Financial Markets

How efficiently does your NSW council operate?

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Who has ever bothered to read the annual reports published by the local councils? Have we ever brought our local councillors to task on costs? For instance, why does household waste removal cost 2x as much in Woollahra as it does in Penrith? Of course, income disparity is one factor but is there a luxury element to garbage disposal in the wealthy suburbs? Garbage collection is just garbage collection, no? Of course, the distances travelled by garbage trucks might be a factor. Yet Waverley costs $17,500/hectare for annual rubbish disposal whereas Hornsby (arguably national parks don’t make it apples for apples comparisons) is $511/ha. Lane Cove has a similar area to Waverley but costs only $4,709/ha. Someone is making some serious coin on the collections in some council areas based off annual escalations one would think.

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Why does the City of Sydney council have a $924/resident cost per council staff versus $277 in Liverpool? Or on an area basis, why does it cost $83,000/ha in Sydney vs a similarly populated Parramatta at $12,300/ha?

Staff ha.png30% of Clover Moore’s budget is allocated to council staff. Councils in Hornsby, The Hills and Camden are less than 20%. Cumberland and Liverpool councils have around 50% of the budget allocated to staff.

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The City of Sydney rakes in $757mn pa or $3,154 per 240,000 odd residents. Mosman pulls in just under $50mn or $1,600 per 31,000 residents. Blacktown pulls in $640mn revenue per annum across 366,534 residents.

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Did we realise the collective equity base of our Sydney metro councils exceeds $66bn? $21bn of that in Sydney. How well are those assets being managed? There are some lazy balance sheets and even lazier investment strategies for all the collective billions sitting in those accounts.

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So next time you attend your council meeting, perhaps you can ask what the investment strategies are among the millions of your monies raised has been allocated?

 

We should be thinking of merging more councils. Plenty of inefficiencies to be squeezed out and plenty of opportunities to lower rates to the residents. Get off the high horse on declaring climate emergencies and look at streamlining services that really benefit those they serve.

Fail

Interesting article on Bloomberg discussing the obvious outcome of Sweden’s plan to get more EVs on the grid. As most hair-brained climate alarmist governments have a desire to outdo each other on the virtue signaling scale it often leads to poorly thought out decisions which end up costing tax payers a fortune.

Bloomberg’s Jesper Starn wrote,

Demand for electricity in Stockholm and other cities is outgrowing capacity in local grids, forcing new charging networks to compete with other projects from housing to subway lines to get hooked up.”

We’ve been here so many times before. Take Germany in bio-fuels.

The German authorities went big for bio-fuels in 2008 forcing gas stands to install E-10 pumps to cut CO2. However as many as 3 million cars at the time weren’t equipped to run on it and as a result consumers abandoned it leaving many gas stands with shortages of the petrol and gluts of E-10 which left the petrol companies liable to huge fines (around $630mn) for not hitting government targets.

Claude Termes, a member of European Parliament from the Green Party in Luxembourg said in 2008 that “legally mandated biofuels were a dead end…the sooner It disappears, the better…my preference is zero…policymakers cannot close their eyes in front of the facts. The European Parliament is increasingly skeptical of biofuels.” Even ADAC told German drivers to avoid using E10 when traveling in other parts of continental Europe.

Spain perhaps provides the strongest evidence of poorly planned subsidy execution. In 2004 the Spanish government wanted to get 1GW of solar under its feed in tariff over 4 years. Instead it got 4GW in 1 year meaning its budget exploded 16x and it had €120bn in tax liabilities over the course of the promise. In the end, the government reneged on the promises it made because it couldn’t afford it. So much for the assurance of government run programs.

Not to mention the overproduction that has often been created by subsidies. When the subsidies are withdrawn, we see fierce cost cutting which buries prices and sends many producers to the wall which was the experience of the last cycle. Take a look at India’s once largest wind power producer Suzlon. At the peak $425 a share. Now $4.35. 90% up in smoke.

To think Bill Shorten wanted 50% EVs by 2030. Clearly Australian voters disagreed.

If governments can’t sustainably raise living wages without regulation, cheaper energy prices act like a tax cut so sticking with coal, gas and nuclear make far more sense than the life experience of sharp price increases thanks to green madness.

Here is betting Sweden doubles down on green madness to remain “woke”

NSW to lose State of Origin 4 (Adani)

Who’d a thunk? The Queensland Labor Government is fighting for its life. If it means trading principle for expediency, they have chosen the latter path. Even throwing on last-minute ‘infrastructure taxes’ couldn’t halt progress. Adani has been approved.

Labor has spent 8 years obstructing Adani Carmichael from going ahead. After the unlosable election result handed to its federal colleagues, Premier Annastacia Palaszczuk saw the light. Political suicide was at stake. It won’t stop the inevitable, especially post QLD Treasurer Jackie Trad’s deeper deficits announced this week.

What Greens Senator DiNatale fails to understand (despite saying every election hereon will be a #ClimateElection) is that Queenslanders couldn’t give a hoot for Victorians complaining about their wish to have jobs. The reality is that Adani Carmichael will likely be open for decades to come. It will employ those working at the mines and the local economies that support them.

What evidence has DiNatale got for thousands of jobs being destroyed? It is that level of economic comprehension that means they will remain such a joke as a credible party. Not least helped by the eloquence of NSW MLC Cate Faehrmann who thinks encouraging a blockade in a neighbouring state seems fair game.

There are only supposed to be three games in the State of Origin.  Faehrmann is guaranteed to lose her suggested matchup, much like former Senator Bob Brown’s convoy pre-election warm-up game concluded. Queensland will run rings around the NSW attack, as always!

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Tesla is good at digging holes

Tesla shares have rebounded from the $180s so CEO Elon Musk has come out of the woodwork suggesting mining might be on the agenda to lock in its future battery supply.

Tesla might be adept at digging financial holes for itself but we shouldn’t think that will turn it into an efficient miner.

Just typical Musk banter.

Japanese FSA concedes defeat on pensions

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So the Japanese Financial Services Agency (FSA) has finally conceded that the pot can’t sustain elderly pensioners and believe that the onus should be pushed back on individuals. Unsurprisingly the natives are upset.

On May 22, the FSA presented a draft report entitled “Asset Formation and Management in an Aging Society” to the Financial Council. This draft report summarizes the ideal form of finances based on a 100-year lifespan but also aims to encourage individuals to form assets on their own of at least ¥20,000,000 (c.US$180,000). It also recommended long-term investment in stocks formed between 30 and 60 years old. After retirement, the premise is to continue working and earn salaries to maintain the asset level.  Sadly by 2060, 40% of the population will be aged over 65! It stands at 28% today.

The focus of this report is on the clear recognition of the limits of public pensions. In the report, there is a statement that “public pensions alone may not reach a satisfactory standard of living“.

For such a greying society, the reality is that once people hit retirement age, they are often let go and rehired on fractions of what they once earned. The idea of retiring gracefully is a complete myth. Hence the increase in pensioner crime and the 50% increase in prison capacity to house the highest cohort in Japanese prisons.

So whenever you hear Western central banks wax lyrical that if worst comes to pass, we just need to follow the Japanese example of low growth and low inflation, you have even more evidence that it simply won’t work. The Japanese have a culture of shared misery in tough times. Western culture sadly does not have that feature.

CM wrote about the dangers of pension shortfalls around the globe. The unfunded liabilities in America just for public pensions alone stands at around $5.2 trillion. Such were the shortfalls in Rhode Island, that the whole structure needed to be revamped with payouts being shed 40% just to stay solvent.

At least Japan has fallen on its sword, re pensions. CM is owed a pension but always set aside the amount owed at zero.

RBA should expect a dead cat bounce from the rate cut

The RBA has cut rates to a record low 1.25%. The irony here is people and businesses invest because they see a cycle, not because interest rates are low. Lowering rates will do little to spur investment, especially as the global economy cools.

Post the Hayne Royal Commission, the banks will likely pass on the full amount which will only impact margins and weaken them given the high reliance on wholesale funding.

The other problem the RBA faces is that banks have become so reluctant to lend post the RC that the net impacts of the rate cut will be negated by the unwillingness to lend at levels we have seen in the past given the penalties associated with it.

CM still contends that the Aussie banks tread a perilous path given their leveraged balance sheets. CM thinks part nationalization or worse is a real prospect if the slowdown is severe enough. The equity buffers are tiny relative to the real estate portfolio. All contained in the above link.

The rate cut is unlikely to boost confidence other than loosen the noose around stretched borrowers’ necks.

IATA caves to the climate change cabal to fill the UN coffers

The International Air Transport Association (IATA) has got behind the movement to do its bit for climate change. In a two page flyer, it covered the idea that we reckless passengers must consider our carbon footprint but at the same time help the U.N. raise $40bn in taxes, sorry ‘climate finance,’ between 2021 and 2035.

The Carbon Offsetting & Reduction Scheme for International Aviation (CORSIA) is the vehicle which the UN’s International Civil Aviation Organization (ICAO) intends to liberate us from our sins and help fund the waste so endemic in the NY based cabal. Wherever the UN is involved expect a sinister agenda behind the virtue.

All airlines have been required to monitor, report and verify their emissions on international flights since Jan 1, 2019. Operators will be required to buy “emissions units” from the UN. If one asked the UN would it prefer emissions to be cut or taxes to be raised, it would select the latter every time.

But why? Passengers don’t seem to demand airlines flight shame them before they board. On the contrary, many carbon offset schemes exist among airlines but hardly any passengers elect to pay them. Note the world’s largest offset program below.

In its 2017 Annual Report, Qantas boasted,

We have the world’s largest airline offset program and have now been carbon offsetting for over 10 years. In 2016/17, we reached three million tonnes offset.”

Carbon calculators tend to work on the assumption of 0.158kg CO2/passenger kilometre.

In the last 10 years, Qantas has flown around 1 trillion revenue passenger kilometres. While the literature in the annual report denotes one passenger offsets every 53 seconds, the mathematical reality is simple – 2% of miles are carbon offset. So that means that 98% of people couldn’t care less.

Perhaps more embarrassing is that The Guardian noted in Jan 2018 that,

Qantas [was the] worst airline operating across Pacific for CO2 emissions

Kind of a massive load of hot air when you do the maths!

Which begs the question, why does the IATA feel compelled to intervene in ramping up the costs of travel when passengers aren’t calling for it? IATA’s job is to keep airlines flying and support the growth where it forecasts a doubling of air travel by 2030. Airlines have been ordering Boeing 737 MAX & Airbus A320neo short-haul jets as well as long-range B787 & A350 in huge numbers to take advantage of fuel efficiency that helps lower operating costs.

By IATA’s own admission, global air travel in totality is only 2% of man-made CO2 emissions. That is to say that all air travel is responsible for 0.00003% of CO2 in the atmosphere. Big deal! What is the point of taxing an industry where the footprint is so minuscule?

Take Josh Bayliss, CEO of Virgin Group. He said,

“It’s definitely true that right now every one of us should think hard about whether or not we need to take a flight.”

Why doesn’t he close down the airlines in the portfolio? Instead of waiting for his customers to grow a conscience via flight shaming and do the right thing why not force their choice? The obvious answer is that it’s hypocritical in the extreme.

Airlines operate on about 70% capacity load factor break even so if Virgin flights end up being half full thanks to flight shaming he’ll only end up having his fleet of jets spewing more or less the same CO2 per flight which will ultimately put the airline out of business.

It is all too stupid. IATA joins the growing list of bodies petrified to talk in hard numbers about true impacts. When the 22,000 pilgrims that fly each year to UN COP summits around the world to kneel at the altar of the IPCC practice what they preach, CM may start to feel concerned Until then, CM will keep calling the climate hoax out. Deeds, not words, IATA!