Contrarian

Maybe the teachers need to sit outside the headmaster’s office

If kids want to strike and learn to protest, shouldn’t we the public be able to see whether the children are being constructively taught both sides of the argument in class before they paint placards? CM has a strong feeling that only “one” side of the climate story is being pushed – the alarmist one. Skeptical kids should live in fear of detention.

Perhaps that should be the litmus test – if teachers are proud of getting kids to form such demonstrations, they should not be afraid to allow open access to what they’re teaching. Something tells me they wouldn’t dare because it would prove their own bias beyond doubt.

Here are three things CM would do:

Make the kids debate both sides of the argument in detail. Make them think. Research. Investigate.

Conduct an ethics class to show the countless lies, scandals and whistleblowers outing even government agencies on fabricating data. Kids know what happens when they lie. Perhaps they would grow up to be questioning about what bias they’re fed.

Do an economic feasibility study on renewables vs fossil fuels. Let students decide on whether investing their futures in renewables for zero outcome by 2100 makes sense. Teach them that renewables aren’t cheaper than fossil fuels for two reasons – first, fossil fuel prices are plummeting and second renewable calculations are based on 100% operating capacity which is unrealistic in the extreme. Put them at 20% and renewables are 5x more expensive relatively speaking.

If after thorough and rigorous debate the kids still believed they’re doomed then they can protest their little hearts out.

What it proves is that school faculties are pushing political agendas rather than education. We teach kids that lying is bad and there are consequences for doing so. Shouldn’t teachers be put on the naughty step for doing the same?

CM worries about their future indeed. Oh and it won’t be global warming that kills them. Their dreams have a far higher risk of being killed off through the activism peddled by their teachers. Say, have the teachers told the kids about those alarmists warning childbirth as a cause for future warming?

Karl Marx would be proud.

Nothing to see here

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Aussie bank mortgage lending continues to reach ever dizzier heights. What is probably lost on many is that Westpac & CommBank have outstanding mortgage loans extended to as many Aussies as the colossal Bank of America (BoA) is lending to Americans.

Shareholder equity as a % of real estate loans looks like this. Note how post GFC  the US banks have shored up the balance sheet to avoid a repeat of the disastrous contagion when Lehmans collapsed. Note Citi, BoA and Wells Fargo each took $20-45 billion in TARP to prevent a collapse.

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Westpac & CommBank have shareholder equity vs R/E loans of 16%. That means if the aggregate loan value get smacked  by 16% or more via defaults or a sharp slowdown then these banks would be in negative equity. Extreme?

In 2009 the Global Financial Crisis (GFC) had turned over 16% of BoA’s residential mortgage portfolio into either NPLs, mortgage payments over 90-day in arrears or impaired (largely from the shonky lending practices of Countrywide (which BoA bought in 2008). Countrywide’s $2.5bn acquisition price turned out to cost BoA shareholders a further $50bn by the end of the clean-up. Who is counting?

In 2018, Australia’s GDP is likely to be around A$1.75 trillion. Our total lending by the banks is approximately $2.64 trillion which is 150% of GDP. At the height of the Japanese bubble, total bank lending as a whole only reached 106%. Mortgages alone in Australia are near as makes no difference 100% of GDP.

Japan ended up wiping out Y90 trillion ($A1.1 trillion) or 17% of its GDP at the time. The only thing that springs to mind with the Aussie banks is complacency and the RBA minutes today only reinforced that view. At least 3 years behind the curve. Yes of course people will lob stress tests as a reason not to worry (we were told in 2007 that everything would be fine until the whole edifice collapsed) but CM doesn’t buy it for a second.

Aussie banks are still beholden to global wholesale markets. In a world where rates are rising overseas and companies like GE are facing a massive wall of higher funding costs due to credit downgrades, risk is about to be priced properly. The Aussie dollar is likely to be hit too.

A recent ME Bank survey in Australia found only 46 per cent of households were able to save each month. Just 32 per cent could raise $3000 in an emergency and 50 per cent aren’t confident of meeting their obligations if unemployed for three months.

The Weekend AFR reported that according to Digital Finance Analytics, “there are around 650,000 households in Australia experiencing some form of mortgage stress. If rates were to rise 150 basis points the number of Australians in mortgage stress would rise to approximately 930,000 and if rates rose 300 basis points the number would rise to 1.1 million – or more than a third of all mortgages. A 300 basis point rise would take the cash rate to 4.5 per cent, still lower than the 4.75 per cent for most of 2011.”

Do you know how many homes NAB has under repossession on its books at the latest filing? Around 300.

Trump mid term victory more probable than not

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Actions not words. Forget all of one’s personal opinions (hatred) of Trump and analyze the facts.  This is a picture of Obama trying to rally Democrats in Nevada this week. Despite the small audience, Obama mentioned himself 92 times in 38 minutes as opposed to talking up the candidate he was there to support. Sounded like a desperate attempt to save his own legacy. The following pictures are of Trump’s rally for Ted Cruz in Houston, Texas.

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Conventional wisdom tells us that the party in opposition tends to get the House in the mid terms. Politics is in such a funk, why would we for one second believe that consensus should be the default in November 2018? How did that work out on 2016?

Ahh yes, but the Democrats have learned from treating the prior election as a coronation for Hillary Clinton. They’ll be out in droves. No doubt they will but after the Kavanaugh debacle in the Senate and over 10,000 strong Honduran caravan surging to the US southern border (the Dems have been eerily quiet over this) it only plays to Trump’s domestic agenda. What many overlook is that ICE records indicate there are  474,000 illegal immigrants still in the queue for processing. Four hundred and seventy four thousand. Think of the costs to process that.

So to the polls? They were wildly inaccurate at the 2016 election. Largely because they are telephone polls to 1,000 people with landlines. Hardly an accurate assessment. Only old folk have landlines now don’t they?

A MSN (left leaning) online poll conducted last month showed 76% of 73,000 would lean Republican in the mid terms. How valuable are polls? Let’s be honest, a Fox poll leaning to conservatives and and a CNN poll swaying to liberals Shouldnt shock anyone. It is the anomaly that should cause us to question a mood as this MSN poll did. Are 73,000 people representative of the 250mn eligible to vote? More than 1,000 would be that is for sure.

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Once again, forget personal dislikes for Trump. If a p*ssy grabbing, racist, xenophobic, bigoted, nationalist silver back Nazi orange buffoon as he is often referred to as can get this many people to a gathering imagine if he had none of the baggage? Potentially less people because there is not as much shock value.

CM has said for ages that the mainstream media is his best ally. The constant one-eyed bias against him only gives more air time. He is a showman. The White House has become  a reality TV program. All the MSM does is feed his exposure. Sadly ratings reflect that he is winning. The media can only tell the public that Trump is the antithesis of the establishment so many times before it wears thin and people tune out.

Then again perhaps it is more telling that the average American doesn’t look to him as a spiritual leader. Or put that another way, the mid terms will be a measure of how successful he has been to date (even if blasted Russian bots meddling in the voting machines are behind it).

If he has genuinely helped put Americans on a better financial footing in their minds that is all that matters to them. Call Stormy ‘Horseface’, slag off Blasey-Ford for her amnesia and bash CNN at a rally for “fake news”. None of it matters. It appears Americans are less likely to be intimidated by thuggery (chasing Republicans out of restaurants or shooting them) of the left than to join their ranks as the #WalkAway campaign has demonstrated.

Trump is the most left field curve ball President in US history.  So unconventional in his diplomacy. He has shown that pushing back can get results. Whether smashing NATO members for failing to execute on  their own self imposed military spending targets, stopping Rocketman testing nukes or getting Juncker to sign an FTA a week after he stumbled blind drunk at a NATO summit there is some method to the madness.

In two weeks time we’ll get a result which will reflect the mood of America. The observation of CM is that the Dems are playing all the same party tricks as the 2016 election albeit at 11.

CM may be well off the reservation on this but those same vibes from Nov 2015 suggest Trump may well upset decades of history. Fake views? Allie Stuckey did a rather amusing parody of the Democrats here.

We’ll know soon enough.

Flannery departs GE. Market rewards +14% in pre-market

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General Electric (GE) shares have been a dreadful investment. The company, which trades in negative equity is indicated c.14% higher in trade after CEO John Flannery stepped down inside one year on the job. Lawrence Culp replaces him as Chairman & CEO.

Losing Flannery will look to add about $14bn to GE’s value. Keeping Musk will look to add $7.1bn to Tesla’s value today. A tale of two CEOs. The power or losing one to that of keeping one.

If we’re so keen to stick to Paris should we feel guilty about nuclear power?

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Australia seems keen to stick to the Paris Accord. Despite knowing whatever we do on saving the planet through following the politics of Paris will result in no palpable change in world temperatures at considerable economic cost to overstretched taxpayers. If we seem so keen to do our bit for tokenism, why not copy so many signatories and build nuclear plants? After all if we don’t want to be censured for abandoning the accord should we feel any sense of guilt if we adopt the very same CO2 limiting measures of others? Safety in numbers – literally.

CM was privy to a meeting with a former US Navy officer who was speaking about how negative PR can create false narratives. Nuclear power was one of them. He argued that the US & Japan were losing the PR war hence technological leadership on civilian nuclear power. The likes of Toshiba-Westinghouse are now shrinking minnows whose dwindling order book looks like the victim of a sunset industry when in reality it has been terrible program management. However why should it?

Nuclear power is set to be 14% of global electricity generation by 2040 from 11% today. Emerging Asia get the practicalities of nuclear power. Affordable and sustainable baseload with virtually no emissions.

Of course the horrible outcomes of poorly managed nuclear plants has come at great financial cost as experienced most recently  with Fukushima but the safety record of nuclear power is astonishingly good. Quantum levels more people die in coal mine accidents every year than the combined deaths from radiation from Chernobyl or Fukushima meltdowns since either occurred.

The misplaced fear of Fukushima was so high at the time that Americans across the Pacific were stocking up on radiation masks and Geiger counters in preparation of impending irradiation. It seemed the further one got away from the reactor the more hysteric people became. Deaths in the US as a result of the Fukushima meltdown? Zero!

As it stands, the US has two nuclear plants under construction at present which are saddled with delays and costly overruns based on incompetent execution. The Chinese have twenty in the build phase. India 7. Korea and the UAE 4 each. Russia 3. Even Bangladesh & Pakistan have two in the pipeline using technologies outside of the US/Japan.

There are about 150 power reactors with a total gross capacity of about 160GWe on order with about 300 more proposed. Where are the former world leaders in power technology? Next to nowhere. Cowering in a corner and allowing themselves to be beaten up senseless over false statistics. Where is the PR reporting reality? It’s as if they’ve given up. Where is the media lambasting China, India and other nations for putting our lives at risk? That’s right – nowhere.

What probably escapes many people is that for all the negative news cycle around nuclear power and the thirst for renewable alternatives, many Americans are already surrounded by active nuclear plants. While they visit a zoo or the beach they are blissfully unaware that at all the naval ports dotted around the mainland (e.g. California, Connecticut, NY, Florida, DC, Texas, South Carolina etc) and islands (e.g. Hawaii, Japan) there are 100s of nuclear reactors sitting safely in close proximity to millions of civilians. Yet where is the outrage? Not a peep.

Shout from the hilltops at the efficiency of renewables all you want. Then explain why those with higher levels of renewables as baseload power end up with the highest incidents of blackouts and steepest prices.

South Australia is the case in point. Australia is home to the cheapest materials (gas, coal and uranium) to make affordable electricity but we have caved to the green madness and saddled ourselves with punitive power prices to meet goals based on unproven and often whistle blown manipulated science. If climate scientists were subject to the same punitive damages that players in the financial industry are then it is likely the “targets” leading to our ecological disaster would be pared back to such a degree we’d just keep calm and carry on. Yet because there is no risk of jail sentences the tax dollars get misappropriated, funding an industry whose survival and growth depends on fear. Talk about a lack of ethics.

Even worse we want to double down on this inefficient renewable technology (where claims are often made on 100% capacity rather than the 20% they truly operate on) despite having empirical evidence of its all too obvious shortcomings. Virtue signaling actions such as blowing up old coal fired power stations has ironically proven the stupidest of moves in that all the while demand hasn’t changed reductions in reliable baseload supply makes us vulnerable.

Throw on the desire to electrify the automobile  and we already know that existing base load won’t cope with the increased demands. Take a look at Britain as an example. Apart from the risks of losing massive fuel tax levies (around 5% of total government revenue) the power industry’s current projections of new electricity generation additions can’t meet the expected demand if we all plug our EV in overnight.

So Australia should quit worrying about what others think and act in its own best interests. Maybe Canberra needs a PR agency more than the nuclear industry does. High time to look at real data and sustainability.

 

Harley-Davidson to go into the Adventure category

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Actually credit where credit is due. Harley maybe very late to the party but realizes it must be bold to survive in the long run. Adventure (ADV) bikes (think of them as 2-wheeled SUVs)  are one of the most popular motorcycle segments now due to versatility but the competition is fierce and only getting moreso. Harley plans to launch a 1250cc ADV bike in 2020.

It is unlikely to cause segment leader BMW to quake in its boots with respect to its best seller GS series although the question is can the Harley brand can carry any sales at all? At the luxury end BMW, KTM, Ducati, Triumph, Moto Guzzi and Aprilia all have ADV bikes. BMW & KTM are the sales chart leaders. BMW for inventing the segment and KTM for strapping a 160hp nuke to its expertise in off road and 17 straight wins in the Paris-Dakar.

It is fast becoming a horsepower war. BMW is looking to launch a 145-150hp 1250cc next year for the GS from the 125hp 1170cc twin it currently has to keep up with the competition.

Without a spec sheet it is hard to tell much about the Harley ADV. It looks heavy. Weight matters. The BMW is around 240kg. The KTM 210kg. Will the Harley keep it under 260kg?

Horsepower is not a Harley strong suit. You won’t find power in a Harley spec sheet at the dealer. Will it use a clump of lazy torqued Milwaukee pig iron for an engine? In a low slung cruiser one can get away with it but in a tall ADV bike, when negotiating goat tracks (that’s a wide belly pan!), traction, power delivery and how a bike carries its weight is crucial. Can Harley produce over 120hp from this 1250cc engine with flexibility across the rev range? Will it be chain driven? Shaft? Belt? These things matter to the ADV snobs.

The design of the ADV Harley is certainly bold. CM likes it although if you drop it that headlight unit sure looks expensive to replace. Like many SUVs never see more off-road than a gravel driveway, the most dirt tracking Harley ADVs will see might be some road repairs on Route 66. The Pan America name certainly rings of highway biased use.

The next thing will be price. Even before (and after) we have full specs can Harley launch the bike at a competitive price? Harley can’t just rock up into a segment it’s never been active in and demand the type of premium it’s cruisers carry. It’s top of the line CVO series can be $50,000. BMW is considered the premium offering in ADV. Luxury Italian brand Ducati tried to price it slightly north and was caned in the sales race. KTMs are priced slightly cheaper but BMW remains king and having owned one know exactly why. The BMW is good at absolutely EVERYTHING.

Harley has history in new ventures. It broke the mold decades ago and took a stab at sports bikes with the Buell brand, but it was an abject failure. Porsche was called into help develop the V-Rod engine some 18 years ago but that is no longer sold.

Harley also aims to launch electric bikes, smaller 250-500cc categories for Asian markets and a mid range 500-1250cc for new sport type street fighters. All looks margin crushing from a distance.

From an investor perspective the accountants will require a lot of volume to justify the R&D expense. The shares closed toward the lows on the announcement.

Without getting too Harvard MBA, Harley feels extension of product is vital. To a degree it is right. Unfortunately graveyards for such strategies are too commonplace. Few get it right. Buell was case in point. BMWs K1600 Bagger will flop because it was an excuse trying to find a home for its 1600cc 6-cylinder regardless of capabilities. Customers see through this.

Harley’s ADV will have distribution channels as it’s biggest weapon. It will have a hard time converting ADV faithful unless it offers something truly better at a competitive price. Otherwise it will gather dust on showroom floors.

Personally this ADV will probably do better than most think. It won’t get close to toppling the Beemer but there are enough quirky people out there who want to be different. Nice job Harley but can it turn groups profitably around? The last 5 years have been a disaster. The question is all this product arrives at a time when the economy is likely to turn south.

Who says the Germans don’t do humour?

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Mercedes-Benz has decided to showcase its least fuel efficient SUV, the G63 AMG (which has the aerodynamics of a house brick), overlooking some renewable wind power. Irony, sarcasm and humour rolled into one. Is this to champion the importance of boosting policy that encourages carbon offsets or will the car double as a back up generator when the wind doesn’t blow?

Maybe the joke is on us. Perhaps the Germans aren’t doing humour at all but providing realistic assessments on actual consumer behaviour and the inability of renewables to provide baseload power.