I have been trading shares since I was 18 and my last big loss was when the music retail chain Brashes went broke in 1998. I wish I could say I was a great success as a stockpicker, but I can't. I have made money consistently but the only chance I have had to make big money was with Webjet which I bought for 5 cents. Webjet closed on Friday 28 September 2012 at $4.09. I got a bad case of cold feet and pulled out. At the time, the broker was despairing and said I was the only person who'd made money on Webjet. Famous last words.
I bought my first stock with Eyres Reed in Perth from Peter Eyres, nephew of the firm's principal, Gordon Eyres. I bought 2,000 Ferrovanadium Corp at 9 cents. I said they were a long term investment -- 18 months. Peter Eyres expressed some astonishment, as holding anything beyond the close of trade was considered to be a long term investment in those days. This was in 1971, at the tail end of the nickel boom. Ferrovanadium owned a vandadium deposit at Barrambie, north of Meekathara in outback Western Australia. I had an insider tip that the mine would be developed "within 18 months". It's now 2012 and it's still waiting to be developed. All Ferrovanadium's assets were sold in exchange for two stripper wells, in Arkansas, I believe. At the time, I had a good laugh but I could afford to -- by then I had sold out. I was reminded of Mark Twain's definition of a gold mine -- "a hole in the ground surrounded by liars". Vanadium, by the way, is used to make tool steels and there is an eternal shortage, but never severe enough apparently for anyone to bother developing the Barrambie mine.
I did not buy more shares following my less than satisfactory experience with Ferrovadium until I returned from Taiwan in 1982. I spoke to Gordon Eyres and we bought a very good portfolio based on Western Australian regional companies -- Calsil, Peters WA, WA Trustees, Swan Brewery and several others. I made money on all of them. They have all ceased to exist as independent companies. By the time the so called "entrepreneurs" got going, it was like shooting fish in a barrel. I was continually being harrassed by companies soliciting my stocks in takeovers or proxy battles. I well remember jumping up and down for joy when John Elliott announced a bid for Carlton and United Breweries (CUB) , which I held. When the government announced overseas invested companies such as Cadbury Scwheppes and P&O would no longer be required to have a local minority shareholding it was almost like getting free money when they took out the minorities.
Owning stocks used to be fun. The Central Norseman Gold Mines AGM was held about half an hour before the Western Mining AGM. When Central Norseman found some new gold and was actually making money, Hugh Morgan would be harranged by the shareholders, numbering in total about 20, all over 70, who demanded to know when the firm would pay a dividend. "I've held this bloody stock since since the 1950s and want to get a divie out of it before I die" yelled one elderly gentleman at Hugh Morgan. Of course, the Central Norsemen AGM was held in the expectation that they were also WMC holders and wouldn't delay the WMC AGM by asking too many awkward questions. While all shareholders are entitled to attend the AGM, those that do can be broken down into two groups -- the analysts and other serious investors and the retirees, who turn up for the refreshments. BHP Goldmines had a great spread, while one other well-known firm, which invited shareholders to stay for a "cup of tea and a biscuit" provided exactly that.
The best advice I've had on trading shares is "when the ship starts sinking, don't just stand there, jump!" That adage may have cost me some money from time to time, it has also saved me many thousands of dollars. When it comes to "trade or buy and hold", most people don't hold, they just don't do anything. Those who've held the punters' favourites like BHP and the Big Four banks have done well, not because they've had a conscious strategy to hold, but because they've done bugger all. When another one of my mother's shares goes bust, most recently Alseco, which collapsed from $12 to near zero, she will tell me as if imparting some great secret that a capital loss is a tax deduction. As I tell her with great restraint you can only offset a capital loss against a capital gain and she has never -- not once in 20 years -- taken a profit.
While I have made consistent profits, they have not been great profits --- useful, rather than spectacular. I would like to turn my attention two two men who have made real money.
You would never guess John Babb was a wealthy man. He was a taxi driver, known to his fellow cabbies as "night and day" because he wouldn't stop working. He read the Financial Review, often dropped in on the Stock Exchange of Melbourne when all trades were recorded on the chalk board in the exchange in Collins Street. He kept is ear to the ground, and he had the ear of -- and an account with -- just about every major broker in Melbourne. He bought Poseidon twice in its journey to $280 in February 1970. Although I spoke to John many times, usually at least twice a week, I never found out just why he was so much better than me as a stock picker. Towards the end he started losing his touch -- he did $20,000 cold when Budget Rent a Car went bust a few days after it floated. He lost a lot of money but he made a lot more money. He bought News Ltd on the float and made many hundreds of thousands.
"Big Bill Baillieu" is the most influential businessman Australia has ever known. Asked why his floats often did better in London than Australia, he is reputed to have said "the further you get from a mine, the better it looks." His career is recorded in one of the best business biographies of the post-war era "William Lawrence Baillieu: Founder of Australia's Greatest Business Empire" by Peter Yule (Hardie Grant, 2012). His fortune was founded on the the mines of Broken Hill and encompassed just about every sphere of Australian business. He was an entrepreneur in the true sense of the word.
Over the period I have owned stocks, I have dealt with brokers in all mainland States. A very few of them are crooks; most are just following advice produced by the research department or pushing what they are told to sell. Some are very good. They almost always have "skin in the game." The two best brokers I have dealt with are Gordon Eyres of Eyres Reed and Ian Gillion of Gilllon Derham. Ian was the odd lots broker to the Exchange. In the old days, you had to deal in a "marketable parcel" of a certain number of shares. If you had an "odd lot", that is, a small number of shares, Ian Gillon would buy them from you at a deep discount. Ian's daughter, Sally, also worked in the business. I recall one day calling into the Gillion Derham office to deliver a cheque and asked Sally what Santos were doing. She looked at the Reuters screen and
said "you'd better be quick, they've just struck oil." It turned out it was a development well in the Cooper Basin. I had a good laugh with Ian about that later but the stock did well.
A computer screen is a lot more efficient than dealing direct with a broker. It is also a lot less fun and doesn't know what the current gossip is. If you want a price, you are a lot less likely to follow it up with an order, which is probably a good thing. When deregulation came the Australian share market, Ian Gillion said "It's completely stuffed this business. I think he was right.
If you want a tip, I have held Swan Breweries, CUB, Wolf Blass Wines, Mildara, SA Brewing (which became Southcorp), Foster's and made money on all of them. I now hold Treasury Wines Estates and I'm doing very well on them, so if you want a tip, buy TWE. As the US economy recovers they will gradual.ly improve and the will be a very tempting morsel for any international buyers who wants to get their hands on Australia's best brands. Did I hear China?
Friday 28 September 2012
Time to short Australian residential property?
A close relative of mine returned recently from New York, where he worked on mergers and acquisitions for a major international commerical law firm located within a stone's throw of the New York Stock Exchange. As an official member of the New York Bar, he was fully qualified to work on some of history's biggest deals -- exactly which ones he wasn't permitted to disclose. On his return to Australia, he did announce one thing -- that he, along with just about every institutional investor in the US, believes Australian residential property is 50% overvalued. he said he wouldn't be buying a residence until property prices are a lot lower.
Just how justifed is this? Michael Lewis in his best seller "The Big Short" (Penguin, 2010) shows how the lunatics took over the Wall Street asylum. What we in Australia call the global financial crisis (GFC) was due to financial engineers manufacturing products no-one understood which were then forced down the throats of borrowers who didn't understand them either. The infamous NINJA loans (no income, no job, no assets) were a one way bet that house prices would keep rising -- and not just rise, but rise consistentally and substantially. Of course, that bet didn't pay off but the feeding frenzy that accompanied the massive profits generated by mortgage backed securities blinded all but a prescient few that America's banking system was headed towards disaster and would likely drag the rest of the world with it.
Australia's RMBS (residential mortgage backed securirties) market was a cheap source of wholesale funds before the GFC. Now few foreigners will touch the RMBS market. Australian boss of the bond Goliath Pimco "speaking personally" says most instituional investors believe Australian residential real estate is the world's biggest property bubble. One might say, however, if it is a bubble, it has remained inflated for a very long time without deflating. In addition, major lenders are said to evaluate low doc/no doc loans very carefully, although evidence exists that mortgage originators do turn a blind eye to applicants who do not meet the required criteria. The major banks are still trying to sort out the mess they were landed in through their association with Queensland-based Storm Financial, which will cost them hundreds of millions of dollars. On the whole, the banks' loan standards are high and they are under no pressure to shower the indigent with a gushing fountain of money.
One, then, should look at the macro factors driving rhe Australian economy. No prizes will be awarded to those who nominate China. The "China put" is looking very shaky. Shipments of one of Australia's main export, iron ore, have fallen 16% this year, the first reversal in almost two decades. Increasingly, it is looking like China's "borrow to export" model has hit the wall, with the currrent slowdown heralding a new phase of China's development rather than a cyclical downturn. The much-discussed shift to a consumer-based economy doesn't seem to be happening. Most people are too busy staying alive and saving for education, medical treatment and their old age to be too worried ablout consumer goods. And by the way, Shanghai has one of the world's lowest birth rates -- no new consumers.
Another factor is US shale gas coming on line. The first gas exports from the US to Asia set to begin in 2015. The US can supply Asia at 20% of rhe current price The current price is set by reference to the crude oil price. Some elements of Australia's so-called "investment pipeline" are beginning to look even more marginal, such as the coal seam gas projects, which are already marginal. Within 15 years, the US will be a net energy exporter. They have so much shale gas they literally don't know what to do with it all.
In the event of a real crash in the Australian residential market, what would happen? According to a recent IMF "stress test", in an "Ireland scenario", where house prices halve and unemployment rises to 16% , the Big Four would have to raise capital, but they would survive.
Moody's, the most respected of the three major international ratings agencies, has recently re-risked Australian RMBS. This has not been favourably received. Moody's has factored in the China slowdown but not a "black swan" event such as hostilities between China and Japan in the East China Sea over rhe Senkaku islands disrupting two-way trade.
National Australia Bank's June 2012 property survey shows a generalised weakening of residential property, with ongoing weakness in New South Wales and Victoria, the two most populous states. Wesstern Australia and Queensland, the two resource-rich states, are showing modest growth. NAB does not expect sustained growth across the nation for at least two years. NAB's next survey will be released in mid October.
In all, Australian property does seem overvalued from an international perspetive but Australia has been enjoying the best terms of trade for a century. Australia is by any measure a remarkably propserous nation. But now it's when the merry-go-round stops, rather than if. As Warren Buffett, the Sage of Omaha said, it's only when the tide goes out you see who's been swimming naked. As far as I can see, we'll all be observing a gentleman called Tony Abbott to see if he's got his budgie smugglers on. Julia Gillard will be by that time, we can only hope, back in the changing rooms.
In the meantime, there's an old market adage to keep in mind:
He who sells what isn't his'n
Must pay the price or go to prison
Just how justifed is this? Michael Lewis in his best seller "The Big Short" (Penguin, 2010) shows how the lunatics took over the Wall Street asylum. What we in Australia call the global financial crisis (GFC) was due to financial engineers manufacturing products no-one understood which were then forced down the throats of borrowers who didn't understand them either. The infamous NINJA loans (no income, no job, no assets) were a one way bet that house prices would keep rising -- and not just rise, but rise consistentally and substantially. Of course, that bet didn't pay off but the feeding frenzy that accompanied the massive profits generated by mortgage backed securities blinded all but a prescient few that America's banking system was headed towards disaster and would likely drag the rest of the world with it.
Australia's RMBS (residential mortgage backed securirties) market was a cheap source of wholesale funds before the GFC. Now few foreigners will touch the RMBS market. Australian boss of the bond Goliath Pimco "speaking personally" says most instituional investors believe Australian residential real estate is the world's biggest property bubble. One might say, however, if it is a bubble, it has remained inflated for a very long time without deflating. In addition, major lenders are said to evaluate low doc/no doc loans very carefully, although evidence exists that mortgage originators do turn a blind eye to applicants who do not meet the required criteria. The major banks are still trying to sort out the mess they were landed in through their association with Queensland-based Storm Financial, which will cost them hundreds of millions of dollars. On the whole, the banks' loan standards are high and they are under no pressure to shower the indigent with a gushing fountain of money.
One, then, should look at the macro factors driving rhe Australian economy. No prizes will be awarded to those who nominate China. The "China put" is looking very shaky. Shipments of one of Australia's main export, iron ore, have fallen 16% this year, the first reversal in almost two decades. Increasingly, it is looking like China's "borrow to export" model has hit the wall, with the currrent slowdown heralding a new phase of China's development rather than a cyclical downturn. The much-discussed shift to a consumer-based economy doesn't seem to be happening. Most people are too busy staying alive and saving for education, medical treatment and their old age to be too worried ablout consumer goods. And by the way, Shanghai has one of the world's lowest birth rates -- no new consumers.
Another factor is US shale gas coming on line. The first gas exports from the US to Asia set to begin in 2015. The US can supply Asia at 20% of rhe current price The current price is set by reference to the crude oil price. Some elements of Australia's so-called "investment pipeline" are beginning to look even more marginal, such as the coal seam gas projects, which are already marginal. Within 15 years, the US will be a net energy exporter. They have so much shale gas they literally don't know what to do with it all.
In the event of a real crash in the Australian residential market, what would happen? According to a recent IMF "stress test", in an "Ireland scenario", where house prices halve and unemployment rises to 16% , the Big Four would have to raise capital, but they would survive.
Moody's, the most respected of the three major international ratings agencies, has recently re-risked Australian RMBS. This has not been favourably received. Moody's has factored in the China slowdown but not a "black swan" event such as hostilities between China and Japan in the East China Sea over rhe Senkaku islands disrupting two-way trade.
National Australia Bank's June 2012 property survey shows a generalised weakening of residential property, with ongoing weakness in New South Wales and Victoria, the two most populous states. Wesstern Australia and Queensland, the two resource-rich states, are showing modest growth. NAB does not expect sustained growth across the nation for at least two years. NAB's next survey will be released in mid October.
In all, Australian property does seem overvalued from an international perspetive but Australia has been enjoying the best terms of trade for a century. Australia is by any measure a remarkably propserous nation. But now it's when the merry-go-round stops, rather than if. As Warren Buffett, the Sage of Omaha said, it's only when the tide goes out you see who's been swimming naked. As far as I can see, we'll all be observing a gentleman called Tony Abbott to see if he's got his budgie smugglers on. Julia Gillard will be by that time, we can only hope, back in the changing rooms.
In the meantime, there's an old market adage to keep in mind:
He who sells what isn't his'n
Must pay the price or go to prison
Monday 24 September 2012
Clever countries do not reward stupidity
As I sit at my computer on at 8:20 pm Monday 24 September 2012, I am quite aware I am a deviant. Why? Because just about everyone in Melbourne, plus tens of thousands more in the old football states of Tasmania, South Australia and Western Australia plus many more in the new territories of New South Wales and Queensland are watching the Brownlow Medal count. Even my wife, who had never even seen a game of Australian Football until she was well into her '20s, is watching. The Brownlow is the trophy for the best and fairest player in the Australian Football League, the most outstanding player in what is now certainly Australia's national game. The Brownlow is the highest indivudual honor a footballer can attain.
It is not my intention to say footballers are stupid -- these days, many are highly educated -- or that the viewers of the Brownlow count are necessarily stupid. But it is true that smart countries do not reward stupidity.
The term 'clever country' was coined by Prime Minister Bob Hawke on 8 March 1990 when he said "No longer contnet to be the lucky country, Australia must become the clever country." We will overlook the fact that the "lucky country" was an ironic term coined by the late Donald Horne, and the fact that my wife, who is Chinese and therefore values both cleverness and education (not the same thing) burst out laughing when when she heard the PM say this phrase, as it was so obviously absurd. Australia is known for a number of things in Asia, but cleverness is not one of them.
Tonight on the ABC TV news the government announced a new education policy and paraded a snaggle toothed moron as evidence of its necessity. Now the government has already 'fessed up that its new handicapped care policy (see my post 'Be hard hearted with handicapped') will cost not $1 billion but at least $10 billion! as I predicted. These days I greet my friends in the ALP with the words 'how many billions have they spent today? For reasons of sheer economic necessity and common sense, Australia should concentrate its educational resources, in the first place, on the most capable young people.
The best description of Australia's economic good fortune I have ever read came from a French journalist who said 'Australia is like the village idiot who wins the jackpot every time he buys a lottery ticket ."
Truly intelligent societies, like Taiwan, which lives on its wits -- not by how many million tons of rocks they dig up and ship to China -- respect and reward intelligence. Scholars are important and respected in Taiwan. Their opinions are often quoted in the press. How else would a tiny island half the size of Tasmania with a population slightly larger than Australia not only gain an enviable standard of living but also become a world leader in high tech?
In China, few things are sacred, but the gaokao, the nationwide university entrance exam, which gives the poorest peasant's son the same chance to excell as the Party Secretary's son, is regarded as the great leveler in the Middle Kingdom. University entrance, which is highly sought after as the gateway to fame and wealth, is decided on the results achieved in the gaokao.
Bob Hawke came from a priviledged background. His uncle was Premier of Western Australia and his father was a learned man. His fellow students said he had a 'Jewish mother' because she pushed and pampered him. He went to Perth Modern School, the best high school in the State. He was a Rhodes Scholar and studied at Oxford University, one of the most respected universities in the English-speaking world. Bob Hawke has been doing his yobbo act for so long, including his corney 'Solidarity Forever' rendition at the last Australian Council of Trade Unions (ACTU) conference, that people forget he is a scholar from the upper middle classes. Bob Hawke may try to disguise the fact, but he is a highly intelligent man and the best Prime Minister of Australia since Sir Robert Menzies.
Some may regard the attention paid to educating nature's fools as the mark of an enlightened society but I regard it as sheer stupidity. Many, if not most, children of Chinese origin in Australia attend on their weekends what are known as bushibans, or cram schools. Chinese parents know that Australia is honest enough that one exam paper is marked the same as another and if their children get better marks that Anglo-Celtic students, then their kids will get the place in dentistry, medicine or whatever. In other words, the best jobs with the best incomes.
Therefore, Bob Hawke's 'clever country' statement can be regarded as what the Chinese call 'pi hua' --- literally, 'fart talk.'
It is not my intention to say footballers are stupid -- these days, many are highly educated -- or that the viewers of the Brownlow count are necessarily stupid. But it is true that smart countries do not reward stupidity.
The term 'clever country' was coined by Prime Minister Bob Hawke on 8 March 1990 when he said "No longer contnet to be the lucky country, Australia must become the clever country." We will overlook the fact that the "lucky country" was an ironic term coined by the late Donald Horne, and the fact that my wife, who is Chinese and therefore values both cleverness and education (not the same thing) burst out laughing when when she heard the PM say this phrase, as it was so obviously absurd. Australia is known for a number of things in Asia, but cleverness is not one of them.
Tonight on the ABC TV news the government announced a new education policy and paraded a snaggle toothed moron as evidence of its necessity. Now the government has already 'fessed up that its new handicapped care policy (see my post 'Be hard hearted with handicapped') will cost not $1 billion but at least $10 billion! as I predicted. These days I greet my friends in the ALP with the words 'how many billions have they spent today? For reasons of sheer economic necessity and common sense, Australia should concentrate its educational resources, in the first place, on the most capable young people.
The best description of Australia's economic good fortune I have ever read came from a French journalist who said 'Australia is like the village idiot who wins the jackpot every time he buys a lottery ticket ."
Truly intelligent societies, like Taiwan, which lives on its wits -- not by how many million tons of rocks they dig up and ship to China -- respect and reward intelligence. Scholars are important and respected in Taiwan. Their opinions are often quoted in the press. How else would a tiny island half the size of Tasmania with a population slightly larger than Australia not only gain an enviable standard of living but also become a world leader in high tech?
In China, few things are sacred, but the gaokao, the nationwide university entrance exam, which gives the poorest peasant's son the same chance to excell as the Party Secretary's son, is regarded as the great leveler in the Middle Kingdom. University entrance, which is highly sought after as the gateway to fame and wealth, is decided on the results achieved in the gaokao.
Bob Hawke came from a priviledged background. His uncle was Premier of Western Australia and his father was a learned man. His fellow students said he had a 'Jewish mother' because she pushed and pampered him. He went to Perth Modern School, the best high school in the State. He was a Rhodes Scholar and studied at Oxford University, one of the most respected universities in the English-speaking world. Bob Hawke has been doing his yobbo act for so long, including his corney 'Solidarity Forever' rendition at the last Australian Council of Trade Unions (ACTU) conference, that people forget he is a scholar from the upper middle classes. Bob Hawke may try to disguise the fact, but he is a highly intelligent man and the best Prime Minister of Australia since Sir Robert Menzies.
Some may regard the attention paid to educating nature's fools as the mark of an enlightened society but I regard it as sheer stupidity. Many, if not most, children of Chinese origin in Australia attend on their weekends what are known as bushibans, or cram schools. Chinese parents know that Australia is honest enough that one exam paper is marked the same as another and if their children get better marks that Anglo-Celtic students, then their kids will get the place in dentistry, medicine or whatever. In other words, the best jobs with the best incomes.
Therefore, Bob Hawke's 'clever country' statement can be regarded as what the Chinese call 'pi hua' --- literally, 'fart talk.'
Sunday 23 September 2012
He Fan's 'China Challenge' is ludicrous nonsense
Asian language education is suddenly the Holy Grail of Australian education. Students studying Asian languages are conned into believing they will somehow get a great job as a result of their studies. I speak two Asian languages fluently -- Bahasa Indonesia and Mandarin Chinese -- and I can tell you I have never gained a single hour of paid employment as a result. All bachelor degree level Chinese will get a young graduate in China is a job as an English teacher.
That being said, I have no regrets at all about learning Mandarin because I have been able to travel alone and unassisted from Aomen in the south and Dalian in the north and from Shanghai in the east and Si'an in the west. Almost without exception, the only cities Anglo Australians have heard of are Beijing and Shanghai. This is comparable to visiting Australia and seeing only Toorak and Point Piper. Beijing and Shanghai constitute about 2 percent of the population of China. How many Australians have even heard of Zhengzhou, capital of Henan Province, a marvellous city of 8 million people, known as the Chicago of China? Or Dalian, a city of bone and sinew, where I could look out of my window and see high speed trains being manufactured and an old Soviet era aircraft carrier being reconstructed? Or Gongyi, a city where heavy indsutry rules -- most of it still in private hands -- making it one of trhe most prosperous cities in China?
This allows me to say without equivocation that He Fan's article 'The China Challenge '(AFR, 21 September 2012) is total self serving rubbish. For those of you who have not read the Review section of Friday's Australian Financial Review, headed 'Your Guide to the World of Issues, Ideas and Opinions, He Fan 'says Australia must change its view of Asia if it is to befriend The People's Republic.' He Fan is the deputy director of the Institute of World Economics and Politics, Chinese Academy of Social Sciences, Beijing. He is consultant for the Ministry of Finance, Ministry of Commerce, Ministry of Foreign Affairs and the People's Bank of China. He is also a member of the Bellagio group of central bankers and academics (Group of Thirty). I have no proof of the veracity of this biography, as it is entirely derived from the statement accompanying his article in the AFR.
The aim of this article is to convince Australian readers that we can somehow get on good terms with the neighborhood bully be being nice to him. Take the second paragraph. "Fairly speaking, this is not because Chinese people are ignorant of foreign affairs. On the contrary, international politics is a hobby to many Chinese, like sport is to many Australians.' Now, I have talked to dozens of Chinese (in Mandarin) about many topics, from taxi drivers to Party secretaries, including sensitive issues such as the fate of the One Child Policy and not a single one has mentioned foreign affairs. As far as Australia is concerned, occasionally someone will mention koala bears, but that's about the sum total of Chinese knowledge of Australia.
Let me draw an analogy. My late half sister loved what she believed to be Chinese food. She was a poor person, and Chinese food was a special treat. Her favourite dishes were lemon chicken and beef with black bean sauce. She truly believed she understood China because she liked Chinese food and the serving staff (always Chinese) smiled at her. Well, lemon chicken and beef with black bean sauce is a created cuisine. It is not Chinese food at all, it is Australian food. You will never be served lemon chicken or beef with black bean sauce in China because it is not Chinese food. Similarly, He Fan's article has nothing to do with Australia. It is a Chinese confection intended to achieve Chinese goals.
He Fan writes as if China has a choice in buying the products it purchases from Australia. He posits spurious comparisons between the ANZ Bank and Citigroup and between ANU and Harvard and Stanford. Each has its role. As for raw materials, China has been attempting to develop alternative sources of supply in Africa, where the Chinese are cordially loathed, without success.
He Fan quotes ANU's Hugh White as proposing a "shrewd strategy" of balancing itself between the United States and China, allowing for the US to make "strategic space" for China. It suits He Fan to quote an appeaser like White because in the narrow and deluded world of international strategic analysis in Australia he carries some weight.
Australia should not devalue its strategic assets. We will always be freer, more prosperous and a more spacious land than China. Our geostrategic situation gives us influence above that which our population would suggest. Given a chance, Chinese in their millions would emigrate here and make good citizens. Let's tell He Fan to take his delusions with him and go home to China.
That being said, I have no regrets at all about learning Mandarin because I have been able to travel alone and unassisted from Aomen in the south and Dalian in the north and from Shanghai in the east and Si'an in the west. Almost without exception, the only cities Anglo Australians have heard of are Beijing and Shanghai. This is comparable to visiting Australia and seeing only Toorak and Point Piper. Beijing and Shanghai constitute about 2 percent of the population of China. How many Australians have even heard of Zhengzhou, capital of Henan Province, a marvellous city of 8 million people, known as the Chicago of China? Or Dalian, a city of bone and sinew, where I could look out of my window and see high speed trains being manufactured and an old Soviet era aircraft carrier being reconstructed? Or Gongyi, a city where heavy indsutry rules -- most of it still in private hands -- making it one of trhe most prosperous cities in China?
This allows me to say without equivocation that He Fan's article 'The China Challenge '(AFR, 21 September 2012) is total self serving rubbish. For those of you who have not read the Review section of Friday's Australian Financial Review, headed 'Your Guide to the World of Issues, Ideas and Opinions, He Fan 'says Australia must change its view of Asia if it is to befriend The People's Republic.' He Fan is the deputy director of the Institute of World Economics and Politics, Chinese Academy of Social Sciences, Beijing. He is consultant for the Ministry of Finance, Ministry of Commerce, Ministry of Foreign Affairs and the People's Bank of China. He is also a member of the Bellagio group of central bankers and academics (Group of Thirty). I have no proof of the veracity of this biography, as it is entirely derived from the statement accompanying his article in the AFR.
The aim of this article is to convince Australian readers that we can somehow get on good terms with the neighborhood bully be being nice to him. Take the second paragraph. "Fairly speaking, this is not because Chinese people are ignorant of foreign affairs. On the contrary, international politics is a hobby to many Chinese, like sport is to many Australians.' Now, I have talked to dozens of Chinese (in Mandarin) about many topics, from taxi drivers to Party secretaries, including sensitive issues such as the fate of the One Child Policy and not a single one has mentioned foreign affairs. As far as Australia is concerned, occasionally someone will mention koala bears, but that's about the sum total of Chinese knowledge of Australia.
Let me draw an analogy. My late half sister loved what she believed to be Chinese food. She was a poor person, and Chinese food was a special treat. Her favourite dishes were lemon chicken and beef with black bean sauce. She truly believed she understood China because she liked Chinese food and the serving staff (always Chinese) smiled at her. Well, lemon chicken and beef with black bean sauce is a created cuisine. It is not Chinese food at all, it is Australian food. You will never be served lemon chicken or beef with black bean sauce in China because it is not Chinese food. Similarly, He Fan's article has nothing to do with Australia. It is a Chinese confection intended to achieve Chinese goals.
He Fan writes as if China has a choice in buying the products it purchases from Australia. He posits spurious comparisons between the ANZ Bank and Citigroup and between ANU and Harvard and Stanford. Each has its role. As for raw materials, China has been attempting to develop alternative sources of supply in Africa, where the Chinese are cordially loathed, without success.
He Fan quotes ANU's Hugh White as proposing a "shrewd strategy" of balancing itself between the United States and China, allowing for the US to make "strategic space" for China. It suits He Fan to quote an appeaser like White because in the narrow and deluded world of international strategic analysis in Australia he carries some weight.
Australia should not devalue its strategic assets. We will always be freer, more prosperous and a more spacious land than China. Our geostrategic situation gives us influence above that which our population would suggest. Given a chance, Chinese in their millions would emigrate here and make good citizens. Let's tell He Fan to take his delusions with him and go home to China.
Saturday 22 September 2012
Masters of black arts manipulate Muslim street
Most people know very little about politics. They are essentially stupid. Even in what passes for democracy in Australia, only around 30% of citizens would vote if they were not forced to do so. I refer to this as "enforced consent" The voter turnout figures are little better for local government elections in England, where local government delivers far more services than in Australia. People get the governments they deserve. That might sound cruel -- no one deserves Julia Gillard, or Tony Abbott for that matter -- but this blog is after all entitled 'very,very un-PC'
Because of their stupidity, people are easily manipulated by the masters of the black arts. China is currently up in arms about the Japanese occupation of the Diaoyu Islands. There's nothing like a nationalist hurrah to divert the population from a bad economy -- and China's economy is bad. Some fool in China surrounded his Honda with anti-Japanese slogans and set it on fire. The ironic thing is the car was probably made in a Chinese factory. If you watched the Chinese protesters on the islands, two were side by side, one waving a Republic of China (Taiwan) flag and one was waving a People's Republic of China flag. Any oil or gas under said to be under the islands is irrelevant, a mere diversion. This is blatant Han Chinese chavinism designed to stir up trouble.
Britain's Dark Lord, Peter Mandelson, put Tony Blair in power and helped keep him there. Regarded as the architect of New Labour, he was elevated to the peerage and the Privy Council, earning a new title, the Prince of Darkness.
Australia's own Master of the Black Arts, Bill Shorten, member for Maribrynong, is distinguished by his ability to wholeheartedly agree with any statement made by his political superiors, even if he has yet to hear it. His most notable claim to fame is that any 'reform' he makes to industry superannuation only serves to tighten the union movment's stranglehold over the nation's savings. His latest stroke of genius is to legislate so that Queensland public servants made redundant in recent downsizing must be employed -- by private sector employers -- under public service terms, conditions and salaries.
But for sheer idiocy and ease of manipulation, the world's Muslims must take the cake. I do not wish to imply that all Muslims are stupid. There are as many stupid Muslims as there are anyone else. But what country would declare a public holiday so the public could have a riot apart from Pakistan? Quite frankly, I do not know why second generation Muslims are radicalised while their parents, like all immigrants, simply want to establish themselves in their new country and get ahead.
As far as the movie which set off this chain of mayhem, I have seen it and it is obvious that it was designed to be offensive as possible to people of the Islamic faith. As far as its value as cinema is concerned , it is completely devoid of merit. I know I'm supposed to say 'the poor Copts, Christians in Egypt are persecuted blah blah blah, boo hoo hoo' but quite frankly the people behind the movie were Copts just stirring up trouble.
I can see no reason why anyone should doubt the historicity of the Prophet Mohammed. Scholars do not doubt that Jesus existed or even that the historical Buddha, Siddhartha Gautama, existed, even though he was born almost 1,000 years before Mohammad. The truth is that Islam has a very similar relationship to other faiths to Christianity in the late Middle Ages, before the Rennnaissance, before the Reformation, before the Enlightenment and before Modernism. Islam provides a complete world view for its adherents. Islam has a dynamism and energy Christianity lost centuries ago. Thus, when its fundamental belief system is threatened, it provokes a visceral reaction similar to that of a conservative Catholic when confronted by an evangelical Protestant. The Muslim street is very easily aroused.
It seems only logical that, as we now have a considerable number of Muslims in Australia, we should help them integrate into our society. Going soft on lawbreakers will be conterproductive but the response of trhe older Anglo-Celts, that 'we should send them back where they came from' is not possible.
Because of their stupidity, people are easily manipulated by the masters of the black arts. China is currently up in arms about the Japanese occupation of the Diaoyu Islands. There's nothing like a nationalist hurrah to divert the population from a bad economy -- and China's economy is bad. Some fool in China surrounded his Honda with anti-Japanese slogans and set it on fire. The ironic thing is the car was probably made in a Chinese factory. If you watched the Chinese protesters on the islands, two were side by side, one waving a Republic of China (Taiwan) flag and one was waving a People's Republic of China flag. Any oil or gas under said to be under the islands is irrelevant, a mere diversion. This is blatant Han Chinese chavinism designed to stir up trouble.
Britain's Dark Lord, Peter Mandelson, put Tony Blair in power and helped keep him there. Regarded as the architect of New Labour, he was elevated to the peerage and the Privy Council, earning a new title, the Prince of Darkness.
Australia's own Master of the Black Arts, Bill Shorten, member for Maribrynong, is distinguished by his ability to wholeheartedly agree with any statement made by his political superiors, even if he has yet to hear it. His most notable claim to fame is that any 'reform' he makes to industry superannuation only serves to tighten the union movment's stranglehold over the nation's savings. His latest stroke of genius is to legislate so that Queensland public servants made redundant in recent downsizing must be employed -- by private sector employers -- under public service terms, conditions and salaries.
But for sheer idiocy and ease of manipulation, the world's Muslims must take the cake. I do not wish to imply that all Muslims are stupid. There are as many stupid Muslims as there are anyone else. But what country would declare a public holiday so the public could have a riot apart from Pakistan? Quite frankly, I do not know why second generation Muslims are radicalised while their parents, like all immigrants, simply want to establish themselves in their new country and get ahead.
As far as the movie which set off this chain of mayhem, I have seen it and it is obvious that it was designed to be offensive as possible to people of the Islamic faith. As far as its value as cinema is concerned , it is completely devoid of merit. I know I'm supposed to say 'the poor Copts, Christians in Egypt are persecuted blah blah blah, boo hoo hoo' but quite frankly the people behind the movie were Copts just stirring up trouble.
I can see no reason why anyone should doubt the historicity of the Prophet Mohammed. Scholars do not doubt that Jesus existed or even that the historical Buddha, Siddhartha Gautama, existed, even though he was born almost 1,000 years before Mohammad. The truth is that Islam has a very similar relationship to other faiths to Christianity in the late Middle Ages, before the Rennnaissance, before the Reformation, before the Enlightenment and before Modernism. Islam provides a complete world view for its adherents. Islam has a dynamism and energy Christianity lost centuries ago. Thus, when its fundamental belief system is threatened, it provokes a visceral reaction similar to that of a conservative Catholic when confronted by an evangelical Protestant. The Muslim street is very easily aroused.
It seems only logical that, as we now have a considerable number of Muslims in Australia, we should help them integrate into our society. Going soft on lawbreakers will be conterproductive but the response of trhe older Anglo-Celts, that 'we should send them back where they came from' is not possible.
Charity muggers devalue philanthropy
We have all encountered them on the streets of our major cities -- charity muggers,as they are called, or reduced to the portmanteau word 'chuggers'. As far as I can tell, the term 'chugger' is English. Not even the most trusted charities are immune from this trend.
Some time ago in Perth I was accosted by collectors from Medicine Sans Frontiere (MSF), the French charity which is often known by the English translation of 'Doctors Without Borders.' They explained that as they are known to refuse any government contributions, they alone could get emergency relief into Somalia, which was suffering from a famine. It is not too closely guarded secret that MSF is well thought of in the Islamic world and not well regarded in Israel. Somalia is an Islamic entity. I offered the MSF collectors $100 cash on the spot. They refused to accept my donation. They only wanted a commitment to a regular payment scheme. Having previously been stung by another charity, I refused and so MSF lost my $100.
The charities will tell you that regular payment schemes give them guaranteed cash flow which makes budgeting easier. This is, to a certain extent, true. What they don't tell you is that the average payment scheme lasts 15 to 18 months, but the first 12 months of payments are absorbed by the marketing company which recruited the donor as their commission. Now, I know several pensioners who donate in excess of $2,000 to charity (as they call it) via regular contribution schemes without realising that these donations, which are a significant proportion of their meagre incomes, are in fact commissions paid to marketing companies.
On the latest available figures (2005) Australian individuals and businesses donated $11 billion to charity annually. Of this amount, $7.7 billion came through cash donations from individuals, while another $2 billion came though events such as fun runs and so on. It is estimated 87% of adults donated to charity, or some 13.4 million individual donors. For the 2008-2009 tax year, the average donor claimed $450 in deductions for charity. Taxpayers with incomes of $1 million or more claimed an average of $48,700 tax deductible donations. Some 33% of all donations were to religious institutions -- churches, synagogues, mosques and so on. Community based and welfare institutions, international and development aid groups and medical research all each accounted for 10% of the total funds donated. Donations peak in June, just before the end of the financial year, and around Christmas time.
I really have no problem with people making charitable donations, but I hate being harrassed by young backpackers, most of whom I believe are on an hourly rate, to sign up to a long term plan to aid a charity to which they have no connection beyond a paypacket and no personal commitment at all. I do believe philanthropy is the basis of a civil society and that it is commendable, but that it should be targeted if it is to benefit society.
Let me give an example. My mother is by most measures a wealthy woman. She loves the ballet, the opera and the symphony. The symphony asked her to become a patron. She refused, saying 'I'm not a philanthropist, I already pay $1,000 a year to go to the symphony.' At the same time, she makes donations to dozens of so-called charities over the phone, some of which verge on being fraudulent. The symphony relies on its patrons to survive. It is a worth ornament of modern life and surely is a more deserving cause than many of these bogus 'charities.'
It is literally months since I have had an unsolicited call seeking an donation because I tell them abruptly not to waste their time and mine by making future calls. I do make donations to organisations I think are worthwhile, such as the Salvation Army, and other civic groups whose aims I support but I don't make them in the street or over the phone. But even the Salvation Army, to whom I made a donation in the Red Shield Appeal, rang me to sign me up to a regular contribution scheme.
When an organisation such as the Salvation Army, which is held in high esteem by people rich and poor, feel they have to get onto the regular contribution scheme bandwagon, it's a sad day for philanthropy.
Some time ago in Perth I was accosted by collectors from Medicine Sans Frontiere (MSF), the French charity which is often known by the English translation of 'Doctors Without Borders.' They explained that as they are known to refuse any government contributions, they alone could get emergency relief into Somalia, which was suffering from a famine. It is not too closely guarded secret that MSF is well thought of in the Islamic world and not well regarded in Israel. Somalia is an Islamic entity. I offered the MSF collectors $100 cash on the spot. They refused to accept my donation. They only wanted a commitment to a regular payment scheme. Having previously been stung by another charity, I refused and so MSF lost my $100.
The charities will tell you that regular payment schemes give them guaranteed cash flow which makes budgeting easier. This is, to a certain extent, true. What they don't tell you is that the average payment scheme lasts 15 to 18 months, but the first 12 months of payments are absorbed by the marketing company which recruited the donor as their commission. Now, I know several pensioners who donate in excess of $2,000 to charity (as they call it) via regular contribution schemes without realising that these donations, which are a significant proportion of their meagre incomes, are in fact commissions paid to marketing companies.
On the latest available figures (2005) Australian individuals and businesses donated $11 billion to charity annually. Of this amount, $7.7 billion came through cash donations from individuals, while another $2 billion came though events such as fun runs and so on. It is estimated 87% of adults donated to charity, or some 13.4 million individual donors. For the 2008-2009 tax year, the average donor claimed $450 in deductions for charity. Taxpayers with incomes of $1 million or more claimed an average of $48,700 tax deductible donations. Some 33% of all donations were to religious institutions -- churches, synagogues, mosques and so on. Community based and welfare institutions, international and development aid groups and medical research all each accounted for 10% of the total funds donated. Donations peak in June, just before the end of the financial year, and around Christmas time.
I really have no problem with people making charitable donations, but I hate being harrassed by young backpackers, most of whom I believe are on an hourly rate, to sign up to a long term plan to aid a charity to which they have no connection beyond a paypacket and no personal commitment at all. I do believe philanthropy is the basis of a civil society and that it is commendable, but that it should be targeted if it is to benefit society.
Let me give an example. My mother is by most measures a wealthy woman. She loves the ballet, the opera and the symphony. The symphony asked her to become a patron. She refused, saying 'I'm not a philanthropist, I already pay $1,000 a year to go to the symphony.' At the same time, she makes donations to dozens of so-called charities over the phone, some of which verge on being fraudulent. The symphony relies on its patrons to survive. It is a worth ornament of modern life and surely is a more deserving cause than many of these bogus 'charities.'
It is literally months since I have had an unsolicited call seeking an donation because I tell them abruptly not to waste their time and mine by making future calls. I do make donations to organisations I think are worthwhile, such as the Salvation Army, and other civic groups whose aims I support but I don't make them in the street or over the phone. But even the Salvation Army, to whom I made a donation in the Red Shield Appeal, rang me to sign me up to a regular contribution scheme.
When an organisation such as the Salvation Army, which is held in high esteem by people rich and poor, feel they have to get onto the regular contribution scheme bandwagon, it's a sad day for philanthropy.
Sunday 2 September 2012
Topple Australian banking's Four Pillars
Australia's financial system is based on the Four Pillars -- Commonwealth Bank of Australia, Westpac Banking Corp, National Australia Bank and the Australia and New Zealand Banking Group. The Four Pillars doctrine was established in 1990 by Treasurer Paul Keating during the Hawke administration. There were originally to be Six Pillars -- the Four Pillars plus the two major life offices, National Mutual and the Australian Mutual Provident Society. (AMP).
The Six Pillars, however, were already beginning to collapse. National Mutual wanted to overtake AMP as number one life office and was doing so by offering capital guaranteed products at uneconomic levels. When it reverted to sustainable rates, the flood of funds dried up. AXA of France, eyeing National Mutual's difficulties and burgeoning Asian business, made a move on the Melbourne-based life office, which prevented half of Australia's households losing their retirement savings.
The original aim of financial deregulation was to expand choice in the Australian banking market. The government offered a 'who's who' of international banking domestic banking licenses, with the aim of shaking up the domestic industry. In fact, the reverse happened. No foreign bank has a substantial retail banking business in Australia. They have either left or sold out to the major Australian banks. HSBC retains a small retail presence, as does Citibank.
Of course, there are (or were) State government owned regional banks. State Bank of Victoria was sent to the wall thanks to the wunderkinder at its investment banking offshoot Tricontinetal Corp and was taken over by Commbank. The State Bank of NSW was also taken over, in a roundablout way, by Commbank. Commbank also end up with BankWest, the avatar of Western Australia's Rural and Industries Bank (and also inherited many unhappy customers). The State Bank of South Australia collpased and was acquired indirectly by Westpac.
Three small banks, usually referred to as regional banks, have battled on. The Bendigo and Adelaide Bank uses a quasi communithy based ownership structure, which has proved to be great for launching branches and much less effective in closing them down when they prove to be unviable, as some inevitably must be. Bank of Queensland operates on a franchise model, which has not prevented it from taking some heavy hits in commercial property. Suncorp is entrenched in the Queensland market.
What has been the net outcome of banking deregulation? The opposite of that intended. Just about every financial institution of any note has been taken over by the Big Four. Some may object that Macquarie Bank has been excluded. First, MacBank is an investment bank with a very narrow market and second, without the government guranteeing is ovgerseas loans during the global financail crisis (GFC) it is likely MacBank would have gone to the financail knacker's yard.
The premise of the initial round of bank rationalisations in the early 1980s was that banks would be stronger and more competitive. NAB took over the the Commercial Banking Compnay of Sydney (CBC) and the Bank of New South Wales merged (in much the same way Germany merged with Poland in 1939) with the Commercial Bank of Australia to form Westpac, then Australia's largest bank. In case you missed the subtext, the CBC was a Sydney bank and the CBA was a Melbourne bank.
To put anyone who is totally ignorant about Australian banking out of their misery, both Melbourne and Sydney host two of the Four Pillars -- Melbourne has the ANZ and NAB, while Sydney has Commbank and Westpac. This suits the politicians very nicely -- and the rest of Australia not very well.
As with most things in Australia, banking is over controlled and over regulated. Apart from Westpac's pathetic attempt to reboot the Bank of Melbourne -- after it took over the original Bank of Melbourne, an excellent business based on the highly popular RESI building society which it then killed off by rebadging all the branches with Westpac red -- "innovation" by Australian banks has been rare in recent years. The Bendigo did absorb the mnnow Bank of Cyprus but the Big Four have cleaned up just about everything else.
Why not let rhe market have a go? Whether the governemnt admits it or not, the Four Pillars are "too big to fail". Why not encourage a small to medium business bank, or let the Australian Post Office compete in the retail market? After all, it's run by a former NAB banker.
Like any organism that's been in a lush paddock for too long, the Big Four have become fat and lazy. It's time they had a shakeup. And it's woth noting the Four Pillars policy doesn't stipulate that the Four Pillars must be Australian owned.
The Six Pillars, however, were already beginning to collapse. National Mutual wanted to overtake AMP as number one life office and was doing so by offering capital guaranteed products at uneconomic levels. When it reverted to sustainable rates, the flood of funds dried up. AXA of France, eyeing National Mutual's difficulties and burgeoning Asian business, made a move on the Melbourne-based life office, which prevented half of Australia's households losing their retirement savings.
The original aim of financial deregulation was to expand choice in the Australian banking market. The government offered a 'who's who' of international banking domestic banking licenses, with the aim of shaking up the domestic industry. In fact, the reverse happened. No foreign bank has a substantial retail banking business in Australia. They have either left or sold out to the major Australian banks. HSBC retains a small retail presence, as does Citibank.
Of course, there are (or were) State government owned regional banks. State Bank of Victoria was sent to the wall thanks to the wunderkinder at its investment banking offshoot Tricontinetal Corp and was taken over by Commbank. The State Bank of NSW was also taken over, in a roundablout way, by Commbank. Commbank also end up with BankWest, the avatar of Western Australia's Rural and Industries Bank (and also inherited many unhappy customers). The State Bank of South Australia collpased and was acquired indirectly by Westpac.
Three small banks, usually referred to as regional banks, have battled on. The Bendigo and Adelaide Bank uses a quasi communithy based ownership structure, which has proved to be great for launching branches and much less effective in closing them down when they prove to be unviable, as some inevitably must be. Bank of Queensland operates on a franchise model, which has not prevented it from taking some heavy hits in commercial property. Suncorp is entrenched in the Queensland market.
What has been the net outcome of banking deregulation? The opposite of that intended. Just about every financial institution of any note has been taken over by the Big Four. Some may object that Macquarie Bank has been excluded. First, MacBank is an investment bank with a very narrow market and second, without the government guranteeing is ovgerseas loans during the global financail crisis (GFC) it is likely MacBank would have gone to the financail knacker's yard.
The premise of the initial round of bank rationalisations in the early 1980s was that banks would be stronger and more competitive. NAB took over the the Commercial Banking Compnay of Sydney (CBC) and the Bank of New South Wales merged (in much the same way Germany merged with Poland in 1939) with the Commercial Bank of Australia to form Westpac, then Australia's largest bank. In case you missed the subtext, the CBC was a Sydney bank and the CBA was a Melbourne bank.
To put anyone who is totally ignorant about Australian banking out of their misery, both Melbourne and Sydney host two of the Four Pillars -- Melbourne has the ANZ and NAB, while Sydney has Commbank and Westpac. This suits the politicians very nicely -- and the rest of Australia not very well.
As with most things in Australia, banking is over controlled and over regulated. Apart from Westpac's pathetic attempt to reboot the Bank of Melbourne -- after it took over the original Bank of Melbourne, an excellent business based on the highly popular RESI building society which it then killed off by rebadging all the branches with Westpac red -- "innovation" by Australian banks has been rare in recent years. The Bendigo did absorb the mnnow Bank of Cyprus but the Big Four have cleaned up just about everything else.
Why not let rhe market have a go? Whether the governemnt admits it or not, the Four Pillars are "too big to fail". Why not encourage a small to medium business bank, or let the Australian Post Office compete in the retail market? After all, it's run by a former NAB banker.
Like any organism that's been in a lush paddock for too long, the Big Four have become fat and lazy. It's time they had a shakeup. And it's woth noting the Four Pillars policy doesn't stipulate that the Four Pillars must be Australian owned.
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