Scandal

Comey testimony proves media can’t stop playing the man rather than the ball

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Comey admitted in his testimony that he was never pressured by Trump to end any investigations. Damn and blast. The media has done another collective Rachel Maddow “we’ve got his tax returns” backfire. So insistent on trying to seek revenge they forgot the old Chinese proverb, “before setting out on revenge, first dig two graves.” So eager are they to play the man they overlook basic check sheets to find balance. Trump may well be a loose cannon at times but the media is the pot still calling the kettle black.

While I long argued Trump would win the election I’ve been an advocate of trying to seek balance to the one sided argument against him. It doesn’t mean I think he is ideal.  I disagree with many (not all) things he has done and petty things (like his attitude to Merkel) are certainly not fitting the most powerful office in the world. Trump derangement syndrome is none-the-less real. The media attack dogs never seek to do moral equivalence with their beloved Obama over the same supposed crimes of leaking sensitive info or whatever. I do think Trump is Turnbull-esque in lacking judgement as well as constant cabinet reshuffles but the most twisted irony is that financial markets would seem to want him there using any wobble on the back of an impeachment scenario as an excuse rather than admit the hyper asset bubble blown for 8 years.

The mainstream media now preys on clickbait. Thinking the number of clicks, likes and shares are endorsements and can replace quality content (as much as they self appraise it’s high value added factual). In fact the revenue numbers of media outlets who continually rant  is telling. Fairfax in Australia has had two rounds of layoffs in the space of 12 months and The Guardian is openly begging for donations.

The media is surely going to keep launching salvo after salvo to try get him out of office. As stupid as they keep suggesting the ‘orange baffoon” is he keeps getting their measure. I issue a caution though. The deplorables that voted him in want him to get on with the job. With all these distractions the quest that they hope will get them under the “have not” hole is pushed further into the future. Getting an impeachment to stick and force a resignation is not high on a have not’s priority list. They need help as I argued at the time of the election. Whether Trump can provide it is a moot point but they voted for change and the “haves” ought to be careful how they indirectly impact the “have nots”

The screaming, carrying on and promoting blood sport may end up creating proper civil unrest. It’s simmering but the media as usual is oblivious to it all. In any event the last thing the world needs is instability in the world’s largest economy at this point in a peaking cycle.

Comey canned

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Well the inevitable has happened. Trump fired FBI Director Comey. Some might say this is a Nixonian ‘Saturday night massacre’ when the president removed the special Watergate prosecutor, Archibald Cox, leading to the the resignation of Elliot Richardson, then Attorney General. Now for a can of worms. Note how Trump made the explicit remark in his termination letter to Comey that the FBI Director confirmed “three times” that he was not under investigation. That remark in and of itself will get the conspiracy theorists on overdrive.

PA Democrat Senator Bob Casey said,

“This is Nixonian. Deputy Attorney General Rod Rosenstein must immediately appoint a special counsel to continue the Trump/Russia investigation. On March 20th Director Comey said, ‘I have been authorized by the Department of Justice to confirm that the FBI, as part of our counterintelligence mission, is investigating the Russian government’s efforts to interfere in the 2016 presidential election and that includes investigating the nature of any links between individuals associated with the Trump campaign and the Russian government and whether there was any coordination between the campaign and Russia’s efforts…This investigation must be independent and thorough in order to uphold our nation’s system of justice.”

Prepare for the barrage of ‘Fake News’ claims for anyone wanting to force an independent investigation. You can see now that Trump will use the ‘three times’ to shut down the need to conduct it. If indeed nothing is wrong then he should gladly invite an independent investigation or release findings of the investigation to date. That way he clears his name. Doesn’t pass the sniff test. All this does is undermine confidence, something the world could do without.

The McTurnbull Burger – 2017 budget that says ‘waistline be damned!’

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Remember the Big Mac jingo? “Two all beef patties, special sauce, lettuce, cheese, pickles,  onions on a sesame seed bun?”  Well the 2017 budget From the Coalition might as well be called the super sized McTurnbull Burger. Two all thief parties, special porkies, levies, fees, spun on a $600bn dollar bomb. While the government needed to introduce a vegan budget of lentils, tofu and alfalfa to get the country’s nutrition properly sorted they’ve said waistline be damned. Morgan Spurlock couldn’t keep up with this super sized meal. As my wise sage Stu told me last week, “About as well-timed as Mining Super Profits tax – ding ding ding – top of the banking cycle just called by inept bureaucrats”

If people wanted a tax and spend party they’d have voted Labor. In a desperate attempt to supersize the meal they’ve made of the economy since Turnbull took office the debt ceiling will be raised. Wage growth has slowed for the past 5 years from 4% to under 2% according to the RBA. Throw higher Medicare on top why not?!. Cost of living is soaring. So let’s look at the extra calories they’ll inevitably load on the taxpayer.

1) Let’s tax the big 4 banks. That’ll work. What will they do as responsible shareholder owned organizations? Pass those costs straight on to the tapped out borrower where 1/3 mortgagees already under strain and 25% odd have less than a month of buffer savings. NAB already jacked interest only loans 50bps.

2) allowing retirees to park $300,000 tax free into super if they downsize their empty nest. Wow! So sell your $5mn waterfront property so you can park $300k tax free into superannuation. Can see those Mosmanites queue up to move to Punchbowl to retire. Hopefully the $1mn fibro former council shack the Punchbowl pensioner flips will mean they can move to a $500,000 demountable in Casula in order to free up the property market for the first home buyer who is getting stung with higher interest rates, .

3) Australia has a property bubble. The Reserve Bank has recently had an epiphany where they’re afraid to raise rates to crash the housing market and they can’t cut because they’ll fire it up more. Allowing creative superannuation deposit schemes (max $30,000 per person & $15k/year) to help with a deposit only doubles down on encouraging first home buyers to get levered up at the top of the market using a system designed to build a safety net for retirement. When governments start abusing sensible policies in ways it was never designed for then look out for trouble down the line. This doesn’t help first home buyers it just pushes up the hurdle to enter.

4) Australia’s credit rating is on the block. Australia’s main banks are 40% wholesale financed meaning they have to go out into the market unlike Japanese banks which are almost 100% funded by their depositors. Aussie banks could see a rise in their cost of funds which the RBA could do little to avoid. That will put a huge dent in the retail consumption figures.

5) speaking of credit cards. Have people noticed that average credit card limits have not budged in 7 years. If banks are confident in the ability of consumers to repay debt, they’d let out the limits to encourage them to splash out! Not so – see here for more details.

6) Infrastructure – I live in the land of big infrastructure. Jobs creation schemes which mostly never recover the costs – especially regional rail. The Sydney-Melbourne bullet train makes absolute sense. We only need look at the submarines to know that waste will be a reality.

7) small business – tax concessions of $20,000 not much to write home about. Small businesses thrive on a robust economy which is unlikely to occur given the backdrop. Once again this budget is based on rosy assumptions and you can bet your bottom dollar Australia won’t be back in surplus by 2021.

Some  media are talking of Turnbull & Morrison stealing the thunder of the Labor Party, providing a budget more akin to their platform. Sadly I disagree that this legitimizes Turnbull. It totally alienates his base, what is left of it. Tax the rich, give to the poor. Moreover voters see through the veneer. The stench of the Coalition is so on the nose that without ditching Turnbull they have no chance of keeping office. Labor is not much better and One Nation and other independents will hoover up disaffected voters by effectively letting the others dance around the petty identity political correctness nonsense.

In the end the McTurnbull Burger meal will look like the usual finished product which resembles nothing like the picture you see on the menu. A flattened combination of squished mush, soggy over-salted fries and a large Coke where the cup is 90% ice. Yep, the Coalition has spat between your buns too. This is a meal that won’t get voters queuing up for more. Well at least we know Turnbull remembers that smiles and selfies are free after all ‘he’s lovin’ it‘! After all virtue signaling is all that matters. All this to arrest some shoddy poll numbers which will unlikely last more than one week.

One’s idea of perfection is another’s failure

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Had an oil service done on my motorbike yesterday. They undercharged me 2-yen by mistake. As the receipt they wrote was for 2-yen more they will post a new receipt for 120-yen postage with a reply paid envelope for another 120-yen. Such is the perfectionist culture they’ll suck up 120x the cost (excluding Labour and stationery) to cover a 2-yen mistake. In the West we’d just chip in 2-yen of our own and put it to bed. Not a criticism but an observation of how this culture is so different. How often the West forgets culture when analyzing Japan.

No, it was because you thought it was a coronation not an election

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Reading through Hillary Clinton’s comments about ‘why’ she lost in November missed one huge point. She thought it was a coronation, not an election. It was supposed to be an ordained affair. Blaming Comey or Putin misses the point entirely. She conveniently forgets she had the entire mainstream media on her side coming in with poll after poll showing it was a forgone conclusion. Even betting agency Paddy Power paid out on a Clinton victory one month before the election. The DNC backed off the gas. To lose to a pussy-grabbing opponent who looked straight down the camera lens at 10s of millions saying “no one respects women more than I do! None!” after the scandal broke says more than most. She wasn’t a good enough candidate period.

Why did she make Debbie Wasserman-Schulz the head of her campaign strategy when she was forced to resign from the DNC chair for deliberately shafting Bernie Sanders? Accepting leaked questions before the CNN debate thanks to Donna Brazile. With all the dirty tricks leading into the campaign she still lost. Her emails were a matter of poor judgement. She had Obama out at every turn talking about how great his legacy was when an ever growing mass of people weren’t experiencing such happiness in their day to day lives. In fact the opposite was happening as poverty, welfare recipients and those working more than one job kept hitting new highs.

People who read this blog would know I’d been saying that Trump would win since the GOP primaries because he was connecting with the strugglers. No matter how big a BS-artist he maybe, he was visiting the manufacturing wastelands and recognizing their plight. Hillary was too busy entertaining her inner-city mates, ignoring the deplorables. I pointed out that he was growing his Twitter following at twice the rate of Clinton. So no matter how horrid you might think Trump was, is, will be, he still won an election by the rules. Perhaps if the establishment had done a better job over so many decades indeed Mrs Clinton would have been crowned first female POTUS. Then again perhaps identity politics was another reason why Americans were fed up her campaign.

On a slightly different topic, note that Macron has grown his Twitter base around 100,000 since he won the first round. Le Pen is around 60,000 net adds. Twitter growth has been a good predictor of election victories as it captures underlying moods that 1,000 people called at random in a poll can’t help to match.

In any event election success boils down to one line to voters – “it is the economy stupid!”

Hinomaru Hard Drive proves Japan Inc’s memory is too short

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It seems the Japanese government is trying in earnest to launch a local based consortium to fend off foreign attempts to buy Toshiba’s memory business. Taiwan’s Hon Hai, which recently acquired Sharp, is in the running to buy it. It begs the question that if the technology that resides inside Toshiba’s memory division is so state of the art (Hon Hai seems to think so), why aren’t Japanese corporations lining up to buy it? Affordability may be one argument but why isn’t there a Softbank Masayoshi Son styled mega-scale leveraged buy out? Where is the risk taking corproation that can see the future value? Why does the government require an orchestrated syndicate to launch a group bid? We only need to look at the long history of failure of this type of consortium formation.

Exhibit #1. Elpida Memory. Originally the love child of the failed DRAM businesses of Hitachi & NEC in 1999, it adopted Mitsubishi Electric’s struggling DRAM operation in 2003. It listed in 2004 and went bankrupt in 2012. Put simply Japan’s DRAM business, already buried by foreign manufacturers with lower costs, required regular capital raisings which dfailed to deliver the rosy future painted by the charismatic CEO Sakamoto. Hinomaru DRAM died.

Exhibit #2: Japan Display (JDI) which is the listed LCD JV of Sony, Hitachi & Toshiba is yet another mish mash of companies that is trying to keep an uncompetitive product on life support. While it might have Apple as a customer it has margins which scream lap dog. JDI’s market capitalization is 1/3rd of its listing value. Once again Hinomaru Display shows signs of remaining an uncompetitive sloth. Yes, tech analysts will tell me it has best in class technologies. Sad thing is they aren’t getting paid a fair rent for it.

Exhibit #3: Renesas Electronics was formed as the rejected love-child of NEC Electronics which was bought by Mitsubishi Electric and Hitachi. The lack of profitability saw the government’s Incubation Network Corporation of Japan take a c.70% stake in the group to help revitalize it. The shares have performed well in the last 12 months but remain 90% below the peak when it was conceived. Much of the performance is weighing on the expectation of automotive electronic systems requiring more of their chips.

Minister of Economy Trade and Industry (METI) Hiroshige Seko said recently that Toshiba’s memory chip technology could be used to wage destructive cyberattacks if installed in corporate data centers. National security issues should always be entertained as they are in many countries but corporate data centre vulnerability is a much broader problem. Protecting memory chips won’t necessarily stop hackers – in individual, underworld and state sponsored forms – from carrying out cyber attacks.

What we are dealing with here is yet another last ditched attempt to save face in an industry which has lost its competitive edge. Instead of being an IP owner that outsources production it insists on keeping the entire model in a state that can’t compete. Ultimately market economics is a tough judge and jury. Putting together such Hinomaru structures only leads to inefficient capital allocation that hopes to survive as two drowning men trying to make one swimmer. It misses all of the points of making it competitive. Instead of taking hard decisions, it wants the board of Toshiba to accept a lower bid from national interests as preferable to a better bid from a foreigner. How that plays into Japan’s wish to foster best in class corporate governance one will never know? Like Daiko Henjo, such rearguard actions only support the idea that running businesses inefficiently is OK because eventually government backed bailouts are there to save them.

That doesn’t foster risk taking so desperately needed to turn the tech industry’s in Japan around. Is it any wonder that Intel made 50% more net income over the last 25 years than all of Japan’s largest 20 tech companies combined?…

Giving power back to the people by giving power back to the people

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Is it any wonder AGL has scrapped its plans to build a 200-400MW gas-fired plant in South Australia (SA). Once again SA Premier Jay Weatherill’s complete failure to roll out sensible and sustainable energy policy is on full display. Instead of admitting his plans have caused SA to have the country’s most expensive, yet most unreliable electricity supply he used AGL’s common sense strategy to boast his own $550mn plan to offset the catastrophic failure of his own making was nothing short of a master stroke. Weatherill boasted,

“If there are big power companies squealing, the plan is working…it is a finely calibrated plan, it’s been carefully crafted to go as far as we can to actually drive competition but also not scare away investment…We’ve been screwed for too long by large power companies, it’s as simple as that…We’re taking the power back for the people of South Australia. A few people are upset about that because they’re not going to be able to make their enormous profits out of South Australians and if they’re squealing about that we’re happy…Large power plant companies screw ordinary South Australians. Increased competition is what drives down prices, not somebody just essentially maintaining their current monopoly position by upgrading plant and equipment.”

SA scrapped its coal-fired power and relies on wind power for 40% of its electricity. When the wind doesn’t blow, SA relies on backup power from neighboring Victoria, which has its own ridiculous renewable energy targets. Victoria has announced the closure of the Hazelwood coal-fired electricity plant which constitutes 20% of Victoria’s power on March 31st. So Victoria’s ‘pipe’ of backup will all but disappear.

What gets me is that it was Weatherill, not the private sector that “took power away from the people” (literally). Weatherill’s virtue signaling by means of thrashing private industry is a woeful attempt to take the moral high ground when in reality he is just being sanctimonious.

The bigger risk is this ‘back-up gas-fired generator’ should it ever be built will be run on an intermittent basis when power becomes a problem. The batteries don’t have anywhere near enough life to power a blackout for any reasonable period of time. Sadly, large scale machinery like this can’t run on an intermittent basis. It is much like a commercial aircraft. If aircraft sit idle on a tarmac for a sustained period of time, high precision parts get gummed up and require expensive maintenance to get back to working order. Those planes parked in the Arizona desert at the end of GFC that airlines thought to bring back into service cost $1.5mn/year each to maintain. Tyres have to be rotated every two days to prevent flat spots, fuel tanks have to be kept full, engines run and hydraulic controlled surfaces moved daily and windows require special sealants to prevent premature aging.

Same for a gas-fired power plant. It isn’t like switching on the Weber BBQ and expecting the thing to ignite. It would paradoxically call for higher running costs to operate periodically than run at constant load. So even if Weatherill can hand South Australians cheaper prices for their electricity at the plug (highly doubtful) they’ll be slugged through higher taxes elsewhere to pay for the higher upkeep of the gas-fired plant.

Is the finely calibrated plan working? If this is a finely calibrated I would hate to see what a half-baked plan looks like to Weatherill. Giving power back to the people is exactly that – give power back to them.