Wry & Dry

W&D Blockchain. Buffett wins hedge bet. CBA: back to the, err, yesterday.

Wry & Dry changes name to W&D Blockchain and...

...issues 2 million shares, raising a $2m for Mrs W&D to buy new Ferragamos.

Just kiddin'.

But that is how facile January was.  More later on the crypto-currency craze, that portent of certain disaster.

And Happy New Year, Readers!  May your 2018 be prosperous.  And this is a bumper issue, so you can get up to speed with that which has bubbled since you went to beach, bush or Bali.

CBA I: back to the, err, yesterday

Readers will have noticed that the scandal-plagued CBA has appointed a new Head Teller to succeed the hapless Ian Narev: Matt Comyn.

[By the way, Mr Comyn's name has a Scottish source.  His forebears would include John I Comyn, Lord of Badenoch, a 13th century Scottish peer.  History records other Scottish Comyns.  It is unlikely that a Comyn arrived on the First Fleet.]

Mr Comyn is an insider's insider.  He had the good sense to be head of CBA's retail banking division as interest rates were falling and home lending growth was going through the roof.  So he has runs on the board, albeit on a flat track against mediocre bowling.  But the media is not sure of the idea, and asked the question: as an insider, will he be able to change the toxic culture of the CBA and drive the change necessary to 'restore trust in the CBA'?

W&D considers this is the wrong question.  Instead:

Q1. The CBA board has appointed the very person on whose watch the significant money-laundering/ terrorism financing scandals occurred.  Can you please explain to W&D, again, CBA's policy of accountability?

Q2. What is Mr Comyn's track record of technological and innovative success in areas where the CBA needs to position itself? 

A:   Comyn's appointment is a very poor choice because it, once again, shows that the CBA has (a) a weird policy of accountability at the highest level and (b) decided to continue to be a (very large) building society.

Yes, yes, yes, there are the problems of the money-laundering scandal, CommInsure scandal, financial planning scandal, [insert your CBA scandal here] etc.  W&D's view is that CBA should have appointed an experienced senior executive/ director, or even outsider, to be solely responsible for fixing the mess and draining the CBA swamp.  And appointed a suitable CEO has to get on with changing CBA for tomorrow, not fixing yesterday.

Comyn's appointment suggests that the CBA board really has no idea.  And so made the easy choice.

CBA II: lawyers' partners scramble for flights...

...to exotic vacation locations, seated at the sharp end of the plane.  Ah, the gravy plane.  No sooner had Mr Comyn signed his new employment contract than ASIC parked a tank on CBA's front lawn.  Another lawsuit, this time to match the interest rate-rigging cases against the other three banks.  CBA's lawyers have said the matter will be defended vigorously.  They would say that, wouldn't they.

And W&D is pleased that after 6 months someone in the media has woken up to the fact that the CBA might have a problem, not only with the Austrac regulatory folk, but also with the US regulatory authorities.   Not wishing to blow his own trumpet, but well, what the heck, it was in August last year that W&D warned of the long-arm of the US anti-money-laundering agency: the Financial Crimes Enforcement Agency.  FinCEN is a bureau of US Department of the Treasury. 

Only yesterday did an Australian media outlet start digging into what FinCEN might do to CBA's income statement.

Cartoon CBA its probably legal

Load up the red pen, lads.  

O'Prah for President!

W&D was delighted with the news that the Yoo-Ess-Aye might next have another Irish president.  This follows the eight years enjoyed in the White House by President O'Bama.

Someone called O'Prah is being pushed forward by those who wish to see the Yoo-Ess-Aye descend even further into arcane civil war between victims and victors.

W&D's humble view is that this civil war will only end when those in between the victims and victors (i.e. the centre) regain their voice.

Until then, the next voice to be heard might be from newly sworn-in President O'Prah, screaming at her inauguration: "...and everybody gets a car!" 

Cartoon Oprah and cars

Oh, dear.  It's come to this.

Summer Speedos

  • Consumer confidence in Australia has commenced the year with the highest January reading since 2010.  Possibly as a result of the Australian cricket team smashing the Poms.
  • The Trans-Pacific Partnership, a free trade agreement, was agreed, without the US.  It's a massive boost to Australia's trade.  Stumbling blocks to ratification: William Shorten and the Greens.  Sigh.
  • Federal public servants take, on average, two more sick-leave days per year than workers in the private sector.  Delicate petals.
  • 70% of Australians want 26th January retained as Australia Day, a poll by the IPA found.  
  • The International Monetary Fund expects world economic growth in 2018 (3.9%) to be its highest since 2010, the increase from 3.5% previously, mainly as a result of Tsar Trump's tax cuts.
  • Apple, a manufacturer and distributor of mobile phones, expects to pay about $47 billion in taxes as it repatriates some $245 billion from offshore accounts to the US.  The decision is a result of Tsar Trump's tax reform package.
  • Australia is enjoying a jobs' boom: 35,000 jobs were created in December, twice that expected and the highest since 2008.  Happy days.
  • China's GDP grew at 6.9% in 2017, up from 6.7% in 2016 and the first increase since 2010.
  • Australia's inflation rose 1.9% in 2017, up from 1.8% in 2016.  Yawn.
  • ASIC, the corporate Labrador, found that 75% of the time financial advisers at the big four banks and AMP ignored the best interests of the customers.  And in 10% of cases gave advice that left clients worse off. No surprises there.

On the last point, W&D notes that at Macquarie Bank, less than 5% of products on their approved list are Macquarie products.  And less that 5% of all products recommended are Macquarie products.  So how is it that the other banks have a number at 75%?

There's: I wear black because I can.  And there's: I wear black because I must.

In early January, in Iran, as part of a broader protest movement, some Iranian women raised their voices against oppression of females.  They want to, inter alia, shed the forced wearing of head-to-toe black garb.  

In early January, in Hollywood, some leading ladies (Nicole Kidperson, Reese Witherfork; etc) donned black in their own '#MeToo' protest.  #MeToo et al may help stem the imposition of predatory, offensive or pre-self-indulgence behaviour from men upon the next generation of young women. 

But W&D senses that the Golden Globes grandstanding was less about #MeToo and more It's About Me.  Plus a touch of hypocrisy.  Readers will recall that  It's About Me #MeToo flag bearer, that wonderful actress, Meryl Streep, was first to leap to applaud at the awarding of the 2003 Oscar to Roman Polanski.  Polanski fled the USA in 1978 to avoid charges of drugging and raping a 13-year-old girl.

W&D wishes the #MeToo women of Hollywood would also stand up for the really disadvantaged women of the world.  Where is their #MeToo protest in support of the women of Iran?  Or of Saudi Arabia?  Or of Afghanistan?

Cartoon the sound of me

Perhaps they are just women "in countries too far away, of which we know little." [1]

Out of hand I

This crypto-currency thing has got right out of hand.  To keep Readers up to date, W&D offers the following:

  • Bitcoin, the most widely known crypto-currency, had a price peak of US$19,511 on 18th December.  Last night it traded at $8,915: a 54% fall.
  • An American company that sells ready-to-drink soft drinks, Long Island Iced Tea Corp, changed its name to Long Blockchain Corp.  Its shares skyrocketed 350% over the three-day period around the announcement. 
  • Computers hackers stole more than $600m of crypto-currency (NEM) from a Japanese crypto-currency exchange.
  • Facebook, a social media personal-details tracking behemoth website, has banned ads that promote crypto currencies (e.g. Bitcoin).

W&D is waiting for the obits.

Out of hand II

In an article just before Christmas, First Samuel's CIO, Dennison Hambling, commented upon the wave of companies that were presented to him as possible investments but that had absurd valuations.  

W&D had always thought that sustained and growing net profit was a useful factor in deciding whether or not to invest in a company.  Apparently, this seemingly sensible concept is now 'old school'.

As was shown by the headlines in various local media in early January: "Australia's latest $1 billion start-up."

Start-up is a verb, W&D, thought.  Start-up is something you did to the Victa lawn mower.  But no, it is also a noun, it seems.  A start-up is a new venture, whereby optimistic, mostly young folk with tattoos, unkempt hair and possibly body odour, embark upon making money from a new idea.  With OPM: Other Peoples' Money.

Hence, the sub-heading: "Canva, a white-hot, Surry Hills-based design software start-up became the world's latest "unicorn" this week - a private company valued at more $US1 billion."

W&D ignored the catchy moniker of 'unicorn'.  And instead looked under the bonnet.

Canva is yet to make a profit.  Well, what the heck, Amazon didn't make a profit until recently, ploughing all its revenue back into the business.  The trouble with Canva is that it doesn't have much revenue.  In FY-17 it generated just $24m in revenue.  So from where does the US$1 billion valuation come?  

Err, a media release!

When the company raised its $42m in venture capital, it was accompanied by a media release shouting the US$1 billion valuation.

W&D dips his lid to Canva's media marketing people.  Nice work.

But W&D will not dip his hand into his pocket to invest.

And the attractive people vote for...

The below is presented without comment.  The source is The Effects of Physical Attractiveness on Political Beliefs, a research paper by university professors: Dr Rolfe Peterson and Dr Carl Palmer 

"Controlling for socioeconomic status, we find that more attractive individuals are more likely to report higher levels of political efficacy, identify as conservative, and identify as Republican (i.e. right wing)."

Pauline Hanson, come on down!

Only in Tasmania

Readers will be aware that Tasmania is small and the island state of Australia, with a population of about 500,000.  It returns 12 senators to Canberra - the same as Victoria.  Victoria's population is over 6 million.

That psephological weirdness extends to state politics. Readers will be aware that the Premier of Tasmania has called a state election for 3rd March.  Bizarrely, each of the major parties (Liberal, Labor) has said that it will not form a minority or coalition government.

In a parliament of 25 seats (with 5 multi-member electorates each returning 5 members) and with Labor resurgent under their new leader, the charismatic and photogenic Rebecca White, the polling suggests a close outcome. So close that it is entirely possible that neither party will gain the 13 seats required to govern.

As each party has ruled out deals with others, this means that the Greens, which will probably win three seats, will govern. 

Only in Tasmania.

Innovate. Or perish.  Sorry, looks like we'll perish.

The below table speaks for itself.



Follow the money

Readers will be familiar with the IPL - the Indian Premier League.  It's average attendance is the fifth highest globally [2].  It's a tournament of short-form cricket between teams representing eight Indian cities, held over just two months.  Each team bids for players, and can have up to eight overseas players.  The January news was that the English cricket, Ben Stokes, had the highest bid: $2.4m.  Nice work if you can get it.  But he may not get it, as he might be serving time in the Tower of London. 

The curiosity was that an Afghani, Rashid Khan, received the seventh highest bid: $1.7m.  A sum surely larger than the GDP of his country.     

Amazon's new city 

Amazon (an online retail distributions company, not the river) narrowed down to 20 the list of possible cities in which it will build its second HQ.  The usual suspects were on the list: Atlanta, Boston, Chicago, New York, etc.  

W&D is rooting for Nashville, Tennessee.  Nashville is a mere 264 kilometres from Nutbush (population 259), the birthplace of Tina Turner, who famously wrote and sang about Nutbush City Limits in her boot-scooting song.  W&D considers that this proximity will give Amazon a sense of humility that is otherwise absent from it's corporate persona. 

More seriously, W&D is surprised that Qatar didn't make the shortlist.

Netflix - The Crown of debt?

W&D was encouraged by his sprogs to watch a television series called The Crown.  The Crown is an amazingly widely viewed series, that is an interesting blend of almost-history and Downton Abbey, and beautifully made.

Which brings W&D to Netflix, the American company that makes and distributes, inter alia, The Crown.  Is this a meteor soon to crash to earth?

Well, no, not if you believed the stock market's reaction to its profit release in late January.  Share price up 8.5%, to $246, from $10, five years' ago.  Nice work, if you can get it.

But all the news was about the surge in subscribers: 6.4 million in the December quarter, 2 million more than forecast.  Wow! 

Or maybe not.  See below for the red ink on Netflix' cash flow statement. 


Free cash flow is the amount of cash that a company earns or burns.  And Netflix burns a lot.  The aim is to spend money on content today in the hope that more subscribers will come tomorrow.  And hence boost revenues.  But until revenues catch up with the cash burn, Netflix must do what any household would do: borrow.  Netflix has a pile of debt. 

Its debt is rated 'junk' but people keep on buying it.  Because of the company's share price and now market capitalisation of over $100 billion. 

Netflix is trading on a forward P/E of 91.  Disney, which is sort of in the same business, is trading on a P/E of 17.

Readers can join the dots.

Get out the Allen key

Readers will have sadly noted the demise of Ingvar Kamprad, the Swedish founder of Ikea.  Ingvar was a long-lived 91 when he died.

W&D wonders if there is a flat-pack coffin section in Ikea that might exemplify Ingvar's amazing entrepreneurship.

With an Allen key included.  Of course.

Mom's apple pie is better 

W&D wasn't surprised, as he slowly eased a slice of home-grown lemon into the Waterford of Hendrick's and bitter lemon, when he saw the stats.  Young-ish Americans (25-34) are increasingly staying at home.   Over 27% of this cohort are living with either mom and pop or with a relative, over double what it was 50 years ago.  Economists are putting this change down to housing affordability.

Humbug, says W&D.  It's all about mom's cooking and the young-ish preferring to spend their money on sex, drugs and rock 'n roll rather than on a mortgage.

American young adults at home

Cartoon kids at home

Deepak, W&D's Uber driver...

...was talking about share market volatility.  He'd read an article that said because 'the volatility index' was at an all time low, the market was set to fall.

"All I know about volatility is when Anjali gets angry at me," he admitted.  "She screams at me and throws a thali at me, especially when she suspects me of day-trading."

"So she should," W&D replied.  "But the volatility index is a different beast."

The volatility index (or VIX, as it is known by its 'ticker symbol' on the Chicago Board Options Exchange) is a popular measure of the expected volatility of the S&P 500 Index [3] over the next 30 days [4].  Readers will know that the VIX is quoted in percentage points at a 68% confidence level (i.e. one standard deviation).  For example, if the VIX is 15, this is an expected annualised change, with a 68% probability, of a range of 15%.  This is converted to a monthly figure by dividing by the square root of 12, which means +/- 4.33% over the next 30 days. 

Got that?

The VIX finished 2017 at a record end-of-year low of 10.40%.  Which means that the S&P 500 is expected to trade within a range of +/- 2.3% over the next 30 days.  

Deepak, who had a reasonable grasp of maths, got this.  "But so what?" he correctly asked.  

W&D agreed. "The VIX is not predictive of anything, other than emotion."

 "Just like Anjali," Deepak sighed.  

"And remember, Deepak," W&D cautioned, "the share market is only ever one tweet away from a correction.  VIX cannot control that tweet.  Only the thumbs of Tsar Trump can."

Hedge funds' failure

The Germans have contributed much to the world.  Consider Bach, Beethoven and Brahms.  Or the VW Beetle. 

But W&D considers that most onomatopoeic of words 'schadenfreude' is their best contribution.  'Pleasure derived from another's misfortune', even when the another is a rotter, is not Christian, W&D sheepishly admits.  But, good grief, it is a good feeling.

W&D is thinking of Jack Watts' goal against Collingwood, AFL round 12, 2017.  It can be now disclosed that W&D derived more pleasure from the Collingwood losing than the actual goal itself.  Readers would no doubt agree, and may wish to revisit the video here [5]

But more currently, W&D wishes to consider those most expensive and outlandish of investment promises: hedge funds.  The outrageous fees earned (a base fee of 2% and a performance fee of 20%) were okay as long as the tide was rising.  But when the tide receded, it was clear which were wearing the Speedos.  And which were not.

Readers will recall that in late 2007, investing guru Warren Buffett wagered one million dollars that the S&P 500 (the broad-based measure of the US stock markets) would outperform a basket of hedge funds chosen by Protege Partners (a hedge fund 'manager of managers') over the next 10 years.  The winnings would be donated to a girls' charity in Omaha.

Hedge funds failure

Buffett won his bet.  The charity got their one million dollars (and then some, as it turned out).  And the hedge funds got massive egg-on-face.

Ah, the schadenfreude. 

Tsar Vlad cannot control...

...the weather in Moscow.

December set a new record for the least amount of sunshine ever seen in Moscow. Six minutes.

W&D muses that Tsar Vlad instead of Moscow must have been at his modest dacha on the Black Sea. 

Tsar Vlad's holiday home.  Err, one of...

And, to soothe your troubled mind...  


Last words...

"Businesses are coming back to America like never before.  Chrysler, as an example, is leaving Mexico and coming back to the USA. "  

-   Donald Trump, President of the Yoo-Ess-Aye, in a tweet on Monday.

Err, not quite. Fiat Chrysler has six plants in Mexico and none are closing.  Trucks currently built in the Saltillo plant will now be built in the USA, but the Saltillo factory will now be building commercial vehicles.

First Samuel client events calendar




2018 Events  (Invitations not yet sent)


Eat Street - food & wine fest



NGV Winter Masterpieces Exhibition

Masterworks from Moma (New York)



Forum - guest speaker TBA


Some lightly salted absurdities from all over...

At the extreme left-hand end of the Bell Curve

Pro-tip: when transporting $1.5m of drugs, follow all traffic laws.

A 27-year-old man from Sacramento, California, and a 38-year-old man from Huntington Beach, California, were driving a truck in Nebraska.  The truck was carrying a precious load.  Which makes one wonder why they failed to signal a right-hand turn.

Y'see, the illegal turn was spotted by a local copper.  The local copper was writing out the ticket, when he smelled an odour coming from the back of the truck.  It was just $1.5m of cannabis.


"Tell it to the judge, son."  

Guess what happened 

In mid-January, a Pegasus Airlines aeroplane was landing at Trabzon airport on Turkey’s Black Sea coast.  And somehow ended up in an embarrassing position: 

The Pegasus Airlines flight swerved off the tarmac and down a slope after landing at Trabzon airportEmergency services arrived to find:

a.  A hijacker had taken control of the plane;

b.  The pilot was drunk;

c.  The pilot, having, at last, joined the mile-high club, still in a passionate embrace with a flight attendant; or

d.   Michael Caine lying on the floor in the back of the plane saying "hang on a minute lads, I've got a great idea."  

Close.  But no cigar.  The correct answer is as yet unknown. 


Pro-tip 2: don't follow your GPS when you see a lake coming...

Tara Guertin loaned her Jeep to three friends to drive back from a skiing vacation.  They got lost.  It was dark.  And foggy.  So the driver turned on the Waze GPS navigation.  

Which led them down a boat ramp.  And onto the frozen Lake Champlain.  The driver didn't realise the car was on ice until about 40 metres from the shore.  Sadly, the frozen lake surface was no match for the weight of the Jeep...  


The diver and passengers scrambled out.  The Jeep sank.  Car owner Tara re-enacted the drive using Waze.  And got the same result (she didn't drive onto the lake, though).  Lawsuit pending?

Have a wry and dry weekend.  


[1]  "... a quarrel in a far away country between people of whom we know nothing." Neville Chamberlain, UK Prime Minister, speaking in 1938 of the Czechoslovakia crisis, when he effectively gave that country to Hitler's Germany in exchange for 'peace in our time'.  The 'Munich Agreement' was Chamberlain's epitaph.  War came less than a year later.  As Chamberlain's biographer David Dutton wryly observed, "... his reputation will in the last resort depend upon assessments of this moment [Munich] and this policy [appeasement]...  To expect otherwise is rather like hoping that Pontius Pilate will one day be judged as a successful provincial administrator of the Roman Empire."

[2]  The top ten are: NFL (American football); Bundesliga (German soccer); English Premier League (soccer); AFL (Australian football); IPL (cricket); MLB (American baseball); Big Bash (Australian cricket); NPL (Japanese baseball); La Liga (Spanish soccer); Liga MX (Mexican soccer). 

[3]  The S&P 500 is the most widely used and best representation of the US stocks market.  It is, more or less, the 500 largest companies by market capitalisation traded on US stock exchanges.  The 'Dow' (i.e. Dow Jones Industrial Average) is a popular measure, but it has significant shortcomings. 

[4]  The VIX is based on the S&P 500® Index (SPX), the core index for U.S. equities, and estimates expected volatility by averaging the weighted prices of SPX puts and calls over a wide range of strike prices.

[5]  For reasons that remain unfathomable to W&D, Watts was traded to an interstate club at the end of the season.