Month: August 2016

Westpac reports c.39% jump in people in arrears on debt repayment

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Australia’s property market is bonkers. Prices now at 12x income vs 7x at the time of GFC. Is it any wonder Westpac reported those in arrears by more than 90 days has surged 39% in 9 months. The Commonwealth Bank reported a 27% increase in bad loan costs over the year. A recent ME Bank survey in Australia found only 46% of households were able to save each month. Just 32% could raise $3000 in an emergency and 50% aren’t confident of meeting their obligations if unemployed for three months.

I pulled up this mortgage calculator from Westpac. What I found amusing (circled) is the slide bar to borrow $1,000,000 is so far to the left confirming how stupidly out of whack Aussie house prices must be. Or is it that their customer base is full of big swingers.

While Westpac spoke of the trouble spots being in mining areas gross household debt in Australia is  160% of GDP. Take the mining town of Gladstone. In the last three years housing prices have plummeted 52%.  Over 10% of the property is up for sale not to reap a nice return but cut losses. It is a completely different dynamic. Average rental prices per week have dropped from $320/week to $150/week as mining activity leaves high vacancy rates. Real estate agents there have been talking up the market saying panic wouldn’t ensue if landlords weren’t flicking the chicken switch. Talk about defending a lost cause.

Aussie banks have 60% of their loan portfolio in property. The next is daylight followed by Norway at 40%. I can really see the Aussie banks getting bailed out should things get ugly at the same time the credit rating gets chopped and wholesale funding rates (c.40-50% of their borrowing) surge.

This week Sumitomo Trust Bank offered a 30 year fixed 0.75% mortgage. To put it in perspective, to borrow the same $1,000,000 would see that mortgage borrower pay $109,000 in interest vs our Aussie battler paying $1,380,000 on a 6.75% rate.

I recall when Japanese banks suffered a monumental property collapse. The mark to market of properties was too frightening that loans weren’t called bad if borrowers paid what rattled in their pockets. Arise the creative accounting to mask the reality.

Time to cull the Wallabies at the head, the half and the flank

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How can the Wallabies call themselves professionals? Now Nick Phipps has been caught on camera throwing All Black centre Fekitoa’s boot as far away as possible to disadvantage him. Cheika’s team have no discipline. During the England series Hooper threw sand in an opponents face during a scrum

As I pointed out in the first Bledisloe match, the Wallabies don’t look like a team. Players with socks around their ankles before the match starts shows they are showing up for a fee rather than pride in wearing the green and gold. The Wallabies lack the spirit of players like Kearns, Farr Jones, Lynagh, Campo, Gould, Rodriguez or Ella.

If I ran the ARU players like Phipps and Hooper would be suspended for two years at least if not permanently. It is clear they know they can get away with blatantly poor sportsmanship from their own masters and the coach. It shows change is urgently required in the leadership. The Wallabies can blame the ref all they want but there is no doubt the All Blacks are blueprint of team. I sincerely hope that if the All Blacks were being bugged the Wallabies were  wondering how to be a team.

Australia needs to do no soul searching. Strict discipline is required. Prima Donnas and cheats get dropped for players who want to play. Cheika should be sacked and Moore dropped as captain. Players pulling their socks up in more ways than one will see them able to match the best in the world. As it stands their rank will continue to fall. “Stronger as one” sums the Wallabies mindset as individuals only. “Stronger as a team” might be a better motto.

German Justice Minister shouldn’t praise a radical left punk band’s actions when the state’s own security agency has them under surveillance for inciting hatred

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I’ve often said politicians should be banned from social media outlets like Twitter. Impulsive and ill thought out reactions to 140 word tweets from invisible ranters  distract politicians from getting down to the job at hand. None more so than German Justice Minister Heiko Maas of the SPD.

Maas decided to tweet that an extreme left wing punk rock band, Feine Sahne Fischfillet,  (which is being surveilled by the German version of the NSA for threatening violence against the police and wanting to destroy democracy not to mention several band members being prosecuted) was doing a wonderful job for “setting a good sign against intolerance and racism” at a recent concert organised in Anklam, Mecklenburg-Vorpommern.

When the local media got hold of the tweet it forced Maas to blame his “social media team” for it. No apology or remorse for the action. It was someone else’s fault. Are people seriously willing to buy the fact he allows comments to go out in his name unchecked, especially given his position?

Chancellor Merkel is suffering in the polls thanks to her misguided altruism. More than 50% of Germans do not wish her to serve a fourth term. Not surprising given the recent terrorist attacks and Merkel’s refusal to stop the flow of migrants. Is it any wonder the right wing AfD continues to climb in the polls.

In Berlin, radical left anarchists are burning cars and smashing bank buildings in retaliation for what they claim is police brutality. Far-left activists in Berlin warned that they would exact €1m in revenge for any police raids on their squats and other ‘projects’ in the capital Dozens of cars were burned last weekend.

The police have reported a significant increase in far-left violence nationwide in 2015, with politically motivated left-wing crimes jumping 18 percent to 9,600. The refugee influx is a root cause with far-right groups have reacting violently and far-left groups attacking them in response. In January this year 211 far-right extremists were arrested for hosting an anti-refugee rally in Leipzig complaining Chancellor Merkel is ruining their homeland after the cover up after the new year sexual assaults in Cologne.

The Interior Ministry revealed that 39,000 (+19%YoY) politically motivated crimes were committed in 2015, with 23,000 having a far right motive. Crimes against refugees have soared from 199 in 2014 to over 1,000 in 2015.

We should recall in April 2015 the German blog http://www.Netzpolitik.org published posts with leaked information about the plans of Germany’s secret service to expand its digital-surveillance budget. In July the blog’s publishers, received a letter from the federal prosecutor saying that they and their anonymous sources were being investigated for treason. Two panic buttons were pressed: data privacy and freedom of the press. When news of the investigation broke out it brought thousands of Germans on to the streets. Angela Merkel and Heiko Maas distanced themselves from the prosecutor, Harald Range.

However in an August 4th press conference Mr Range attacked Mr Maas for “meddling in the independent judiciary”. Range said he refused to allow his position to be influenced by politics in any way.

Mr Maas fired Mr Range soon after his comments. Merkel and Maas acted as though they had nothing at all to do with the investigation that cost Range his job. With Range gone, a mess still remains that could still lead to other politicians, ministers or agency chiefs getting pushed out.  How independent is Germany’s judiciary system?

Der Spiegel wrote at the time,

“In recent days, the chancellor, Justice Minister Heiko Maas and Interior Minister Thomas de Maizière have sanctimoniously thrown their support behind freedom of the press. But reality often looks different. In reality, senior government officials and intelligence agency heads in Germany have long been pursuing a policy of intimidating and deterring journalists and their sources...

Leaks and whistleblowers are being hunted down and criminalized. Treason, a word that had hardly been heard for decades, is once again being used as part of the repertoire of politicians in Berlin — and all in the alleged name of protecting the common good. Security is to be increased in order to better protect the country from terrorism. At the same time, however, the balance between the executive, legislative, judiciary and the press as the Fourth Estate is being thrown off.

Ever since, the German government and its security agencies have made every attempt possible to ensure that they control what information becomes public. It is Merkel’s cabinet alone that determines what is defined as a state secret. And any person who casts doubt on that right, even if it is for good reason, runs the risk of being pursued with the full force of the law.”

Let us hope in future Mr Maas listens to punk music as enjoyment rather than use it for political posturing.

Vulcan 607 – a real tale of being an underdog

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Want a great read? Here it is. Vulcan 607 is the true story of the RAF bombing the Port Stanley airfield in the Falklands War in what was called Operation Black Buck.  If you want to learn about execution of a plan when you don’t have all the tools at your disposal this book shows what can be achieved. It should be compulsory reading for millennials to show them life is not always simple and requires more than an app and WiFi. This was the longest ever bombing raid at the time. It involved using what was left of a knackered air force tired aerial tankers and Vulcan bombers close to be put out to pasture due to their age. No satellite GPS positioning, no fancy digital. All done with slide rules and a calculator the night before the raid.

You had to hand it to the pilots who after the raid (figuring the hard part was done flying thru enemy defences) had to air-air refuel in hurricane winds and an electrical storm. The air tankers had to refuel themselves and refuel the Vulcan bomber. Some of the fuel passed through five aircraft before being burned by the attack aircraft. All this was done in total darkness.  Mid-air refueling was as easy, according to one Vulcan pilot, as “sticking wet spaghetti up a cat’s arse”

Before the raid, budget cuts meant few parts were available. Many missing parts like refueling valves (which had been filled with 20-year-old cement) were scavenged from other Vulcans that had been donated to museums and the bomb racks were reclaimed from scrapyards. A seal for a new radar-jamming device was improvised from corks from a home-brew beer kit and another crucial component was discovered in the engineers’ mess, serving as an ashtray. Having broken a refueling probe during refuelling practice they managed to find the only one left in an old supply depot as the maker had gone  out of business.

So next time your staff complain at what they don’t have, perhaps worth considering what can be done against the odds if one tries.

Minimum wage vs no job

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Last month I wrote how  CEO Jamie Dimon is to offer 18,000 JP Morgan staff a minimum 20% pay hike by 2019 from the current $10.15/hr.

He said, “Wages for many Americans have gone nowhere for too long. Many employees who will receive this increase work as bank tellers and customer service representatives. Above all it enables more people to begin to share in the rewards of economic growth.”

Over the next three years, JPM will raise that pay for 18,000 employees to between $12 and $16.50 an hour.

Such is the prosperity, workers will need to wait til 2019 to reap the rewards provided they aren’t fired in the meantime. It surprises me that if it is such an important issue for Dimon, why does he need 3 years to sort it out? I only wonder what sort of efficiency gains will be expected for the money and if we see a reduction in the number of staff as a result.

Although minimum wages aren’t automatically helping some companies that have business across the country. Ashley Furniture has just let go 840 staff from its California operation where the min wage is $15/hr proved too much to bear. It will move its manufacturing to other plants around the country with min wages at half the rate of California. From a rational perspective it’s easy to see why it chose to lay off staff given the discrepancy. It isn’t to say it’s a good outcome but one assumes if nationwide wages were bumped to $15 how many manufacturers would up stumps and produce abroad?

Even McDonalds is dispensing with order clerks and replacing them with touch panels meaning fewer staff to pay.

As technology keeps making our lives simpler it will also make more of us redundant.

Which begs the greater question – how many of those that rejoiced at a $15/hr pay packet at Ashley Furniture will be kicking themselves now they’re out of work?

No life in the death industry

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The FT has an interesting article on hearse makers looking abroad for growth. 1.6 million people die every year in Japan and one would think the life in death markets would be plentiful.

I once visited a company called San Holdings which is the largest listed provider of funerals in Japan. It said that its customers were looking to economize on funerals. Instead of lavish funerals and large wakes to farewell the dead, more were choosing to have a tight family farewell. As a result the average outlay for a funeral had fallen over 30% over the past 5 years.

Although regional Japan is subject to higher death rates than the cities companies like San Holdings see no real wish to expand. The agricultural coops had a virtual monopoly on funerals outside the cities. In rural ag communities, the local coops provide banking, insurance and other services so seeing the opportunity offered “pre-paid” funerals when their customers eventually ‘buy the farm’. It is yet again a sign of the poverty prevailing in Japan. Sending loved ones on their final journeys in the most opulent fashion is now making way for the bargain basement blue light special.

Obamacare likely to collapse as it gets exposed for what it wasn’t in the first place

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It looks as though Obamacare is looking increasingly less likely to deliver. The whole premise of Obamacare was to provide affordable health care. Obamacare was all about offering a wider number of people more access to healthcare at competitive prices on transparent public exchanges. It seems that moving into 2017, more people will be faced with only 1 choice meaning healthcare premiums are likely to get less affordable for many. States such as Tennessee are great examples of it potentially going to zero cover.

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”Blue Cross Blue Shield (BCBS) is the only insurer that has provided statewide coverage in Tennessee over the past 3 years with other insurers electing to only participate in select counties.  BCBS has lost a total of c.$500mm over that time period, in Tennessee alone, which prompted their request for a 62% premium increase in 2017.  The problem for the insurance commissioner is that BCBS hasn’t yet committed to providing insurance statewide, a decision they don’t have to formally make until mid-September.  Given that BCBS is the only statewide provider, any decision to pull back coverage could result in people in certain Tennessee counties losing access to health insurance all together. ”

Once again, the fawners over Obama’s legacy might once again look at what this plan hasn’t achieved and maybe we can reflect on an article written in The Australian in early 2015

“Nothing symbolises the depths to which the American democratic process has sunk than the testimony of Jonathan Gruber,the architect of Obamacare, to a House of Representatives inquiry. “The (Affordable Healthcare) bill was written in a tortured way to make sure the (Congressional Budget Office) did not score the mandate as taxes,” he said. “If CBO scored the mandate as taxes, the bill dies, OK? Lack of transparency is a huge political advantage … call it the stupidity of the American voter or whatever … that was really, really critical to get the thing to pass … I wish … we could make it transparent, but I’d rather have the law than not.”

Full marks to Professor Gruber for his candour. His subterfuge worked a treat. It conned the Supreme Court and moved House Speaker Nancy Pelosi to say, “We have to pass the bill so you can see what is in it.”

Such is the nature of the Obama administration. Opposed by a clear and consistent majority of citizens, the dishonestly titled Affordable Healthcare Act passed. It means, contrary to President Obama’s countless assurances, millions of Americans cannot choose their doctor or hospital and will have to pay higher premiums. To cover the costs of this socialised medicine, tax increases on everything from Medicare to capital gains were voted in by the Democrats.”