid-term elections.  Readers will recall that each of Democrat Presidents O'Bama and Clinton lost more House seats in their first mid-term elections than TT.  The President's party has lost an average of 37 House seats since 1945.  TT's Republicans lost less than this.  The Republicans losing the House was widely predicted.

Secondly, the Republicans gained seats in the Senate.  Readers will know that only one-third of the Senate seats were up for re-election and this cohort was a remnant from O’Bama’s years.  Thus were not subject to the massive swing to the Republicans with TT’s election in 2016. 

And in keeping control of the Senate, TT has control over executive (especially judicial) appointments.  And possible removal from office (for details on this, see W&D's conversation with Deepak, below).  

But wait, there's more, TT has announced he will run for a second term.  

Why the announcement?  As if he wouldn't.

Back to the future

Readers will recall a former Leader of the Federal Opposition, named Mark Latham.  Well, Latham (who was flogged by John Howard in the 2004 election) is making a comeback: he's joined Pauline Hanson's One Nation party.

Cartoon Latham and Hanson

Latham's voter base was essentially old-style Labor i.e. blue collar, conservative male - not a chardonnay socialist in sight.  He's now moved from the left of the fish fork to the far right of the soup spoon, moving past even the silver tail of Abbott and the silver tongue of Alan Jones. 

Latham will not return to federal politics, but instead will seek an upper house seat in NSW.

But the value he will bring to One Nation is to boost One Nation's Senate vote, especially in NSW.  His fury at feminism, immigration, gay-marriage, Islam and the ABC matches that of Pauline and will go down very well with social conservatives.

Pauline Hanson is becoming like the Queensland cane toad: Heading further south.  And indestructible.   

BRIC-à-brac

Readers will know that there was a time when the world thought that Brazil, Russia, India and China would take over the world. 

They were four rapidly growing and large economies, had large and urbanising populations and generally reformist governments resolved to blend measures of democracy with pro-market policies.  It was forecast that by 2020 the combined GDP of the four would match that of the US. 

This portent led in 2001 to an American economist [1] devising the the acronym BRICs, to describe them (South Africa was added in 2010, neatly turning a plural (BRICs) and possessive plural (BRICs') into just a possessive plural (BRICS')).  

Economically the combined GDP of the BRICS hasn't caught the US.  But W&D's view on the economic catch-up of the BRICS is irrelevant.  The BRICS may catch up to US's GDP in 2020 or 2025.  This doesn't matter.

What matters is that, simply put, politically 2018 is much different from 2001.  And the factors that encouraged such optimism in 2001 no longer exist.

Consider the state of each country in 2001:

Brazil commenced far reaching economic reforms in the 1990s and with its large population and economy was on the threshold of significant growth.

Russia had just dropped the lead weight of communism and there was much optimism about both democracy and economic reform under newly installed Vladimir Putin.

India had just begun a wave of economic success as sclerotic public administration was slowly unwound.  And success was even more widespread.[2]

China was admitted to the World Trade Organisation and the Deng Xiaoping's economic and political liberalisation policies were transforming the economy.

But in 2018:

Brazil is beset by corruption, 10%+ unemployment and has just elected a far right-wing former army officer as President

Russia's economy continues to languish, with economic sanctions adding to an undiversified export (gas) economy and to an increasingly isolated right-wing President-For-Life

India continues to wade through the mire of corruption and administrative inefficiencies and is led by a right wing Hindu nationalist

China is feeling pain of the US finally say 'no' to an asymmetrical trading relationship (China ranks 59th out of 62 countries evaluation by the OECD for openness to foreign investment) and with an increasingly autocratic ruler.  And, risibly, Emperor Xi Jinping has, on Monday, once again promised to further open up China to foreign investment.  He's being saying this for five years and virtually nothing has happened.

Cartoon Bric county blues

Meanwhile - there's a different sort of BRIC-a-brac in the Yoo Ess Aye

W&D word of advice?  Ignore the BRICs, or indeed BRICS, as a bloc.  They have very little in common.

W&D's forecast:  Russia and China will collapse under their own weight with dramatic geo-political ramifications.  Brazil will revert to post-banana republic economics.  Only India will slowly but inevitably flourish, as its democratic roots and quasi-Western civilisation leanings will slowly overcome its state-based tribalism.

And they play cricket.   

Speaking of ill-gotten gains...

W&D dips his lid to Zamira Hajiyeva, wife of the former state banker of the Republic of Azerbaijan (the husband has a 15-year bed-and-breakfast arrangement with the Azerbaijan government), who spent £16m at Harrods.  And in so doing became the subject of the UK's first Unexplained Wealth Order.  

UWO is a new legislative device aimed at drug dealers, arms financiers and money launderers, whereby sudden increases in wealth have to be explained.  Zamira is accused of spending dosh the rightful property of her husband's ex-employer.  She also faces extradition to Azerbaijan for fraud offences.

Cartoon Harrods unexplained wealth

Think of the Qantas points had she would have had she shopped at Myers. 

Goldman Sachs' Malaysian stench

In all of the history of American banks and investment banks, only one has come close to the influence and political power of J.P. Morgan (in earlier days) [4]: Goldman Sachs.

W&D is still scratching his head, trying to work out how Goldman Sachs earned some $600m in fees from a collection of deals valued at about $6.5 billion for the Malaysian investment fund 1MDB.  And so is the government of Malaysia.  A further problem is that some $4.5 billion is missing.

Y'see, 1MDB, was set up by Najib Razak, the former Prime Minister.  W&D has previously commented on the sudden appearance of wealth in Najib's home, including a veritable warehouse of shoes that would have made Imelda Marcos jealous.  Plus enough jewelry to set up a Tiffany's At Home business.

Najib has been charged with sins too extensive to list.  And the US Department of Justice has indicted two former Goldman Sachs bankers, accusing them of laundering billions of dollars from 1MDB.  One of the bankers is Tim Leissner, who has pleaded guilty.

Readers will be as curious as W&D: did the key people at Goldman's really think that $600m in fees from $6.5 billion in deals didn't suggest some level of, well, impropriety.

Cartoon Goldman unexplained wealth

Jess Sessions, the (as from yesterday, now former) US attorney-general, called the 1MDB scandal "kleptocracy at its worst".

W&D is also curious as to how far up the Goldman tree the stench will rise.         

W&D Readers heard it here first

A Dutchman, Emile Ratelband, aged 69, has launched a legal bid to change his age to 49.  And hence his dating prospects.

"We live in a time when you can change your name and change your gender. Why can't I decide my own age?" he said.

He argues he feels discriminated against because of his age, and that it was affecting his employment chances and ... his success rate on Tinder, the dating app

"When I'm on Tinder and it says I'm 69, I don't get an answer. When I'm 49, with the face I have, I will be in a luxurious position."

He modestly observed that according to his doctors he has the body of a 45-year-old, and described himself as a "young god".

This leads W&D to consider ... Oh, never mind.

Snippets from all over 

1.  US debt

US consumer debt, or, euphemistically, consumer “credit”, jumped 4.9% in the third quarter compared to the third quarter last year.  Or by $182 billion, to almost, but no cigar, $4 trillion (actually $3.93 trillion).

W&D comments:  As befits the stalwart American consumers, it was the highest ever. With higher US interest rates, this will end in tears.

2.  US wages boom

With US unemployment at 3.7%, a 49-year low, wages increased by 3.1% over a year ago.

W&D comments: And it's the low-skilled workers who are getting increases: weekly wages for high-school drop-outs have risen by 23.4% since 2010, compared with just 14.4% for college graduates.

3.  Auctions down + prices down = property stamp duty ...

... down.  Some 53% of residential properties up for auction failed to sell last weekend, a six-year low.

W&D comments:  The omens are bad for state government coffers.  Stamp duty of the sale/ transfer of residential property has underpinned the surge in state government spending.  And it's not just the obvious but catch-up infrastructure spending.  It's the number of public servants.  For example in the People's Workers' Socialist Republic of Victoria, government employees salaries have risen by an average of 5.5%. p.a.  This will end in tears.

4.  Down at the car wash

In a frenzy of American local government offers and promises, on-line retailer Amazon is close to selecting a city in which to locate its second HQ.  Some $5 billion in construction work and up to 50,000 jobs go with the deal.  Crystal City in Virginia received much media last weekend.  But the market has money on either Dallas or New York.

W&D comments: W&D is disappointed that Tucson, Arizona didn't make to short list of 20 cities.  It's marketing pitch included sending a 6.5 metre saguaro cactus to Amazon.  Amazon declined to accept the cactus because of its 'corporate gifts policy', thereby confirming the absence of a 'corporate sense of humour policy'.

5.  Don't count the sales

Apple, an American mobile telephone company, will no longer provide data on the number of iPhones, etc it sells.

W&D comments:  This is weird.  Readers will recall that in 2009 Apple's former CEO Steve Jobs criticised Amazon for not releasing unit sales data on its Kindle.  "Perhaps it's not selling many," he said.

Tool of the Week 

Podium finish goes to ... Chairman Dan, the Premier of the Peoples' Democratic Socialist Republic of Victoria, for secretly signing a secret deal ('Memorandum of Understanding') with China's not-so-secret so-called Belt and Road Initiative.  Readers will know that BRI is an integral part of China's debt diplomacy, about which W&D has often written.  But to remind Readers, BRI lends vast dollars to countries (so far) for the building of massive infrastructure projects.  The trouble is that when the debt obligations become so great that country has to cede security for the defaulted loan.  In the case of Sri Lanka, for example, it was a 99-year lease on a deep water port.

Cartoon Chairman Dan at the foot of old communists

Chairman Dan has ventured into the murky spectrum of foreign affairs and signed a Memorandum of Understanding without revealing what is the understanding.  W&D muses: has he put at risk assets of we-the-people-of-Victoria that might have to be surrendered on any default?

W&D advises Readers not to worry.  And suggests that Chairman Dan put Victoria's desalination plant as security.  

Oh, the irony.

And W&D hesitates to raise the ghost of ... Tirath Khemlani. [5]

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

... wanted to speak about talk of possible impeachment of President Trump.  "With the Democrats winning in the US House of Representatives, can Donald Trump be impeached?" he asked. 

"Certainly, and easily," replied W&D.

Deepak's face lit up.  "So he will go.  Or given the DCM, as you often say," he said happily.

"I didn't know you were a Democrat supporter," said W&D.  "And there is no chance of Trump being removed from office."

"Hang on.  You just said that he could now be easily impeached."

"I did," responded W&D strongly.  "But impeachment is like being indicted or charged.  That is what the House does, and by a simple majority.  But then it is up to the Senate to try the accused.  And to succeed 'a concurrence of two-thirds present' in the Senate is required.  The Republicans control the Senate, so the House Democrats won't waste time looking to impeach Trump.  Unless something really, really scandalous is dug up."

"Ah, like what happened for Bill Clinton," Deepak recalled.

"Exactly. He was indicted by the House on two charges: perjury and abuse of power.  But he was found not guilty by the Senate."

"So Trump's past offences will not matter," asked Deepak, looking disappointed.

"Ah, not necessarily.  The House might impeach Trump in an attempt to reduce his chances of success at the next presidential election.  Wannabee Democrat candidate, Elizabeth Warren is stirring the pot.  Speaking of strong women, how is Anjali."

"Very fine, thank you," responded Deepak, moving on from his disappointment at the chances of Trump being removed from office had vanished.  "And I've told everyone that we are having a daughter, not a son.  I'm not sure they are still happy for us."

"A fatal conclusion,"  W&D responded, as he got out of the car.  "Of course they are.  But remember that there comes a point in a pregnancy when, for friends, it is all a process matter.  They have shared your initial excitement.  And now wait for the news of the birth."

"So, you think they are still happy for us," said Deepak, lightening up.

"Of course," said W&D as he receded.  "But, I should tell you, the bigger issue for you, as a traditionalist, is now the cost of replacing blue baby clothes with pink."

Deepak went white.

And, to soothe your troubled mind...  

Miscellany 

Last words...

"I’ll judge myself by the largest turnaround in agricultural commodity prices in Australian history.” 

 -  Barnaby Joyce, former Leader of the National Party, on rumours that he will be challenged in the pre-selection for his safe seat of New England.   

Agricultural prices are principally determined overseas, not by the Leader of the National Party.  

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

Limited places are now only available at;

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

Alan Deguillaume was passing through a small town and was thirsty.  But in the bar into which he went in New Westminster, British Columbia, he wasn't happy with the cocktail he was served.  So he did what any unhappy customer would.  No, actually, he didn't complain.  Instead, he poured the drink over the bar; swiped the cash register to the floor and punch the barman.  And then fled.

He also forgot the security camera, which filmed every move he made.  Click here for the full video 

(CTV News)

He was arrested one month later. The Mounties always get their manperson.

Guess what happened next?

Keith Eggum, who had half a moustache and no right eyebrow, was charged with disorderly conduct and felony bail jumping.  He was convicted.  He thought the jury could have predetermined his guilt by his 'eccentric appearance'.  What does Keith do next? 

a.  Accept the conviction;

b.  Accept the conviction but shave his moustache and other eyebrow;

c.  Accept the conviction but have moustache and eyebrows to augment those he had plucked; or

d.  Lawyer up.       

Close.  But no cigar.  d. is correct.  He lawyered up, arguing a breach of due process in that he had requested a haircut before the trial and had been refused.  But the 2nd District Court of Appeals in Madison, Wisconsin refused his appeal, saying his due process violation argument was 'underdeveloped'.    

(CBS58)

Ever woken up from a snooze and wondered where you were?

(NBC News) 

And no-one noticed that he is missing...

Have a Wry & Dry weekend. 

Cheers!

Anthony

[1]  Jim O'Neill, an economist with Goldman Sachs.

[2]  Including Australia forcing India to follow-on the second test match, only to lose by 171 runs thanks to a 376-run second innings stand between Dravid (180) and VVS Laxman (281), and Singh's 13 wickets. Stephen Waugh still has nightmares.

[3]  Readers should download Argo, a brilliant and thrilling film about the six Americans who escaped.

[4]  John Pierpont Morgan was the legendary US banker who built J.P. Morgan into the most influential of all global financial businesses until it was split up as a consequence of the famous Glass Steagall Act of 1933.  J.P. Morgan remained a bank and Morgan Stanley became an investment bank. The London business of J.P. Morgan became Morgan Grenfell (and taken over by Deutsche Bank in 1990).  J.P. Morgan merged with Chase Manhattan Bank in 2000, to become JPMorgan Chase. 

[5]  The Loans affair, also called the Khemlani affair, was a political scandal involving the Whitlam Labor Government of Australia in 1975, in which it was accused of attempting to unconstitutionally borrow money from Middle Eastern countries through the agency of Pakistani banker Tirath Khemlani, bypassing standard procedures of the Australian Treasury. Minerals and Energy Minister Rex Connor, along with Treasurer and Deputy Prime Minister Dr Jim Cairns misled Parliament and were forced from the Whitlam Cabinet over the Affair, which was a key precursor to the Constitutional Crisis and the Dismissal of the Whitlam Government in 1975.