Wry & Dry

Put a cap on it, son. ABC can't 123. Stood up.

The Barnaby Intersection

Wry & Dry was looking forward to this week.  The intersection (almost) of Valentine's Day and Chinese New Year augured a week of lurv and fireworks.  But W&D's personal ambitions (as modest as they were) in this regard were obscured by events at The Barnaby Intersection.

The Barnaby Intersection, always a traffic hazard, is where the highways of politics and personal life meet.  It is closely watched by the media vultures and by people sitting in pubs (whose imaginary participation in the imaginary 'Pub Test' is a vital lubricant to the wheels of politics).

And this week, at The Barnaby Intersection, the traffic of lurv, sex, procreation, fidelity and family spectacularly crashed into politics and media.  With fireworks aplenty.

Sadly, Barnaby doesn't see that there is a problem.  Well, W&D certainly does. 

Barnaby was clearly smoking a Marlboro behind the sheds at St Ignatius' College, Riverview in Sydney, when he should have been at Sex Education For Catholic Boys classes.  Or maybe he did attend and discovered that Catholics didn't believe in contraception.  Either way, had he listened to those words that every father tells their sons ("put a cap on it, son"), none of this would have happened.  But no.  Clearly, the blood draining from Barnaby's thimble-sized brain as he contemplated passion with Ms Campion was sufficient to impair his judgement.  

Cartoon Tamworth mounting yards

And that simple act of temporary happiness has probably ensured that after the next election, he will be out of office.  More, later.

Deepak, W&D's Uber driver, was talking about...

...the 'correction'.  "What is this thing called 'a correction?" he asked W&D.  "I thought correction was what Anjali does to me when I come home after too many Kingfishers [1]."

W&D, residing comfortably in the back seat, lifted his lips from his glass of 1985 Perrier-Jouët Belle Époque.  "Nothing about which to be worried.  A 'correction' is just when the share-market has run too far, too fast.  The technical definition is a 10% fall since the previous highest point."

Cartoon ASX correction

"So," Deepak responded, "the market just gives up some recent gains and then returns to normal.  So what was last week's fuss all about?"

"Three reasons," W&D commented.  "Firstly, the market hadn't had a 'correction' for a long, long time.  Investors became complacent.  And so were surprised when the market fell."

"Secondly, the ASX hadn't raced up like the US market had.  And only fell just over 3% over the week. So there should be even less fuss in Australia."

"Thirdly, the media will always make the news bigger than the story.  So, for example, the headline 'biggest one-day points' fall in Dow' was correct.  But as the Dow was at a record high, any decent percentage fall would be of a large number.  Hence the fall would be a large number in terms of points.  The 4% one-day fall was well back in the queue of largest percentage falls, not even in the top 30."  W&D showed him the below chart. 

WI Feb 18 Market downturn 

"As you can see, the market often 'corrects'," W&D concluded.  "But 'corrections' are part of investing life.  In the end, they don't matter.  In fact, since June 2000, the ASX (including dividends) has returned 8% p.a. And that includes the shambles of the GFC.  And that is 5% above inflation."

"Ah, so I have nothing to be worried about," Deepak asked, hopefully.

"Only Anjali, when she finds out you have lost a pile on Bitcoin."

Deepak went white.  Well, whiter.

Building a mosaic... 

It is very difficult for W&D to draw a line under Barnaby's fiasco.  At every turn, it is the gift that keeps on giving, the parliamentary Magic Pudding [2].  Consider the following:

Firstly, the main issue is not morals, it is about judgement. 

Part A: He is the Deputy Prime Minister, a position that suggests the holder of the title has some ability to think clearly, if nothing else.  Bonking a staffer is one thing.  Covering it up is another.  For how long did he think he could keep his betrayal, affair and impregnated girlfriend a secret?  At the very least he could have 'owned the story' and fessed up.  That wouldn't have ameliorated the problem, but might have controlled it.

Part B: The story, like his public life, is now unraveling, spiralling out of control.  The honourable thing to do would be to resign, at least as Leader of the Gnats (and hence as Deputy PM).  And save any further embarrassment for the government, his two families and himself.  But it would seem that the cut in salary from just over $400,000 to about $200,000 would be too much for a man who now has two families to finance.

Secondly, there is the hypocrisy.  This man championed traditional marriage; used family #1 as props for his recent by-election campaign; and opposed, for example, the Gardasil vaccine, which protects against HPV and cervical cancer, on the basis that it would give young women "a licence to be promiscuous".     

Thirdly, he is and has been an incompetent MP and minister.  Readers will know that Barnaby's parliamentary life has been a litany of incompetence and self-indulgence.  When he was in the Senate, he voted against the government 16 times.  His time as Minister for Agriculture was a period of unashamed pork-barreling and now as Minister for Infrastructure he is focused not on desperately needed urban projects, but on rural projects, such as the 'nation-building' but fiscally irresponsible Melbourne to Brisbane inland railway. 

Conclusion: The Mosaic.  Readers will know of an investment postulation called the Mosaic Theory [3], where a conclusion is reached by piecing together a seemingly unrelated set of items.  That is, forming a mosaic of small individual pieces.  Each of Joyce's failings, by itself, is probably not a resignation offence. 

But piece together all of the above and W&D can only see a mosaic of disaster.  

Speaking of big ego, small brain

One man who saw the writing on the wall, eventually, is Jacob Zuma, South Africa's President.  The country had had enough of him some time ago.  But his party (ANC) supported him.  However, the corruption and incompetence became suffocating.  And so the ANC fired him last week.  And on Wednesday he quit, days before the parliament would have so done.

W&D epistle isn't long enough to list all of Zuma's failings.  Except to note that in 2006 he was charged (and acquitted) with raping the daughter of a family friend.  The woman was HIV positive.  He said at the trial it was all okay, as he had showered after the unprotected passion to guard against possible infection.

Same school as Barnaby...   

Unintended consequences

Tsar Trump has been touting, no, shouting, how his tax reforms are changing the world.  Consider the tax changes that will allow US companies to repatriate profits held offshore.

Apple, a US mobile phone maker, has US$245 billion held 'offshore'.  And will repatriate those funds and in so doing pay $38 billion in tax.  The balance will be used to reinvest, repay debt and buy-back shares.

Trouble is that the US$245 billion wasn't sitting in bank accounts.  It has been invested, principally into corporate and government bonds.  These investments must now be sold. 

Another push upwards on US interest rates.

"Stood down"

W&D noted media reports that a Mr Richard Umbers, CEO of embattled retailer Myer, was 'stood down'.

Cartoon standing down

Readers would also be confused by this term.  What does it mean?

In his younger and wilder days, W&D was once 'stood up'.  That is, the prospective hot date changed her mind, and, without notice, did not show.  W&D always hesitated to undertake further investigation into this disgraceful behaviour.

So, W&D can only assume that 'stood down' is the opposite of 'stood up'.

Being 'stood up' is a bad thing.  Therefore, being 'stood down' must be a good thing. 

W&D hopes that Mr Umbers is pleased with the decision. 

It is with some trepidation that...

...W&D this week mentions banks.  Actually a bank.  And, hip, hip, hooray, it's not CBA.  It's that let's-lawyer-up-for-whatever-reason-to-ensure-our-lawyers-get-good-holidays bank: Westpac.

Westpac has been charged by ASIC, the corporate Labrador, with allowing its employees to not provide personal financial advice when recommending, over the phone, to clients that they 'rollover' their superannuation into a Westpac product.  Some $640 million was rolled over by these clients into Westpac's wealth management business, BT Financial.

Cartoon Westpac signing

ASIC contends that personal financial advice should have been given, especially about comparing the client's existing superannuation arrangement (fees, performance, service, etc) with BT's.

This is really weird.  It's weird because the law on this matter is a plainest part of the Corporations Act. 

And, ethically, speaking, Westpac is in the role of fiduciary.  And hence its clients should expect that Westpac would place its clients' interest above its own.  And provide the comparisons necessary for clients to make up their own mind.  Regardless of what the law requires.  

W&D waits with interest to see what the Federal Court decides.

Okay, it's back to the... CBA

Well, not directly.  W&D notes that yesterday the US' fifth largest bank was fined US$600m (A$750m) by US regulators over failings in its anti-money laundering programme over a period of more than five years.

Just say'n.

Unintended consequences

With the announced ban on sexual relationships between federal ministers and members of their staff, W&D wonders what will happen to the condom-vending machines in Parliament House.  Will the machine owners seek compensation for loss of profits?

Cartoon Turnbull no sex

ABC can't 123

Readers will be aware that the Australian Broadcasting Commission is not W&D's favourite enterprise.  As an organ of independence (much like Barnaby Joyce's ...oh, never mind) it fails.    

But political bias is one thing, economic incompetence is another.

Emma Alberici, its chief economics correspondent, has come out with an extraordinary tabloid piece opposing the government's tax cuts. (The article is still on the ABCs' website).  W&D is not sure whether this is the proper role of a correspondent.  Nonetheless, W&D will assume that it is. 

The problem is that she asserted that "why cut company tax when one in five of Australia's top companies paid zero tax for the past three years."

Well, my dear Emma, company tax is paid on profits.  If companies do not make a profit or have carry forward losses from previous years, they do not pay company tax.  It has nothing to do with the rate of company tax.

And further, my dear Emma, your example of Qantas "hasn't paid company tax in three years even as the airline managed to double the salary of its Chief Executive" is not only economically fallacious, it is mischievous.  Qantas is still writing off losses incurred by the union dispute, the economic fallout from the GFC, and the $2.8 billion loss in 2014.  It will resume paying tax in about 2020.  Over the past 12 years, Qantas has had an average company tax rate of 29.9%.

Now, my dear Emma, will you now rewrite your thesis?  With due apologies?

Speaking of company tax cuts...

...there has been much mischief about the government's proposal to gradually cut company tax to 25% from the existing 30%.  Not only from those who should know better (e.g. the ABC) and those who don't (e.g. Pauline Hanson) but also those who can't (the Greens).

W&D sees this very simply, if cutting company tax is such a bad thing, is the reverse true?  That is, increasing the company tax rate is a good thing.  Would Australia, workers, investors, etc be better off with a higher tax rate?

Err, demonstrably no.

And, to soothe your troubled mind...  

Miscellany 

Last words...

"I regard the bitcoin craze as totally asinine."  

-   Charlie Munger, a billionaire and investment partner of Warren Buffett.

Mr Munger is 94-years old.

First Samuel client events calendar

Date 

Description

Details

2018 Events  (Invitations not yet sent)

Tue-29-May-18

Eat Street - food & wine fest

Sofitel

Wed-18-Jul-18

NGV Winter Masterpieces Exhibition

Masterworks from Moma (New York)

NGV

Tue-14-Aug-18

Forum - guest speaker TBA

Leonda

Some lightly salted absurdities from all over...

At the extreme left-hand end of the Bell Curve

Pro-tip: when you live in Russia, best not to use a nuclear warhead facility for private purposes

Several scientists working at a top-secret Russian nuclear warhead facility decided to use one of Russia's most powerful supercomputers to mine Bitcoins.  The supercomputer was not supposed to be connected to the internet - to prevent intrusion - and once the scientists attempted to do so, the nuclear centre's security department control room lit up like Christmas.

They were handed over to the Federal Security Service (FSB),

(BBC)

What were they thinking?  The FSB is the successor to the KGB.  "...and they were never seen of again."   

Guess what happened next

Off duty policeman Steve Thomas was involved in a small crash and bash in the Bronx, New York: no-one hurt, but cars damaged so as not to be driveable.  What happened next?

a.  Steve admits it was his mistake and all ends happily;

b.  Steve finds out the other driver was his wife, and they both laugh;

c.  Steve got into an argument with the other driver; and arrested him; or

d.  Steve got into an argument with the other driver; pulled out his gun and shot a tyre of the other person's car.  

Close.  But no cigar.  The correct answer is d.  Steve was arrested, charged with criminal possession of a firearm, reckless endangerment and criminal mischief. 

(New York Post) 

Homework

For much of the past year, President Trump has declined to participate in a practice followed by the past seven of his predecessors: He rarely, if ever, reads the President’s Daily Brief, a document that lays out the most pressing information collected by U.S. intelligence agencies from hot spots around the world.

Trump has opted to rely on an oral briefing of select intelligence issues in the Oval Office rather than getting the full written document delivered to review separately each day, according to three people familiar with his briefings. 

Reading the traditionally dense intelligence book is not Trump’s preferred “style of learning,” according to a person with knowledge of the situation. 

(Washington Post) 

"Style of learning"?  Hold the phone.  The President doesn't have to memorise the contents, just understand it.  Sigh.

 

Have a wry and dry weekend.  

Anthony

 

[1]  The Magic Pudding is an Australian children's book, written and illustrated by Norman Lindsay.  It tells of a magic pudding which, no matter how often it is eaten, always reforms itself in order to be eaten again.

[2]  Mosaic has nothing to do with Moses.  The word is derived from the Greek Mouseion 'of the muses'.  Museum, music and muse have the same source.  A Muse was any of nine sister goddesses, each of whom was regarded as the protectress of a different art of science.

[3]  India's top selling beer.