Just how far behind the curve is the Fed?

As the Fed raised its Fed Funds Rate to 1.5~1.75% overnight, one has to question just how far behind is it? 3M Libor rates have surged from 0.5% in 2016, c.1% at the start of 2017 to 2.27% today, the highest levels since 2008.  Normally Libor minus Overnight Index Swap (OIS) rates don’t diverge so much without causing a credit issue. The gap is effectively the market price over and above the risk free rate. At the time of the GFC, the Libor-OIS spread hit 3.5%, with 1% being the detonator level. While it is currently at 0.54% spread, it has risen consecutively for the last 32 sessions.


As Libor drives corporate credit recycling, with corporate debt piles approaching record highs and average credit ratings the worst they’ve been in over a decade (chart below depicts Top tier as AAA and bottom tier as BBB-) we could see the Libor-OIS spread keep expanding.


What could be causing this? If we think logically the US Treasury has to refinance $1.5 trillion over the next 12 months and $8.4 trillion over the next 4 years. Add to that a Fed looking at quantative tapering and a less eager Japan and China as buyers of US$ federal debt then the corporate will undoubtedly get crowded out. The demands for refinancing are not being met with the supply of funds.


Of note, the St Louis Fed reports the YoY increase in inflation reported by the CPI in the US in Feb 2018 was 2.3%. The 10yr breakeven inflation rate is around 2.08%. CPI ex food items is still at 1.9%. In any event the US remains in a negative real yield environment.


The Fed can bang on all it wants about healthy growth, full employment but the depth of problems stored up is getting worse. $9 trillion in unfunded public pension liabilities, $67 trillion in combined public, private and corporate debt…

…many are recently talking of the huge pent-up profit boost to banks which have had such compressed spreads for so long. Indeed that all makes absolute sense from a theoretical (and to date practical) reasoning but banks like those in Australia up to their gills in mortgage debt, rising spreads have far nastier implications for blowing up balance sheets than boosting P&L accounts.

In a sense it is almost futile to call central banks as being behind the curve. The failure to take the harsh medicine of almost two decades ago is gathering momentum in so far as there is not much can left to kick down the road.

Trudeau pushes for more compelled speech


You can’t make this stuff up. The Trudeau government plans to ban front-line public service workers from saying Mr., Mrs., Mother, and Father. In what can only be seen as another push toward more compelled speech legislation,  the majority have to put up with more political correct nonsense for the benefit of peoplekind.

Seriously though, if someone is going to be so irreparably mentally damaged by the misuse of a pronoun that it requires legislation to protect he/she/xie, the victim has far bigger issues that require immediate help. How fragile can one be?

The beauty is that for the 99% of us that identity with our biological make-up must make way for the 1% of which it’s actually only 1% of that who would benefit from this legislation. Take the same sex marriage debate in Australia. The 2015 Census showed that only 0.03% of all couples identified as a traditional marriage and same sex. It isn’t questioning equal rights but most campaigners had next to no idea how many it truly impacted. Yet don’t step in the way, else be shot down as a bigot or homophobe.

To put the shoe on the other foot, shouldn’t our rights to be addressed Mr. or Mrs. be equal to that of those who don’t?  Like Bill C-16 the apparatchiks in charge of introducing these laws are by far and away the least appropriate people to enforce it. What are civil rights if legislation only applies in favour of certain groups? Surely Canada’s social service systems can field and burn in requests on which people wish to be called what without having to blanket ban language.

The laughable fact with respect to Bill-16 (which is designed to protect gender identity and expression), is that the Trudeau government did not consult transgender people widely. The sheer fact that they clump all transgender people as “one” distinct group just shows how ignorant Trudeau’s cabinet is. There aren’t individuals within the trans community who think differently from other trans? Who’d had thought?

Yet the left see that such legislation is all about positive outcomes which judged by the complaints by the transgender community show the opposite. Many transgender people do not want to have their identity widely advertised. Yet this legislation seeks to disrupt others into compelled speech many trans people aren’t calling for.

Welcome to the slippery slope. At least one thing is for sure, if the polls are right and  Trudeau gets booted in the 2019 election, Qantas will happily put him in charge of the political correctness department so as to make sure all of the aircraft safety videos address gender equality over the more important safety aspects.

Alternative for Sweden (AfS) is established


It seems that several members of the conservative anti-immigrant Sweden Democrats (SD) have splintered to form the Alternative for Sweden (AfS) (video here). The party was founded a few weeks ago by Gustav Kasselstrand, a former member of the SD which saw its support slip to 14.8% in November 2017, compared to 18.4% percent in June, according to the Swedish Statistics Office. Although in March 2018, Sentio poll has the SD at 23% (from 21.9%), a Demoskop poll at 18.6% (15.4% in Feb) and SiFo poll at 15.9%.

The government, comprised of the Social Democrats and Greens, had a 36.4% approval rating, compared with 35.6% in the June poll. The AfS thinks that the SD has become too compromising and see the fall in the polls as reason to break away and follow in the footsteps of the rise and rise of Germany’s AfD.

SD party leader Jimmie Åkesson said in Feb 2018 that the party is its own worst enemy…“Our biggest problem is that we have not been able to build real credibility...”
going on to say it was uncertain whether SD would benefit from “…moving further to the right on immigration issues because parties like the Social Democrats and Moderates have snatched our politics within the area [just like Rutte in The Netherlands adopting policies of Geert Wilder’s Freedom Party at the Dutch election last year]…The next term of office will be crucial for us to establish ourselves as a government alternative…We must compromise and be pragmatic

Even at its current level of support, the Sweden Democrats would still have enough seats to block either the centre-left or centre-right blocs from forming government after the upcoming September 2018 election.

The SD saw surging support several years ago on what they saw was politically correct limp-wristed responses to growing migrant crime. In Malmo, Deputy Police Commissioner Mats Karlsson said in response to multiple explosions that occur in the city on a regular basis, “Our dilemma is that we can never guarantee anything for sure. Evidently there are individuals who have hand grenades and they often resort to violence over things that may seem very banal to you or I – a conflict over an ex-girlfriend or a little brother wanting to outperform his big brother…It’s bad enough when they use guns, because they’ve got such poor aim, but grenades are really worrying. They have a 360-degree reach.”

As CM has made the point for years, whether one likes the direction of right wing politics or not, yet more nationalist parties are feeling the seeds of discontent within their own constituencies and offering a platform to parties that don’t seem to be listening. On Sept 9th, Swedes will get their democratic say. Austria, Germany, Holland, Italy, The Netherlands and France have all seen large shifts toward anti-immigrant/eurosceptic parties in recent elections. It isn’t a coincidence with the EU at the helm.

Double Dipper Dan


Social Justice Warrior and Victorian Premier Dan Andrews is in hot water after 21 of his Labor MPs have been embroiled in a “Rorts for Votes” scheme investigated by the Ombudsman which breached parliamentary guidelines. It found Labor misused almost $388,000 during the 2014 election campaign. Labor spent $1,000,000 of taxpayers dime over two years trying to stop the Ombudsman investigating them. While the money has reportedly been repayed, Andrews & Co are pleading honest mistakes with regards to probably the most basic and well understood laws of election campaigning. Were someone to rob a bank, invest the proceeds to make a big return then return the original funds, would the justice system turn a blind eye? Andrews would seem to think that there should be no consequences.

Dan Andrews is the first to point the finger at everyone else for morals and ethics. How quick he is to virtue signal on social media at his amazing feats for the state of Victoria which put the rest of the country to shame. To belt neighboring states inferior unemployment rates when his government has been creating New Deal type tax spending programmes to fund new jobs.

Here is a list of just five of the shocking lapses in ethics and morals his government can lay claim to:

1) Andrews handed over $500mn in taxpayer funds to contractors for the backflip on the East-West link. He said during the election campaign he would honour those contracts but said after becoming Premier that “Be very clear about this: there will be no compensation paid.” Then still burnt the funds.

2) He told Victorians that the closure of the Hazelwood coal fired power station would hit electricity bills by 85c/week for the sake of the environment. This turned out to be an average of $278/year because of the over reliance on wholesale electricity markets. Despite all of his hair brained renewables schemes, to make up for the shortfall of closing Hazelwood 100MW of dirty diesel generators were secured to offset any shortfalls in baseload. He also spoke of how many green jobs would be created. Facts show that green job creation has been on a long term downtrend

3) Was instrumental in forcing rural fire-fighting volunteers (those who do it from the heart) against their will to come under the control of the fireman’s union who helped him get elected.

4)  To indoctrinate diversity the Vic Police practiced segregation in police recruiting seminars as the blueprint to reach nirvana in terms of the type of open mindedness and multi-cultural society we should strive for. If they truly wanted to teach the virtues of diversity why don’t they just have a come one come all seminar which didn’t base it on gender, religious or sexual orientation. Victoria has more cops per capita than any other state yet home invasions, carjackings and other crime rates are soaring.

5) The Andrews’s government wants to allow girls as young as 11 to get access to the contraceptive pill without consent from the parents. Most parents worry about their kids. What they eat and what they put in their bodies. Some kids may only want it to reduce pain during their menstrual cycle but to have a government provide a service which deliberately allows kids to bypass parental approval is downright wrong.

While Opposition Leader Matthew Guy has hardly helped his cause by having dinner with a member of the underworld in August 2017 in what was dubbed ‘Mobster-Lobster-gate’ this should hopefully wake up socialist Victoria to the crooked nature of the incumbents.

Jordan Peterson slays Trudeau’s Bill C-16

Professor Jordan Peterson articulated the reasons why Canada’s Bill C-16 (protection of gender expression and gender identity under the Human Rights Act)   is so reprehensible. Less so on grounds of ‘intent’ per se but the fact that it is grounded on unsubstantiated research with zero scientific backing and loose ideology rather than reality. Listening to the Canadian Senate ask questions, Peterson manages to make perfectly reasonable retorts to the identity politics driven nature of the bill. He even goes as far as to say that the people proposing it hadn’t even consulted those with “non-standard genders” to get their feelings on the matter. Peterson said he’d received countless letters to back this up

In typical Trudeau cabinet style, the issues surrounding the identity and gender bill were mostly assumed positions. In much the same way as Bill M-103 operates it is a law which is one way only. One can bet that if a person identifying as their biological gender (99% of us) complained that his or her feelings had been hurt by a transgender person who didn’t acknowledge their gender identity/expression it would be thrown out before it even reached a courtroom. Had the person who identified as a  “non-standard” gender complained the case in the reverse thennthe book would be thrown at the perpetrators. This is the problem. A law must have exactly the same application to everyone rather than a selective bias to protect a few.

No one is questioning a basic requirement for basic human rights. However Peterson makes the point very clear that the very people who proposed the law are by far and away the least appropriate people to enforce it. It is a law that seeks to muzzle free speech. To curb language. Peterson labours the point that the state shouldn’t have a right to prosecute people on the basis of a law that essentially forces them to pretend to accept someone’s subjective opinion on what they happen to identify with. Ironically Peterson tells the panel that the law actually works against “non-standard” genders because when they’re not part of the process they feel misrepresented.

The biggest flaw with such laws is the idea that the argument (as Peterson refuted so well) is so weak on its own that it must be made a statute of law to defend what can’t support with rational debate. The day that diversity has to be indoctrinated is the day we know it has no basis. Much like the hypocrisy surrounding white South African farmers. Many on the left proved their own inner racism and twisted logic by suggesting their skin colour precluded them from the same basic human rights afforded to the groups it peddles constantly. That’s the beauty of identity politics. No solutions are ever sought. Perpetual grievance is the goal in order to ensure equality in misery.

The unbiased ABC happily calls and treats us as c*nts

The Australian Broadcasting Corporation (ABC) says it is strictly impartial when it comes to politics. No bias whatsoever. The point was proven beyond a shadow of a doubt when it came to one of its comedy programmes calling conservative politicians c@nts. It is not a question of humour (if one can call it that) being like cartoons addressing political satire, it is a question of the organization flagrantly violating its own charter. Australian taxpayers deserve better. The financials of the ABC reveal how out of touch it is.

The ABC was originally established to make sure even rural communities could access news. Scroll forward c.90 years and we are able to stream radio programs from Berlin or TV shows from Canada right to our mobile handset, desktop or TV screen. Media choice is everywhere. Yet the Aussie taxpayer funds multiple ABC radio and TV stations to cater to markets well covered by the commercial sector. The ABC and the SBS get over A$1.5bn a year in funding.

Let’s dig a bit deeper in the stats of the ABC. Comparing 2016/17 and 2015/16 we see that TV audience reach for metro fell from 55.2% to 52.5% and regional slumped from 60.3% to 57.3%. If we go back to 2007/8 the figures were 60.1% and 62.4% respectively. For the 2017/18 period, the ABC targets a 50% reach. Hardly a stretch.

Since 2008, the average salary of ABC’s staff has risen 25% from $86,908 to $108,408. Total staff numbers have risen from 4499 to 4769. Therefore salaries as a percentage of the ABC revenues have risen from 37.1% of the budget to 50%. The ABC’s ability to generate sales from content has fallen from A$140mn to A$70mn last year. The multicultural SBS has seen its budget grow from A$259mn in 2008 to A$412mn in 2017. SBS staff numbers have grown from 844 to 1,466 over the same period with average salaries rising from A$82,689 to A$88,267 or 7.2%. Which begs the question why is the SBS able to operate at 31% of the budget in salaries while the ABC is at 50%? Surely the ABC’s economies of scale should work in its favour? Clearly not.

Australia’s largest commercial terrestrial station, Nine Network, has 3,100 employees against revenues of $1.237bn. So to put that into context, Nine can generate c. A$400,000 per employee whereas the ABC generates A$217,236 in tax dollars per employee. In a sense the ABC could be shut down, and each employee paid $108,000 in redundancy costs annually for two years simply by selling off the land, buildings and infrastructure. The SBS generates A$281,000 in tax dollars per employee. The ABC will argue it deserves $400,000/employee revenues rather than a 46% headcount reduction to be on equal terms with the efficiency in the private sector.

On a global basis, the BBC generates GBP 4.954bn and employs 21,000 staff. 22.7% of those revenues are spent on salaries. Average salaries have grown 17% since 2007/8. Average income per employee at the BBC is now GBP236,852 (A$428,000) thanks to the generous mandatory licensing fees. Average salaries at the Beeb are now GBP 55,651 ($A100,728).

Imagine if the ABC was listed and forced to compete. If it is infinitely confident it has the right content which captures future audience trends (which by its own measures doesn’t) then it can call whoever it wants a c*nt and see whether the ratings stack up when it comes time to attract revenue and capital. Why not give the ABC staff a choice to list and say what it wants or stay government owned and tow the line of the charter? Of course the answer is stay under the protectorate of blind politicians and say what they please. The beauty of the private sector is that sunlight is the best disinfectant.

Is it really our ABC? There is no balance in content and even less balance in its accounts. It should be massively defunded.

Virtue signaling fails again at the ballot box


No matter how dreadful the Liberals under Turnbull are at a federal level, South Australians realized that the 16 years of Labor in SA led them to the slowest growth, highest unemployment and most expensive electricity prices in the nation thanks to the loony renewables policy of the Weatherill government.  He ran a platform to double down on the failed policy that led to multiple state wide black outs. Common sense prevailed and he was rightly booted.

No amount of blowing up coal fired power stations or smug smiles while shaking hands with Elon Musk to make out as if wasting $560mn more of taxpayers money was intentional, could sway the hearts of the electorate.

The Libs gained a majority on its own right with 25 seats. Labor set to lose 5 seats to 18. The Greens lost more ground in SA, slipping over 2% to 6.6%. No seats. At the sharp edge of the wedge, a growing number of constituents don’t need the virtue signaling. They want sustainable jobs, sensible stewardship of their tax dollars and reliable, affordable electricity.

Whether the Libs can actually deliver is another question but Premier Weatherill’s flagrant failure came home to roost. However Turnbull mustn’t take these state victories as an endorsement for the coalition at the federal level. He’s still badly burnt toast.