Benchmarks

Return of the State-Owned Enterprise

Image result for state owned enterprises

A new investor to Japan once asked CM how to categorise corporate behaviour in the land of the rising sun. CM replied, “Japan is not capitalism with warts, but socialism with beauty spots.

Latest reports confirm the Bank of Japan (BoJ) has now become a top 10 shareholder in almost 50% of listed stocks. In a sense, we have a trend which threatens to turn Japan’s largest businesses into quasi-state-owned enterprises (SoE) by the back door. The BoJ now owns $250bn of listed Japanese equities. It is the top shareholder in household Japanese brands such as Omron, Nidec and Fanuc. At current investment rates, the BoJ is set to own $400bn worth of the market by 2020-end.

The original reason for this move was to boost the ETF market and hope that Mrs Watanabe would pocket her winnings and splurge them at Mitsukoshi Department Store to increase consumption. Sadly all she has done is stuff it under the futon.

Although the government has been very public about the drive for good corporate governance, a stewardship code that drives to unwind cross-shareholdings, improve liquidity and lift returns, sadly the BoJ essentially reverses free-float and confounds the ability of companies to be attractive investments. What will happen if one day the BoJ announces it needs to pare its balance sheet back or that its holdings become too noticeable? These stocks will crater and Mrs Watanabe will become even more gun shy.

We shouldn’t forget that behind the walls of the BoJ, there is discussion to buy all $10 trillion of outstanding Japanese Government Bonds (JGBs) and convert them into zero-coupon perpetual bonds with a mild administration fee to legitimise the asset. Global markets won’t take nicely to wiping out 2 years worth of GDP with a printing press. Such a reckless experiment has yet to hit the Japanese Diet for discussion because such a move will require legislation to approve it. If it happens, the inflation the BoJ has now given up on will turn into a tsunami.

One reason Boston Globe hasn’t won a Pulitzer since 2016

At what point do mainstream media outlets reach peak Trump Derangement Syndrome (TDS)? When will editorial departments seek common sense? The Boston Globe pulled down an opinion article that suggested waiters tamper with Trump officials’ food. Apart from encouraging staff to breach food safety laws, they show themselves to be juvenile in the extreme. Journalistic integrity? Hardly.

If the liberal left media truly believe they represent mainstream America in moral and societal values, which all of the crazy Trump supporters need to follow, tampering with food is not a great benchmark.

If you want a laugh, take a look at the Boston Globe’s stated values! What a surprise it hasn’t won a Pulitzer since 2016!

The irony in “They’re all yours, Sanctuary Cities”

Will Trump’s tactics to expose the hypocrisy of sanctuary cities work? Democrats remain stubborn over funding border security. In his view, if sanctuary cities are all publicly open arms about accepting illegals then they should be happy to welcome busloads of them. The great irony of these virtue-signalling Democrat controlled cities is that they’re upset that this reality may dawn, although publicly stating they’ll be welcome. The greater irony is that a growing number of illegal immigrants are choosing to move OUT of sanctuary cities. In 2007, 7.7mn (63.1%) lived in the 20 largest metros to 6.5mn (60.7%) in 2016 according to Pew. During that time 1.5m illegal immigrants were deported (12.2mn ->10.7mn).

Despite one’s views of illegal immigration and the use of people as political pawns, ICE has just released its 2018 statistics. The numbers are staggering.

ICE’s 2018 annual report notes the following situation at the border:

U.S. Immigration and Customs Enforcement (ICE) Enforcement and Removal Operations (ERO) has continued to use resources as effectively and efficiently as possible to enforce the nation’s immigration laws.

In FY2018, ERO arrested 158,581 aliens, 90% of whom had criminal convictions (66%), pending criminal charges (21%), or previously issued final orders (3%). The overall arrest figure represents an 11% increase over FY2017.

  • 2015: 101,800
  • 2016: 110,104
  • 2017: 143,470
  • 2018: 158,581

The number of individuals detained by ERO is driven by enforcement actions taken by ICE and apprehensions made by U.S. Customs and Border Protection (CBP). In FY2018, 396,448 people were initially booked into an ICE detention facility, an increase of 22.5% over FY2017.  Book-ins to detention resulting from CBP arrests increased by 32% over the previous year, illustrating a surge in illegal border crossings.

  • 2015: 307,342
  • 2016: 352,882
  • 2017: 323,591
  • 2018: 396,448

In FY2018, ERO removed 256,086 illegal aliens, reflecting an increase of 13% over FY2017. The majority of removals (57%) were convicted criminals. Additionally, 5,914 of the removed illegal aliens were classified as either known or suspected gang members or terrorists, which is a 9% increase over FY2017.

  • 2015: 235,413
  • 2016: 240,255
  • 2017: 226,119
  • 2018: 256,086

Here are some of the reasons for arrest – both criminal convictions and charges – for 2017 (2018):

  • Driving under the influence : 80,547 (80,730)
  • Dangerous drugs: 76,503 (76,585)
  • Immigration violation:  62,517 (63,166)
  • Assault: 48,454 (50,753)
  • Larceny: 20,356 (20,340)
  • Burglary: 12,836 (12,663)
  • Fraud: 12,398 (12,862)
  • Illegal weapon possession: 11,173 (11,766)
  • Sex offences: 6,664 (6,888)
  • Stolen Vehicles: 6,174 (6,261)
  • Forgery: 5,210 (5,158)
  • Homicide: 1,886 (2,028)
  • Kidnapping: 2,027 (2,085)
  • Prostitution racketeering: 1,572 (1,739)

Since the initial surge at the Southwest border (SWB) in FY2014, there has been a significant increase in the arrival of both family units (FMUAs) and unaccompanied alien children (UACs). In FY2018, approximately 50,000 UACs and 107,000 aliens processed as FMUAs were apprehended at the SWB by the U.S. Border Patrol (USBP). These numbers represent a marked increase from FY2017 when approximately 41,000 UACs and 75,000 FMUA were apprehended by USBP.

While USBP routinely turns FMUA apprehensions over to ICE for removal proceedings, ICE is severely limited by various laws and judicial actions from detaining family units through the completion of removal proceedings. For UAC apprehensions, DHS is responsible for the transfer of custody to the Department of Health and Human Services (HHS) within 72 hours, absent exceptional circumstances. HHS is similarly limited in their ability to detain UACs through the pendency of their removal proceedings. When these UACs are released by HHS or FMUA are released from DHS custody, they are placed onto the non-detained docket, which currently has more than 2,641,589 cases and results in decisions not being rendered for many years. Further, even when removal orders are issued, very few aliens from the non-detained docket comply with these orders and instead join an ever-growing list of 565,892 fugitive aliens.”

Switching to compassionate grounds, who wants to see screaming kids? No-one. Locked in cages? Even less. Separated? Well, there is a good reason for that. When even the likes of left-leaning HuffPo admitted in December 2014 that 80% of women and girls are sexually assaulted while trying to make it across the border there is a good reason to question the proof of identity of the supposed parents. Even if 90% of parent/children pairs are legit, what of the 10% that aren’t? Do ICE risk it? Australia had an experience of a mother from Nepal (a democracy not at war) who deliberately poured boiling water on her infant to expedite processing on the mainland. Are these the values of people we should provide refuge to? We should not forget that many people make the journey knowing ALL the risks that confront them yet still attempt it despite the warnings.

To emphasize the danger of lax screening,  multiple kids were found dead after being abandoned once across the border as their usefulness as a golden ticket on compassionate grounds was expended. If that isn’t some of the worst forms of child abuse then what is? Moreover, these people are hardly the type that decent Americans would want to embrace with open arms!

In Jan 2016 WaPo noted, “The Office of Refugee Resettlement, an agency of the Department of Health and Human Services, failed to do proper background checks of adults who claimed the children…several Guatemalan teens were found in a dilapidated trailer park near Marion, Ohio, where they were being held captive in squalid conditions by traffickers and forced to work“. So slave labour to repay human traffickers? Let’s encourage more to attempt the crossing?

Then ICE has the trouble of finding the parents/guardians (sponsors) already living (often) illegally to collect their unaccompanied children at pre-arranged court hearings. The media went into a frenzy saying that ICE had lost the records. The truth came out in Feb 2016 that,

“The head of ICE’s removal operations, Thomas Homan, told members of the Senate Judiciary Committee that 7,643 immigrants who arrived as children were sent home between the 2012 and 2015 budget years…More than 171,000 children, mostly from Honduras, El Salvador and Guatemala, were arrested at the border during that same time…The number of children caught crossing the border illegally spiked in 2014 [see impacts in NY Times graphic] and the Obama administration promised that those who were not eligible for protection in the United States would be swiftly sent home… And with an immigration court backlog of more than 474,000 pending cases, some cases can take years to move through the court system…

…about 40% of immigrants are no shows at court…Finding immigrant children with outstanding deportation orders is also complicated by the fact that they often are no longer at the addresses provided to the government.”We are out looking,” Homan said. “But they are hard to find. A lot of these folks who don’t show up in court, we don’t know where they’re at.”

The pictures of kids in concentration camp style cages were from 2014. Yet don’t let that get put in the way of a narrative to show the nationalist tendencies of the current administration.

While we can express outrage at the treatment of illegal immigrants at the border, the tougher laws have started to resonate with Ana Garcia Carias, wife of Honduran President Juan Orlando Hernandez, who said, Stay in the country and let’s look for solutions to support you. She visited the border and said that she didn’t recommend her citizens go to the US undocumented.

In summary, Americans want their borders safe. Rasmussen Reports notes that most citizens do not want to abolish ICE. The polling firm noted,

only 25% of Likely U.S. Voters favour getting rid of ICE whose duties include border control. Fifty-five percent (55%) are opposed…Sixty-nine percent (69%) of Republicans and 53% of voters not affiliated with either major political party oppose getting rid of ICE. Democrats agree by a narrower 44% to 36% margin.”

AS CM always says, if people don’t like the laws, then move to change them. Trump’s tactics are unorthodox but will expose the hypocrisy of those that push forward the idea of protecting illegal immigrants.

To infinity and beyond?

Several days before Enron went belly up, Goldman Sachs released a research report on the company titled, “As good as it gets“. Grandiose statements are often precursors to calamity.

When Barrons publishes articles with “The bull market has no expiration date” start running for the hills. Sounds like Barrons has channeled Buzz Lightyear from Toy Story who said, “to infinity and beyond.”

What happened to Greenspan’s “irrational exuberance“?

Remember his godlike status was such that markets would hang on his every word forcing him to eventually utter,

I know you think you understand what you thought I said but I’m not sure you realize that what you heard is not what I meant!”

Maybe Barrons forgot that Buzz also said, “this isn’t flying! It’s falling with style.” Unfortunately there will be no grace when this bubble pops.

Thanks to SM007 for the flag.

Profligacy paid for by wishful thinking

Lots of promises. Lots of grand assumptions. To be honest, best just ignore the minutiae. It’s a complete waste of time. The biggest question is, if the global economy, by Treasurer Josh Frydenberg’s own admission, is slowing down (just look at government bond yields flattening/gone negative) how on earth is Australia going to grow receipts from $485.2bn in 2018/19 to $566.9b in 2021/22? A 17% growth in tax revenue. Expenses will rise from $487bn to $559.9bn respectively. Give aways +15%. Best hope the world economy doesn’t tank. Expenses are locked in. Tax revenues aren’t.

Worse, these projections have all been massaged higher than the 2018-19 budget. What has changed to our overall net position in the last 12 months to gain such confidence? Climate alarmists would blush at the extent of the upward massaging of numbers. Did Treasury sit down after consuming 3 bottles of Absinthe to come up with these revisions? Think about it. How can we get an extra $5.9bn in tax receipts in 2021-22 when conditions are sure to be worsening?

This is NOT an old school Coalition budget by any measure. This is a crossing fingers, closing the eyes and hoping we muddle through budget. If the proverbial hits the fan, a monster deficit is assured. Take it to the bank.

We are technically at full employment. Unless we embark on mass migration (which we’re looking to cut) how will flat wage enduring Aussies and corporates contribute to a 17% rise in the Canberra coffers? Wishful thinking. The government targets around 23.9% of GDP for tax receipts and pats itself on the back for “the government’s average real spending growth is expected to be the lowest of any Commonwealth government in over 50 years.” Although that claim is dispelled by their own tables contained here.

Cutting taxes can create more tax revenue. Poland sliced its corporate taxes in half in 2004 and doubled revenue. However that was more a grey money grab than pure unadulterated tax policy spurring public revenue growth.

Giving away more money to the middle class through tax cuts and hand outs in the hope they spend more seems wishful thinking. The problem is if global growth hits a wall, we don’t have a Howard/Costello surplus to buffer the storm. No $38bn backstop in the war chest.

China, the US and EU are struggling. Things are so bad in the US that the Federal Reserve had to chicken out of any more rate rises because it would tank the economy. Our growth will stall if the world slows. Forget 28 straight years of continuous growth in Australia. The knock on effects will see unemployment surge, consumption fall off a cliff, housing prices crash and tax revenues slump. Forget a $7.1bn surplus. Think $20bn deficit because the promises are too grand and the tax receipts blindingly optimistic.

Of note in the 2019-20 budget is the expansion of the ATO’s tax grab from evil multinationals and HNW individuals who’ve avoided paying their fair share. That will result in a $3.612bn extr over the next 4 years. That against the $5.74bn tax cut for middle class Aussies over the same period. Spending up everywhere. Just not sure why the Treasury hasn’t pointed to where the extra revenue is coming from.

Take the assumptions of 2.75% GDP growth flat to 2020/21. Unrealistic. Treasury assumes the same labour force participation rate with unemployment remaining to 5% and wage growth of 3.25% in 2020/21, up from 2.1%. All looks so simple. Yet inflation is expected to grow to 2.5% meaning real wages will be flat.

Aussies, saddled under 180% debt to GDP, shouldn’t take any sense of comfort from this budget. What Frydenberg presented tonight was nothing more than a hope that the most rosy scenarios play out when thunder clouds are so obviously rolling in. It’s utterly irresponsible. Yet that’s today’s political class – spineless. They’re unprepared to tell Aussies that they have to be prepared to live with much less. Instead of asking us to tighten our belts, a whole load of freebies that can’t be paid for end in our laps so they can hold on to power for a bit longer.

UN hit with yet another scandal

Kết quả hình ảnh cho Michel Sidibé

Independent experts have concluded that UN AIDS Executive Director, Michel Sidibé,  has been responsible for creating a toxic environment that promoted “favoritism, preferment and ethical blindness.” Sidibé accepted no reponsibility for any sexual harassment, bullying or abuse of power that occured under his watch.

The investigation started after Sidibé’s deputy was accused of  forcibly kissing, groping and trying to drag a colleague into his Bangkok hotel room in 2015.

In a survey of the 670 staff members at the UN agency conducted by the independent investigators, 18 admitted they had experienced some form of sexual harassment in the previous year and a further 201 said they were on the wrong end of workplace abuse.

One staff member went on the record saying, “U.N.AIDS is like a predators’ prey ground…You have access to all sorts of people, especially the vulnerable: You can use promises of jobs, contracts and all sorts of opportunities and abuse your power to get whatever you want, especially in terms of sexual favors. I have seen senior colleagues dating local young interns or using U.N.AIDS resources to access sex workers.

UN Secretary General Antonio Guterres, who made it clear he had a zero tolerance policy with regards to sexual harassment when he took office,  has refused to fire him. Despite his term ending in January 2020, Sidibé has offered to quit in June 2019 in order to ensure a stable transition period! In what world does a person outed for turning a blind eye to such a poisonous culture get to leave on his own terms? Sacred cows.

Sidibe admitted in an email after the investigation was published, “not all of our staff, in all their diversity, are experiencing the inclusive work culture to which we aspire.” Choice words.

Why do governments continue to fund the UN when it shows time and time again that it operates without any form of governance or ethical code? Remember it wasn’t that long ago that certain people at the UN thought former Zimbabwean dictator Robert Mugabe would make a sensible ambassador for the World Health Organization (WHO). Why would any country seriously want to sign over sovereign powers to the UN with respect to the compact on migration? The UN isn’t fit to run anything of substance.

Why after all the scandals with the IPCC do people put faith in their ability to manage climate change summits? The Delinquent Teenager, written by Canadian investigative journalist Donna Laframboise chronicles how the IPCC participants are picked by governments, not for their scientific knowledge and expertise, but for their political connections and for “diversity.” You can read some of the ridiculous selection processes for lead authors here.

Note the UN promised to streamline. As CM noted 15 months ago,

“The latest U.N. regular budget, while superficially smaller than the previous budget, made no fundamental programmatic or structural adjustments—e.g., reducing permanent staff, freezing or reducing salaries and other benefits, and permanently eliminating a significant number of mandates, programs, or other activities—that would lower the baseline for future U.N. budget negotiations. Despite the Secretary-General’s proposal to eliminate 44 permanent posts, the 2012–2013 budget actually increased the number of permanent posts by more than a score compared with the previous budget. The failure to arrest growth in U.N. employment, salaries, and benefits is especially problematic because personnel costs account for 74% of U.N. spending according to the U.N.’s Advisory Committee on Administrative and Budgetary Questions (ACABQ). Without a significant reduction in the number of permanent U.N. posts or a significant reduction in staff compensation and related costs, real and lasting reductions in the U.N. regular budget will remain out of reach.”

The Katowice Kindergarten

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While Swedish 15-yo Greta Thunberg deserves absolutely no criticism for presenting in front of a COP24 audience for something she has been made to believe, the deliberate use of children to behave as political pawns is disgraceful, although hardly surprising from a body which has such dreadful ethics. Climate alarmism hit new lows when UN Secretary General Guterres and a collection of hand picked delegates fawned over Thunberg’s catchphrases like she was smarter than all of those there. Honestly if kids are so smart, why bother with pursuing tertiary education? Although the mainstream media might have had a point about the children being more mature than the adults.

Childishness seems to be a recurring theme at the COP24 summit. Whether it is the chanting and laughter brigades deployed to disrupt forums on coal or the “Fossil of the Day Awards” where the host brazenly shames representatives who don’t conform to the realpolitik of the climate alarmists, it is juvenile. There are even fossil fuel derived signs and a T-Rex suited sidekick to add to the childish antics of slagging off the Polish hosts for promoting clean coal.

There was touch of irony when the masked compere in a skeleton tuxedo lambasted Australia for having the hide to use its $100s of millions of carbon credits it earned from the Kyoto Protocol. So flimsy is the framework behind these self-coined “historic” agreements, that countries can get a bashing for adhering to the clauses agreed by the same body hosting the summit. Take that!

When will these stooges work out that shaming those that hold alternative views won’t win over the hearts and minds of those they haven’t convinced?  Why can’t they debate with reasoned arguments, facts and courteous common sense rather than tease those that disagree with them in the sandpit? Surely if the supposedly flaky arguments presented by skeptics are allowed to be heard without interruption, they’ll dig their own grave when asked to back up their own untruths? It is that simple. Ahh but to the cultural Marxists, there are no voices to be heard other than their own. A bit like the marching Maoist Chinese girls in The Last Emperor.

Let us be frank. The UN could not give two hoots for this girl other than what she can do to resurrect the fortunes of a conference that is dying in relevance. Think about it. In Copenhagen, 40,000 climate pilgrims showed up to COP-21. This was the summit where Al Gore mysteriously disappeared when it was shown his hockey stick prophecies were utter tripe. Katowice COP24 has managed 22,000 delegates and 7,331 observers. At least we can say there are far fewer hypocrites at this function shooting to maintain frequent flyer status.

COP summits are little more than a cash grab which is pretty obvious when looking at the delegates present. 42% of those at COP24 are from Africa lining up to receive millions in funding from guilt ridden Western nations. There is a reason why Guinea sent 409 delegates and Australia 30, even though the latter has twice the population of the former.

Although is there another reason why the political class is not listening to the kids? Thunberg is probably unaware many leaders of European nations have no progeny.

France’s Emmanuel Macron – no kids.
Germany’s Angela Merkel – no kids
UK PM Theresa May – no kids.
The Netherlands PM Mark Rutte – no kids.
Former Italian PM Paolo Gentiloni – no kids.
Swedish PM Kjell Stefan Löfven- no biological kids.
Luxembourg PM Xavier Bettel – no kids.
Austrian Chancellor Sebastian Kurz – no kids (although he’s only 32)
Scotland’s Nicola Sturgeon – no kids.
EC President Jean-Claude Juncker – no kids.
Incidentally Japan’s PM Abe also has no children.

CM is a fervent supporter of children learning and becoming passionate about certain topics, on the proviso that teaching faculties are prepared to debate both sides of the story in earnest and allow critical evaluation. As evidenced by the 15,000 strong school student led climate strikes across Australia, the Department of Education & Training should be fast tracking spirit levels to schools around the country to ensure there is balance in the classroom.