Words cannot express the depths of my contempt for the Australian political class but as the Bee Gees song says "words are all I have." I say "political class" because both major parties are no more open to newcomers or new ideas than a Mafia family. The are self perpetuating elites reinforced by funding direct from the taxpayer. If the electors allow themselves to be treated like idiots, then it is natural the contenders for office will treat them as such. Why aren't they discussing the $70 billion deficit and how they will mitigate its effects on the body politic? The deficit can only get worse.
It's hard to say who sees the electorate as the greater fools, Kevin Rudd or Tony Abbott. Rudd flipped out again in Brisbane, inflicting his bile on a poor makeup artist, an incident well reported in the Murdoch papers. It is well known in political circles that Rudd is regarded by his troops as being mentally ill and is said to be suffering from Asperger's Syndrome. As for Tony Abbott, he was back on the box a few days ago doing what he loves best -- acting like a bogan. And no, these are not trival issues. We have no way of knowing what Rudd or Abbott will do in office, all we can do is assess their characters. Until we can recall governments, all he have is a ballotocracy where were stuck with an elective dictatorship for three years.
No party should be making any spending promises. They should say the kitty is empty. Just how deep the Budget black hole is is open to speculation, but it ranges from $30 to $70 billion. Abbott and Rudd should treat the electorate like adults and say it is irresponsible to make spending pledges and talk about the programs they are going to cut. The China boom is over. They should say so.
First among these cuts should be the middle class welfare with which Costello and Howard bribed the electorate to win their string of victories. Howard was like the out-of-town uncle who always turns up with a pocketfull of lollies. Costello was never liked. It is still possible to find copies of his autobiography, heavily discounted, in remainder bins around the city. Costello didn't have Paul Keating's "flash Harry" charm or John Howard's avuncular bedside manner. Costello and Howard used the early returns from the China boom to bribe their way to power. The GST was the means by which they extracted these bribes from the electorate.
Costello and Howard turned the Australian middle class from a group of proud, largely self sufficient people into a class of mendicants, always seeking handouts from the government. Australians have always been keen on getting money from the government and were only too ready to be bribed. But just try taking this money off them.
I once had a very good friend called Bill Moy. Moy was a multimillionaire and among other endeavours, was heavily involved in the Victorian Division of the Liberal Party for many years. Once, during the many games of rummy with which we spend our evenings in Taipei, he asked me "What is the primary aim of a political party?: I answered "To govern well." Moy replied "Not at all. The am of a political party is to win and retain power." That is the way politics works in Australia.
Mainly due to that attitude, I think Australia is beyond saving. Unless someone emerges with the balls, like Bob Hawke and Paul Keating, to tell the Australian people that the party's over, the black hole will only get deeper. As for the Gonski bribes for teachers, the disability scheme and all the rest of the Rudd-Gillard programs -- they were totally irresponsible but you can't expect better from most Labor governments. All you can say is that on current evidence, Tony Abbott will be worse. I am sure Tony Abbott believes in something, but economic rationality is not one of them.
Friday, 23 August 2013
Thursday, 27 June 2013
Kevin '747' Rudd and Bill 'The Knife' Shorten take power
Politics generates myths. No doubt we will be treated to all sorts of myths about the marvels Julia Gillard would have performed if she could only have stayed in office. The truth is Julia was one of the most cack handed prime ministers of all time.
Take the election date, set for 14 September 2013. Not only is it perilously close to the G20 meeting, which Australia will lead, it's also Yom Kippur, the Day of Atonement, the most solemn day on the Jewish religious calendar. Even most secular Jews will want to go to the synagogue or stay at home. As a Jewish friend of mine said "Maybe Julia thought she had the Jewish vote in the bag already." Kevin Rudd has lived his whole life to show the world how great he is, so he will milk the G20 for all it's worth.
Expect a much later poll date. Kevin doesn't have to go until at least 30 November 2013. He likes being PM, so he doesn't want to rush things. As for the Kevin 747 sobriquet, he loves flying here and there, bringing light to a benighted world, for example Indonesia, to which he will give his helpful advice on stopping the asylum seeker boats. This, of course, will help undo the mess Rudd made when he overturned John Howard's asylum seeker policy, which had stopped the boats. Let's see how that plays in Sydney's western suburbs.
As for Bill "The Knife" Shorten, who knows where he will strike next? Bill is a graduate of Xavier College, the preserve of Melbourne's upper crust Catholics. Xavier is run, as one might expect, by the Jesuits. Bill's Dad however had some dubious friends, among them the leaders of Melbourne's most notorious criminal union, the Painters and Dockers. Few members of the Painters and Dockers did not have an extensive criminal record. His Mum was a clerical worker who went on the earn a law degree and did some teaching.
As far as wielding the knife is concerned, Bill "has form" as they say. He knocked off the sitting member for Maribyrnong (not much of a loss) Bob Sercombe, who was also, rather unusually, a member of the Shadow Cabinet. Then he knifed Kevin 747 to promote Julia Gillard to the Lodge, then he knifed PM Julia Gillard and promoted Kevin 747 back to PM. Who will feel his blade next?
As for Kevin 747, he will be off overseas again, especially as Parliament has risen and he doesn't have pesky things like Question Time to worry about. Some good men like Martin Ferguson have exited Parliament for good. Stephen Smith has returned to the Golden West and will be Canberra bound no more. Smith, who accepted the poisoned chalice of Defence, may have decided discretion is the better part of valour. Why can't Wayne Swan, who couldn't sell a relativley good economy story, take the hint and head back to Bananaland for a well earned rest?
As for the marginal seat holders who thought life with Kevin couldn't be as bad as being out of Parliament forever, just remember that those who live by the sword die by the knife -- sorry, sword.
.
Take the election date, set for 14 September 2013. Not only is it perilously close to the G20 meeting, which Australia will lead, it's also Yom Kippur, the Day of Atonement, the most solemn day on the Jewish religious calendar. Even most secular Jews will want to go to the synagogue or stay at home. As a Jewish friend of mine said "Maybe Julia thought she had the Jewish vote in the bag already." Kevin Rudd has lived his whole life to show the world how great he is, so he will milk the G20 for all it's worth.
Expect a much later poll date. Kevin doesn't have to go until at least 30 November 2013. He likes being PM, so he doesn't want to rush things. As for the Kevin 747 sobriquet, he loves flying here and there, bringing light to a benighted world, for example Indonesia, to which he will give his helpful advice on stopping the asylum seeker boats. This, of course, will help undo the mess Rudd made when he overturned John Howard's asylum seeker policy, which had stopped the boats. Let's see how that plays in Sydney's western suburbs.
As for Bill "The Knife" Shorten, who knows where he will strike next? Bill is a graduate of Xavier College, the preserve of Melbourne's upper crust Catholics. Xavier is run, as one might expect, by the Jesuits. Bill's Dad however had some dubious friends, among them the leaders of Melbourne's most notorious criminal union, the Painters and Dockers. Few members of the Painters and Dockers did not have an extensive criminal record. His Mum was a clerical worker who went on the earn a law degree and did some teaching.
As far as wielding the knife is concerned, Bill "has form" as they say. He knocked off the sitting member for Maribyrnong (not much of a loss) Bob Sercombe, who was also, rather unusually, a member of the Shadow Cabinet. Then he knifed Kevin 747 to promote Julia Gillard to the Lodge, then he knifed PM Julia Gillard and promoted Kevin 747 back to PM. Who will feel his blade next?
As for Kevin 747, he will be off overseas again, especially as Parliament has risen and he doesn't have pesky things like Question Time to worry about. Some good men like Martin Ferguson have exited Parliament for good. Stephen Smith has returned to the Golden West and will be Canberra bound no more. Smith, who accepted the poisoned chalice of Defence, may have decided discretion is the better part of valour. Why can't Wayne Swan, who couldn't sell a relativley good economy story, take the hint and head back to Bananaland for a well earned rest?
As for the marginal seat holders who thought life with Kevin couldn't be as bad as being out of Parliament forever, just remember that those who live by the sword die by the knife -- sorry, sword.
.
Wednesday, 26 June 2013
Kevin Rudd returns as PM
Kevin Rudd, the man the Labor Party caucus vowed it could never work with again, has returned as Prime Minister of Australia. He's already up to his old tricks, keeping the nation waiting for more than 20 minutes until he delivered his acceptance speech. Can a leopard change its spots? I think not. His tardiness and micromanaging is notorious
According to a Roy Morgan snap poll on Wednesday 26 June, the night of the coup, the vote is now ALP 49.5%, vs Liberal-National Party 50.5% -- too close to call an election result, the pollsters say.
I am deeply ashamed to say the man who ratted on Julia Gillard is my local member, Bill Shorten. He swung the numbers. In end, the stage managed result came out as predicted -- 57 for Rudd, 45 for Gillard, with Anthony Albanese as deputy PM. Albanese, who always looks close to tears at big moments, is from the Left, while Rudd is from the Right. Penny Wong, who is also from the Left, was elected unanimously as government Senate leader -- figure that one out.
Many non Australians find it hard to understand Australian politics because the positions of both major parties are almost identical. As I tell my American friends, there is no equivalent to Republican Party in Australia, just the Labor Party, which is liberal, and the Liberal Party, which is liberal. Both would fit into the US Democratic Party quite comfortably.
Numerous politicians commenting on the Rudd coup went on about the "life of service" that draws people to politics. I have known politicians since I was in my early teens. Politicians have an agenda to push or an organisation to represent. That is not service, it is self interest. Labor people are by far the worst when it comes squealing about their life of service, I don't see any of them returning their very generous taxpayer funded pensions.
Chief executioner was Bill Shorten. First he put Kevin Rudd in power, then knifed him to put Julia Gillard in power. Then he knifed Julia to return Kevin to power, just in time for Kevin to take leadership of the G20, which will surely be a highlight of Kevin's life. Not that Julia is beloved, even by her own constituents. The reporter for the government broadcaster, the ABC, seemed near tears when no Gillard supporters would go on camera to say what a lovely lady we was, while several residents said she was not much of a local member and wasn't well liked.
My wife, who is an immigrant, told me to write that after viewing almost an entire evening of Kevin's coup she has concluded that politicians have no idea of how ordinary people like us -- that is, electors -- think. She says Australians are good at playing politics, except that it is like an audience watching clowns. "A tale told by an idiot, full of sound and fury, signifying nothing."
As for the hatchet man, Bill Shorten, will we see him in years to come roaming the arid halls of New Parliament House like Lady Macbeth muttering "Out, damned spot! Hell is murky! Yet who would have thought the old man to have had so much blood in him?" Or her. Or both. Who next will feel Bill's blade? And they say this man will be prime minister one day.
According to a Roy Morgan snap poll on Wednesday 26 June, the night of the coup, the vote is now ALP 49.5%, vs Liberal-National Party 50.5% -- too close to call an election result, the pollsters say.
I am deeply ashamed to say the man who ratted on Julia Gillard is my local member, Bill Shorten. He swung the numbers. In end, the stage managed result came out as predicted -- 57 for Rudd, 45 for Gillard, with Anthony Albanese as deputy PM. Albanese, who always looks close to tears at big moments, is from the Left, while Rudd is from the Right. Penny Wong, who is also from the Left, was elected unanimously as government Senate leader -- figure that one out.
Many non Australians find it hard to understand Australian politics because the positions of both major parties are almost identical. As I tell my American friends, there is no equivalent to Republican Party in Australia, just the Labor Party, which is liberal, and the Liberal Party, which is liberal. Both would fit into the US Democratic Party quite comfortably.
Numerous politicians commenting on the Rudd coup went on about the "life of service" that draws people to politics. I have known politicians since I was in my early teens. Politicians have an agenda to push or an organisation to represent. That is not service, it is self interest. Labor people are by far the worst when it comes squealing about their life of service, I don't see any of them returning their very generous taxpayer funded pensions.
Chief executioner was Bill Shorten. First he put Kevin Rudd in power, then knifed him to put Julia Gillard in power. Then he knifed Julia to return Kevin to power, just in time for Kevin to take leadership of the G20, which will surely be a highlight of Kevin's life. Not that Julia is beloved, even by her own constituents. The reporter for the government broadcaster, the ABC, seemed near tears when no Gillard supporters would go on camera to say what a lovely lady we was, while several residents said she was not much of a local member and wasn't well liked.
My wife, who is an immigrant, told me to write that after viewing almost an entire evening of Kevin's coup she has concluded that politicians have no idea of how ordinary people like us -- that is, electors -- think. She says Australians are good at playing politics, except that it is like an audience watching clowns. "A tale told by an idiot, full of sound and fury, signifying nothing."
As for the hatchet man, Bill Shorten, will we see him in years to come roaming the arid halls of New Parliament House like Lady Macbeth muttering "Out, damned spot! Hell is murky! Yet who would have thought the old man to have had so much blood in him?" Or her. Or both. Who next will feel Bill's blade? And they say this man will be prime minister one day.
Wednesday, 29 May 2013
Why shareholders own the company
If you are a shareholder, you are one of the owners of the company. You are not a lender, you are not a stakeholder, you are the ultimate owner. Why? Because the buck ends with you. You are the first person to lose money if the company goes under. If the company goes under, you will probably never see your money again unless you can find someone to fund a class action against the former board. Often a dubious proposition.
I have recently had a dispute with Westpac Banking Corporation. My wife, who is also involved in the transaction, is a shareholder in Westpac. Westpac at one time referred to its shareholders as "proprietors". I was for many years a Westpac "proprietor" and did well out of it. Westpac is the oldest bank in Australia. After several near death experiences, it is no longer the largest bank in Australia. Westpac was once known as a "can do" bank but now seems to be bogged down in red tape and incompetence.
As a result of my unsatisactory experience, I suggested to my wife that she write to "her bank." She said that was a ridiculous idea; why should they take any notice of her? I pointed out that she was an owner of the bank and that she should make her feelings known to the management.
To be a stockholder is to own a "share" in a business. You are not buying a bond, on which interest is paid regularly but gives no ownership privileges. You have become a part owner of a business. Your liability for the company's debts is limited to your shareholding. This is the essense of a limited liability company. You will normally be entitled to any dividends paid by the company, but not to a regular payment such as interest, as paid on a bond. In the old days, investors could be bankrupted by "calls" on shares which were partially paid. That is why many small Australian mining companies were, until recently called NL or "no liability" companies. Holders in NL companies were not liable for calls.
As a holder, you have a number of rights. You can vote for directors. This is the most important right. The directors exist to protect the holders' rights and look after their interests. The managers exist to manage the company. Management also has rights. All public companies should have independent directors who are not beholden to the management or majority shareholders. This is especially pertinent where one person, family or group of people dominates the share registry, as for example rag trader Solomon Lew does in Premier Investments. The most common view of people in Lew's situation is that they don't even try to make the shareholders like them, because it doesn't matter if they do or not. As long as they make money, the shareholders won't complain.
Being a holder doesn't entitle you to go into HQ and pick up a few pens. Shareholder discounts have a checkered history. Institutional shareholders don't like them, because they can't benefit. Their economic utility to the company is doubtful. In some cases, such as former Coles ultra discount offshoot Bi-Lo, the shareholder discount was actually costing the Coles Group money on each transaction. Treasury Wine Estates offers their shareholders some very good discounts on top quality Penfolds wines, but they are in the minority. Usually, the management will say, as do Wesfarmers, the owner of Coles, that they aim to maximisae profits and dividends so all holders benefit. Some companies, such as Bendigo Bank, have peculiar ownership structures where the customers part own some branches. It's a great way of getting a new branch off the ground, but it'makes it hard to shutter loss makers.
Public companies are usually listed on the stock exchange. They have certain legal rights and obligations. They can raise money from the public. As they are "limited" companies, and the liability of the holders is limited to the value of the shares they hold. Public companies also have certain reporting obligations and must be audited by professional auditors. Seeing the men with the green pens move in is an annual rite of passage for a public company. A reputable public company is likely to get a positive hearing from the bank than $2 proprietor limited tax shelter. The auditors assure the holders that the management hasn't been up to monkey business.
Do the shareholders own the company? No-one else does, but the management has legally defined rights as well. These days, the managers are likely to hold shares in the company, to give them an incentive to "create shareholder value." Or to translate, to get the shareprice up, which benefits everyone. Much attention is given to "stakeholders". These are entities like employees, unions, the community where the company is located, suppliers -- even charitable groups to which the company donates. They are not owners. The ones who take the rap, as they used to say in gangster movies, are the owners. They are the people who have risked their money and they are entitled to reap the rewards of their investment. If their investment goes bad, they lose their money.
I have recently had a dispute with Westpac Banking Corporation. My wife, who is also involved in the transaction, is a shareholder in Westpac. Westpac at one time referred to its shareholders as "proprietors". I was for many years a Westpac "proprietor" and did well out of it. Westpac is the oldest bank in Australia. After several near death experiences, it is no longer the largest bank in Australia. Westpac was once known as a "can do" bank but now seems to be bogged down in red tape and incompetence.
As a result of my unsatisactory experience, I suggested to my wife that she write to "her bank." She said that was a ridiculous idea; why should they take any notice of her? I pointed out that she was an owner of the bank and that she should make her feelings known to the management.
To be a stockholder is to own a "share" in a business. You are not buying a bond, on which interest is paid regularly but gives no ownership privileges. You have become a part owner of a business. Your liability for the company's debts is limited to your shareholding. This is the essense of a limited liability company. You will normally be entitled to any dividends paid by the company, but not to a regular payment such as interest, as paid on a bond. In the old days, investors could be bankrupted by "calls" on shares which were partially paid. That is why many small Australian mining companies were, until recently called NL or "no liability" companies. Holders in NL companies were not liable for calls.
As a holder, you have a number of rights. You can vote for directors. This is the most important right. The directors exist to protect the holders' rights and look after their interests. The managers exist to manage the company. Management also has rights. All public companies should have independent directors who are not beholden to the management or majority shareholders. This is especially pertinent where one person, family or group of people dominates the share registry, as for example rag trader Solomon Lew does in Premier Investments. The most common view of people in Lew's situation is that they don't even try to make the shareholders like them, because it doesn't matter if they do or not. As long as they make money, the shareholders won't complain.
Being a holder doesn't entitle you to go into HQ and pick up a few pens. Shareholder discounts have a checkered history. Institutional shareholders don't like them, because they can't benefit. Their economic utility to the company is doubtful. In some cases, such as former Coles ultra discount offshoot Bi-Lo, the shareholder discount was actually costing the Coles Group money on each transaction. Treasury Wine Estates offers their shareholders some very good discounts on top quality Penfolds wines, but they are in the minority. Usually, the management will say, as do Wesfarmers, the owner of Coles, that they aim to maximisae profits and dividends so all holders benefit. Some companies, such as Bendigo Bank, have peculiar ownership structures where the customers part own some branches. It's a great way of getting a new branch off the ground, but it'makes it hard to shutter loss makers.
Public companies are usually listed on the stock exchange. They have certain legal rights and obligations. They can raise money from the public. As they are "limited" companies, and the liability of the holders is limited to the value of the shares they hold. Public companies also have certain reporting obligations and must be audited by professional auditors. Seeing the men with the green pens move in is an annual rite of passage for a public company. A reputable public company is likely to get a positive hearing from the bank than $2 proprietor limited tax shelter. The auditors assure the holders that the management hasn't been up to monkey business.
Do the shareholders own the company? No-one else does, but the management has legally defined rights as well. These days, the managers are likely to hold shares in the company, to give them an incentive to "create shareholder value." Or to translate, to get the shareprice up, which benefits everyone. Much attention is given to "stakeholders". These are entities like employees, unions, the community where the company is located, suppliers -- even charitable groups to which the company donates. They are not owners. The ones who take the rap, as they used to say in gangster movies, are the owners. They are the people who have risked their money and they are entitled to reap the rewards of their investment. If their investment goes bad, they lose their money.
Saturday, 18 May 2013
Democracy is not working
Democracy is not working. It is not working in the United States, it is not working in Europe and it is not working in Australia.
America is suffering from legislative gridlock. The Congress was intended to work on consensus. What the American's call "partisanship" has taken over. In other words, the ill feeling between the Democrats and Republicans has reached the point where legislation vital to the functioning of the United States is not passed. America is crawling out of its economic black hole, slowly, but the process of governing is going from bad to worse.
European economies are ceasing to function, hamstrung by "cradle to the grave" welfare states. Germany is prospering because its manufacturers dominate the European Union due to an effectively devalued European currency. Pathetic minnows like Cyprus are simply crushed to suit the dominant European powers and the "European project."
Australia has had the best terms of trade in a hundred years, yet the Federal Government, led by Labor Prime Ministers Kevin Rudd and Julia Gillard, has run budget deficits for the last six years that collectively amount to $100 billion or more. Liberal Prime Minister John "The Rodent" Howard bought off the electorate with with bucket loads of middle class welfare, effectively squandering the early returns from the China boom. The Liberals are no better, and are some ways worse, than the ALP.
We must therefore ask Lenin's question: "What is to be done?" When I say democracy is not working, I mean democracy is not working in its present form. I do not believe there an alternative to some form of elective democracy to running a sophisticated state. China, for example, works after a fashion, but it is still far poorer than the Western powers in every way. Thus, the question is should we have less democracy or more democracy?
I can still remember my parents proudly marching off to vote for their preferred candidate in the Western Australian Legislative Council. They had become owners of a property of sufficient value for them to meet the property franchaise. Thus, within living memory, property qualifications have been imposed on voting in Australia.
Similarly, Mitt Romney, Republican candidate in the 2012 US presidential election',was described as "scary" and "narrow minded" because he told a private meeting that America could be divided into "producers" and "consumers". Romney never overcame the "weird" factor and lost to Barak Obama
It is my belief that Australia and Europe are beyond saving because parties compete to buy off electors and interest groups. Much as conservatives lament America's plunge towards a welfare state, the US has gone nowhere near as far in this direction as other Western democracies. Indeed, I think Obama's health plan is good, in theory at least. What makes Obamacare bad are peculiarly American characteristics such as wanting the best, immediately, forever, no matter what the cost.
Bearing in mind Mitt Romney's experience, I do not believe it is possible to restrict the franchise to only producers or property owners. The non-producers would simply revolt, and they can vote. Ideally, anyone in receipt of a payment from the Crown should be denied a vote. But this is, politically, a "bridge too far."
So, we come to the alternative, more democracy. This is both feasible and desirable. What we have now is not a democracy, but a ballotocracy. We elect a parliament and the parliament can doing anything it likes for the term of the parliament. The only way to get rid of a parliament is for it to be defeated on the floor of the parliament or for the prime minister to seek an early dissolution of the House from the Governor General. It is not a democracy, it is an elective dictatorship. Once a Bill passes both Houses and approved by the Governor General, it can only be overturned by the High Court.
The alternative is for the people -- us -- to be able to recall parliament. We could kick out failed regimes like the Gillard Government. Critics say the government would be unable to to implement its policies. Great! That's what 75% of Australians want to do. We should also be able conduct referendums to overturn legislation we don't like.
We can't have less democracy but we can have more democracy. It could save us from ruin. Let's do it!
America is suffering from legislative gridlock. The Congress was intended to work on consensus. What the American's call "partisanship" has taken over. In other words, the ill feeling between the Democrats and Republicans has reached the point where legislation vital to the functioning of the United States is not passed. America is crawling out of its economic black hole, slowly, but the process of governing is going from bad to worse.
European economies are ceasing to function, hamstrung by "cradle to the grave" welfare states. Germany is prospering because its manufacturers dominate the European Union due to an effectively devalued European currency. Pathetic minnows like Cyprus are simply crushed to suit the dominant European powers and the "European project."
Australia has had the best terms of trade in a hundred years, yet the Federal Government, led by Labor Prime Ministers Kevin Rudd and Julia Gillard, has run budget deficits for the last six years that collectively amount to $100 billion or more. Liberal Prime Minister John "The Rodent" Howard bought off the electorate with with bucket loads of middle class welfare, effectively squandering the early returns from the China boom. The Liberals are no better, and are some ways worse, than the ALP.
We must therefore ask Lenin's question: "What is to be done?" When I say democracy is not working, I mean democracy is not working in its present form. I do not believe there an alternative to some form of elective democracy to running a sophisticated state. China, for example, works after a fashion, but it is still far poorer than the Western powers in every way. Thus, the question is should we have less democracy or more democracy?
I can still remember my parents proudly marching off to vote for their preferred candidate in the Western Australian Legislative Council. They had become owners of a property of sufficient value for them to meet the property franchaise. Thus, within living memory, property qualifications have been imposed on voting in Australia.
Similarly, Mitt Romney, Republican candidate in the 2012 US presidential election',was described as "scary" and "narrow minded" because he told a private meeting that America could be divided into "producers" and "consumers". Romney never overcame the "weird" factor and lost to Barak Obama
It is my belief that Australia and Europe are beyond saving because parties compete to buy off electors and interest groups. Much as conservatives lament America's plunge towards a welfare state, the US has gone nowhere near as far in this direction as other Western democracies. Indeed, I think Obama's health plan is good, in theory at least. What makes Obamacare bad are peculiarly American characteristics such as wanting the best, immediately, forever, no matter what the cost.
Bearing in mind Mitt Romney's experience, I do not believe it is possible to restrict the franchise to only producers or property owners. The non-producers would simply revolt, and they can vote. Ideally, anyone in receipt of a payment from the Crown should be denied a vote. But this is, politically, a "bridge too far."
So, we come to the alternative, more democracy. This is both feasible and desirable. What we have now is not a democracy, but a ballotocracy. We elect a parliament and the parliament can doing anything it likes for the term of the parliament. The only way to get rid of a parliament is for it to be defeated on the floor of the parliament or for the prime minister to seek an early dissolution of the House from the Governor General. It is not a democracy, it is an elective dictatorship. Once a Bill passes both Houses and approved by the Governor General, it can only be overturned by the High Court.
The alternative is for the people -- us -- to be able to recall parliament. We could kick out failed regimes like the Gillard Government. Critics say the government would be unable to to implement its policies. Great! That's what 75% of Australians want to do. We should also be able conduct referendums to overturn legislation we don't like.
We can't have less democracy but we can have more democracy. It could save us from ruin. Let's do it!
Tuesday, 2 April 2013
Cyprus and its banks: killing a chicken to frighten a tiger
The Panorama Coffee Shop is situated in Keilor Road, Niddrie, a fairly typical shopping strip in Melbourne's suburbs. The coffee shop is run by a hardworking Greek woman from Cyprus named Soula. It has great cakes, good coffee but it is very hard work. Last year, a branch of the Bank of Cyprus opened down the street. I cautioned Soula against depositing her hard earned money there. Late last year, the Bank Of Cyprus's Australian operation was taken over by the Bendigo and Adelaide Bank and rebadged.
You didn't exactly have to be a financial genius to realise that Cyprus's banking system, based on shonky Russian depositors, was not long for this world. Cyprus is also a safe haven for Israelis who don't want the government of the Jewish state taking too close an interest in their affairs.
Now, what is the difference between Switzerland, which runs a very similar operation, and Cyprus? The difference is Switzerland is run by Swiss and Cyprus is run by Cypriots, or to be more exact, Greeks.
The EU has chopped off the head of the Cyprus chicken to warn other bigger operators that neither the IMF or the EU will bail them out if they get into trouble. Moreover, they are getting everything they deserve. The Cyprus banking system simply grew too big for the underlying economy. The government of Cyprus couldn't bail out the Cypriot banking system even if it wanted to. The banking system was simply too big to be saved. The same applies to other European states -- Switzerland, Luxembourg among other so called "tax havens" that have no economic base apart from manipulating the international tax system. This could even be said of the City of London. EU countries such as France and Germany regard the Cyprus crisis as a chance to get revenge on tax havens that have been siphoning off their tax revenues.
Should Cyprus have ever been part of the "European project?" Probably not. But the EU is like the Hotel California: you can't leave, you can only check out. Or as they used to say in Vietnam about "hearts and minds" operations -- "if you have them by the balls, their hearts and minds will surely follow." And Angela Merkel has Cyprus by the balls.
Do I feel sorry for the Cypriots? Not at all. Notwithstanding the fact that I have little say in the matter, I do pay my taxes. My surplus capital is invested in stocks listed on the Australian Stock Exchange, not sitting in a tax haven bank account, although I could quite easily do this. As for the Russians who stand to lose a substantial part of their deposits, I do, strangely enough, have a degree of sympathy. If someone wants to keep some their hard earned money out of the hands of Putin's kleptocrat Mafia state, I think that is simply being prudent.
Just to clarify my headline, the phrase to "kill a chicken to frighten a tiger (or sometimes, monkey)" is an ancient Chinese saying about demonstrating to the relevant party the desirability of following a certain course of action by inflicting harm on a lesser, usually related, victim.
Cyprus is a small, pathetic victim -- a prime example of someone getting in over their head. The Cypriots will be suffering from their naivete for a long, long time.
You didn't exactly have to be a financial genius to realise that Cyprus's banking system, based on shonky Russian depositors, was not long for this world. Cyprus is also a safe haven for Israelis who don't want the government of the Jewish state taking too close an interest in their affairs.
Now, what is the difference between Switzerland, which runs a very similar operation, and Cyprus? The difference is Switzerland is run by Swiss and Cyprus is run by Cypriots, or to be more exact, Greeks.
The EU has chopped off the head of the Cyprus chicken to warn other bigger operators that neither the IMF or the EU will bail them out if they get into trouble. Moreover, they are getting everything they deserve. The Cyprus banking system simply grew too big for the underlying economy. The government of Cyprus couldn't bail out the Cypriot banking system even if it wanted to. The banking system was simply too big to be saved. The same applies to other European states -- Switzerland, Luxembourg among other so called "tax havens" that have no economic base apart from manipulating the international tax system. This could even be said of the City of London. EU countries such as France and Germany regard the Cyprus crisis as a chance to get revenge on tax havens that have been siphoning off their tax revenues.
Should Cyprus have ever been part of the "European project?" Probably not. But the EU is like the Hotel California: you can't leave, you can only check out. Or as they used to say in Vietnam about "hearts and minds" operations -- "if you have them by the balls, their hearts and minds will surely follow." And Angela Merkel has Cyprus by the balls.
Do I feel sorry for the Cypriots? Not at all. Notwithstanding the fact that I have little say in the matter, I do pay my taxes. My surplus capital is invested in stocks listed on the Australian Stock Exchange, not sitting in a tax haven bank account, although I could quite easily do this. As for the Russians who stand to lose a substantial part of their deposits, I do, strangely enough, have a degree of sympathy. If someone wants to keep some their hard earned money out of the hands of Putin's kleptocrat Mafia state, I think that is simply being prudent.
Just to clarify my headline, the phrase to "kill a chicken to frighten a tiger (or sometimes, monkey)" is an ancient Chinese saying about demonstrating to the relevant party the desirability of following a certain course of action by inflicting harm on a lesser, usually related, victim.
Cyprus is a small, pathetic victim -- a prime example of someone getting in over their head. The Cypriots will be suffering from their naivete for a long, long time.
Great questions of our age
My wife is Chinese. She is from Taiwan, but her parents were from mainland China. As a husband, I am only required to produce two things -- a pay packet and children. Between us, we have produced three children, all of whom could be described as outstanding scholars. That part is OK.
The pay packet is the problem. I am a writer. Writers do not get pay packets. Writers are, by definition, self employed. You might have a job as a professor at a good university which requires you to publish the occasional short story or journal article and teach about six hours a week for 20 weeks of the year. For this you will get a very handsome salary and a job from which you are effectively unsackable. I do not regard such a person as being a writer. Or you may get a gig (increasingly rare) on one of the Sun King's flagship publications that Uncle Rupert doesn't require to produce one of those vulgar things called a profit. Such publications are about as rare as a sober Irishman on St Patrick's Day, but they do exist. I do not call such a person a professional writer.
I call a professional writer someone who makes average weekly earnings plus 25% to allow for lack of holidays and so on. That would mean approximately $90,000 gross, not allowing for the great many tax deductions any resourceful self employed person can find. That is, an average sort of income. I know many
writers. I don't know of any, including the famous ones, who earn even this modest income. I estimate, and others agree, that there are about ten professional writers in Australia who have met and overcome this financial hurdle consistently for ten years. One of my friends, who I consider to be one of Australia's outstanding literary stylists, asked me how much the Adam Smith Club Newsletter paid its contributors. I am not usually so crass as to burst out laughing in my friends' faces, but this time I couldn't help myself.
I have one very good friend who I have known for many years who could reasonably be described as internationally famous. He likes to project an image of prosperity but when he gets a decent cheque he blows it on an overseas trip or something similar and he is returned to poverty.
My wife is contemptuous of the fee I get from the main publication I write for, News Weekly. News Weekly is vaguely associated with the Catholic Church and has a degree of influence, but all she is interested in is the pay packet, which unfortunately News Weekly is unable to produce. That's better than when I started writing for them. I was paid nothing until the late B A Santamaria, founder of the National Civic Council, decided it was unfair for me to be paid nothing when I was writing every fortnight. It was a small amount, but it was useful.
No-one in my family has any interest in my writing at all. My daughter, who is a self-described feminist, is offended by News Weekly's pro-life stance. Our family is half Irish Catholic. Unfortunately, my mother doesn't like Catholics -- she comes from the Protestant side of the family. My mother is a millionaire but she is unwilling to spend the $25 or so to subscribe to News Weekly. My mother's logic regarding money is best seen in the following example. Last August was my mother's 90th birthday. I paid for a ticket from Melbourne to Perth for her party, which cost me over $400. I also paid for my two youngest children, who flew Qantas, which cost more, as their elder brother, who is a mergers and acquisitions banker, decide to fly Qantas. When, after the "cosy" family dinner at an expensive restaurant, I exploded and said I'd paid $400 out of my own pocket to attend her party, she replied that without my sister's loyalty card, the dinner would have cost her OVER $400!
To return to the great questions of our age. We were at the supermarket. My wife had finally decided to spend $8 on a bottle of Brown Bothers Moscato at Coles. I had just finished writing an article speculating on the possibility of armed conflict between China and Australia, including its allies, such as the US. My wife told me to stop talking nonsense, as she had her mind on important things -- she had two overripe zucchinis in the fridge. Should should she by some eggs and make zucchini slice, or buy a can of tomatoes and make ratatouille?
The pay packet is the problem. I am a writer. Writers do not get pay packets. Writers are, by definition, self employed. You might have a job as a professor at a good university which requires you to publish the occasional short story or journal article and teach about six hours a week for 20 weeks of the year. For this you will get a very handsome salary and a job from which you are effectively unsackable. I do not regard such a person as being a writer. Or you may get a gig (increasingly rare) on one of the Sun King's flagship publications that Uncle Rupert doesn't require to produce one of those vulgar things called a profit. Such publications are about as rare as a sober Irishman on St Patrick's Day, but they do exist. I do not call such a person a professional writer.
I call a professional writer someone who makes average weekly earnings plus 25% to allow for lack of holidays and so on. That would mean approximately $90,000 gross, not allowing for the great many tax deductions any resourceful self employed person can find. That is, an average sort of income. I know many
writers. I don't know of any, including the famous ones, who earn even this modest income. I estimate, and others agree, that there are about ten professional writers in Australia who have met and overcome this financial hurdle consistently for ten years. One of my friends, who I consider to be one of Australia's outstanding literary stylists, asked me how much the Adam Smith Club Newsletter paid its contributors. I am not usually so crass as to burst out laughing in my friends' faces, but this time I couldn't help myself.
I have one very good friend who I have known for many years who could reasonably be described as internationally famous. He likes to project an image of prosperity but when he gets a decent cheque he blows it on an overseas trip or something similar and he is returned to poverty.
My wife is contemptuous of the fee I get from the main publication I write for, News Weekly. News Weekly is vaguely associated with the Catholic Church and has a degree of influence, but all she is interested in is the pay packet, which unfortunately News Weekly is unable to produce. That's better than when I started writing for them. I was paid nothing until the late B A Santamaria, founder of the National Civic Council, decided it was unfair for me to be paid nothing when I was writing every fortnight. It was a small amount, but it was useful.
No-one in my family has any interest in my writing at all. My daughter, who is a self-described feminist, is offended by News Weekly's pro-life stance. Our family is half Irish Catholic. Unfortunately, my mother doesn't like Catholics -- she comes from the Protestant side of the family. My mother is a millionaire but she is unwilling to spend the $25 or so to subscribe to News Weekly. My mother's logic regarding money is best seen in the following example. Last August was my mother's 90th birthday. I paid for a ticket from Melbourne to Perth for her party, which cost me over $400. I also paid for my two youngest children, who flew Qantas, which cost more, as their elder brother, who is a mergers and acquisitions banker, decide to fly Qantas. When, after the "cosy" family dinner at an expensive restaurant, I exploded and said I'd paid $400 out of my own pocket to attend her party, she replied that without my sister's loyalty card, the dinner would have cost her OVER $400!
To return to the great questions of our age. We were at the supermarket. My wife had finally decided to spend $8 on a bottle of Brown Bothers Moscato at Coles. I had just finished writing an article speculating on the possibility of armed conflict between China and Australia, including its allies, such as the US. My wife told me to stop talking nonsense, as she had her mind on important things -- she had two overripe zucchinis in the fridge. Should should she by some eggs and make zucchini slice, or buy a can of tomatoes and make ratatouille?
Friday, 22 February 2013
Medibank Private heading for IPO
One of the first initiatives of the newly elected Whitlam Labor government in 1972 was the nationalisation of the Australian health care system. Every doctor in Australia was bleating about "the doctor-patient relationship", when it was obvious the only relationship the doctors were interested in was the relationship between the patient's wallet and the doctor's bank account. The health system didn't implode as the doctors had predicted, but it did cost them money.
Compared to the US system, the Australia health care system is a model of sanity. No-one asks, if you have a heart attack, who is your insurer? Everyone is covered for these events. However, if you have private insurance, which is subsidised by the government, you will go to the head of the queue for elective surgery, such as hip replacements, knee operations and so on. Thus, private insurance is a discretionary item.
The Australian healthcare system is a mixture of public and private. It is impossible to meet the demand for health care, as it is always expanding. As the population ages, as in Australia, health outlays will grow and the demands on the healthcare system, especially for elective surgery, will expand. Having a vigorous private health system makes good economic and political sense.
For many years, Australia has had a strong private health insurance industry. Most states had a major insurer, usually mutually owned, such as the Hospital Benefit Fund (HBF) in Western Australia. In other words, it was a not-for-profit model. Now, the health insurance sector operates on a profit based model. Some of the main players are BUPA from the UK and the acquisitive NIB.
Medibank Private was established in 1976 to provide competition to the private sector insurers. No government would dare interfere with the basic model of health care in Australia. That would be political poison. The doctors whine they don't make enough money, but I haven't seen any of them claiming low income benefits at Centrelink. Medicine is like anything else. Stars like ophthalmic surgeons make a motza while the average general practitioner can make around $250,000 if he or she is in a high volume practice.
Shadow Treasurer Joe Hockey announced in February 2010 that Medibank Private, which is wholly government owned, would be sold off by an incoming Coalition government. Medibank Private is the government's ;private health insurance company. The incoming Liberal Treasurer needs to find $60 billion fast. As for the Libs so called "razor gang" finding this sort of money through savings in the bureaucracy, having seen several in action, I have three things to say -- "ha ha ha". To do this, they would have to find savings equivalent to abolishing the Department of Defense, the biggest department in the federal government. If you believe the razor gang can find these sorts of savings, I have a nice near-new bridge going cheap.
Medibank Private is a profit maximising entity. The substantial annual dividend it pays to the government is very much appreciated. No reason exists why the government should own it. From personal communication, Medibank Private does not attempt to restrict premium increases to the rate of inflation. Premiums are increasing at about twice the rate of inflation. Due to the "community rating" model, policy holders liable to catastrophic injuries due to the nature of their employment or recreation, such as professional sportsmen and skiers, pay the same premiums as everybody else. Changing this would open a can or worms no-one would like to confront. The private health sector is one of those things Labor "doesn't like" because "rich people" use it to jump the queue. Queues are the essence of socialism. Private health will get a much better deal from the Coalition.
If Joe Hockey were wise, he would aim for an initial public offering (IPO) rather than a trade sale. A trade sale to industry would raise a lot of money quickly, but it would put the noses of millions of policy holders -- or "members" as Medibank Private prefers to call them -- out of joint. A float along the lines of the Commonwealth Bank of Australia IPO would make Joe Hockey a very popular man.
Compared to the US system, the Australia health care system is a model of sanity. No-one asks, if you have a heart attack, who is your insurer? Everyone is covered for these events. However, if you have private insurance, which is subsidised by the government, you will go to the head of the queue for elective surgery, such as hip replacements, knee operations and so on. Thus, private insurance is a discretionary item.
The Australian healthcare system is a mixture of public and private. It is impossible to meet the demand for health care, as it is always expanding. As the population ages, as in Australia, health outlays will grow and the demands on the healthcare system, especially for elective surgery, will expand. Having a vigorous private health system makes good economic and political sense.
For many years, Australia has had a strong private health insurance industry. Most states had a major insurer, usually mutually owned, such as the Hospital Benefit Fund (HBF) in Western Australia. In other words, it was a not-for-profit model. Now, the health insurance sector operates on a profit based model. Some of the main players are BUPA from the UK and the acquisitive NIB.
Medibank Private was established in 1976 to provide competition to the private sector insurers. No government would dare interfere with the basic model of health care in Australia. That would be political poison. The doctors whine they don't make enough money, but I haven't seen any of them claiming low income benefits at Centrelink. Medicine is like anything else. Stars like ophthalmic surgeons make a motza while the average general practitioner can make around $250,000 if he or she is in a high volume practice.
Shadow Treasurer Joe Hockey announced in February 2010 that Medibank Private, which is wholly government owned, would be sold off by an incoming Coalition government. Medibank Private is the government's ;private health insurance company. The incoming Liberal Treasurer needs to find $60 billion fast. As for the Libs so called "razor gang" finding this sort of money through savings in the bureaucracy, having seen several in action, I have three things to say -- "ha ha ha". To do this, they would have to find savings equivalent to abolishing the Department of Defense, the biggest department in the federal government. If you believe the razor gang can find these sorts of savings, I have a nice near-new bridge going cheap.
Medibank Private is a profit maximising entity. The substantial annual dividend it pays to the government is very much appreciated. No reason exists why the government should own it. From personal communication, Medibank Private does not attempt to restrict premium increases to the rate of inflation. Premiums are increasing at about twice the rate of inflation. Due to the "community rating" model, policy holders liable to catastrophic injuries due to the nature of their employment or recreation, such as professional sportsmen and skiers, pay the same premiums as everybody else. Changing this would open a can or worms no-one would like to confront. The private health sector is one of those things Labor "doesn't like" because "rich people" use it to jump the queue. Queues are the essence of socialism. Private health will get a much better deal from the Coalition.
If Joe Hockey were wise, he would aim for an initial public offering (IPO) rather than a trade sale. A trade sale to industry would raise a lot of money quickly, but it would put the noses of millions of policy holders -- or "members" as Medibank Private prefers to call them -- out of joint. A float along the lines of the Commonwealth Bank of Australia IPO would make Joe Hockey a very popular man.
Friday, 8 February 2013
Why Melbourne doesn't have an airport rail link
Transurban has one good asset -- its CityLink system. CityLink is a good system, it provides quick and reliable freeway transport for motorists across Melbourne. The rest of its assets are a pack of dogs. Without CityLink, Transurban would be a dog too, not the steady earner beloved of pension funds. Or a "dog with fleas" as Gordon Gekko said.
The absence of a rail link to Melbourne Airport suits Transurban fine, because you can only get to Melbourne Airport by car, taxi or bus. The SkyBus service costs $17 one way. Taxis cost around $50 from the airport to the city. A rail link would mean Transurban would lose a great many of these customers. Transurban operates toll roads, so it makes sense for them to maximise traffic.
Tansurban is not alone in applauding the lack of an airport rail link. Australia Pacific Airports, which operates the airport, has just completed a multimillion dollar upgrade of its parking facilities. It costs around $20 just to park long enough to pick someone up. It is almost impossible to pick someone up from the curb at the airport. Melbourne Airport's parking fees are said to be among the highest in the world. Australian Pacific Airports would be very upset by an airport rail link, which would see much of their business disappear. Even a recent suggestion there should be a dedicated bus lane on the freeway to the airport caused barely concealed alarm.
Transurban, the taxi industry and Australian Pacific Airports are what economists call "rent seekers". Who would benefit from an airport rail link? Only the consumers. And who cares about them? Certainly the Baillieu Government doesn't, because they could change the "no rail link" policy with the stroke of a pen. Good old "Do Nothing Ted" is maintaining his reputation.
The absence of a rail link to Melbourne Airport suits Transurban fine, because you can only get to Melbourne Airport by car, taxi or bus. The SkyBus service costs $17 one way. Taxis cost around $50 from the airport to the city. A rail link would mean Transurban would lose a great many of these customers. Transurban operates toll roads, so it makes sense for them to maximise traffic.
Tansurban is not alone in applauding the lack of an airport rail link. Australia Pacific Airports, which operates the airport, has just completed a multimillion dollar upgrade of its parking facilities. It costs around $20 just to park long enough to pick someone up. It is almost impossible to pick someone up from the curb at the airport. Melbourne Airport's parking fees are said to be among the highest in the world. Australian Pacific Airports would be very upset by an airport rail link, which would see much of their business disappear. Even a recent suggestion there should be a dedicated bus lane on the freeway to the airport caused barely concealed alarm.
Transurban, the taxi industry and Australian Pacific Airports are what economists call "rent seekers". Who would benefit from an airport rail link? Only the consumers. And who cares about them? Certainly the Baillieu Government doesn't, because they could change the "no rail link" policy with the stroke of a pen. Good old "Do Nothing Ted" is maintaining his reputation.
US shale gas makes life hard for Australia
Canada has announced its third export gas project aimed at the Asian market. Another export gas project in Texas is likely to get the go-ahead soon. The hopes of US gas consumers for a captive market have been dashed. The availability of low cost feedstocks has revolutionised the US chemical industry but there is just so much shale gas around in the US it would be silly not to take advantage of the current seller's market in Asia.
Australian gas producers have a window of about five years before US gas projects come on stream but after that the market will become very competitive. When the Panama Canal is widened in 2015, it will be economic to ship Texas Gulf coast gas to Asia. That will really set the cat amongst the pigeons. As predicted in my post "Dump Australian Gas Stocks" (16 Nov. 2012) Australian producers, who are committed to multibillion dollar gas trains, are getting nervous about US competition. Australian gas users as seeking some form of reservation for local use but that bird is unlikely to fly, at least on the terms they are seeking. Also, with shale gas being flared off in the US, it makes no sense not to export it. And the US is a much more reliable supplier than than Oman.
Australian gas producers seem to be getting edgy about missing the market. With major Australian projects way over budget, Shell has said they will build a floating platform for their Browse project, which will be made in Korea, or some similar country, where workers actually work. Of course, Shell is too smart to say "Australian workers are just too expensive and strike prone" but as Bob Dylan said "You don't have to be weatherman to see which way the wind is blowing." Western Australian state Premier Colin Barnett is pushing hard for a land-based facility for Browse, but insiders say he is unlikely to win on this one.
Several other US shale gas export plants are awaiting approval, often with similar stake holders to the Australian projects, for example Shell. It's going to be an interesting couple of years. As for the coal seam gas to be produced in Queensland, it's an inferior product and the wells sunk on agricultural land make it very unpopular with farmers.
Australian gas producers have a window of about five years before US gas projects come on stream but after that the market will become very competitive. When the Panama Canal is widened in 2015, it will be economic to ship Texas Gulf coast gas to Asia. That will really set the cat amongst the pigeons. As predicted in my post "Dump Australian Gas Stocks" (16 Nov. 2012) Australian producers, who are committed to multibillion dollar gas trains, are getting nervous about US competition. Australian gas users as seeking some form of reservation for local use but that bird is unlikely to fly, at least on the terms they are seeking. Also, with shale gas being flared off in the US, it makes no sense not to export it. And the US is a much more reliable supplier than than Oman.
Australian gas producers seem to be getting edgy about missing the market. With major Australian projects way over budget, Shell has said they will build a floating platform for their Browse project, which will be made in Korea, or some similar country, where workers actually work. Of course, Shell is too smart to say "Australian workers are just too expensive and strike prone" but as Bob Dylan said "You don't have to be weatherman to see which way the wind is blowing." Western Australian state Premier Colin Barnett is pushing hard for a land-based facility for Browse, but insiders say he is unlikely to win on this one.
Several other US shale gas export plants are awaiting approval, often with similar stake holders to the Australian projects, for example Shell. It's going to be an interesting couple of years. As for the coal seam gas to be produced in Queensland, it's an inferior product and the wells sunk on agricultural land make it very unpopular with farmers.
Friday, 28 December 2012
Is Australia ruled by the one percenters?
I have a Canadian friend who lives in Taipei, where he works for the Taiwan international trade development corporation. We have been friends for many years and I have a high regard for his judgement, especially when it comes to China. Most of his friends are, and always have been, Chinese. On politics, however, we are polar opposites. I am a free market conservative and he is a Trotskyist.
He began going on about the "One Percenters", the target of so much wrath around the world, the one percent of the population who are supposed to rule the world. I initially wrote it off as part of his Trotskyist leanings. When I said it was hard for Australian workers to "maintain the rage" when many of them earn $100,000 a year, live in million dollar houses and change cars every couple of years, he said they were being "bought off". The Occupy Wall St movement did much to highlight the alleged role of the One Percenters. According to my friend, the Sage of Omaha, Warren Buffett, said the One Percenters were a bunch of crooks. That is irrelevant. Membership of the One Percenters is not decided by personal nomination.
I have been involved in politics since I was a teenager and I have been writing about business-related topics for over 30 years. I will restrict my comments to Australia, as I have a fairly intimate knowledge of Australian business, government and politics. I also know quite a bit about Taiwan and China, both of which are very different to Australia.
The first thing to note is that Australia is a small country in terms of economic activity and population. The population of Australia in mid 2012 was just under 23,000,000. Second, Australia is, and always has been, an importer of capital and an exporter of raw materials. Its finance and trading industries are not internationally significant and are oriented towards the domestic market. As Australia is a young country, very few of its business and financial elite are more than a few generations removed from the farmyard or factory floor. Few people would rate as being wealthy by intrernational measures, with obvious exceptions such as Rupert Murdoch (now officially an American), Gina Reinhart, the iron ore heiress (said to be the richest woman in the world) and Frank Lowy (Westfield shopping centres, one of the world's largest chains). The Australian business elite is highly concentrated, less than one percent, but its membership is not a secret.
Australia has only four significant centres of economic activity. Sydney, capital of New South Wales, and its hinterland, the financial centre of Australia; Melbourne, capital of Victoria, mining, commercial and manufacturing centre of Australia; south-east Queenland, centred on Brisbane, the coal centre of Australia; and Perth, capital city of Western Australia, administrative and service centre for iron ore production, Australia's number one export. South Australia, the Northern Territory and Tasmania are mendicant states that contribute little to national output.
Thus, we have four more or less distinct centres of economic activity. Not so long ago, most enterprises were restricted to one State. They would be closely related to the State governments, over whom they would exercise significant influence. National players, like the Broken Hill Proprietary Co (BHP) would tailor their investment decisions to maximise their political leverage. Now, most of the regional companies have gone and have been consolidated into national or international enterprises. The business elite has thus become more concentrated. I would, however, doubt that the membership of the business elite would be much of a secret to regular readers of the financial press. I have only ever met one businessman who didn't like getting his name in the paper. He introduced himself only as "Michael" and said his investment bank made several billion by buying up pubs and their accompanying poker machine licenses when they were introduced into Victoria. He certainly wasn't the average pub blowhard but I have no idea if he was telling the truth. He valued his privacy above all else. As indicated, the fact that membership of this elite is widely known does not mean shonky deals between business and government do not occur.
Other elite structures, such as goverment, public service, police, armed services are, in Australia at least, largely meritocratic and contestable. Some, such as the Australian Labor Party, are developing family linkages similar to the Mafia. While deals are done under the 'old mates act' and many institutions are more corrupt that we would like to think, Australia is a fairly clean country. Blatant nepotism in official structures is rare.
That a governing elite exists is beyond doubt. The important thing to keep in mind is that membership is contestable In my (brief) socialistic youth I toyed with the idea of confiscatory death duties to 'level the playing field' but it would be almost impossible to imagine a more unpopular policy for the average Australian voter than death duties. Death duties are political poison. No-one seems to mind, or even envy for that matter, billionaires like James Packer or Gina Reinhart as long as they are gainfully employed. Australia is a young country and dynastic fortunes are not common. Most second and third generation "trust fund babies" don't like to dirty their hands with business and go in for philanthropy, the arts and so on. China is not a meritocractic country. The elite is co-opted into the Communist Party, which is ruled by the 'princelings.' We have no idea what goes on in the Communist Party. That is not the case in Australia. Shareholders in companies with a family tradition, such as the Myer department store chain, find it reassuring that the founding family still takes an interest in the business.
He began going on about the "One Percenters", the target of so much wrath around the world, the one percent of the population who are supposed to rule the world. I initially wrote it off as part of his Trotskyist leanings. When I said it was hard for Australian workers to "maintain the rage" when many of them earn $100,000 a year, live in million dollar houses and change cars every couple of years, he said they were being "bought off". The Occupy Wall St movement did much to highlight the alleged role of the One Percenters. According to my friend, the Sage of Omaha, Warren Buffett, said the One Percenters were a bunch of crooks. That is irrelevant. Membership of the One Percenters is not decided by personal nomination.
I have been involved in politics since I was a teenager and I have been writing about business-related topics for over 30 years. I will restrict my comments to Australia, as I have a fairly intimate knowledge of Australian business, government and politics. I also know quite a bit about Taiwan and China, both of which are very different to Australia.
The first thing to note is that Australia is a small country in terms of economic activity and population. The population of Australia in mid 2012 was just under 23,000,000. Second, Australia is, and always has been, an importer of capital and an exporter of raw materials. Its finance and trading industries are not internationally significant and are oriented towards the domestic market. As Australia is a young country, very few of its business and financial elite are more than a few generations removed from the farmyard or factory floor. Few people would rate as being wealthy by intrernational measures, with obvious exceptions such as Rupert Murdoch (now officially an American), Gina Reinhart, the iron ore heiress (said to be the richest woman in the world) and Frank Lowy (Westfield shopping centres, one of the world's largest chains). The Australian business elite is highly concentrated, less than one percent, but its membership is not a secret.
Australia has only four significant centres of economic activity. Sydney, capital of New South Wales, and its hinterland, the financial centre of Australia; Melbourne, capital of Victoria, mining, commercial and manufacturing centre of Australia; south-east Queenland, centred on Brisbane, the coal centre of Australia; and Perth, capital city of Western Australia, administrative and service centre for iron ore production, Australia's number one export. South Australia, the Northern Territory and Tasmania are mendicant states that contribute little to national output.
Thus, we have four more or less distinct centres of economic activity. Not so long ago, most enterprises were restricted to one State. They would be closely related to the State governments, over whom they would exercise significant influence. National players, like the Broken Hill Proprietary Co (BHP) would tailor their investment decisions to maximise their political leverage. Now, most of the regional companies have gone and have been consolidated into national or international enterprises. The business elite has thus become more concentrated. I would, however, doubt that the membership of the business elite would be much of a secret to regular readers of the financial press. I have only ever met one businessman who didn't like getting his name in the paper. He introduced himself only as "Michael" and said his investment bank made several billion by buying up pubs and their accompanying poker machine licenses when they were introduced into Victoria. He certainly wasn't the average pub blowhard but I have no idea if he was telling the truth. He valued his privacy above all else. As indicated, the fact that membership of this elite is widely known does not mean shonky deals between business and government do not occur.
Other elite structures, such as goverment, public service, police, armed services are, in Australia at least, largely meritocratic and contestable. Some, such as the Australian Labor Party, are developing family linkages similar to the Mafia. While deals are done under the 'old mates act' and many institutions are more corrupt that we would like to think, Australia is a fairly clean country. Blatant nepotism in official structures is rare.
That a governing elite exists is beyond doubt. The important thing to keep in mind is that membership is contestable In my (brief) socialistic youth I toyed with the idea of confiscatory death duties to 'level the playing field' but it would be almost impossible to imagine a more unpopular policy for the average Australian voter than death duties. Death duties are political poison. No-one seems to mind, or even envy for that matter, billionaires like James Packer or Gina Reinhart as long as they are gainfully employed. Australia is a young country and dynastic fortunes are not common. Most second and third generation "trust fund babies" don't like to dirty their hands with business and go in for philanthropy, the arts and so on. China is not a meritocractic country. The elite is co-opted into the Communist Party, which is ruled by the 'princelings.' We have no idea what goes on in the Communist Party. That is not the case in Australia. Shareholders in companies with a family tradition, such as the Myer department store chain, find it reassuring that the founding family still takes an interest in the business.
Thursday, 20 December 2012
sense and nonsense about homosexuality
When I told me wife I was going to write about homosexuality, my wife's advice was "don't say anything nasty." It is not gay men or lesbian who are peddling nonsense, however, it is their critics. Some of their beliefs seem to defy reason.
Take for example the belief that all males are naturally heterosexual and are somehow converted -- or subverted -- into being gay. In my experience, most gay men discover around the age of 15 -- usually to their horror -- that the are not attracted to the opposite sex. Rather, the reverse. They are quite alarmed to find the are attracted to other males. This can be very disturbing, especially to young men who have strong religious beliefs in faiths that emphasise heterosexual marriage. A humorous account of this can be found in "Naked" by David Sedaris (Little, Brown 1997). I am not much in favour of the "Scale of Sexuality" where there is a progression from heterosexuality to homosexuality -- most men are either gay, or they are not. Of course, particularly in show business, many men are not as heterosexual as they appear but this mainly for publicity. You can't "convert" someone to homosexuality.
Other cultures have different ideas. In Asia, its quite acceptable for gay boys to have their fling, particularly in cultures like Thailand. They are expected to eventually settle down, marry and produce children. I once had the extreme misfortune to share a dorm room with two Thai boys who went to sleep in each other's arms every night and played the same three Thai songs over and over again, day and night. A relation of mine is Chinese, gay, married and has recently produced a child. He does not live with his wife. This is not as unusual as it sounds in China.
Are there no genuine bisexual men then? I am told that most gigolos are bisexual and that they are very good lovers. On the other hand, I believe the number of genuinely bisexual men to be small. "As Nature Made Him: The Boy Who Was Raised as a Girl" by John Colapinto (Harper Collins 2000) shows just how difficult it is to change a person's sexual orientation. I therefore regard aversion therapy and other forms of behaviourial modification therapies aimed at changing a person's sexual orientation as being a form of torture. David Riemer had his penis and testicles removed by surgery but he was still a heterosexual male.
I have a number of friends who I either know or suspect are gay. To be quite honest, I feel uneasy around the classic effeminate gay man but mostg gay men don't worry me at all. I consulted two experts on what I should do if one one of my friends made a pass at me, as has happened before. One said that gay men have a very good idea about a person's sexuality (gaydar) and if he valued our relationship he would be unlikely to make advances. Another said "if he loves you, why shouldn't he?"
According to my research, a certain proportion of males (always small) in any culture are gay. Even where homosexuality is punishable by death, these gay men will seek an outlet for their sexuality. A smaller proportion will be lesbians. This accounts at least in part for the "man shortage". It is not a figment of the imagination of 30 something women looking for partners. These days, it is far more socially acceptable to be both openly gay and unmarried.
The whole discussion about male and female sexuality has become enmeshed in the gay marriage debate. The two are related, but only tangentially.
My advice to those who campaign against homosexual people, rather than the radical gay political agenda, is to follow the advice of "The Moonshiner"
I'm a rambler, I'm a gambler, I'm a long way from home
And if you don't like me well leave me alone
I'll eat when I'm hungry, I'll drink when I'm dry
And if moonshine don't kill me I'll live til I die.
Take for example the belief that all males are naturally heterosexual and are somehow converted -- or subverted -- into being gay. In my experience, most gay men discover around the age of 15 -- usually to their horror -- that the are not attracted to the opposite sex. Rather, the reverse. They are quite alarmed to find the are attracted to other males. This can be very disturbing, especially to young men who have strong religious beliefs in faiths that emphasise heterosexual marriage. A humorous account of this can be found in "Naked" by David Sedaris (Little, Brown 1997). I am not much in favour of the "Scale of Sexuality" where there is a progression from heterosexuality to homosexuality -- most men are either gay, or they are not. Of course, particularly in show business, many men are not as heterosexual as they appear but this mainly for publicity. You can't "convert" someone to homosexuality.
Other cultures have different ideas. In Asia, its quite acceptable for gay boys to have their fling, particularly in cultures like Thailand. They are expected to eventually settle down, marry and produce children. I once had the extreme misfortune to share a dorm room with two Thai boys who went to sleep in each other's arms every night and played the same three Thai songs over and over again, day and night. A relation of mine is Chinese, gay, married and has recently produced a child. He does not live with his wife. This is not as unusual as it sounds in China.
Are there no genuine bisexual men then? I am told that most gigolos are bisexual and that they are very good lovers. On the other hand, I believe the number of genuinely bisexual men to be small. "As Nature Made Him: The Boy Who Was Raised as a Girl" by John Colapinto (Harper Collins 2000) shows just how difficult it is to change a person's sexual orientation. I therefore regard aversion therapy and other forms of behaviourial modification therapies aimed at changing a person's sexual orientation as being a form of torture. David Riemer had his penis and testicles removed by surgery but he was still a heterosexual male.
I have a number of friends who I either know or suspect are gay. To be quite honest, I feel uneasy around the classic effeminate gay man but mostg gay men don't worry me at all. I consulted two experts on what I should do if one one of my friends made a pass at me, as has happened before. One said that gay men have a very good idea about a person's sexuality (gaydar) and if he valued our relationship he would be unlikely to make advances. Another said "if he loves you, why shouldn't he?"
According to my research, a certain proportion of males (always small) in any culture are gay. Even where homosexuality is punishable by death, these gay men will seek an outlet for their sexuality. A smaller proportion will be lesbians. This accounts at least in part for the "man shortage". It is not a figment of the imagination of 30 something women looking for partners. These days, it is far more socially acceptable to be both openly gay and unmarried.
The whole discussion about male and female sexuality has become enmeshed in the gay marriage debate. The two are related, but only tangentially.
My advice to those who campaign against homosexual people, rather than the radical gay political agenda, is to follow the advice of "The Moonshiner"
I'm a rambler, I'm a gambler, I'm a long way from home
And if you don't like me well leave me alone
I'll eat when I'm hungry, I'll drink when I'm dry
And if moonshine don't kill me I'll live til I die.
Saturday, 15 December 2012
Exams for investors are a bad idea
ASIC chairman Greg Medcraft's suggestion that investors should sit a two hour exam before investing in certain financial products has set the cat among the pigeons.
The Australian Securities and Investment Commission (ASIC) is intended to regulate certain financial markets. The big four banks are regulated by the Australian Prudential Regulation Authority (APRA). Among ASIC's clients are a host of deadbeats that give the appearance of being banks without being banks. The most recent failure was the Banksia ( note "Bank"sia ) finance group centred on Kyabram, a rural township in the north of the State of Victoria. Why anyone would entrust their life savings to an institution of this nature when they could cross the street get the security of a major bank at the cost of a few percent is beyond me. But then I am a city slicker, I don't hate the banks as many country people with long memories do. As far as fixed interest investments are concerned, the difference between the return on a secure investment and a risky one is so inconsequential it is not worth bothering about.
But what the ASIC chairman was really on about were things like contracts for difference (CFDs), debentures, FX trading and self managed super funds (SMSFs).
There may be people who make money out of CFDs, let us just say I've never met anyone who has. CFDs tend to be marketed to gullible people who have no idea of the risks involved. As for FX trading, the average punter would be competing against professional traders who in all likelihood have PhDs in maths. I was at one time fairly good at maths, but when I last tried balancing my cheque book (a long time ago when I had one) and was defeated, I decided my maths weren't up to FX trader standards. The truth is all these instruments exist to transfer money from the amateurs to the professionals, much the same as any gambling product.
Can you tell people this? Of course you can. Will they listen? Probably not. It's amazing how many people will commit thousands to an investment they don't understand when their largest previous outlay was a Lotto ticket.
Any investment is about the evaluation and management of risk. Without risk, there will be no return. The greater the risk, the greater the potential return. The risk involved should be appropriate to the individual concerned. If a young man gets dudded for a few thousand on CFDs, it will be probably be a worthwhile learning experience. For an old age pensioner, it may be the difference between eating steak or cat food.
Even if it could be shown that a two hour examination would prevent people from making foolish investments -- which I very much doubt -- do they have a place in financial management? It is not the government's role to protect people from themselves. Financial advisers, stockbrokers and a host of other professionals exist to help people invest their money. On top of all that, do we really need an exam?
For a time I invested in what are known as "penny dreadfuls." Some people claim they make money from these stocks, which are more formally known as "small cap mining stocks". I know for a fact that some investors do make money from these stocks, but like most gamblers, you hear more about the winners than the losers. I broke about even. In the end, I decided it wasn't worth the aggravation. But if someone thinks they have found the next Woodside or News Corporation, they should be allowed to have a punt. If they want to have a share in a stock whose sole asset is an expanse of kangaroo pasture, that's their business.
A fool and his money are soon parted. It's an old saying but a true one. No investment is risk free, even if it is the risk that the capital value will be eaten away by inflation. In the end, you can't protect people from themselves. Exams for investors are a bad idea.
The Australian Securities and Investment Commission (ASIC) is intended to regulate certain financial markets. The big four banks are regulated by the Australian Prudential Regulation Authority (APRA). Among ASIC's clients are a host of deadbeats that give the appearance of being banks without being banks. The most recent failure was the Banksia ( note "Bank"sia ) finance group centred on Kyabram, a rural township in the north of the State of Victoria. Why anyone would entrust their life savings to an institution of this nature when they could cross the street get the security of a major bank at the cost of a few percent is beyond me. But then I am a city slicker, I don't hate the banks as many country people with long memories do. As far as fixed interest investments are concerned, the difference between the return on a secure investment and a risky one is so inconsequential it is not worth bothering about.
But what the ASIC chairman was really on about were things like contracts for difference (CFDs), debentures, FX trading and self managed super funds (SMSFs).
There may be people who make money out of CFDs, let us just say I've never met anyone who has. CFDs tend to be marketed to gullible people who have no idea of the risks involved. As for FX trading, the average punter would be competing against professional traders who in all likelihood have PhDs in maths. I was at one time fairly good at maths, but when I last tried balancing my cheque book (a long time ago when I had one) and was defeated, I decided my maths weren't up to FX trader standards. The truth is all these instruments exist to transfer money from the amateurs to the professionals, much the same as any gambling product.
Can you tell people this? Of course you can. Will they listen? Probably not. It's amazing how many people will commit thousands to an investment they don't understand when their largest previous outlay was a Lotto ticket.
Any investment is about the evaluation and management of risk. Without risk, there will be no return. The greater the risk, the greater the potential return. The risk involved should be appropriate to the individual concerned. If a young man gets dudded for a few thousand on CFDs, it will be probably be a worthwhile learning experience. For an old age pensioner, it may be the difference between eating steak or cat food.
Even if it could be shown that a two hour examination would prevent people from making foolish investments -- which I very much doubt -- do they have a place in financial management? It is not the government's role to protect people from themselves. Financial advisers, stockbrokers and a host of other professionals exist to help people invest their money. On top of all that, do we really need an exam?
For a time I invested in what are known as "penny dreadfuls." Some people claim they make money from these stocks, which are more formally known as "small cap mining stocks". I know for a fact that some investors do make money from these stocks, but like most gamblers, you hear more about the winners than the losers. I broke about even. In the end, I decided it wasn't worth the aggravation. But if someone thinks they have found the next Woodside or News Corporation, they should be allowed to have a punt. If they want to have a share in a stock whose sole asset is an expanse of kangaroo pasture, that's their business.
A fool and his money are soon parted. It's an old saying but a true one. No investment is risk free, even if it is the risk that the capital value will be eaten away by inflation. In the end, you can't protect people from themselves. Exams for investors are a bad idea.
RBA despairs as Aussie dollar powers ahead
Everyone wants the Aussie dollar to retreat, except for travelers going overseas. The welcome fillip tourists get to their spending power is little consolation for exporters and import competing manufacturers who cannot compete against cheap imports.
The Reserve Bank of Australia (RBA) cut the cash rate by 25 basis points (bp) on Tuesday 4 December 2012 to 3 percentage points, a level which the RBA had previously described as "desperation". The 3 percent rate has not been seen since the days of the global financial crisis (GFC) when the RBA and the government hurled everything except the kitchen sink at the economy to prevent a "depression". As it was, Australia was lumbered with useless school halls, self igniting ceiling insulation and cash handouts that pensioners -- working on the principle it wasn't their money anyway -- shoved down the the mouths of poker machines all over Australia. That even a dysfunctional organisation like the Australian Labor Party could even contemplate reinstating the author of this lunacy, Kevin Rudd, as prime minister is enough to make one despair for the democratic process.
The reason the Aussie dollar won't come down is that it is now a reserve currency. In the days gone by, when the International Monetary Fund (IMF) ruled the world, fixed exchange rates were fixed by governments. Nations could devalue their currencies in a series of competitive devaluations. With exchange rates now -- in theory -- set by the market, this shouldn't happen. These "beggar my neighbour" policies, which many economic historians blame at least partially for the Great Depression of the 1930s, are not supposed to happen now. But the pundits didn't count on the Fed's "Helicopter Ben" Bernanke cranking up the printing press and flooding the world with greenbacks. It's only dawning now on America's competitors that this is a form of devaluation aimed at giving US exporters a competitive advantage. This devaluation works because most the world's trade is still conducted in US dollars.
For smaller economies without the clout of Bernanke's Federal Reserve or the US Treasury, there is only so much they can do to hold the line. The Swiss have accumulated reserves running into the hundreds of billions as they try to hold their peg against the euro. For Australia, no matter how low the cash rate goes, the Aussie dollar will hold up, not least because the Aussie dollar is a proxy for the Chinese yuan. Unless the Chinese banking system collapses, which is possible but unlikely, the Aussie dollar will hold up. The more likely situation is that China will go from double digit growth to steady growth in the mid to high single digits on the back of domestic demand. For those buying the Aussie dollar, it's an indirect bet that the Chinese economy will achieve sustainable growth without China basing its economic growth on being the lowest cost exporter. As for the RBA being able to force the Aussie dollar down through unilateral action, forget it. About all they will be able to do is annoy FX traders from time to time.
For previous posts, see "Aussie dollar unlikely to collapse" (4 Oct. 2012) and "Aussie dollar just won't stay down" (9 Nov. 2012).
The Reserve Bank of Australia (RBA) cut the cash rate by 25 basis points (bp) on Tuesday 4 December 2012 to 3 percentage points, a level which the RBA had previously described as "desperation". The 3 percent rate has not been seen since the days of the global financial crisis (GFC) when the RBA and the government hurled everything except the kitchen sink at the economy to prevent a "depression". As it was, Australia was lumbered with useless school halls, self igniting ceiling insulation and cash handouts that pensioners -- working on the principle it wasn't their money anyway -- shoved down the the mouths of poker machines all over Australia. That even a dysfunctional organisation like the Australian Labor Party could even contemplate reinstating the author of this lunacy, Kevin Rudd, as prime minister is enough to make one despair for the democratic process.
The reason the Aussie dollar won't come down is that it is now a reserve currency. In the days gone by, when the International Monetary Fund (IMF) ruled the world, fixed exchange rates were fixed by governments. Nations could devalue their currencies in a series of competitive devaluations. With exchange rates now -- in theory -- set by the market, this shouldn't happen. These "beggar my neighbour" policies, which many economic historians blame at least partially for the Great Depression of the 1930s, are not supposed to happen now. But the pundits didn't count on the Fed's "Helicopter Ben" Bernanke cranking up the printing press and flooding the world with greenbacks. It's only dawning now on America's competitors that this is a form of devaluation aimed at giving US exporters a competitive advantage. This devaluation works because most the world's trade is still conducted in US dollars.
For smaller economies without the clout of Bernanke's Federal Reserve or the US Treasury, there is only so much they can do to hold the line. The Swiss have accumulated reserves running into the hundreds of billions as they try to hold their peg against the euro. For Australia, no matter how low the cash rate goes, the Aussie dollar will hold up, not least because the Aussie dollar is a proxy for the Chinese yuan. Unless the Chinese banking system collapses, which is possible but unlikely, the Aussie dollar will hold up. The more likely situation is that China will go from double digit growth to steady growth in the mid to high single digits on the back of domestic demand. For those buying the Aussie dollar, it's an indirect bet that the Chinese economy will achieve sustainable growth without China basing its economic growth on being the lowest cost exporter. As for the RBA being able to force the Aussie dollar down through unilateral action, forget it. About all they will be able to do is annoy FX traders from time to time.
For previous posts, see "Aussie dollar unlikely to collapse" (4 Oct. 2012) and "Aussie dollar just won't stay down" (9 Nov. 2012).
Friday, 16 November 2012
Dump Australian gas stocks
In its usual slow witted way, the Australian Securities Exchange (ASX) is gradually waking up the fact that US shale gas will likely put Australian natural gas producers out of business when it is unleashed upon world markets.
With gas trains costing in the multibillions, this is very serious business. US shale gas is on the market for a fifth the price of Australian gas. US gas can be landed in Asia at half the price of Australian gas. Local gas users are going ballistic because they can't get a guaranteed supply of gas from local gas producers except at extortionate prices. This assumes the US Government will give shale gas producers export licenses, but the first shipment of US gas will arrive in Asia in 2015 -- surely the first of a tidal wave of such shipments. Within 20 years, the US will be self sufficient in petroleum products and will be able to do away with economic lunacy like ethanol for fuel.
Of the Australian petroleum producers, Santos is the most exposed. Santos is a major partner in one of the three gas trains planned for Gladstone, a port city in Queensland. Santos is offering an inferior product, namely coal seam gas, which has only half the heating value of natural gas. The company is very unpopular with land owners, who are seeing their farms destroyed by gas wells. Coal seam gas is not produced by the notorious fracking procedure, though occasionally it is similar, but this doesn't make it any more popular with the public.
Most gas these days is sold on long term contract. With more gas coming on stream, more gas will be sold on the spot market, meaning customers will be able to play one supplier off against the other. Is it likely Tokyo Power, for example, will pay double, or five times, for Australian gas when US gas will do the same job?
For further information, see "US shale gas will change the world" by Jeffry Babb (News Weekly, 21 July 2012)
With gas trains costing in the multibillions, this is very serious business. US shale gas is on the market for a fifth the price of Australian gas. US gas can be landed in Asia at half the price of Australian gas. Local gas users are going ballistic because they can't get a guaranteed supply of gas from local gas producers except at extortionate prices. This assumes the US Government will give shale gas producers export licenses, but the first shipment of US gas will arrive in Asia in 2015 -- surely the first of a tidal wave of such shipments. Within 20 years, the US will be self sufficient in petroleum products and will be able to do away with economic lunacy like ethanol for fuel.
Of the Australian petroleum producers, Santos is the most exposed. Santos is a major partner in one of the three gas trains planned for Gladstone, a port city in Queensland. Santos is offering an inferior product, namely coal seam gas, which has only half the heating value of natural gas. The company is very unpopular with land owners, who are seeing their farms destroyed by gas wells. Coal seam gas is not produced by the notorious fracking procedure, though occasionally it is similar, but this doesn't make it any more popular with the public.
Most gas these days is sold on long term contract. With more gas coming on stream, more gas will be sold on the spot market, meaning customers will be able to play one supplier off against the other. Is it likely Tokyo Power, for example, will pay double, or five times, for Australian gas when US gas will do the same job?
For further information, see "US shale gas will change the world" by Jeffry Babb (News Weekly, 21 July 2012)
Ratings agency model is broken
My father was a panel beater. He ran what the Americans would call a body shop. In the days before insurance companies got smart and started issuing their assessors with standard schedules for various types of collision damage, my father made a very good living by manipulating the prices of parts, labour and so on. He occasionally substituted second hand parts for new parts and so on, which wasn't strictly legal -- but it was highly profitable. Above his shop he had a battered sign which said "All care but no responsibility taken." According to my legal friends, that declaration has no legal status, which he found out to his cost several times.
The ratings agencies have always operated on the same principle. Their business model has always struck me as being very peculiar. And now an Australian judge has ruled that the "All care but no responsibility" model is worth about as much as the sign above my father's shop when it comes to offering them protection from legal remedies.
For those of you who don't know how their model works, the ratings agency will rate a product, and be paid by the firm issuing the product. Is it any wonder then that the ratings agencies rated CDOs (colatoralised debt obligations) AAA when they should have rated them c.r.a.p.? Of course, then no one would have invested in them, especially as some bodies have a statutory obligation to invest only in financial instruments with a certain rating.
The Federal Court of Australia ruled on November 5 that Standard & Poors was jointly liable with ABN AMRO for the losses suffered by local government bodies in Australia when they bought the product promoted by the bank. The ABN AMRO product, called a "constant proportion debt obligation" (CPDO), was a wonder of financial engineering best described in layman's terms as "double up or quit" when the market went down. S&P denied its ratings were inappropriate and aims to appeal the ruling. The AAA rating S&P gave the CPDLOs meant that the ABN AMRO product has as much chance of going bust as the US Treasury. A sadly inaccurate expectation .
Now the ratings Three Stooges -- S&P, Moody's and Fitch -- are defending some 40 similar cases around the world. The standard defence is that ratings are only "opinions" and no one should rely on them. If they are only opinions, why have them? And why is there a statutory requirement for many investors -- including government bodies -- to only invest in financial instruments with a certain rating?
Some say Moody's, commonly held to be the best of the bunch, must be good because Warren Buffet, the Sage of Omaha', is a major invest. Sorry, much as his acumen and integrity draw near universal acclaim, he is a businessman, not the Good Housekeeping Seal of Approval.
Instead, what about asking investors, who are using the service, to pay for it? Cash flow might suffer, but it would seem to be a better method of promoting accuracy. "The Big Short: Inside the Doomsday Machine" Michael Lewis's excellent account of the collapse in the CDO bubble, demonstrates what can happen when the ratings agencies go haywire. In the meantime, who are the ratings agencies kidding? Are they seriously saying they are producing a product on which investors can't rely? If so, why bother?
The ratings agencies have always operated on the same principle. Their business model has always struck me as being very peculiar. And now an Australian judge has ruled that the "All care but no responsibility" model is worth about as much as the sign above my father's shop when it comes to offering them protection from legal remedies.
For those of you who don't know how their model works, the ratings agency will rate a product, and be paid by the firm issuing the product. Is it any wonder then that the ratings agencies rated CDOs (colatoralised debt obligations) AAA when they should have rated them c.r.a.p.? Of course, then no one would have invested in them, especially as some bodies have a statutory obligation to invest only in financial instruments with a certain rating.
The Federal Court of Australia ruled on November 5 that Standard & Poors was jointly liable with ABN AMRO for the losses suffered by local government bodies in Australia when they bought the product promoted by the bank. The ABN AMRO product, called a "constant proportion debt obligation" (CPDO), was a wonder of financial engineering best described in layman's terms as "double up or quit" when the market went down. S&P denied its ratings were inappropriate and aims to appeal the ruling. The AAA rating S&P gave the CPDLOs meant that the ABN AMRO product has as much chance of going bust as the US Treasury. A sadly inaccurate expectation .
Now the ratings Three Stooges -- S&P, Moody's and Fitch -- are defending some 40 similar cases around the world. The standard defence is that ratings are only "opinions" and no one should rely on them. If they are only opinions, why have them? And why is there a statutory requirement for many investors -- including government bodies -- to only invest in financial instruments with a certain rating?
Some say Moody's, commonly held to be the best of the bunch, must be good because Warren Buffet, the Sage of Omaha', is a major invest. Sorry, much as his acumen and integrity draw near universal acclaim, he is a businessman, not the Good Housekeeping Seal of Approval.
Instead, what about asking investors, who are using the service, to pay for it? Cash flow might suffer, but it would seem to be a better method of promoting accuracy. "The Big Short: Inside the Doomsday Machine" Michael Lewis's excellent account of the collapse in the CDO bubble, demonstrates what can happen when the ratings agencies go haywire. In the meantime, who are the ratings agencies kidding? Are they seriously saying they are producing a product on which investors can't rely? If so, why bother?
Friday, 9 November 2012
Aussie dollar just won't stay down
Despite admissions that the Reserve Bank of Australia (RBA) is selling the Aussie dollar, the little Aussie battler just won't stay down. Last time I blogged on the Aussie dollar, just over a month ago (4 October 2012), the Aussie was at 1.023. Today (Friday 9 November) it is at 1.0426, despite a 25 basis point cut in the cash rate to deter investors. The Aussie dollar has gone up, instead of down, as it was supposed to do.
As I predicted in my last post "Aussie dollar unlikely to collapse", there are a variety of reasons why the A$ will stay strong, not least the fact that the Federal Government is locked into structural deficits of $122 billion between 2013 and 2016. The government's spending plans are sheer lunacy. At a time of tightening revenue, the ALP has announced a $10 billion disability support plan (it was $1 billion when they tried to sell the plan to the States, but it grew) and a multi billion dollar universal dental plan. I developed the habit of asking my friends in the ALP "how many billions did they spend today?"
After the farce of the mining tax, which raised no revenue at a time which the Gillard government alleges is the height of the mining boom, what other piggy banks can they raid? A rise in the GST is the next cab off the rank, though the Greens are unlikely to obligingly commit political suicide to pass the tax, as the long-dead Australian Democrats did with the GST.
Faced with a strong dollar which is killing off what remains of Australian manufacturing industry, RBA Governor Glenn Stevens is desperate to get the A$ lower, but the tools he can use are limited. Apart from annoying traders by intervening in the FX market, he can cut rates again, but that would be about the last shot in his locker. A rate below 2.75% is getting into desperation territory. It's amazing how just about every market economist in Australia can misjudge the RBA's intentions so frequently. Governor Stevens is no doubt taking into account that a further rate cut is likely to encourage another housing bubble, and with housing affordability already heading into the political danger zone, another rate cut this year is no certainty.
The Aussie dollar has become a de facto reserve currency as central banks diversify away from the US$. Press reports indicate that the Swiss central bank, which is holding in excess of US$400 billion in reserves, which it has bought to keep the franc down, has been buying Aussie dollars direct from the RBA to minimise upward pressure on the Aussie dollar. While the US$ remains shaky and Australian fundamentals look relatively sound,, central banks can be expected to keep buying the Aussie dollar as a diversification from the US$ and the Aussie dollar will remain under upward pressure. There's not much the RBA can do about this.
As I predicted in my last post "Aussie dollar unlikely to collapse", there are a variety of reasons why the A$ will stay strong, not least the fact that the Federal Government is locked into structural deficits of $122 billion between 2013 and 2016. The government's spending plans are sheer lunacy. At a time of tightening revenue, the ALP has announced a $10 billion disability support plan (it was $1 billion when they tried to sell the plan to the States, but it grew) and a multi billion dollar universal dental plan. I developed the habit of asking my friends in the ALP "how many billions did they spend today?"
After the farce of the mining tax, which raised no revenue at a time which the Gillard government alleges is the height of the mining boom, what other piggy banks can they raid? A rise in the GST is the next cab off the rank, though the Greens are unlikely to obligingly commit political suicide to pass the tax, as the long-dead Australian Democrats did with the GST.
Faced with a strong dollar which is killing off what remains of Australian manufacturing industry, RBA Governor Glenn Stevens is desperate to get the A$ lower, but the tools he can use are limited. Apart from annoying traders by intervening in the FX market, he can cut rates again, but that would be about the last shot in his locker. A rate below 2.75% is getting into desperation territory. It's amazing how just about every market economist in Australia can misjudge the RBA's intentions so frequently. Governor Stevens is no doubt taking into account that a further rate cut is likely to encourage another housing bubble, and with housing affordability already heading into the political danger zone, another rate cut this year is no certainty.
The Aussie dollar has become a de facto reserve currency as central banks diversify away from the US$. Press reports indicate that the Swiss central bank, which is holding in excess of US$400 billion in reserves, which it has bought to keep the franc down, has been buying Aussie dollars direct from the RBA to minimise upward pressure on the Aussie dollar. While the US$ remains shaky and Australian fundamentals look relatively sound,, central banks can be expected to keep buying the Aussie dollar as a diversification from the US$ and the Aussie dollar will remain under upward pressure. There's not much the RBA can do about this.
Thursday, 8 November 2012
Why do intelligent people do stupid things?
I have a friend who is a senior barrister, specialising mainly in commercial law. I don't believe he has a great deal of money to invest, but he is anxious to get a good return on his capital because he isn't getting much work at the moment. He described a seminar he attended which was run by a so called "property expert."
He was enthusiastic about the seminar. When he outlined the "expert" pitch I was not surprised to learn that it was the same pitch I had heard 30 years ago from a similar organisation when I first arrived in Melbourne. Of course, there have been several bad slumps since and anyone following these pitchmen's advice would be broke by now. The operation revolves around strata titling, which involves buying a blocks of flats, which had been rented out individually but are on a corporate title (or apartments as they are now called) and changing the title to an individual title, so each apartment can be sold separately. Today they are doing almost the same thing, except the apartments tend to come from slow-moving residential developments. Of course, they offer finance. You would be very silly to accept this highly leveraged offer, as are are no doubt getting a hefty commission.
My friend was tempted, but he is too intelligent to be caught, but smart people do get trapped into this sort of deal. But what about when an entire community is trapped? Banksia was a financial group operating in the northern part of Victoria, around Kyabram. It was, apparently, a generous funder of community activities and offered interest rates a bit above a bank. Banksia functioned like a bank, but was not supervised by the Australian Prudential Regulation Authority (APRA) as the banks are. Australian banks are among the most strictly regulated financial institutions in the world with self sustaining ratings to match. Banksia's funds were invested mainly in commercial property and dubious ventures such as golf clubs. Banksia had less than half the liquid reserves banks are required to maintain by law.
Cruel though it is to tell the girl who has lost the money she saved for her wedding or the retiree who lost his life savings that they are fools, but they are. Luck doesn't enter into it. How can an entire community be conned? It has happened numerous times in Australia. It's almost a carbon copy of what happened with the Pyramid financial group, also in Victoria. Pyramid caused a near depression in Geelong, where it had its headquarters. Geelong, about 70 kms south of Melbourne, is the largest provincial city in Victoria.
Not only country dwellers get trapped. The Teachers Credit Society in Perth, Western Australia, went bust when it invested most of its members' funds in a chain of health studios, which failed, like most other health studios did at the time. In a scandalous abuse of taxpayers' funds, the State government bailed the teachers out, even though there was no legal justification for doing so. But how could a government facing an election allow every teacher in the State lose his or her life savings?
The lucky electors of Kyabram have Paul Weller of the National Party representing them. The National Party can be expected to play true to form and put the thumb screws on the Premier, Ted Baillieu, whose Coalition Government is holding onto power by one vote in the Legislative Assembly, especially now the odoriferous Geoff Shaw's car usage has been referred to the police. It is thus a lay down misere that the trusting people of Kyabram will suffer, but not too much if the National Party can help it.
Why do people do these things? Greed is certainly right up there but you would have to be a bit simple minded to trade a term deposit in one of the Four Pillars, which have better ratings than many sovereign nations, for a percentage point of so more in an unregulated deposit taking institution. Then there's the "support the local business" argument, especailly if they cost effective marketingf such as supporting local sporting clubs. Again, people convinced by this argument can't be too bright, but for people in a regional area (including Western Australia) it is a very convincing argument. The gnomes of Zurich aren't popular in the country. Sheer irrationality in the face of money is a predominant factor in all these cases.
And one should not forget sheer ignorance. My mother said the only investments she has ever lost a lot of money on were "property investments". She means mortgage trusts where the mortgages were held over commercial property. When I told her mortgage trusts go bust about every 20 years, she was quite confused. "But the financial adviser told me to invest in them. If you can't trust a financial adviser, who can you trust?" Well said, Mum! When I added that most people understood the principle that the higher the interest rate, the higher the risk, she said she had never heard of it and she got her financial information by "talking to her friends." My mother does not subscribe to a daily paper.
I don't think people should be rescued from the consequences of their own stupidity, ignorance or bad luck for that matter People either make their own decisions, or they don't. Former Liberal Prime Minister John Howard transformed Australians from a nation of free people to a nation of mendicants. Bad luck used to be part of life, now Australians expect the government to rescue us from the consequences of our own stupidity.
He was enthusiastic about the seminar. When he outlined the "expert" pitch I was not surprised to learn that it was the same pitch I had heard 30 years ago from a similar organisation when I first arrived in Melbourne. Of course, there have been several bad slumps since and anyone following these pitchmen's advice would be broke by now. The operation revolves around strata titling, which involves buying a blocks of flats, which had been rented out individually but are on a corporate title (or apartments as they are now called) and changing the title to an individual title, so each apartment can be sold separately. Today they are doing almost the same thing, except the apartments tend to come from slow-moving residential developments. Of course, they offer finance. You would be very silly to accept this highly leveraged offer, as are are no doubt getting a hefty commission.
My friend was tempted, but he is too intelligent to be caught, but smart people do get trapped into this sort of deal. But what about when an entire community is trapped? Banksia was a financial group operating in the northern part of Victoria, around Kyabram. It was, apparently, a generous funder of community activities and offered interest rates a bit above a bank. Banksia functioned like a bank, but was not supervised by the Australian Prudential Regulation Authority (APRA) as the banks are. Australian banks are among the most strictly regulated financial institutions in the world with self sustaining ratings to match. Banksia's funds were invested mainly in commercial property and dubious ventures such as golf clubs. Banksia had less than half the liquid reserves banks are required to maintain by law.
Cruel though it is to tell the girl who has lost the money she saved for her wedding or the retiree who lost his life savings that they are fools, but they are. Luck doesn't enter into it. How can an entire community be conned? It has happened numerous times in Australia. It's almost a carbon copy of what happened with the Pyramid financial group, also in Victoria. Pyramid caused a near depression in Geelong, where it had its headquarters. Geelong, about 70 kms south of Melbourne, is the largest provincial city in Victoria.
Not only country dwellers get trapped. The Teachers Credit Society in Perth, Western Australia, went bust when it invested most of its members' funds in a chain of health studios, which failed, like most other health studios did at the time. In a scandalous abuse of taxpayers' funds, the State government bailed the teachers out, even though there was no legal justification for doing so. But how could a government facing an election allow every teacher in the State lose his or her life savings?
The lucky electors of Kyabram have Paul Weller of the National Party representing them. The National Party can be expected to play true to form and put the thumb screws on the Premier, Ted Baillieu, whose Coalition Government is holding onto power by one vote in the Legislative Assembly, especially now the odoriferous Geoff Shaw's car usage has been referred to the police. It is thus a lay down misere that the trusting people of Kyabram will suffer, but not too much if the National Party can help it.
Why do people do these things? Greed is certainly right up there but you would have to be a bit simple minded to trade a term deposit in one of the Four Pillars, which have better ratings than many sovereign nations, for a percentage point of so more in an unregulated deposit taking institution. Then there's the "support the local business" argument, especailly if they cost effective marketingf such as supporting local sporting clubs. Again, people convinced by this argument can't be too bright, but for people in a regional area (including Western Australia) it is a very convincing argument. The gnomes of Zurich aren't popular in the country. Sheer irrationality in the face of money is a predominant factor in all these cases.
And one should not forget sheer ignorance. My mother said the only investments she has ever lost a lot of money on were "property investments". She means mortgage trusts where the mortgages were held over commercial property. When I told her mortgage trusts go bust about every 20 years, she was quite confused. "But the financial adviser told me to invest in them. If you can't trust a financial adviser, who can you trust?" Well said, Mum! When I added that most people understood the principle that the higher the interest rate, the higher the risk, she said she had never heard of it and she got her financial information by "talking to her friends." My mother does not subscribe to a daily paper.
I don't think people should be rescued from the consequences of their own stupidity, ignorance or bad luck for that matter People either make their own decisions, or they don't. Former Liberal Prime Minister John Howard transformed Australians from a nation of free people to a nation of mendicants. Bad luck used to be part of life, now Australians expect the government to rescue us from the consequences of our own stupidity.
Sunday, 21 October 2012
Understanding Australian Rules Football
As Australia's pre-eminent historian, Geoffrey Blainey wrote, Australian rules football is "a game of our own".
Australian football is club based -- that is the locus of a fan's passion, especially in Victoria, the game's spiritual home. Although State of Origin football originated in Aussie rules and is popular outside of Victoria, Victorians aren't interested in it. This post will give a very brief outline of the game's history in Victoria then concentrate on the identity of the teams that made up the Victorian Football League (VFL) before it took in, under duress, teams from interstate and became the Australian Football League (AFL)
The first officially recorded game of Australian Rules Football was played in 1858, although some form of the game had been played in the 1840s in Melbourne. Tom Wills, an Australian who had experience with football at Rugby School in England, led the way for regular games and codification of the rules. For the early days of the game, two excellent histories exist, one by Geoffrey Blainey "A Game of Our Own: The Origins of Australian Football" (Black Inc, 2010) and the other by Greg de Moore "Tom Wills: His Spectacular Rise and Tragic Fall" (Allen and Unwin, 2008). The books reflect the backgrounds of the authors.
Prof. Blainey is a professional historian with a flair for a memorable turn of phrase. He coined the phrase "the tyranny of distance". This book, sad to say, is not his best; not because it is unscholarly, but because it tends to be a bit dry for the average reader. As history, however, it is excellent, putting to rest many of the myths that surround the game's origins. Aussie rules, for example, is not derived from Gaelic football and it is unlikely to be related to Aboriginal games collectively known as marngrook.
Dr de Moore's biography of Tom Wills, founding father of Aussie rules, is a gripping tale of a man who did more than any other to codify and popularise the game. In the end, Tom Wills could not come to terms with his fading powers and took his own life. This book can be recommended without equivocation to anyone interested in the early days of Aussie rules. Dr de Moore is a Sydney psychiatrist with a research interest in male suicide.
The first thing to establish about Australian Rules Football is that it is a product of Melbourne's inner suburbs. The VFL came into being when eight teams broke away from the Victorian Football Association (VFA) to form the VFL in 1897 -- Carlton, Collingwood, Essendon, Fitzroy, Geelong, Melbourne, St Kilda and South Melbourne. The VFL became the AFL in 1990. It has been conclusively proved recently that the Victorian teams did not want interstate teams in the competition and only allowed their entry to gain their entry fees, as the VFL was nearly bankrupt. Teams to gain entry, over time, were the Adelaide Crows, Port Adelaide, the West Coast Eagles, the Brisbane Bears, the Gold Coast Suns, and the Greater Western Sydney Giants. Cynics attribute the expansion of the AFL to non traditional territories to be more to do with marketing than passion, but so far the expansion teams have done reasonably well. Which is to say, better than could have been hoped.
Each AFL team has an ethos or a 'meaning' associated with it. Football is like a religion in Melbourne (see previous post on football codes entitled "Ecology of Australian Football"). You are more likely to change your religion than your football team. Victoria is still the heart of the AFL, with ten teams.
Carlton are known as the Blues. The Blues have won 16 premierships, equal top with Essendon. Carlton claims to have have more club members on the BRW Rich List than any other club. If Carlton doesn't have the best players, the club will buy them. Breaching the salary cap won the club a premiership but cost it draft picks which put it back a decade, a sorry legacy only now being overcome. The Blues last flag was in 1995, an unusually long premiership drought. They now have the best AFL coach available for the next three seasons, Mick Malthouse, said to be on over $1 million a year. Although some would disagree, it's not strictly correct to call Carlton silvertails because Carlton is not old money. The "famous old dark Navy Blues" can never be counted out.
Carlton is loathed by other football followers, Collingwood is merely detested, Collingwood are known known as the Magpies (from their black and white strip), frequently shortened to the Pies. Collingwood is the only club to have won four flags in a row. Dark rumors circulate that John Wren's money played a hand in this feat. Collingwood is said to be the most powerful sporting club in Australia. The Woodsmen are proudly working class and the slogan "kill for Collingwood" is only a slight exaggeration. If your partner barracks for Carlton or Melbourne it is known as a mixed marriage.
Essendon are known as the Bombers. Essendon, Carlton and Collingwood are the three powerhouse clubs of the AFL. When games were played at the suburban grounds, Essendon were headquartered at Windy Hill. Their long serving coach Kevin Sheedy once tied down the flag at Windy Hill, presumably so the opposition couldn't gauge the wind. Essendon, also known as the Dons, are equal with Carlton in flags won, but they have also suffered a premiership drought in recent years. The Dons are lower middle class, a bit like Carlton with an attitude and less money.
Fitzroy are extinct. In theory they merged with the Brisbane Bears but the only result was that the Bears became the Lions. Fitzroy supporters were said to do more damage to their own club than their opponents. Fitzroy was Melbourne's first suburb, it has always been small in area and population.
Geelong is a regional city about 80 kms from Melbourne. Known as the Cats, Geelong have had a good run in recent years, picking up several premierships. Geelong gets deranged about football, even more so than Melbounre. There is nothing even remotely fair about the seating allocation for visiting clubs at their stadium and that's the way Geelong people like it. Heroes at Geelong include Graham "Polly" Farmer, the man who reinvented handball and won them a flag, and Gary Abblett, a forward of freakish talent who never quite achieved greatness. Geelong was once called a "handbag team" but they have toughened up.
Melbourne are definitely silvertails, an upper middle class team who once dominated the VFL. Seemingly, they are now in a hole from which they may never emerge. They had champions like master coach Norm Smith and champion Ron Barassi but lost them both. Their recent champion was Jim Stynes, an Irishman who did much to revive the club and who died young. Melbourne is "too proud to merge." Extinction would be deserved and would probably ensue without Melbourne's history as the AFL's founding club.
St Kilda probably deserves the wooden spoon as the least successful club in the AFL. The Saints have won only one flag in their whole history in the VFL and AFL. St Kilda is said to be a fragmented club, which hinders its on field endeavors. Many of its players have been male models, or so it is said. St Kilda covers a traditionally Jewish area -- pre WWII Jewish immigrants typically barrack for Carlton, post war Jewish immigrants barrack for St Kilda. Despite its lack of success, St Kilda has a strong following in Melbourne's southern suburbs. Recently, its main on field problem has been inconsistency. One week the Saints will play a blinder, the next they will will fall over.
South Melbourne relocated to Sydney in 1982. The Sydney Swans, as they are now known, as in theory not a new team. The Swans won the 2012 Premiership. They have won respect for their hard, uncompromising brand of football. The Swans, after some hard early years, have done well on the field. Full forward Warrick Capper's short shorts and Dr Geoffrey Edelsten's antics attracted attention early on. They still have loyalists in Melbourne who remember them as "the Bloods".
The Western Bulldogs, formerly known as Footscray, joined the AFL in 1925. They have only ever won one flag, equal to St Kilda. Footscray is in the western suburbs of Melbourne, a depressed area. Footscray is now "spot the Aussie" territory. The club under David Smorgon, whose family had extensive business interested in the area, has reached out to the immigrant communities. David Smorgon deserves a knighthood for what he has done for the Western Bulldogs. When his presidency winds up next year, he will have been in office for almost 17 years. The VFL wanted to merge the Bulldogs with Fitzroy. Even if they haven't prospered, they have survived, mainly because under leading lawyer Peter Gordon and David Smorgon they have had competent managers, unlike the parade of publicans and bone headed ex players who blighted the club's previous administrations. Being a Bulldogs supporter requires a special kind of stamina. The Bulldogs have never been very good for very long, they are an unfashionable team from an unfashionable area. Even their greatest son, Mr Football, Ted Whitten was known as "kick it to me Ted" by his teammates because he told rookie players if they didn't kick the ball to him he would make sure they didn't get a game next week.
Hawthorn joined the VFL along with North Melbourne and Footscray in 1925. They are probably the greatest club of the modern era. Hawthorn the suburb is an upper middle class area that doesn't deserve Hawthorn the football club. If the people of Hawthorn don't seem to be excited when Hawthorn is in a Grand Final, it's because they are not. Hawthorn have won ten premierships, all since the 1960s. Great players include champion full forward "the Captain" Jason Dunstall, "Lethal" Leigh Matthews who also coached the Lions to three flags, Michael Tuck, the all time AFL games record holder, and Robert "Dipper" Dipierdomenico, one of the most successful Australians of Italian origin ever to play AFL football. Hawthorn were first known as the Mayblooms and were about as effective as their nickname would suggest. Now they are now known for their tough unsociable brand of football.
North Melbourne also joined the VFL in 1925. For years, North were the cellar dwellers of the VFL. Then in 1973, the Kangaroos hired the great Ron Barassi as a coach and recruited several champion players and won a string premierships. The Kangaroos are also unofficially known as the Shinboners, from the local abbatoirs where a number of their players made their living. Alan Aylett, the president in North's glory years, is said to have gone to the local bank manager with a proposition to buy champion players and repay the loan with earnings from their premierships. North Melbourne is not a big suburb, it is still semi industrial and even given its otherwise desirable location near the city, it is not a great place to live. Life has always been hard for North, even when they have had on their roster players like "The King", Wayne Carey at centre-half forward, regarded be many as the greatest player of all time. The Kangaroos are commonly regarded as having the smallest supporter base of any Melbourne club. They won Premierships in 1975 and 1977, plus two more in 1996 and 1999, but life has always been tough at Arden Street.
TO BE CONTINUED IN MY POST 'AUSTRALIAN FOOTBALL OUT OF MELBOURNE'
Australian football is club based -- that is the locus of a fan's passion, especially in Victoria, the game's spiritual home. Although State of Origin football originated in Aussie rules and is popular outside of Victoria, Victorians aren't interested in it. This post will give a very brief outline of the game's history in Victoria then concentrate on the identity of the teams that made up the Victorian Football League (VFL) before it took in, under duress, teams from interstate and became the Australian Football League (AFL)
The first officially recorded game of Australian Rules Football was played in 1858, although some form of the game had been played in the 1840s in Melbourne. Tom Wills, an Australian who had experience with football at Rugby School in England, led the way for regular games and codification of the rules. For the early days of the game, two excellent histories exist, one by Geoffrey Blainey "A Game of Our Own: The Origins of Australian Football" (Black Inc, 2010) and the other by Greg de Moore "Tom Wills: His Spectacular Rise and Tragic Fall" (Allen and Unwin, 2008). The books reflect the backgrounds of the authors.
Prof. Blainey is a professional historian with a flair for a memorable turn of phrase. He coined the phrase "the tyranny of distance". This book, sad to say, is not his best; not because it is unscholarly, but because it tends to be a bit dry for the average reader. As history, however, it is excellent, putting to rest many of the myths that surround the game's origins. Aussie rules, for example, is not derived from Gaelic football and it is unlikely to be related to Aboriginal games collectively known as marngrook.
Dr de Moore's biography of Tom Wills, founding father of Aussie rules, is a gripping tale of a man who did more than any other to codify and popularise the game. In the end, Tom Wills could not come to terms with his fading powers and took his own life. This book can be recommended without equivocation to anyone interested in the early days of Aussie rules. Dr de Moore is a Sydney psychiatrist with a research interest in male suicide.
The first thing to establish about Australian Rules Football is that it is a product of Melbourne's inner suburbs. The VFL came into being when eight teams broke away from the Victorian Football Association (VFA) to form the VFL in 1897 -- Carlton, Collingwood, Essendon, Fitzroy, Geelong, Melbourne, St Kilda and South Melbourne. The VFL became the AFL in 1990. It has been conclusively proved recently that the Victorian teams did not want interstate teams in the competition and only allowed their entry to gain their entry fees, as the VFL was nearly bankrupt. Teams to gain entry, over time, were the Adelaide Crows, Port Adelaide, the West Coast Eagles, the Brisbane Bears, the Gold Coast Suns, and the Greater Western Sydney Giants. Cynics attribute the expansion of the AFL to non traditional territories to be more to do with marketing than passion, but so far the expansion teams have done reasonably well. Which is to say, better than could have been hoped.
Each AFL team has an ethos or a 'meaning' associated with it. Football is like a religion in Melbourne (see previous post on football codes entitled "Ecology of Australian Football"). You are more likely to change your religion than your football team. Victoria is still the heart of the AFL, with ten teams.
Carlton are known as the Blues. The Blues have won 16 premierships, equal top with Essendon. Carlton claims to have have more club members on the BRW Rich List than any other club. If Carlton doesn't have the best players, the club will buy them. Breaching the salary cap won the club a premiership but cost it draft picks which put it back a decade, a sorry legacy only now being overcome. The Blues last flag was in 1995, an unusually long premiership drought. They now have the best AFL coach available for the next three seasons, Mick Malthouse, said to be on over $1 million a year. Although some would disagree, it's not strictly correct to call Carlton silvertails because Carlton is not old money. The "famous old dark Navy Blues" can never be counted out.
Carlton is loathed by other football followers, Collingwood is merely detested, Collingwood are known known as the Magpies (from their black and white strip), frequently shortened to the Pies. Collingwood is the only club to have won four flags in a row. Dark rumors circulate that John Wren's money played a hand in this feat. Collingwood is said to be the most powerful sporting club in Australia. The Woodsmen are proudly working class and the slogan "kill for Collingwood" is only a slight exaggeration. If your partner barracks for Carlton or Melbourne it is known as a mixed marriage.
Essendon are known as the Bombers. Essendon, Carlton and Collingwood are the three powerhouse clubs of the AFL. When games were played at the suburban grounds, Essendon were headquartered at Windy Hill. Their long serving coach Kevin Sheedy once tied down the flag at Windy Hill, presumably so the opposition couldn't gauge the wind. Essendon, also known as the Dons, are equal with Carlton in flags won, but they have also suffered a premiership drought in recent years. The Dons are lower middle class, a bit like Carlton with an attitude and less money.
Fitzroy are extinct. In theory they merged with the Brisbane Bears but the only result was that the Bears became the Lions. Fitzroy supporters were said to do more damage to their own club than their opponents. Fitzroy was Melbourne's first suburb, it has always been small in area and population.
Geelong is a regional city about 80 kms from Melbourne. Known as the Cats, Geelong have had a good run in recent years, picking up several premierships. Geelong gets deranged about football, even more so than Melbounre. There is nothing even remotely fair about the seating allocation for visiting clubs at their stadium and that's the way Geelong people like it. Heroes at Geelong include Graham "Polly" Farmer, the man who reinvented handball and won them a flag, and Gary Abblett, a forward of freakish talent who never quite achieved greatness. Geelong was once called a "handbag team" but they have toughened up.
Melbourne are definitely silvertails, an upper middle class team who once dominated the VFL. Seemingly, they are now in a hole from which they may never emerge. They had champions like master coach Norm Smith and champion Ron Barassi but lost them both. Their recent champion was Jim Stynes, an Irishman who did much to revive the club and who died young. Melbourne is "too proud to merge." Extinction would be deserved and would probably ensue without Melbourne's history as the AFL's founding club.
St Kilda probably deserves the wooden spoon as the least successful club in the AFL. The Saints have won only one flag in their whole history in the VFL and AFL. St Kilda is said to be a fragmented club, which hinders its on field endeavors. Many of its players have been male models, or so it is said. St Kilda covers a traditionally Jewish area -- pre WWII Jewish immigrants typically barrack for Carlton, post war Jewish immigrants barrack for St Kilda. Despite its lack of success, St Kilda has a strong following in Melbourne's southern suburbs. Recently, its main on field problem has been inconsistency. One week the Saints will play a blinder, the next they will will fall over.
South Melbourne relocated to Sydney in 1982. The Sydney Swans, as they are now known, as in theory not a new team. The Swans won the 2012 Premiership. They have won respect for their hard, uncompromising brand of football. The Swans, after some hard early years, have done well on the field. Full forward Warrick Capper's short shorts and Dr Geoffrey Edelsten's antics attracted attention early on. They still have loyalists in Melbourne who remember them as "the Bloods".
The Western Bulldogs, formerly known as Footscray, joined the AFL in 1925. They have only ever won one flag, equal to St Kilda. Footscray is in the western suburbs of Melbourne, a depressed area. Footscray is now "spot the Aussie" territory. The club under David Smorgon, whose family had extensive business interested in the area, has reached out to the immigrant communities. David Smorgon deserves a knighthood for what he has done for the Western Bulldogs. When his presidency winds up next year, he will have been in office for almost 17 years. The VFL wanted to merge the Bulldogs with Fitzroy. Even if they haven't prospered, they have survived, mainly because under leading lawyer Peter Gordon and David Smorgon they have had competent managers, unlike the parade of publicans and bone headed ex players who blighted the club's previous administrations. Being a Bulldogs supporter requires a special kind of stamina. The Bulldogs have never been very good for very long, they are an unfashionable team from an unfashionable area. Even their greatest son, Mr Football, Ted Whitten was known as "kick it to me Ted" by his teammates because he told rookie players if they didn't kick the ball to him he would make sure they didn't get a game next week.
Hawthorn joined the VFL along with North Melbourne and Footscray in 1925. They are probably the greatest club of the modern era. Hawthorn the suburb is an upper middle class area that doesn't deserve Hawthorn the football club. If the people of Hawthorn don't seem to be excited when Hawthorn is in a Grand Final, it's because they are not. Hawthorn have won ten premierships, all since the 1960s. Great players include champion full forward "the Captain" Jason Dunstall, "Lethal" Leigh Matthews who also coached the Lions to three flags, Michael Tuck, the all time AFL games record holder, and Robert "Dipper" Dipierdomenico, one of the most successful Australians of Italian origin ever to play AFL football. Hawthorn were first known as the Mayblooms and were about as effective as their nickname would suggest. Now they are now known for their tough unsociable brand of football.
North Melbourne also joined the VFL in 1925. For years, North were the cellar dwellers of the VFL. Then in 1973, the Kangaroos hired the great Ron Barassi as a coach and recruited several champion players and won a string premierships. The Kangaroos are also unofficially known as the Shinboners, from the local abbatoirs where a number of their players made their living. Alan Aylett, the president in North's glory years, is said to have gone to the local bank manager with a proposition to buy champion players and repay the loan with earnings from their premierships. North Melbourne is not a big suburb, it is still semi industrial and even given its otherwise desirable location near the city, it is not a great place to live. Life has always been hard for North, even when they have had on their roster players like "The King", Wayne Carey at centre-half forward, regarded be many as the greatest player of all time. The Kangaroos are commonly regarded as having the smallest supporter base of any Melbourne club. They won Premierships in 1975 and 1977, plus two more in 1996 and 1999, but life has always been tough at Arden Street.
TO BE CONTINUED IN MY POST 'AUSTRALIAN FOOTBALL OUT OF MELBOURNE'
Friday, 19 October 2012
Ecology of Australian Football
Many non-Australians have trouble understanding Australian football. We must first distinguish between the various Codes of football in Australia. This is an alien concept for Americans for example -- football is football, what is a Code?
Australia has four Codes, all claiming to be authentic football. They all have completely different rules, scoring systems and so on. The four Codes are Australian Football, Rugby League, Rugby Union and soccer.
The most financially viable Code is Australian Football, also referred to as Australian Rules Football or AFL, from the Australian Football League. AFL has at least two teams in all the mainland States. This is the football most people automatically think of when they think of Australian football. AFL originated in Melbourne, capital of Victoria, over 150 years ago. Some AFL clubs are among the oldest sporting clubs in the world. In Melbourne, AFL is not a game, it is a religion. A Melbourian is far more likely to get a divorce than change his or her football team. Your football team is a badge of identity you carry through your life. Conversion from being Protestant to being a Catholic may be considered extreme, but conversion from Carlton to Collingwood would be considered to be sacrilegious, almost insane.
AFL in Melbourne is a universal code. It is unchallenged as the city's first sporting love. No matter if you are a silvertail who supports Melbourne or a battler who supports the Western Bulldogs, there is a team for you in the AFL. AFL is part of the social cement that binds Melbourne together. AFL is part of the social ecology of Melbourne.
The second major Code is Rugby League. Rugby League originated in the north of England because Rugby Union was a purely amateur sport. League players have always been paid. Rugby League began in Sydney in the early 1900s. Rugby League is played mainly in Sydney, capital of New South Wales (NSW) and Queensland. The State of Origin series played annually between NSW and Queensland causes great excitement in those two States. The rest of Australia couldn't give two squirts of cat's piss, as my father would say. Attempts to establish Rugby League outside of NSW and Queensland have been marginally successful. The Melbourne Storm have done well on the field and have developed a small following in Victoria. Victorians are always prepared to give a good team a fair go, but efforts by the press to beat up the Storm haven't made much impression. Part of the beat up may be attributed to the fact that Rupert Murdoch's News Ltd has a financial interest in the game. Far more Victorians watched the Storm win the Rugby League grand final in Sydney than New South Welshmen watched the Sydney Swans beat Hawthorn in the AFL grand final in Melbourne.
Rugby League is the working man's sport. Its heartland is Sydney's western suburbs, what is commonly described as a 'lower socio-economic area.' Manly, the Sea Eagles, are known as the Silvertails. The AFL has established an expansion team, the Greater Western Sydney Giants, in the western suburbs coached by Kevin Sheedy, one of the AFL's great characters. Another expansion team has been established on Queensland's Gold Coast, also Rugby League territory. Both have been moderately successful, probably more so than the AFL marketing department hoped.
Rugby Union is largely played by public (that is, private) school boys, mainly in NSW and Queensland. Attempts have been made to establish Rugby Union teams in Perth, the Western Force, and in Melbourne, the Rebels to participate in the international Super Rugby competition with out a great deal of success.
What differentiates Melbourne from NSW and Queensland is that AFL is universal in Melbourne, while Rugby League and Rugby League divide NSW and Queensland along class lines.
If you are confused about the difference between League and Union, first you may wish to follow my wife who calls League 'the stupid one' and Union 'the smart one.' League consists of running head first into your opponents until you break through for a try. Union is said to be 'the game they play in heaven.' The rules are complex but a lot more appears to happen in Union rather than in League. Sorry, New Zealanders, who imagine we Aussies hang on every Wallabies game, most Aussies don't understand Rugby Union and apart from ex players, mostly private school old boys, aren't interested in it. Until recently, Union players weren't paid because they were all gentlemen who played for the love of the game and if you weren't a gentleman and needed the money, well, you could play League. Union is, outside ex-public school boys, a minor sport. That is not to say it is unimportant, as its followers tend to be well educated and financially secure.
I will call soccer soccer, because outside certain ethnic communities, no one calls it football. The soccer federation have been trying for years to get us to call it football, but we're not listening. They have also been trying for years to stop soccer being seen as an 'ethnic' or 'multicultural' sport. Australia has produced a few handy players like Harry Kewell and Craig Johnson but none of them have been world beaters. Until recently, every soccer team had some ethnic allegiance. Soccer has always had bigger crowds in Sydney, further fragmenting the football Codes. Soccer has never been popular among the Anglo Celts.
Frank Lowy, the brains behind the Westfield shopping empire, who is worth some $5 billion, has put a lot of time into trying to put soccer in Australia on a sounder financial footing. Soccer team ownership tends to attract immigrants and the sons of immigrants who have made good, because you need deep pockets to own a soccer team in Australia. However, the international framework of soccer is so corrupt that even Frfank Lowy doesn't have the money to by a World Cup final series for Australia. Frank Lowy was born in Czechoslovakia and is of Jewish origin. He is one of the most successful of Australia's entrepreneurs.
It is unfortunate that a boring, low scoring contest has become the World Game. If there was something to distract the young men who form the bulk of the crowds and allow them to discharge their testosterone, soccer crowd violence would probably be substantially reduced. The rules, apart from the off side rule, are very simple and you don't even need a ball to play -- you can use a rolled up piece of newspaper. Soccer is a good game to play, it's just not a good spectator sport. Australia doesn't have real slums, so you can't call soccer a slum sport. Soccer is popular with mothers who don't want to see their children exposed to the injuries that are an inevitable consequence of participation in the other Codes.
Finally, if you are American, I know it's hard to cope with the fact that there are four popular football Codes in Australia. No one in NSW really cares that the Sydney Swans won the Premiership and not many people in Melbourne care that a bunch of thick heads called the Storm won the League grand final. American Football unifies the nation; in Australia football divides the nation. And a final PS: there is no such thing as 'Australian Rugby football' or similar combinations: there are four distinct varieties of football in Australia and everyone is very possessive about their Code and their team.
Australia has four Codes, all claiming to be authentic football. They all have completely different rules, scoring systems and so on. The four Codes are Australian Football, Rugby League, Rugby Union and soccer.
The most financially viable Code is Australian Football, also referred to as Australian Rules Football or AFL, from the Australian Football League. AFL has at least two teams in all the mainland States. This is the football most people automatically think of when they think of Australian football. AFL originated in Melbourne, capital of Victoria, over 150 years ago. Some AFL clubs are among the oldest sporting clubs in the world. In Melbourne, AFL is not a game, it is a religion. A Melbourian is far more likely to get a divorce than change his or her football team. Your football team is a badge of identity you carry through your life. Conversion from being Protestant to being a Catholic may be considered extreme, but conversion from Carlton to Collingwood would be considered to be sacrilegious, almost insane.
AFL in Melbourne is a universal code. It is unchallenged as the city's first sporting love. No matter if you are a silvertail who supports Melbourne or a battler who supports the Western Bulldogs, there is a team for you in the AFL. AFL is part of the social cement that binds Melbourne together. AFL is part of the social ecology of Melbourne.
The second major Code is Rugby League. Rugby League originated in the north of England because Rugby Union was a purely amateur sport. League players have always been paid. Rugby League began in Sydney in the early 1900s. Rugby League is played mainly in Sydney, capital of New South Wales (NSW) and Queensland. The State of Origin series played annually between NSW and Queensland causes great excitement in those two States. The rest of Australia couldn't give two squirts of cat's piss, as my father would say. Attempts to establish Rugby League outside of NSW and Queensland have been marginally successful. The Melbourne Storm have done well on the field and have developed a small following in Victoria. Victorians are always prepared to give a good team a fair go, but efforts by the press to beat up the Storm haven't made much impression. Part of the beat up may be attributed to the fact that Rupert Murdoch's News Ltd has a financial interest in the game. Far more Victorians watched the Storm win the Rugby League grand final in Sydney than New South Welshmen watched the Sydney Swans beat Hawthorn in the AFL grand final in Melbourne.
Rugby League is the working man's sport. Its heartland is Sydney's western suburbs, what is commonly described as a 'lower socio-economic area.' Manly, the Sea Eagles, are known as the Silvertails. The AFL has established an expansion team, the Greater Western Sydney Giants, in the western suburbs coached by Kevin Sheedy, one of the AFL's great characters. Another expansion team has been established on Queensland's Gold Coast, also Rugby League territory. Both have been moderately successful, probably more so than the AFL marketing department hoped.
Rugby Union is largely played by public (that is, private) school boys, mainly in NSW and Queensland. Attempts have been made to establish Rugby Union teams in Perth, the Western Force, and in Melbourne, the Rebels to participate in the international Super Rugby competition with out a great deal of success.
What differentiates Melbourne from NSW and Queensland is that AFL is universal in Melbourne, while Rugby League and Rugby League divide NSW and Queensland along class lines.
If you are confused about the difference between League and Union, first you may wish to follow my wife who calls League 'the stupid one' and Union 'the smart one.' League consists of running head first into your opponents until you break through for a try. Union is said to be 'the game they play in heaven.' The rules are complex but a lot more appears to happen in Union rather than in League. Sorry, New Zealanders, who imagine we Aussies hang on every Wallabies game, most Aussies don't understand Rugby Union and apart from ex players, mostly private school old boys, aren't interested in it. Until recently, Union players weren't paid because they were all gentlemen who played for the love of the game and if you weren't a gentleman and needed the money, well, you could play League. Union is, outside ex-public school boys, a minor sport. That is not to say it is unimportant, as its followers tend to be well educated and financially secure.
I will call soccer soccer, because outside certain ethnic communities, no one calls it football. The soccer federation have been trying for years to get us to call it football, but we're not listening. They have also been trying for years to stop soccer being seen as an 'ethnic' or 'multicultural' sport. Australia has produced a few handy players like Harry Kewell and Craig Johnson but none of them have been world beaters. Until recently, every soccer team had some ethnic allegiance. Soccer has always had bigger crowds in Sydney, further fragmenting the football Codes. Soccer has never been popular among the Anglo Celts.
Frank Lowy, the brains behind the Westfield shopping empire, who is worth some $5 billion, has put a lot of time into trying to put soccer in Australia on a sounder financial footing. Soccer team ownership tends to attract immigrants and the sons of immigrants who have made good, because you need deep pockets to own a soccer team in Australia. However, the international framework of soccer is so corrupt that even Frfank Lowy doesn't have the money to by a World Cup final series for Australia. Frank Lowy was born in Czechoslovakia and is of Jewish origin. He is one of the most successful of Australia's entrepreneurs.
It is unfortunate that a boring, low scoring contest has become the World Game. If there was something to distract the young men who form the bulk of the crowds and allow them to discharge their testosterone, soccer crowd violence would probably be substantially reduced. The rules, apart from the off side rule, are very simple and you don't even need a ball to play -- you can use a rolled up piece of newspaper. Soccer is a good game to play, it's just not a good spectator sport. Australia doesn't have real slums, so you can't call soccer a slum sport. Soccer is popular with mothers who don't want to see their children exposed to the injuries that are an inevitable consequence of participation in the other Codes.
Finally, if you are American, I know it's hard to cope with the fact that there are four popular football Codes in Australia. No one in NSW really cares that the Sydney Swans won the Premiership and not many people in Melbourne care that a bunch of thick heads called the Storm won the League grand final. American Football unifies the nation; in Australia football divides the nation. And a final PS: there is no such thing as 'Australian Rugby football' or similar combinations: there are four distinct varieties of football in Australia and everyone is very possessive about their Code and their team.
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