Geopolitics

Bjorn Lomborg points to cold facts of global warming

Bjorn Lomborg has written a powerful piece in the Weekend Australian which looks at the “cost” of climate emergency driven policy. It makes a complete mockery of the people who tell us we must save the planet with their prescriptions. Although CM has made the assertion many times that politicians make promises which are so unaffordable for so little return that it makes no economic sense. The hypocrisy of signatories is also telling.

Some of the choice quotes,

After New Zealand made its 2050 zero emissions promise, the government commissioned a report on the costs. This found that achieving this goal in the most cost-effective manner (which strains credulity because policy seldom if ever manages to be cost efficient) would cost more than last year’s entire national budget on social security, welfare, health, education, police, courts, defence, environment and every other part of government combined. Each and every year.

To replace a 1ha gas-fired power plant, society needs 73ha of solar panels, 239ha of onshore wind turbines or an unbelievable 6000ha of biomass...We often hear that wind and solar energy are cheaper than fossil fuels, but at best that is true only when the wind is blowing or the sun is shining. It is deeply misleading to compare the energy cost of wind or solar to fossil fuels only when it is windy and sunny

Most people think renewables are overwhelmingly made up of solar and wind. Nothing could be further from the truth. Solar and wind contributed only 2.4 per cent of the EU total energy demand in 2017, according to the latest numbers from the International Energy Agency. Another 1.7 per cent came from hydro and 0.4 per cent from geothermal energy…In comparison, 10 per cent — more than two-thirds of all the ­renewable energy in the EU — comes from the world’s oldest ­energy source: [burning] wood.

Today, fewer than 0.3 per cent of all cars are electric, and even if we could reach 200 million electric cars in 2040, the IEA estimates this would ­reduce emissions by less than 1 per cent. That is why, in the face of years of failure, politicians have continued doing one thing: making ever bigger promises.

The promises made in Rio de Janeiro in 1992 and in the Kyoto Treaty in 1997 fell apart. A new study of the promises made under the Paris Agreement finds that of almost 200 signatories, only 17 countries — the likes of Samoa and Algeria — are living up to them, and these are succeeding mostly because they promised so little. But even if every country did everything promised in the Paris Agreement, the emission cuts by 2030 would add up to only 1 per cent of what would be needed to keep temperature rises under 2C.

Harsh but true

It is hardly statesmanlike to tweet off insults but there is a horrible truth to what Trump wrote about Khan and de Blasio. London crime has got out of control. CM wrote about it last year. However should we be the least bit surprised Trump slammed him on Twitter? De Blasio was trashed by his own NYPD for his incompetence. So harsh words that carry a lot of truth.

Not to make a two wrongs argument, but Sadiq Khan made some pretty disparaging remarks about POTUS ahead of his visit so he was inviting a bloody nose from a man with a glass jaw. Khan’s comments led Her Majesty to leave him off the official invite list for the Trump state dinner. Clearly she knows the long history of the UK-US relationship is more important than pandering to the whims of a weak,virtue signaling identity politics loving appeaser. Queen Elizabeth has never forgotten the special friendship she grew up with 80 years ago.

Or maybe we should question the utterly childish antics of the Shadow Foreign Minister Emily Thornberry who called for a mass protest against Trump on June 4? It would be understandable if Idi Amin had visited but this is the UK’s strongest ally which has a democratically elected head of state. Yet Thornberry railed at Trump as if the UK was in a state of war with America. Only proves how unfit Labour is to govern.

When will the left realize they only do his bidding when they let Trump Derangement Syndrome consume them?

Did Trump ask for the Navy move the USS John S McCain?

The press love to ham up an anti Trump story on any occasion. The latest claim was that the president ordered the USS John S McCain out of port on his visit to Japan. It had been involved in an accident 20 months ago (refer pic). Repair jobs take time.

CM contacted a friend who works for the US Forces in Yokosuka (where it is stationed) and said,

It’s been tarped and scaffolded quite a bit in the last year. Moved around a lot depending on what work it needed and priority of ships. Might have moved stuff around for security, so some contratcors could keep working without being to close to the ship Trump and Abe landed on...

…the Navy released a statement saying it was not a request of the White House…

…The Navy had also moved the Admiral’s flag ship, the Blue Ridge out of port for the visit. It is called building 19 because it hardly ever moves.”

So anything to fit a narrative that it was all down to petty requests from the White House. Trump Derangement Syndrome reigns supreme.

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.

Aussies pay more tax than Japanese and Shorten wants to raise them higher!

CM is repulsed by the confetti blowing promises being made ahead of May 18. This election is about cost of living to be sure. It is not about climate change and not about resettling refugees. Yet there has to be a limit on the free give away with a growing deficit. Where is the fiscal responsibility? Do politicians run their own household budgets like this? Not in a million years.

Our federal tax receipts are A$430bn this year. Did you know Japan collects $A750bn at the national level? So Aus is 1/5th the population and raises 1/2 the coin of Japan. Having said that the Japanese government must raise A$500bn EVERY YEAR to plug the national deficit! That’s what happens with poor fiscal management. So doing the math including the debt financing, we still raise 31% the revenues than the Japanese on 20% of the population. We might argue our economy is 1/4 Japan’s but we’re following an unsustainable trajectory. It’s insane. How can we tax people more? Yet that is what Shorten will do.

We can debate til the cows come home about how GST is funneled back to the states from federal coffers but we need to wake up to our relative costs! Our budget deficit is c.$600bn yet here we see Labor throw confetti promises around everywhere. $1.18bn in new aid to foreign countries over the next 4 years. PNG spent our aid money on 40 new Maseratis. Shorten pledged $1bn to acquire land to put the VFT in place. Surely the private sector can deal with that. $2bn for a Melbourne metro. We can go on and on.

Everyone seems like a winner until everyone becomes a loser. The sad fact is that we must wake people up to reality. We need to spend smarter, not chuck more money and hope it has impact. Neither government will see a surplus. Take it to the bank. The economic growth projections aren’t there. No matter who wins this election, the global economy is slowing and either party will be handed a basket case of economy controlled by external forces which includes a slowing US and China. It won’t be pretty. The question is who can best manage that? Not Labor. Climate change will be so irrelevant in this downturn.

It gets worse. The Reserve Bank and APRA are asleep at the wheel. Instead of navigating sensible policies to thwart the largest recession we will face in almost 30 years which will decimate housing, both are discussing climate change compliance reporting by corporates. Seriously? It is so telling they are focusing on the wrong message. Have they seen that the world’s central banks have printed $140 trillion in extra debt since 2008 and got $20 trillion extra in GDP. Shockingly poor returns. $7 of debt gets us $1 of GDP.

Yet our political system has only one pair of rose tinted spectacles where the prescription is 27 years out of date. They are equally as oblivious to the oncoming onslaught where our Aussie banks face a real risk of part of whole nationalization. Their position is as bad as the Japanese ahead of the collapse of their bubble.

Do not be fooled. CM personally believes that the Coalition is not deserved of government but the alternative is even worse. The last thing we need is to rest on that old Aussie saying of “time to give the others a go!” because this is a time when we can least afford change. It will be buyer’s remorse + alpha.

Drinking the UnKool-Aid

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It appears President Trump has been bullying the US Federal Reserve to drop rates by 1% and get them to reopen the spigots on QE. What he is failing to grasp is that businesses invest because they see a cycle, not because interest rates fall.

Trump tweeted,

China is adding great stimulus to its economy while at the same time keeping interest rates low. Our Federal Reserve has incessantly lifted interest rates, even though inflation is very low, and instituted a very big dose of quantitative tightening. We have the potential to go…up like a rocket if we did some lowering of rates, like one point, and some quantitative easing. Yes, we are doing very well at 3.2% GDP, but with our wonderfully low inflation, we could be setting major records &, at the same time, make our National Debt start to look small!

This is a frightening proposal. Rates are at 2.25~2.50%. Although it masks a more important reality. Can Trump avoid a market calamity ahead of the next election? The real engine of the economy is slowing.

Despite the headline US GDP print of 3.2%, consumer spending and business investment slumped to the lowest levels under his presidency. Business investment spending was dominated by “intellectual capital” (soft) which is a pretty hard metric to put a reliable number next to. Equipment and structures (hard) contribution to business investment was near as makes no difference zero. Personal consumption of durable goods slumped to their lowest reading since 2011. Wholesale inventories (ex-autos/petroleum) surged ahead of sales.

Trump might argue China is adding stimulus. He is right. China’s Aggregate Financing (approximately system Credit growth less government borrowings) jumped 2.860 billion yuan, or $427 billion – during the 31 days of March ($13.8bn/day or $5.0 Trillion annualised (a Japanese GDP)). This was 55% above estimates and a full 80% ahead of March 2018. This pump priming added 8% to the Chinese stock indices but since then the market has been rolling off.

The world does not need more debt to be inflated away to get us out of the current mess we are in. A recession is inevitable. To put it into context, the world, since GFC, has added $140 trillion in debt for a grand total of $20 trillion in global GDP growth. That is right. $7 of debt only got us $1 of GDP. So if the Fed acquiesces President Trump he will probably get even worse metrics.

Then again perhaps we can take the words of a venture capitalist, Chamath Palihapitiya, who said on CNBC that “central banks have created an environment where major downturns and expansions are almost impossible.” It is statements like this that almost guarantee that central banks have lost control. Central banks have one role – ensure that markets maintain “confidence”. Powell’s latest move to cut rates after such a shallow peak tells us that “confidence” is waning. 

Could the message be any clearer for Theresa May?

The latest YouGov opinion poll has Nigel Farage’s Brexit Party at 28%, Labour at 22% and the Tories at 13%. Interestingly YouGov polled 5x as many people as usual. Very damning indictment on Theresa May’s lack of decisive leadership. The PM has had no authority from the beginning of this process and remaining (no pun intended) in the top job is toxic for the Conservatives.