France

British Airways places order for 200 Boeing 737 MAX

Nothing like a confidence boosting 200 plane order for the highly criticized Boeing 737 MAX jet at the Paris Airshow. British Airways CEO Willie Walsh said,

We have every confidence in Boeing and expect that the aircraft will make a successful return to service in the coming months.

There is no doubt Boeing offered a competitive price to generate some positive news spin since the crisis erupted. As CM always contended,

Ultimately the market will decide on the 737MAX. The plane has a 4,000+ unit backlog. Even if airlines wanted to change to A320neos, the switching costs would be prohibitively expensive in terms of pilot certification, maintenance and joining the end of an equally long queue. The order book is unlikely to suffer widespread cancellations.”

The mainstream media proves again its proclivity for sensationalist journalism without understanding the industry dynamics or the facts.

Sustainable air travel will require extra sick bags

Air France-KLM is looking to fund the Dutch Delft University of Technology to explore a flying wing design known as the Flying V, where passengers will sit.

Boeing dabbled with the idea in 2007 but scrapped it as it likely worked out passengers sitting out toward the wingtips would be thrown around like rag dolls in turbulent weather. Anyone who has tried to drink hot coffee during rough weather will know how even sitting toward the centre of the plane causes it to swish about, mostly in the saucer. A wing aisle seat would mean one would wear it.

Better to save shareholders’ funds Air France/KLM. Prototyping this “sustainable aircraft” might do wonders for its CSR signaling but has it considered that it must include the environmental footprint of extra sick bags and all those nasty chemicals required to clean up the mess of those who suffer motion sickness but didn’t make it in time?

Perhaps Mother Nature has given us all tips on air travel. There are many passenger jets shaped like birds. Yet no birds shaped like the Delft University of Technology design…

If Air France/KLM is so worried about the environment the best thing to do would be to close down operations.

The Virgin Group CEO Josh Bayliss 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.”

Close the airline if it means so much to save the planet.

More auto marriages have ended in divorce

Auto mergers were once thought of as the best things since sliced bread. Massive operating capacity leverage, shared platforms to reduce cost and a reduction of R&D spend per vehicle. The word “synergy” gets bandied about more than Casanova whispers “I love you“on Valentines Day! Yet why is the auto industry littered with divorces from these romances?

Lets list them.

Daimler bought Chrysler in 1998. Divorced in 2007.

Daimler alliance with Mitsubishi Motors founded in 2000. Divorce in 2005.

Daimler alliance with Hyundai founded in 2000. Divorce in 2004.

Honda – Rover JV. Started 1980. Divorced 1994

BMW – Rover – Started 1994. Deceased 2000.

Nissan – Renault – Started 1999. Currently providing real headaches due to Carlos Ghosn saga. Nissan wants full independence

Ford forms Premier Automotive Group (PAG) comprising Land Rover, Aston Martin, Volvo, Lincoln and Jaguar. Set up in 1999.

Ford sells Aston Martin in 2007.

Ford sells Land Rover & Jaguar to Tata in 2008

Ford sells Volvo to Geely in 2010.

Fiat Chrysler (FCA) formed in 2014 – including Fiat, Abarth, Chrysler, Jeep, RAM, Dodge, Lancia, Maserati & Ferrari brands.

FCA spins Ferrari off in 2016.

This isn’t an exhaustive list but one can be guaranteed that more money has been lost in auto mergers in aggregate than made. Daimler paid $45bn for Chrysler. Almost all of the Mercedes profits plugged the losses of Chrysler. Mercedes quality suffered through cost cutting sending it down toward the bottom of surveys. Daimler’s shares lost over $80bn in market cap as this disaster unfolded.

FCA and Nissan/Renault have been amongst the more successful marriages but global markets have turned many a honeymoon period into separation with fights over custody.

Forming a merger at the top of a cycle seems fraught with risks. Global auto sales are slowing. Renault and Fiat bring a lot of overlap in product lines. Nissan is such an unclear part of the puzzle.

One can argue that synergies which will lower the costs of future production have merit. Investing in battery technology does make sense across multiple product lines.

The biggest problem for the auto industry is that should a slowdown hit mid-merger, which brand suffers the hits? Which marketing team gets culled? Which R&D projects get scuppered? Too many cooks spoil the broth is the end result. There is no way a merger can be locked down in a short timeframe unless one of the parties is facing bankruptcy and has no choice but to comply. That is why Nissan-Renault worked.

Renault-FCA would be better conceived after markets have imploded. Marriages built on tough times stand a far bigger chance of survival than those that are built when things are the rosiest. Shareholders will be the biggest losers if conceived now.

EU populists thumping establishment

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EU election results so far are a disaster for the eurocrats. This was predictable. As CM has long argued, Brussels has continually ignored the issues of member states. Since 2007, poverty levels have grown from 78mn to 118mn of the EU population. UK won’t be the last to leave the EU, unless the bureaucracy in Brussels makes considerable reforms. CM bets it won’t.

UK: Brexit Party – 31.8% (populist), Tories – 7.6% (incumbent). Tories fallen from 20%. Of interest, Brexit took 38% of the West Midlands which is a slap in the face for Corbyn’s Labour Party. Even Islington, Corbyn’s home constituency, saw Labour fall behind the Lib Dems.

Greece: New Democracy 33.3% (populist), Syriza 23.9% (incumbent/socialist) – snap elections to be held

France: RN – 23.5% (nationalist), LREM 22.5% (incumbent) – Le Pen has called for snap elections.

Germany: CDU – 28.8% (incumbent), AfD – 10.8% (nationalist)

Austria: OVP – 34.9% (incumbent/nationalist), FPO – 17.2% (incumbent/nationalist)

Poland: PiS – 42.4% (incumbent/nationalist)

Italy: Liga -33.6% (populist/incumbent) + M5S – 16.7% (populist/incumbent)

Bulgaria: GERB – 30.1% (incumbent/populist)

Hungary: Fidesz – 52.1% (nationalist/incumbent)

Latvia: JV – 26% (populist/incumbent)

Sweden: Socialist Democrats – 23.6% (incumbent), Sweden Democrats – 15.4% (populist)

Czech: ANO – 21.2% (populist/incumbent)

Romania: PNL – 25.6% (populist), PSD – 21.7% (incumbent)

While results are Still coming in, it seems that the populist swell has only gathered momentum.

Voter turnout to EU elections is generally weak but this is the strongest showing since 1994. This is entirely self-inflicted. Europeans are growing increasingly frustrated at the EU’s authoritarian behaviour. The sooner this project fails the better.

While total seat numbers aren’t fully decided, the percentage terms are undoubtedly going to send shockwaves through the E.U. establishment.

Actually, vote on the political emergency

No surprise to see The Guardian parrot on about a climate emergency. The editorial completely misses out on the political emergency we face. The economic climate is a massive issue facing Australia. When Bill Shorten tells us that he “will change the nation forever” we shouldn’t view that positively. It is probably the honest thing he has said. Labor’s policy suite is the worst possible collection one could assemble to tackle what economic headwinds lie ahead. Our complacency is deeply disconcerting.

First let’s debunk the climate noise in The Guardian.

The math on the climate emergency is simple. Australia contributes 0.0000156% of global carbon emissions. No matter what we do our impact is zip. If we sell it as 560 million tonnes it sounds huge but the percentage term is all that is relevant. Even Dr Finkel, our climate science guru, agrees. What that number means is that Australia could emit 65,000x what it does now in order to get to a 1% global impact. So even if our emissions rise at a diminishing rate with the population, they remain minuscule.

Bill Shorten often tells us the cost of doing nothing on climate change is immeasurable. He’s right, only in that “it is too insignificant” should be the words he’s searching for.

Perhaps the saddest part of the Guardian editorial was to say that the Green New Deal proposed by Alexandria Ocasio Cortez was gaining traction in the US. It has been such a catastrophic failure that she lost an unsolicited vote on the Senate floor 57-0 because Democrats were too embarrassed to show up and support it. Nancy Pelosi dismissed it as a “green dream.” At $97 trillion to implement, no wonder AOC says feelings are more important than facts.

With the 12-year time limit to act before we reach the moving feast known as the tipping point, it gets confusing for climate sceptics. Extinction Rebellion wants things done in only 6 years. The UK House of Commons still can’t get a Brexit deal done inside 3 years but can act instantaneously to call a “climate emergency” after meeting a brainwashed teenager from Sweden. It speaks volumes of the desperation and lack of execution to have to search for political distractions like this.

The ultimate irony in the recent celebration of no coal-fired power in the UK for one week was fossil fuel power substituted all of it – 93% to be exact. Despite the energy market operator telling Brits that zero carbon emissions were possible by 2025 (40% of the current generation capacity is fossil fuel), it forgot that 85% of British homes heat with gas. Presumably, they’d need to pop on down to Dixon’s or Curry’s to buy new electric heaters which would then rely on a grid which will junk 40% of its reliable power…good luck sorting that out without sending prices sky high. Why become beholden to other countries to provide the back-up? It is irrational.

Are people aware that the German electricity regulator noted that 330,000 households (not people) were living in energy poverty? At 2 people per household, that is 1% of the population having their electricity supply cut off because they can’t afford to pay it. That’s what expensive renewables do. If the 330,000 could elect cheap electricity to warm their homes or go without for the sake of the climate, which would they choose? 100% cheap, reliable power. Yet Shorten’s plan can only push more into climate poverty which currently stands at 42,000 homes. This is before the economy has started to tank!

If one looks across Europe, it is no surprise to see the countries with the highest level of fossil fuel power generation (Hungary, Lithuania & Bulgaria) have the lowest electricity prices. Those with more renewables (Denmark, Germany & Belgium), the highest. That is Australia’s experience too. South Australia and Victoria have already revealed their awful track record with going renewable. Why did Coca-Cola and other industries move out of SA after decades? They couldn’t make money with such an unreliable

Ahh, but we must protect our children and grandchildren’s futures. So low have the left’s tactics sunk that using kids as human shields in the fight for climate change wards off conservatives calling out the truth because it is not cool to bully brainwashed kids. We should close all our universities. As the father of two teenagers, CM knows they know everything already so there is little requirement for tertiary education!

The Guardian mentioned, “But in Australia, the Coalition appears deaf to the rising clamour from the electorate [on climate change].” Really?

CM has often held that human consumption patterns dictate true feelings about climate change. Climate alarmist Independent candidate Zali Steggall drives a large SUV and has no solar panels on her roof! Her battleground in the wealthy seat of Warringah is probably 70%+ SUV so slapping a Zali bumper sticker does nothing but add to the hypocrisy.

Why do we ignore IATA forecasts that project air travel will double by 2030? Qantas has the largest carbon offset program in the world yet only 2% elect to pay the self-imposed tax. Isn’t that telling? That is the problem. So many climate alarmists expect others to do the heavy lifting.

SUVs make up 43% of all new car sales in Australia. In 2007 it was 19%. Hardly the activity of a population fretting about rising sea levels. In Warringah, waterfront property sales remain buoyant and any bank that feared waves lapping the rooves of Burran Avenue would not take such portfolio risk, much less an insurance company.

Shorten’s EV plan is such a dud that there is a reason he can’t cost it. Following Norway is great in theory but the costs of installing EV infrastructure is prohibitively expensive. It will be NBN Mark II. Will we spend millions to trench 480V connectors along the Stuart Highway?

Norway state enterprise, Enova, said it would install fast chargers every 50km of 7,500km worth of main road/highway. Australia has 234,820km of highways/main roads. Fast chargers at every 50km like the Norwegians would require a minimum of 4,700 charging stations across Australia. Norway commits to a minimum of 2 fast chargers and 2 standard chargers per station.

The problem is our plan for 570,000 cars per annum is 10x the number of EVs sold in Norway, requiring 10x the infrastructure. That would cost closer to $14bn, or the equivalent of half the education budget.

The Guardian griped that “Scott Morrison’s dismissive response to a UN report finding that the world is sleepwalking towards an extinction crisis, and his parliamentary stunt of fondling a lump of coal”

Well, he might doubt the UN which has been embroiled in more scandals related to climate change than can be counted. Most won’t be aware that an internal UN survey revealed the dismay of unqualified people being asked for input for the sake of diversity and inclusion as opposed to choosing those with proper scientific qualifications. The UN has climbed down from most of its alarmist predictions, often citing no or little confidence of the original scare.

Yet this election is truly about the cost of living, not climate or immigration. The biggest emergency is to prepare for the numbers we can properly set policy against.

We have household debt at a record 180% of GDP. We have had 27 years of untrammelled economic growth. Unfortunately, we have traded ourselves into a position of too much complacency. Our major 4 banks are headed for a lot of trouble. Forget meaningless stress tests. APRA is too busy twiddling its thumbs over climate change compliance. While the Royal Commission may reign in loose lending, a slowing global economy with multiple asset bubbles including houses will come crumbling down. These banks rely 40% on wholesale markets to fund growth. A sharp slowdown will mean a weaker dollar which will only exacerbate the problem.

We have yet to see bond markets price risk correctly. Our banks are horribly exposed. They have too little equity and a mortgage debt problem that dwarfs Japan in the late 1980s. Part/whole nationalization is a reality. The leverage is worse than US banks at the time of the Lehman collapse.

We have yet to see 10% unemployment rates. We managed to escape GFC with a peak of 6% but this time we don’t have a buoyant China to rescue us. Consumers are tapped out and any upward pressure on rates (to account for risk) will pop the housing bubble. Not to worry, Shadow Treasurer Chris Bowen assures people not to panic if their home falls into negative equity! This is the level of economic nous on the catastrophe that awaits. It is insanely out of touch.

Are our politicians aware that the US has to refinance US$8.4 trillion in US Treasuries in the next 3 years? That amount of money will crowd out a corporate bond market which has more than 50% of companies rated BBB or less. This will be compounded by the sharp rise in inventories we are witnessing on top of the sharp slowdown in trade (that isn’t just related to the trade war) which is at GFC lows. The 3.2% US economic growth last quarter was dominated by “intellectual property”, not consumption or durable goods.

China car sales have been on a steep double-digit decline trajectory for the last 9 months. China smartphone shipments dwindle at 6 year lows. In just the first four months of 2019, Chinese companies defaulted on $5.8 billion of domestic bonds, c.3.4x the total for the same period of 2018. The pace is over triple that of 2016.

Europe is in the dumps. Germany has had some of the worst industrial production numbers since 2008. German GDP is set to hit 0.5% for 2019. France 1.25% and Italy 0.25%. Note that in 2007, there were 78mn Europeans living in poverty. In the following decade, it hit 118mn or 23.5% of the population.

Global bellwether Parker Hannifin, which is one of the best lead indicators of global industrial growth, reported weaker orders and a soft outlook which suggests the outlook for global growth is not promising.

This election on Saturday is a choice between the lesser of two evils. The LNP has hardly made a strong case for reelection given the shambolic leadership changes. Take it to the bank that neither will be able to achieve surpluses with the backdrop we are headed into. Yet when it comes to economic stewardship, it is clear Labor are out of their depth in this election. Costings are wildly inaccurate but they are based on optimistic growth scenarios that simply don’t exist. We cannot tax our way to prosperity when global growth dives.

Hiking taxes, robbing self-managed super fund retirees and slamming the property market might play well with the classes of envy but they will be the biggest victims of any slowdown. Australia has run out of runway to keep economic growth on a positive footing.

We will do well to learn from our arrogance which has spurned foreign investment like Adani. We miscalculate the damage done to the national brand. Adani has been 8 years in the making. We have tied the deal up in so much onerous red tape, that we have done nothing more than treating our foreign investors with contempt. Those memories will not be forgotten.

There will come a point in years to come where we end up begging for foreigners to invest at home but we will only have ourselves to blame.

The editorial closes with,

However you choose to exercise your democratic decision-making on Saturday, please consider your candidate’s position on climate and the rapidly shrinking timeframe for action. We have endured mindless scare campaigns and half-baked policy for too many decades. We don’t have three more years to waste.

This is the only sensible quote in the entire article. The time for action is rapidly shrinking. However, that only applies to the political and economic climate. One can be absolutely sure that when the slowdown hits, saving the planet will be furthest removed from Aussie voters’ minds.

Why not solar panels on Notre Dame? A turbine on Eiffel?

What is it with people who don’t want to respect centuries of tradition and history? When the 850yo cathedral caught fire the world looked on in collective horror. Now some nitwits think that “climate change” should dominate the restoration of one of Paris’ most iconic buildings.

The Independent wrote, “In response, Paris based architects Studio NAB submitted a design that is adapted to perhaps the greatest challenge of our era: climate change.”

Why not suggest to city planners they should attach a giant propellor to the Eiffel Tower so it can generate wind power?

Climate change is a religion. Sadly Notre Dame is of Catholic faith, not part of the global warming diocese, even with a social justice warrior as the Pope.

Maybe Australia can take notes and clad the Sydney Opera House in solar panels? Perhaps the Japanese can tear down Kiyomizudera and use the wood for biomass?

Paris still in flames post Notre Dame

23 weekends straight now. While the world focused on the tragedy that was Notre Dame, the yellow vest protests continue. Many cars and motorcycles around Paris were set alight.

The yellow vests see Macron’s (unsurprising) immediate call to rebuild the historic landmark yet another slap in the face. The French president continues to ignore their grievances. The yellow vests feel that unemployment, the rise in the cost of living and higher taxation are burying them. They want the same priority shown to them as the 850yo cathedral.

A recap of the grounds of protest:

Economy/Work

  • A constitutional cap on taxes – at 25%
  • Increase of 40% in the basic pension and social welfare
  • Increase hiring in public sector to re-establish public services
  • Massive construction projects to house 5 million homeless, and severe penalties for mayors/prefectures that leave people on the streets
  • Break up the ‘too-big-to-fail’ banks, re-separate regular banking from investment banking
  • Cancel debts accrued through usurious rates of interest

Politics

  • Constitutional amendments to protect the people’s interests, including binding referenda
  • The barring of lobby groups and vested interests from political decision-making
  • Frexit: Leave the EU to regain our economic, monetary and political sovereignty (In other words, respect the 2005 referendum result, when France voted against the EU Constitution Treaty, which was then renamed the Lisbon Treaty, and the French people ignored)
  • Clampdown on tax evasion by the ultra-rich
  • The immediate cessation of privatization, and the re-nationalization of public goods like motorways, airports, rail, etc
  • Remove all ideology from the ministry of education, ending all destructive education techniques
  • Quadruple the budget for law and order and put time-limits on judicial procedures. Make access to the justice system available for all
  • Break up media monopolies and end their interference in politics. Make media accessible to citizens and guarantee a plurality of opinions. End editorial propaganda
  • Guarantee citizens’ liberty by including in the constitution a complete prohibition on state interference in their decisions concerning education, health and family matters

Health/Environment

  • No more ‘planned obsolescence’ – Mandate guarantee from producers that their products will last 10 years, and that spare parts will be available during that period
  • Ban plastic bottles and other polluting packaging
  • Weaken the influence of big pharma on health in general and hospitals in particular
  • Ban on GMO crops, carcinogenic pesticides, endocrine disruptors and monocrops
  • Re-industrialize France (thereby reducing imports and thus pollution)

Foreign Affairs

  • End France’s participation in foreign wars of aggression, and exit from NATO
  • Cease pillaging and interfering – politically and militarily – in ‘Francafrique’, which keeps Africa poor. Immediately repatriate all French soldiers. Establish relations with African states on an equal peer-to-peer basis
  • Prevent migratory flows that cannot be accommodated or integrated, given the profound civilizational crisis we are experiencing
  • Scrupulously respect international law and the treaties we have signed.

Regardless of the need to restore a national monument, Macron has had no impact on restoring order.

Macron’s poll numbers got a bounce from 29% approval to 32% on the back of Notre Dame. He has merely moved from catastrophic to diabolical. Notre Dame is a one off event for Macron. The question is whether they buy his proposed tax cuts for the poor or boosts for small pensions. The yellow vests don’t want platitudes.