The sky falling? No. Least worst alternative. Nordic neutrality nixed.
Whilst enjoying your Perrier-Jouët Belle Époque…
The sky falling? No
Wednesday’s 4% fall on Wall Street was not caused by the rumour that so-called ‘Teal’ candidates1 had formed a political party and might win a majority in tomorrow’s Australian election.
It was the self-realisation of the US stock market that it was overvalued. And it took ‘old economy’ retailers Walmart and Target to cause the sell-off.
This broadened the market downturn from the recent tech-stock rout. The S&P 500 is now down 18% from its peak, just two points from the technical ‘bear-market’.
Should investors worry?
No, these retail companies have had excess returns from covid-lockdowns and low interest rate driven demand. Covid is sort-of over and interest rates are rising.
Think also of other companies that made hay whilst the lockdown sun was shining: Netflix and Amazon are the prime examples.
Tech-stocks are still getting hammered, whether they are actually tech-stocks, or behave like tech-stocks.
The short message is that there might be even more swings as the market responds to emotional short-term pushes and pulls. And it may take a little while for the market to return to a more normal world of less covid and higher interest rates.
Older investors know that the last 30 years, especially the last 10 years, have been an aberration. Both economically and geo-politically. The easy money days are over.
It would be folly to pick winners and losers in such volatility. Investment success will return to the patient.
1 A loose single-issue confederation of independent candidates, comprised mostly of attractive, highly educated females standing in wealthier electorates where bread-and-butter issues don’t matter. They use the colour teal as their moniker as, in trying to attract Liberal voters, it is seen as a softer version of Liberal deep blue and unrelated to either Labor red or the Greens green. More accurately, they should really use RGB 50, 50, 0 which has a hex triplet of 323200. That colour is olive green.
Least worst alternative
This is the worst election choice since 1972. Really, what is the least worst alternative? As Edward IV told his brother2, “You can choose the gallows, the block or the sword.”3
In 1972, a visionary Gough Whitlam (Labor) led a party of astoundingly incompetent ministers to victory over Billy McMahon’s (Liberal) decaying government.
Actually, in each of 1974, 1975, 1977 and 1980 it was a poor choice: Whitlam, Sneddon (who?), Fraser, Hayden. Really.
From 1980 to 2019 at least one of the main contenders had some competence: Hayden, Hawke, Howard, Keating, Abbott and Shorten. Morrison appeared competent after being a successful cabinet minister.
But he’s been disappointing, notwithstanding the appearance of pandemic success. Wry & Dry gives that success to Frydenberg and Hunt.
Whereas Jimmy, for the last 15 months, has been walking around wearing a t-shirt with an archer’s target on it, Albo has been wearing one with a tiny dot under his armpit.
Albo is ahead in the polls because voters just don’t like Jimmy. But he gives Wry & Dry little confidence in ability to manage any of his party, the cross-bench or the country. Likeability is not a critical success factor in politics.
It’s a pity, but most voters don’t understand that there is just one issue at the minute: the world is now in poor shape, and will be for a few years. In short: the economics’ portents are not good and the geopolitical situation volatile.
The reality is that it’s not between Jimmy and Albo. See below for Wry & Dry’s choice.
2George, 1st Duke of Clarence
3George chose neither, instead to be drowned in a butt of Malmsey wine. His crime was treason, of which there was much in the War of the Roses.
People: Eurovision result
Wry & Dry missed the final of the musical contest called Eurovision, as he was still sorting out his sock drawer.
But, as predicted, the entry from Ukraine comfortably won. Wry & Dry wonders whatever happened to the Russian entry:
Nordic neutrality nixed…
Women certainly have steel.
Sanna Marin and Magdalena Andersson, prime ministers respectively of Finland and Sweden, have persuaded their hitherto neutral and nervous governments to apply for admission to NATO.
Readers will know that this is a pragmatic response to Tsar Vlad’s bellicosity. But the decisions overturn centuries of policy.
Finland has pursued a policy of neutrality since the Second World War, reflecting the reality of a big and oftentimes grumpy bear next door. Russia had annexed Finland from Sweden in 1809; Finland regained sovereignty only in 1917.
Sweden’s neutrality commenced in 1812 and was sort-of recognised in the Congress of Vienna4. It has been, more-or-less, neutral ever since.
But, but, but. There is always someone keen to seek advantage from multi-party negotiations in a crisis. All members of NATO must agree on new entrants. Turkey is a member of NATO5. Sultan Recep Tayyip Erdoğan, a master of self-serving brinkmanship, has said that Turkey would not accept Finland and Sweden into NATO, because of their alleged support for Kurdish ‘terrorists’.
The Sultan has previously said that admitting Turkey’s rival Greece to NATO was a mistake, which should not be repeated with Finland and Sweden.
The Finnish foreign minister said that his government was not interested in “bargaining” with the Sultan. That doesn’t mean that others will not. Expect the Sultan to back down after securing domestically-symbolic gestures.
4 The Congress of Vienna was the outcome of multi-lateral negotiations to sort out the boundaries of Europe after Napoleon’s failed attempt to reorder it to his whim. Consider:
- Russia got most of Poland and retained Finland
- Prussia got 60% of Saxony
- A German Confederation of 39 states was formed from the previous 300 of the Holy Roman Empire
- The Netherlands and the Southern Netherlands (current Belgium) became a united monarchy
- Austria got Tyrol and Salzburg
- The UK got the balance of the West Indies it didn’t already have, plus Ceylon (not sure how this was a European matter)
- By acts of omission, the Italy of Napoleon reverted to a mere ‘geographical expression” of seven states: Lombardy-Venetia, Modena, Naples-Sicily, Parma, Piedmont-Sardinia, Tuscany and the Papal States.
5 Turkey joined NATO in 1952, as one of the western bulwarks against the Soviet Union and the Warsaw Pact. The reasoning was to, in the case of conflict, ensure no naval access to the Black Sea by the Soviet Union. This would complement restricted Soviet naval access to the Atlantic between Greenland, Iceland and the UK. Turkey has the second largest army in NATO, after the USA.
…but Italians want appeasement
A poll of Italians this week6 found that 46% wanted Russia to retain Crimea and the territory it now occupies in the east of Ukraine. Only 23% supported Ukraine fighting to win back its land.
What’s going on? Is this a reflection of the famed Italian tank?
No. Readers should remember that Italians have always had fond feelings towards Tsar Vlad, second in Europe only to Greeks. And apparently there is pro-Russian bias in Italian media, leading to a ‘distorted media debate’.
Of course, former prime minister Bunga Bunga Berlusconi7 , now 85 and still wearing that undetectable hairpiece, remains a strong supporter of Tsar Vlad. He suffers from RDS and recently announced grandly that he opposed sending arms to Ukraine and said that NATO should recognise the independence of Donbas from Ukraine.
6As reported by The Times.
7 Bunga Bunga being the name given to the Bacchanalian parties he ran when he was prime minister. Yesterday, a magistrate accused him of “brightening up his evenings with a group of concubines, meaning sex slaves, who were paid to entertain him” and spent “paid-for nights with him”. Ah, memories of ancient Rome.
Operation Fly Formula
Readers may recall stories of when Australian hikers were killed in a plane crash in a remote area of New Guinea, The Ruddster8 took charge of the retrieval effort. He called in the experts, rolled out maps of PNG and gave suggestions as to what to do. That’s really being a hands-on leader.
Well, Sleepy Joe has now taken charge of America’s latest shortage problem: baby formula. This must be a relief to him, not having to worry about Tsar Vlad or Emperor Xi. And only about American mothers.
American mothers are more formidable than the two autocrats. And they have a vote in the upcoming mid-term elections. Voting is not a concept known to either autocrat.
Sleepy Joe has invoked Korean-era powers to boost production of baby formula.
He said he was, “Invoking the Defense Production Act to increase domestic production [and] launching Operation Fly Formula to use federal planes to fly formula in from abroad.”
Operation Fly Formula? Really?
8Kevin Rudd, twice Prime Minister of Australia.
Meanwhile, in Emperor Xi’s empire…
Tragically, a China Eastern Boeing 737 crashed near Wuzhou in March. Readers may have seen a video of the plane in a near vertical drive before it plunged into terra firma.
American media reported that data from the plane’s flight recorders showed that the plane had been deliberately forced into a nosedive, either by a passenger or the pilot.
These reports have been censored by Beijing.
Beijing reports that the plane actually did not crash, but landed in a field. And then disintegrated. Passengers had de-planed and enjoyed a picnic with the pilot and crew. They all then died from eating local and poisonous mushrooms.
US election update
If Readers thought that the US couldn’t possibly be any more idiotic… then absorb the results of the so-called primary elections before November’s mid-term elections.
Republican voters have demonstrated a willingness to nominate candidates who parrot The Trumpster’s ‘election steal’ claims. Wry & Dry won’t list the names that will be unfamiliar to Readers, except one. In Pennsylvania, Republican voters chose a nominee for governor (i.e. state premier), Doug Mastriono, who sits to the far right of the soup spoon (e.g. no abortion under any circumstances, has hinted at the ‘white replacement’ theory). His campaign centred around the 2020 election being a Democratic conspiracy to steal the outcome. He was endorsed by The Trumpster, enjoys QAnon adherents and will change the electoral roll and voting arrangements.
And there are more.
Be afraid, be very afraid. Trump might well turn out to be bigger threat to the USA than Tsar Vlad or Emperor Xi.
Bring out your dead
The laugh of the week was Liberal campaigning in Kooyong, the electorate of Treasurer Josh.
Josh is under threat from Campaign 200, a campaign aimed at capturing young and female voters.
So, who rolls in to help out Josh? John Howard. No longer young (82) and certainly not female.
Sigh.
They would say that, wouldn’t they
Jimmy Morrison’s policy announcement that home buyers can use some of their superannuation savings for a first-home-purchase deposits brought expected howls of dismay from Anthony Albo (of course, this is an election campaign – Jimmy has howled at some of Albo’s policies) and the industry superannuation industry9. There were two reasons given: it will
- Undermine retirement savings
- Force up housing prices
Allow Wry & Dry to make some observations on one of the two areas where he has some knowledge (the other is tegestology).
Firstly, the scheme won’t undermine retirement savings, it’s effectively a residential property investment sort-of within superannuation, that should pay a capital gain and has the benefit of an imputed rental gain. And it is not funded by we-the-taxpayer. Quite clever, really.
Secondly, it may force up housing prices. Maybe. But where is the fuss about, for example, all of the states and Northern Territory providing First Home Owner Grants, in one form or another, of, generally $10,000? Or various state government stamp duty concessions to first home buyers?
And haven’t house prices boomed with lower interest rates? Albo didn’t complain then.
The industry superannuation funds are, as usual, up in arms over anything that might cause them to lose funds. Carefully curated (computer) models have been published predicting the end of the known world if the policy succeeds.
Do they care about their members’ retirement savings, in whatever form? Or, instead, their own muscle?
And might they have a liquidity problem if Jimmy’s policy becomes law?
9And, predictably, from Croesus Turnbull. This Quisling just couldn’t hide his RDS.
Greens: negotiation 101
The Greens have listed seven demands it will make on Anthony Albo, in case of a hung parliament. Each is perfectly reasonable:
- No new coal (even for coking coal, which is used in steel making) or gas mines
- Free dental treatment (no means test)
- Build one million new homes to end homelessness (census shows about 120,000 homeless, which leave 880,000 free homes for…)
- Free childcare (no means test)
- Cancel all student debt (no means test)
- Lift income support
- Progress Uluru statement
Just need to find the $173 billion needed.
At the bookies’10
Put down your glasses.
This week Last week Coalition majority $5.50 $5.50 Coalition minority $4.50 $7.00 Labor majority $1.95 $1.60 Labor minority $3.50 $3.90
10 Source: Sportsbet
History: Right to bear arms
There have now been 198 mass shootings in America so far this year. And it’s only May.
The Economist reports, sourcing Gallup polling, that Americans now want less strict control laws.
It gets worse. In 1960, 60% of Americans were in favour of banning handguns. Last week, the figure was 19%. In 2021, Americans purchased 18.5 million handguns.
Another example of US ‘exceptionalism’.
Stop press: Wry & Dry has a daughter who works in a school in the US. She just sent Wry & Dry the below photo:
The man was aiming at the high school. Ongoing incident, but it seems no shots fired, man arrested.
Habits: working hours
Famed, iconic and wealthy investment bank Goldman Sachs has said, in an email to staff on 22 April, that it will respect an existing employment policy that junior bankers should not work between 9pm Friday and Sunday morning.
Wry & Dry assumes that, this being Goldman, that ‘Sunday morning’ means 12.01 am.
Money: fiscal cliff
It was a great idea. Create a cryptocurrency to cash in on the cryptocurrency mania. Then somehow tie its value to the USD to give it stability. Then give it a name evoking stability: TerraUSD.
But, unlike other so-called stablecoins that are backed by liquid assets (albeit inadequately), tie its value to another cryptocurrency called luna11.
What could possibly go wrong?
Below is the price chart of TerraUSD, the price of which is pegged to US$1.00. It worked, until it didn’t.
It didn’t work because there was no underlying collateral, which made the regime a ‘faith-based’ currency. When investors, or people, lose their faith, the ending is apocalyptic.
11The theory is investors can exchange one unit of TerraUSD for $1 of luna. If the price of TerraUSD slips below $1, investors are incentivised to buy TerraUSD so they can exchange it for luna and make a small profit, and vice versa when the price moves above $1. This so-called arbitrage is supposed to push TerraUSD’s price back to $1. The arbitrage works, in theory, because a computer algorithm creates (mints) both Terra USD and luna and destroys (burns) both to bring the price back to equilibrium.
Snippets from all over
1. UFOs
U.S. defense officials released videos of unidentified flying objects during the first Congressional (i.e. parliamentary) hearing on the subject in more than half a century. (Wall Street Journal)
Wry & Dry comments: But no phone-shot videos of a suburban family and their alien houseguest.
2. Russian honesty
A military analyst on one of Russian state television’s most popular networks left his fellow panellists in stunned silence on Monday when he said that the conflict in Ukraine was deteriorating for Russia. “The situation for us will clearly get worse,” Mikhail M. Khodaryonok, a retired colonel and a conservative columnist on military affairs, said. (New York Times)
Wry & Dry comments: He has now employed a food taster.
3. EVs suck cobalt from phones
Electric vehicles overtook smartphones and personal computers for the first time last year as the main source of demand for cobalt, a rare metal used in lithium-ion batteries. (Financial Times)
Wry & Dry comments: Democratic Republic of Congo supplies 74% of world demand. Australia is the second largest supplier at 3.5%. Of DRC’s 118,000 metric tonnes of production, Glencore (LSE listed) produces 25,000 MT, Eurasian Resources Group (private, was LSE listed) 15,000 MT and Chinese companies 20,000 MT.
4. McExit
McDonald’s has initiated a process to sell its business in Russia after 30 years of operating in the country. In March, the fast food business closed all of its restaurants in Russia. (The Times)
Wry & Dry comments: Will the health of Russians now improve?
5. EU economic outlook dims
The EU is set to cut its growth forecasts to 2.7% from 4% this year and lift its inflation outlook to 6% as the energy crisis triggered by Russia’s invasion of Ukraine exacts its toll on the EU economy. (Financial Times)
Wry & Dry comments: A least the EU’s GDP is expected to increase this year. Tsar Vlad’s economy (aka Russia) is expected to fall 12%.
Data
- Egypt increased its interest rates by 2% points to 12.25%.
- Australia’s unemployment rate in April fell to a 48-year low of 3.9%.
- China’s economic activity plunged in April, with retail sales falling 11.1% year-on-year.
- UK unemployment fell to 3.7%, the lowest in nearly 50 years.
- Canadian average home prices fell 6.3% in April.
- UK inflation rose 9% in year to April, a 40-year high. Most of the increase was energy price increases.
And, to soothe your troubled mind…
“A desire to protect one’s homeland, in the sense that it exists in Ukraine, it really does exist there, they intend to fight to the last man. Ultimately victory on the battlefield is determined by a high level of morale among personnel, which sheds blood for the ideas which it’s prepared to fight for.”
- Mikhail Khodarenok, the former head of the Main Operational Directorate of the Russian Armed Forces’ General Staff and the editor of an influential military journal, speaking on Russian television.
He batted back frequent interruptions from the show’s host, Olga Skabeyeva — who toes the Kremlin line so closely that she has become known as the “iron doll of Putin TV” .
And least worst alternative is…
Wry & Dry prefers the steady hand of Frydenberg to the ham-fist of Chalmers. Alas, the outcome of his preference will be decided by preferences not be shared by more than 50% of voters.
PS The comments in Wry & Dry do not necessarily reflect those of First Samuel, its Directors or Associates.
Cheers!
Anthony