Trade Embargo

Shipping industry needs to save ITSELF before it has any chance of saving the PLANET

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Yet more eco-mentalism being celebrated by the UN International Maritime Organisation (IMO) with little thought to the very economics that has crippled shipping companies for so long. Shipping companies need to save themselves before bothering to save the planet.  Although the back slapping for the supposed “watershed agreement” (their words) will be achieved by 2050. The most pressing global issue of our times and these metal hulks which burn the ugliest, dirtiest and cheapest fuel (bunker) available have 32 years to get there. Perhaps the irony is that bankruptcy might take half the ships out of service meaning the emissions target could be hit decades earlier. A brief look at history.

It wasn’t so long ago that Korea’s largest container transporter Hanjin Shipping declared bankruptcy.  The above chart shows the daily shipping rates for the industry which remain tepid for the past decade. The problem with the shipping industry is the fleet. Ships are not built overnight. Surging order books and limited capacity meant that as the pre GFC global trade boom was taking place, many shipping companies were paying over the odds without cost ceilings on major raw material inputs (like steel). This meant that ships were arriving at customer docks well after the cycle had peaked at prices that were 3x market prices because of the inflated materials.

The pricing market was looking grim in 2016. CM wrote, “These are the latest prices in 2016 vs the 5 year average by type. New LNG, grain and oil carriers etc are holding up but the used market is being slaughtered. Ships are generally bought with a 25-yr service span at the very least. Global seaborne trade growth has shrunk from 6%+ growth in 2011 to less than 2% now.”

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According to Weber’s Week 4 report, VLCC rates for the route from the Arabian Gulf to China dropped to $10,925 per day on January 26 from $18,389 per day on January 19, which represents a 40% fall week-over-week. The average rate for all VLCC routes dropped to $13,179 per day from $19,974 per day on January 19. The current rates are 67% lower year-over-year.

Clarkson’s note 2010 build Capesize rates have fallen from $20,000/day 6 months ago to less than $3,900/day as of April 2018. 84K CBM LPG carriers have fallen from over $800,000/mth in April 2016 to $542,000/mth today.

Take a look at the financials of global leader Maersk. It recorded $US27.1bn of revenue in 2012 but only $24bn in 2017. Yet profitability slumped from $2.1bn to a paltry $25mn. Maersk carries around $34 billion in deferred tax loss carry forwards. That is the extent of the ‘financial baggage’ it still carries. The three major Japanese shipping companies have had a hell of a hit to profitability in recent years. See below.

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If the volume of goods transported by sea increases 3% every year, the volume in 40 years will be 3.3 times today’s volume. To cut total CO2 emissions in half by 2050, CO2 emissions per ton-mile need to fall by 85%. NYK is looking at the following ship that will cut emissions by 69% in 2030.

If the shipping industry is not fixed through market forces it will be difficult to repair the profitability and balance sheets that would allow the companies to invest in more eco friendly vessels. Bankruptcies are mergers are needed to streamline the sector.

According to Clarksons, the global fleet of all types of commercial shipping is 50% larger than it was before the GFC despite the World Trade Organization saying growth in global trade has crept up from $14.3 trillion in 2007 to $15.46tn in 2016 (+8%). Scrapping rates have fallen 40% since 2012 but since 2017 have risen moderately, appealing to owners with too much tonnage on their hands.

The International Chamber for Shipping’s secretary general Peter Hinchliffe said, “This is a ground-breaking agreement — a Paris agreement for shipping — that sets a very high level of ambition for the future reduction of carbon dioxide emissions…We are confident this will give the shipping industry the clear signal it needs to get on with the job of developing zero carbon dioxide fuels so that the entire sector will be in a position to decarbonise completely.”

What a wonderfully naive plan. At least the IMO can feel warm and fuzzy despite so many headwinds ahead of an industry still in structural distress.

World on the brink of WW3? Press on the blink more like it

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When you read a title like “world on the brink” it is easy to be misled to thinking this is a Trump/Putin related incident. The fact is the Iranian backed Houthi in Yemen have been lobbing ballistic missiles at Riyadh and staging border skirmishes for years. The Americans have been advising Saudi Arabia where to strike the Houthi in Yemen. This is a decades old fight and since the death (assassination) of former President Saleh last year the Houthi have become even more emboldened than they were during the Arab Spring 8 years ago.

Yet it is so easy to draw conclusions. Did the mainstream media report the sinking of a Saudi naval frigate in the Bab-al-Mandeb strait in Jan 2017 which took the lives of 176 sailors? Has the Israeli shekel collapsed since Trump and Putin exchanged verbal salvos? No. The Tel Aviv indices? No. Surely a relatively liquid financial barometer in a country that has been warned not to intervene by Putin too. Would quickly price in any fears.

The situation over Syria may be tense but if you look at what Putin is really trying to do he is weighing the size of Trump’s guts to call his bluff. We shouldn’t forget when Russia first intervened in Syria several years ago, Putin told Obama that US forces had two hours to get out of harm’s way. That is the warning one would give the Luxembourg armed forces, not the most powerful military in the world. Obama heeded Putin. Putin had carte blanche. That’s why nothing happened with the Ukraine. Sanctions were put in place but no one made any attempt to ‘change behviours.’

It is worth nothing that Syria is Rosoboronexport’s (Russia’s military export wing) 2nd largest customer after Iran. Putin is sick of having the West try to remove his clients. Assad is key to Russia’s foothold in the Middle East. With an essentially pro-Iran Iraqi government and Syria as well as Hezbollah Putin has a geopolitical doormat from the troubled separatist states to Russia’s south to Lebanon.

The problem Putin faces is if Trump yanks his chain, does he shoot US missiles down as threatened? He said they’ll attack launch sites which effectively equals sinking US naval vessels as that is how they are launched. This is perhaps the easiest way to escalate a skirmish out of Putin’s control. If Putin doesn’t do anything, Trump holds one over him. So Putin is hoping by the use of very strong language that Trump backs down. It is not exactly the best way to handle on either side but this is the first time in almost a decade where the US has a leader that won’t be pushed around. Unpredictablity is a strength not a weakness

Looking at history. The NVA was supplied by the Russians during the Vietnam War and the Afghans were supplied by the Americans in the war with Russia. Nothing new. The Russians returned the favour when the “Coalition” deposed Saddam and entered Afghanistan. Proxy wars have been fought for over 50 years.

The US is dispatching a carrier battle group to the Mediterranean. Theresa May is sending a UK submarine. The Russians are conducting military exercises with 11 warships in the same area. Of course scare stories are amock and clickbait media will report how we’re two seconds from a thermonuclear exchange.

It begs the question had Obama suggested to Putin he was bombing Syria, he would be praised for level headed genius. If Trump managed to bomb Syria with no Russian response then would we see the media have a mea culpa moment? Not a chance. It would be palmed off as a lucky break. If we go back in history, we can see good nations that did nothing let tyrants get away with murder. Have a look at Russia and China in the last decade. Man made military bases in territorial waters of other nations, early warning systems on the contested  Spratly’s and agreements in Vanuatu and Sri Lanka which provides naval ports for China. Putin is getting the old ‘union’ back together and there are plenty of willing despots happy to ride his coattails.

Putin is livid at the outcome of the nerve agent scandal seeing the expulsion of so many diplomats. He is not one that likes criticism as many an oligarch has found out the hard way. The question for those that fear what Trump might do should worry more about what will happen if he doesn’t. The downside is that the media likes Putin more than Trump. For a president with a glass jaw, his moves will be far more heavily scrutinized than Putin’s. He’s damned whichever way he turns. Putin on the other hand  willl be excused for being a dictator, whatever he chooses to do. The media will hope it dies down as they turn a blind eye and pillory their own governments for not taking in enough refugees.

Appeasement is an ever widening feature of governments in the West today. There are Neville Chamberlains everywhere. Who will stand up to Putin if Trump doesn’t? Whether Syria is the right battleground is beside the point. Because if it isn’t Syria it will end up being somewhere else.  The problem is only Trump “can” credibly shirt-front the former KGB officer.

 

Waking up to a horror of our own creation

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Some will say I am a pessimist. I’d prefer to be called an optimist with experience. At only age 16 (in 1987) I realized the destructive power financial markets had on the family home. Those memories were etched permanently. We weren’t homeless or singing for our supper but things sure weren’t like they use to be. It taught me much about risk and thinking all points of view rather than blindly following the crowd. That just because you were told something by authority it didn’t mean it was necessarily true. It was to critically assess everthing without question.

In 1999, as an industrials analyst in Europe during the raging tech bubble, we were as popular as a kick in the teeth. We were ignored for being old economy. That our stocks deserved to trade at deep discounts to the ‘new economy’ tech companies, no thanks to our relatively poor asset turnover and tepid growth rates. The truest sign of the impending collapse of the tech bubble actually came from sell-side tech analysts quitting their grossly overpaid investment bank salaries for optically eye-watering stock options at the very tech corporations they rated. So engrossed in the untold riches that awaited them they abandoned their judgement and ended up holding worthless scrip. Just like the people who bought a house at the peak of the bubble telling others at a dinner party how they got in ‘early’ and the boom was ahead of them, not behind.

It was so blindingly obvious that the tech bubble would collapse. Every five seconds a 21 year old with a computer had somehow found some internet miracle for a service we never knew we needed. The IPO gravy train was insane. One of my biggest clients said that he was seeing 5 new IPO opportunities every single day for months on end. Mobile phone retailers like Hikari Tsushin in Japan were trading at such ridiculous valuations that the CEO at the time lost himself in the euphoria and printed gold coin chocolates with ‘Target market cap: Y100 trillion.’ The train wreck was inevitable. Greed was a forgone conclusion.

So the tech bubble collapsed under the weight of reality which started the most reckless central bank policy prescriptions ever. Supposedly learning from the mistakes of the post bubble collapse in Japan, then Fed Chairman Alan Greenspan turned on the free money spigots. Instead of allowing the free market to adjust and cauterize the systemic imbalances, he threw caution to the wind and poured gasoline on a raging fire. Programs like ‘Keep America Rolling’ which tried to reboot the auto industry meant cheaper and longer lease loans kept sucking consumption forward. That has been the problem. We’ve been living at the expense of the future for nigh on two decades.

Back in 2001, many laughed me out of court for arguing Greenspan would go down in history as one of the most hated central bankers. At the time prevailing sentiment indeed made me look completely stupid. How could I, a stockbroker, know more than Alan Greenspan? It was not a matter of relative educations between me and the Fed Chairman, rather seeing clearly he was playing god with financial markets.  The Congressional Banking Committee hung off his every word like giddy teenagers with a crush on a pop idol. Ron Paul once set on Greenspan during one of the testimonies only to have the rest of the committee turn on him for embarrassing the newly knighted ‘Maestro.’ It was nauseating to watch. Times seemed too good so how dare Paul question a central bank chief who openly said, “I know you think you understand what you thought I said but I’m not sure you realize that what you heard is not what I meant.”

We all remember the horrors of the collapse of Lehman Brothers and the ensuing Global Financial Crisis (GFC) in September 2008. The nuclear implosions in credit markets had already begun well before this as mortgage defaults screamed. The 7 years of binge investment since the tech bubble collapse meant we never cleansed the wounds. We would undoubtedly be in far better shape had we taken the pain. Yet confusing products like CDOs and CDSs wound their way into the investment portfolios of local country towns in Australia. The punch bowl had duped even local hicks to think they were with the times as any other savvy investor. To turn that on its head, such was the snow job that people who had no business being involved in such investment products were dealing in it.

So Wall St was bailed out by Main St. Yet instead of learning the lessons of the tech bubble collapse and GFC our authorities doubled down on the madness that led to these problems in the first place. Central banks launched QE programs to buy toxic garbage and lower interest rates to get us dragging forward even more consumption. The printing presses were on full speed. Yet what have we bought?

Now we have exchange traded funds (ETFs). Super simple to understand products. While one needed a Field’s Medal in Mathematics to understand the calculations of a CDO or CDS, the ETF is child’s play. Sadly that will only create complacency. We have not really had a chance to see how robots trade in a proper downturn. ETFs follow markets, not lead them. So if the market sells off, the ETF is rapidly trying to keep up. Studies done on ETFs (especially leveraged products) in bear markets shows how they amplify market reactions not mitigate them. So expect to see robots add to the calamity.

Since GFC we’ve had the worst post recession recovery in history. We have asset bubbles in bonds, stocks and property. The Obama Administration doubled the debt pile of the previous 43 presidents in 8 years. Much of it was raised on a short term basis. This year alone, $1.5 trillion must be refinanced.  A total of $8.4 trillion must be refinanced inside the next 4 years. That excludes the funding required for current budget deficits which are growing despite a ‘growing economy’. That excludes the corporate refinancing schedule. Many companies went out of their way to laden the balance sheet in cheap debt. In the process the average corporate credit rating is at its worst levels in a decade. Which means in a market where credit markets are starting to price risk accordingly we also face a Fed openly saying it is tapering its balance sheet and the Chinese and Japanese looking to cut back on US Treasury purchases. Bond spreads like Libor-OIS are already reflecting that pain.

Then there is the tapped out consumer. Unemployment maybe at record lows, yet real wage growth does not appear to be keeping up. The number of people holding down more than one job continues to rebound. The quality of employment is terrible. Poverty continues to remain stubbornly high. There are still three times as many people on food stamps in the US than a decade ago – 41 million people. Public pension unfunded liabilities total $9 trillion. Credit card delinquencies at the sub prime end of town are  back at pre-crisis levels. We could go on and on. Things are terrible out there. Should we be in the least bit surprised that Trump won? Such is the plight of the silent majority, still delinquent after a decade. No wonder Roseanne appeals to so many.

A funny comment was sent by a dyed-in-the-wool Democrat, lambasting Trump on his trade policies. He criticized the fact that America had sold its soul for offshoring for decades. Indeed it had but queried that maybe he should be praising Trump for trying to reverse that tide, despite being so late to the party. Where were the other administrations trying to defend America all this time? Stunned silence.

Yet the trends are ominous. If we go back to the tech bubble IPO-a-thon example. We now have crowd funding and crypto currencies. To date we had 190 odd currencies to trade. Of that maybe a handful were liquid – $US, GBP, JPY, $A, Euro etc – yet we are presented with 1,000s of crypto currency choices. Apart from the numerous breaches, blow ups and cyber thefts to date, more and more of these ‘coins’ are awaiting the next fool to gamble away more in the hope of making a quick buck. Cryptos are backed by nothing other than greed. Yet it sort of proves that more believe that they are falling behind enough such they’re prepared to gamble on the biggest lottery in town. One crypto used Wikipedia as a source for its prospectus.

Yet the media remains engrossed on trying to prove whether the president had sex with a porn star a decade ago, genderless bathrooms, bashing the NRA, pushing for laws to curtail free speech, promoting climate change and covering up crime rather than look at reporting on what truly matters – the biggest financial collapse facing us in 90 years.

There is no ‘told you so’ in any of this. The same feelings in the bones of some 30 years ago are back as they were at the time of Greenspan and Lehman. This time can’t be avoided. We have borrowed too much, saved too little and all the while blissfully ignored the warning signs. The faith and confidence in authorities is evaporating. The failed experiment started by Greenspan is coming home to roost. This will be far worse than 1929. Take that to the bank, if it is still in operation because you won’t be concerned about the return on your money but the return of it!

Yemen – Saleh’s death is the dangerous slice in the Iran & Saudi sandwich

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Even before the Arab Spring, CM (in a previous life) wrote that Yemen was a trouble spot. It’s former President Ali Abdullah Saleh (Sunni) has died of natural causes – he was assassinated in a spate of tribal violence in the capital Sana’a yesterday. No stranger to being an oppressive tyrant during his rule, after being ousted in the Arab Spring he was in recent years working with the Houthi tribe (Shi’ite) to regain power before switching back to a US backed Saudi-friendly deal maker. He proved that power is more important than religious sect. However the Houthi weren’t prepared to suffer a turncoat who betrayed them so Saleh was duly dealt with.

Why is Saleh’s death important? What it now does is give Saudi Arabia more will to take more decisive action against the Iran backed Houthi. It is no surprise that Saudi Arabia has cleaned house with the arrests of  royal family members to tighten the inner circle. It smells like the early stages of broader tit-for-tat skirmishes before all out conflict ensues. Yemen is often argued as a proxy war between the two.

While many are distracted by the US Embassy to Jerusalem as an unnecessary ‘in-the-face” action, it is a very firm line in the sand to where the US cards already lie. No big surprises. For now most Gulf States want Israel on their side to help them defend against and ultimately defeat Iran.

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At the narrow Bab al-Mandeb Strait separating Yemen and Djibouti/Eritrea, cargo ships make their way up the Red Sea to the Suez Canal, could become a major choke point. This year multiple US, Saudi and Emirati warships have been attacked by Houthi rebel forces. In January 2017 a  Saudi al-Madinah frigate was sunk in the strait. An Emirati HSV-2 swift naval craft was also put out of action in late 2015.

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Safe access to the strait is crucial at present because of Egypt’s reliance on imported LNG to maintain stable electricity supply. One LNG tanker heads to Egypt each weeknight through the canal. Just under 10% of global trade goes through it as well. Any blockage or restricted access would force ships to sail the long way around the Horn of Africa adding another 40% to the journey. This would have significant impacts on shipping and trade. Markets aren’t factoring anything at this stage.

The problem with naval conflict is that Yemen is backed by Iran which in turn is one of Russia’s best clients. Iran possesses the SS-N-22 Sunburn missile which is a supersonic anti-ship missile which even the US has no answer for. In recent years this has been upgraded to the Super Sunburn (P-270) which is even more lethal. It is a ramjet which travels at Mach-3 meaning if fired inside a 100km range then the target is likely to be toast (video here). It can be launched from a ship, submarine or land.

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Iran could blame a whole host of tribes (Sunni or Shia) sick of being under the jackboot of effective Saudi control/influence for an attack.

On December 2, Israeli jets bombed an Iranian military weapons base in Syria. Israel has warned Iran it won’t tolerate any military presence on Syrian soil. We shouldn’t forget that China has also deployed its special forces to Syria to help Assad. Clearly the Chinese see a good opportunity to clean up some of the spoils in the region. China is always happy to help out nations that are under sanction. It adds more mess into the geopolitical sphere.

While the GCC has stepped up its air attacks on Yemen post the death of Saleh, he was the only one that has been able to unite the country. Indeed it is possible that the secession of the south becomes an issue. At the time of reunification of North and South Yemen in 1990 many in the south felt their northern neighbors were pillaging too much of their oil reserve wealth. Even their private land was appropriated and spread among the Sana’a elite. Now that Saleh has gone, and Yemen fragmented again, we may see old scores settled. The Southern Movement (loyal to exiled President Hadi) in Yemen wants to take back what was stolen from them. So Saleh’s death may open a vacuum of more instability.

Iran would relish the opportunity of a fractured Yemen to further build its influence. Bab al-Mandeb may become a flashpoint to fight the proxy war. It is extremely messy, creates proper disruption and pushes Saudi Arabia and Iran closer to conflict.

Which ever way you cut it, diplomacy in the Middle East (what little there is) looks set to worsen. In a sense we are dealing with two large clients of Russia (Iran) and America (SA). Now China is siding with Russian interests by using it as a test run of its military muscle. China isn’t committing anything major but it wants to be at the negotiating table when it all goes pear shaped.

It smells very similar to the lead up to the Arab Spring. More turmoil and complacent markets which are not quite absorbing the realities of “local problems” spreading to another neighborhood. Sure we’ve seen many leaders overthrown in Libya, Tunisia, Egypt and so on in the last uprising but the pressure on Saudi is mounting hence the recent crackdown internally.

The other dark horse is Erdogan in Turkey. He is facing a corruption probe over money laundering to help Iran evade sanctions and he seems keen to externalise his problems so he can shut down the local threat. He is threatening to cut off ties with Israel if the US relocates the embassy but for a man with clear ambitions to revive the Ottoman Empire that fell less than 100 years ago that is a mere formality in the future.

The flashpoint remains Yemen. It has the perfect storm of a pawn in a global game of chess. While it whiffs of local tribes seeking revenge there are too many willing to help them achieve their aims which only plays to the broader ructions throughout the rest of the Middle East. Last week Houthi rebels launched a missile attack against the UAE nuclear power plant under construction. Power corrupts. Absolute power corrupts absolutely

When you’re sorry, you’re sorry

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What is it with these supposed heartfelt apologies designed to show sincerity and compassion. Victorian Premier Daniel Andrews has apologized for any hurt that may have been caused 160 years ago to Chinese gold prospectors subject to a tax on entering Victoria meaning many had to walk on foot from South Australia. Andrews said, “It is never too late to say sorry, particularly if you mean it…On behalf of the Victorian government, on behalf of the Victorian Parliament, I express our deepest sorrow and I say to you that we are profoundly sorry.”  One of Andrew’s MPs, Mr Hong Lim, said that the form of the apology had been in discussions for two years,  How sincere can an apology truly be if you have to craft it over 24 months? If you’re sorry, you’re sorry – surely the words should drip from the tongue not require speech writers. Pathetic. Try apologising to your better half 2 years after your crime and see what response you get…

A record to be proud of?

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A lot of people may look at the unemployment statistics and marvel at the seemingly low rates. I noted Queensland’s Palaszczuk government now employs more than 250,000 staff with the bureaucracy ballooning by more than 2500 full-time-equivalent workers in three months supposedly in health and education. Don’t get me wrong – the public sector provides vital services – fire, police and ambulance, to name just three-which are served by top drawer people. However looking across the globe, we see since the turn of the decade the OECD reports that pretty much every country has grown its public sector payroll at the same time government debt climbs and the economy slows.

Forbes wrote an interesting article pointing out an obvious longer term issue as follows:

“In many states, public service has little to do with serving the public and everything to do with using the public’s money to serve politicians. Whenever we open the books, California is consistently among the worst offenders. Recently, we found ‘animal collection curators’ making $110,290; city librarians earning $222,320; public utility commission bosses at $550,028; and county hospital doctors making $1.274 million.

This spring, at Forbes, we exposed 50,000 Illinois public employees earning six-figure salaries who cost taxpayers $8 billion. In California the numbers are exponentially larger: 218,667 employees making six-figures who cost $35 billion. For example, Illinois has 72 ‘city managers’ out-earning every governor of the 50 states. But, in California, the salaries of 171 assistant city managers average $201,550!

Using our interactive mapping tool, quickly review (by ZIP code) the 220,000 California public employees who earn more than $100,000. Just click on a pin and scroll down to search the results rendered in the chart beneath the map.”(You can see that via the previous link)…

In total, there’s roughly $35 billion in total benefit flowing to highly-compensated government workers when counting the 21,332 federal employees based in California with six figure salaries.”

A while back I wrote on the awful state of government pension funds in the US and the risk of insolvency given the unfunded portions were multiples of the state tax collections (for California it was 3x annual tax intake). I wrote:

“To put this in perspective the California Public Employee Retirement System (CalPERS) lost around 2% of its funds in 2015/16. The fund assumes an aggressive 7.5% return. Dr. Joe Nation of Stanford Institute for Economic Policy Research thinks unfunded liabilities have surged to $150bn from $93bn in the last two years. Furthermore suggesting the use of a more realistic 4% rate of return. CalPERS has an unfunded liability of $412bn (or the equivalent of 3 years’ worth of state revenue). California collects $138bn in taxes annually in a $2.3 trillion economy (around the size of Italy). With over-inflated asset markets and increasingly negative returns on highly rated paper, the growth in unfunded liabilities is even more concerning as any market correction (likely to be severe given such blatant manipulation to date). If the correction is huge it will push the unfunded portion to even more dizzying levels.”

Since the Global Financial Crisis (GFC) we’ve been living on borrowed time. It doesn’t take a genius to work out that this endless printing and hoovering up of toxic waste on the public purse then hiding it to mask reality can’t go on forever. It is a legalized Ponzi scheme at best. Even the legality can be questioned. Manipulation of financial markets is taking away the one way to reset and create price discovery.  Talking to some of my old pension fund manager clients, many lament that they are being buried by regulation on one side and government participation which is destroying fundamental performance based on individual company merits. Sure robotic (algorithmic trading) makes sense for a lot of capital allocation but not all.

I still hold that we are on the precipice of the largest economic shock since 1929. The worst part about it is that central banks have no ammunition left. Negative rates worked in Norway for a period but they aren’t working in Japan. Why? Well confidence remains the biggest neck. If you give money away and people stuff it between the mattresses then you aren’t instilling them with hope. Most Japanese know that the “national insurance” they put away is nothing but a massive black hole which will likely never return to them after retirement. So at negative rates, their investment opportunities are made riskier to get less return.

December 4th is a big day. Italian referendum which is likely to fail, throwing Italian politics back into its normal rhythm (volatility) and an Austrian presidential rerun which should favour the right wing FPO after the voter fraud discovered at the previous one held in May.

Throw on top of that Schulz taking an escape pod from the EU, Marine Le Pen edging closer to a presidency next year and we have the settings for overpriced asset markets, stretched government budgets, record levels of debt accumulation, insolvent pension funds, bloated public sectors and impotent central banks out of bullets to resurrect us. With thermonuclear fuel failing to reset us, the only way out of this is to massively cut taxes, deregulate and let the people’s confidence lead us out. In case you hadn’t noticed, more government doesn’t work.

Perhaps Reagan put it best about government – “if it moves tax it. If it keeps moving, regulate it. If it stops moving, subsidize it!”

Trump is actually just the type of politician to shake us from this drug induced slumber over the last few decades. Be thankful we didn’t get Clinton – it would have been more of the failed policies under Obama that crushed the middle class and small business, the incubator of innovation and jobs creation.

Trumped by the Joker but don’t underestimate the one benefit of unpredictability

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It ain’t over til it’s over but Trump has certainly made it a whole lot harder to “Make America Great Again.” This election has thrown up more twists and turns than a Los Angeles freeway junction. The week post the DNC has seen Trump try to intentionally strike out. Talking of rigged elections, crying babies and sacrifices. Even to the ‘uneducated’ some will find it is at an “unnecessary” appeal. He sounds like he isn’t serious.

Wikileaks part 3 is a fast, slider, curve and fork ball all in one. Trump will need a total and complete bases loaded home run to claw back the gap in polls. But don’t get excited by another 4 years of Obama. Hillary Clinton will be ill equipped to handle the coming deep recession.  No smoke and mirrors can cover this up. This will be brutal.

As the world starts to tear up TPP, FTAs and other trade agreements we should start to see rising geopolitical friction. Perhaps one of Trump’s few redeeming features is his “unpredictability.” Foreign powers are for less likely to play chicken with a foreign adversary like that. In an increasingly unstable world having that as a “trump” may actually be better for keeping the balance of power and peace. Under the predictablity of Hillary Clinton and a continuation of Obama 2.0 countries like China will see that as extra incentive to exert influence in the Pacific. The Chinese are smart and patient but will seize the fourth ball and take a walk to the next base if so granted.