Weekend Links – 17th – 18th October 2015




Terra House Holes

Global Macro/Markets

…and furthermore…


Latest posts by __ADAM__ (see all)



    Could China’s Economy Be Bigger Than People Think? – Bloomberg Business … VIDEOS …


    Why air miles and other indicators offer clues to China’s new economy | South China Morning Post … google search title if blocked …


    The growth in consumption as a component of the economy highlights the need for a new approach that better tracks the consumer … read more via hyperlink above …

    Tourism boss: Chinese growth too fast for NZ … New Zealand Herald


    Strong tourist arrivals, particularly from China, are helping to bolster New Zealand’s economy against a slump in dairy prices.

    But Tourism New Zealand boss Kevin Bowler says it would be a good thing if growth in Chinese visitor numbers eased off.

    More than 320,000 visitors arrived from China in the year to August, a 30.5 per cent increase on the same period a year earlier, according to Statistics NZ. … read more via hyperlink above …

    • … Instead …it is countries and localities with poor quality economic governance that are suffering… a local lesson …the ‘basket case’ of South Australia …

      The ugly truth about SA jobs – and what to do about it – InDaily | Adelaide News


      SA turns “rust bucket” as job market deteriorates – Leith van Onselen – MacroBusiness Australia … superb article … behind paywall …


      Yesterday’s September labour force release from the ABS showed in all its hideous glory the deep employment shock that continues to infect in South Australia. … read more via hyperlink above …

      • Is South Australia learning anything from North Dakota ?

        Oil Bust? Bah — North Dakota Is Still Poised To Thrive | Newgeography.com


        … extract …

        … What now that the good times are over in the oil patch? In North Dakota, the epicenter of the once-hot Bakken shale play, the number of active rigs is down to 68 as of this week from 145 in June of 2014.

        Some might argue that it’s now the turn of oil patch cities to suffer, just as they did when prices plunged back in the early 1980s, setting off a decade long decline. But many of these cities have made considerable progress in economic diversification, making themselves far more attractive places for non-energy businesses. … read more via hyperlink above …

      • Was looking At Adelaide as a potential place to sort of retire, however land prices say NO, asking similar to Melbourne and quite restricted availability. Existing house prices everywhere in SA do not reflect the local recession.

      • No mention of how the housing bubble sucked the capital away from productive and innovative investment over the last 15 years in particular.
        SAs ugly truths are just Australia’s ugly truths on steroids. For years, young people with talent and energy have been leaving the place faster and faster, and not just for Syd-bourne (which are also losing heaps of youth and talent overseas) but for overseas markets. And who can blame them, they have been victimized by their elders so FU!!!! SA needs a housing bust to get housing and land costs down to competitive levels but they also badly need to save the car industry because of the base it provides to a diverse and large industrial base and skills and prevents SA becoming a total and permanent disaster, but there seems to be no understanding and even less will for that at state and federal levels. So, I predict at the very least one and maybe two lost generations and SA becoming the permanently depressed equivalent of England’s depressed north.

    Will China lead the world into a new “ecological civilization”, while America falls behind into the remnants of the old carbon age? Hidden by mainstream media, major changes are developing on the global stage. Our guest Laurence Brahm gives us a tour. Meanwhile, business as usual is setting us up for the awful shocks of climate disruption. Our second guest Gernot Wagner says our economies are heading into a series of hits, something he calls “climate shock”.

    In fact, scientific studies say there is at least a ten percent chance we won’t survive at all. We are gambling with an ecosphere, our descendants and a geological age. Let’s hope the ecological civilization comes in time, and let’s pay attention to those who try to lead us there.

    Download or listen (mp3, 14 MB)

    Poll Finds Fewer Americans Than Ever Doubt Climate Change Is Happening

    At least 70 percent of Americans now believe that global warming during the last 40 years is real and supported by solid evidence, coinciding with the lowest percentage of Americans who doubt climate change, according to a new poll released this week.

    Even more startling: the survey also found a dramatic drop during the past year in the number of self-identified Republicans who doubt the existence of climate change, from 41 percent last fall to 26 percent now.

    Even Fossil Fuel Companies Support An International Climate Agreement

    In a joint statement released Wednesday by the Center for Climate and Energy Solutions, 14 major Fortune 500 companies voiced their support for a strong global agreement on climate change.

    The 14-company coalition represents a broad set of business interests, from technology giants like Intel and HP to the electronics manufacturer Siemens Corporation. But the letter also includes supporters that might not seem like the most natural allies to a global climate agreement, including coal mining companies like BHP Billiton and Rio Tinto, oil and gas companies like BP and Shell, and industrial manufacturers like Alcoa and LafargeHolcim. Together, the companies have a combined revenues of $1.1 trillion and employ more than 1.5 million people, according to the Center for Climate and Energy Solutions.

    • “At least 70 percent of Americans now believe that global warming during the last 40 years is real and supported by solid evidence, …”. What a ludicrous statement, like the Australian population, I would estimate less than 20% would have the intelligence to be able to discern what was solid evidence and what was not and I would guess far less than a quarter of those had read practically nothing on topic other than what is provide by papers such as the Telegraph and the Mirror. Please note that I am a climate sceptic ii the sense I don’t think there is sufficient evidence to emphatically prove the change is due to humans but I think that we should err on the side of precaution and therefore take practical steps to cut our emissions.

      • What a ludicrous statement, like the Australian population, I would estimate less than 20% would have the intelligence to be able to discern what was solid evidence and what was not and I

        What it means is that 70% of the US population is sane enough to trust what >98% of the world’s climate scientists are telling them. They don’t individually need to be able to understand the science itself, just like they don’t need to be able to piece fossils together to understand and accept what scientists have said about evolution 🙄

        We hire scientists to tell us what is right and wrong in science (as if you didn’t know … but maybe you’re so dull that you don’t?)

        I am a climate sceptic

        Oh the irony. First you berate people for not understanding the science and not reading the science, then you announce that you are in the same category, or even worse, you are second guessing experts! 🙄

        Oh well, another numpty to add to the long list of MB deniers!

      • Please note that I am a climate sceptic ii the sense I don’t think there is sufficient evidence to emphatically prove the change is due to humans […]

        Why not ?

      • Tim,
        Wholeheartedly agree on preventive action.
        The risk is such that requiring proof of man made climate change and no action until such undisputed proof is provided is silly as a two-bob watch.

        $ $ $ $ $ $ $ $ $ $ $ $ $ $

        “What it means is that 70% of the US population is sane enough to trust what >98% of the world’s climate scientists are telling them.”

        These 6 Corporations Control 90% Of The Media In America

      • These 6 Corporations Control 90% Of The Media In America

        So what? Of the six, only News Corp consistently broadcasts disinformation on AGW. Without News Corp (Fox), the percentage of Americans who acknowledge the true cause and importance of AGW would be close to 100%.

      • And now even News Corp published this today, whoohoo:

        THE chief executives of 10 of the world’s biggest oil and gas companies have pledged support for an “effective” deal to fight global warming at a Paris conference next month.

        IN a statement on Friday, the CEOs of BP, Shell, Saudi Aramco, Total, Repsol, Statoil, Eni, Petroelos Mexicanos, Reliance Industries and BG Group said they recognise greenhouse gas emissions trends are inconsistent with the ambition to keep warming below a level many consider dangerous. Link

        And talking about blowing past our carbon budget, have a look at this article by climate scientist Kevin Anderson.

      • Think we need to bring a measure of sanity here. Firstly NASA’s dataset is all from ground based survey stations, these datasets are hopelessly compromised. This is the same NASA run by James Hanson. The James Hanson who compares coal trains with the Nazi’s trains taking Jews in WW2. R2M constantly refers to articles, opinions etc but it is all largely based on this one dataset.

        R2M also uses crank sites like thinkprogess.org to prosecute his argument. Enough said. The only real source of truth is satellite temperature data. Its results are defendable, auditable, transparent. They tell us the truth that there has been no statistically valid warming for 18 years. The 97% figure is totally discredited. Serious climate scientists, including those who believe in AGW no longer use it. Based on a bogus study out of UQ. I too believe man produced C02 warms the globe, just not the same extent as what R2M et al do. You can see the raw NOAA satellite dataset here https://www.ncdc.noaa.gov/sotc/ and an excellent analysis http://www.drroyspencer.com

        For all those calling for a precautionary principal you need to consider the enormous human toll of increased power prices. biofuels subsidised by various CC policies for example have been described by Jean Ziegler from the UN’s human rights committee as “a weapon of mass destruction” thanks to putting up the cost of food stables beyond the reach of the poor.

        We will move to a lower carbon intensive economy but the free market will arrive there without government and rent seekers.

        Before taking R2M as an expert, it is important to also realise what he believes in, far more government control of our lives and reducing the world population to 2 billion people, which involves forced sterilisation etc. Man ingenuity has always overcome to meet challenges. Whatever challenges we face, we solve inspite, not because of government.

      • Think we need to bring a measure of sanity here.

        If by “sanity” you mean batshit craziness from a science denier like you. 🙄

        Firstly NASA’s dataset is all from ground based survey stations, these datasets are hopelessly compromised.

        Bullshit. Satellite and surface measurements closely correlate

        This is the same NASA run by James Hanson.

        HansEn. He runs NASA? Who knew? 🙄 Last I heard he’d retired from NASA years ago

        The James Hanson who compares coal trains with the Nazi’s trains taking Jews in WW2.

        Very apt comparison, when you think of the genocidal consequences of burning coal.

        R2M constantly refers to articles, opinions etc but it is all largely based on this one dataset.

        Rubbish. There are multiple lines of evidence.

        R2M also uses crank sites like thinkprogess.org to prosecute his argument. Enough said.

        Crank site? Here are the people running it

        Looks pretty mainstream to me.

        Whereas you get your junk from wattsupwiththat.com run by Anthony Watts, a college dropout 🙄

        The only real source of truth is satellite temperature data. Its results are defendable, auditable, transparent. They tell us the truth that there has been no statistically valid warming for 18 years.

        The graph above shows you are wrong.

        The 97% figure is totally discredited.

        How? Where? Lies won’t fly, give us proof.

        Serious climate scientists, including those who believe in AGW no longer use it.

        No longer use what?

        I too believe man produced C02 warms the globe, just not the same extent as what R2M et al do.

        This is how deniers are arguing now. It used to be that AGW was crap, now it is correct, just not as bad as scientists say 🙄

        You can see the raw NOAA satellite dataset here https://www.ncdc.noaa.gov/sotc/ and an excellent analysis drroyspencer.com

        Roy Spencer is a liar. Raw data is not accurate. That’s why scientists don’t use it raw.

        For all those calling for a precautionary principal you need to consider the enormous human toll of increased power prices. biofuels subsidised by various CC policies for example have been described by Jean Ziegler from the UN’s human rights committee as “a weapon of mass destruction” thanks to putting up the cost of food stables beyond the reach of the poor.

        You are lying, Scheissenberg. Ziegler said no such thing.

        We will move to a lower carbon intensive economy but the free market will arrive there without government and rent seekers.

        No thanks to liars like you

        Before taking R2M as an expert, it is important to also realise what he believes in, far more government control of our lives and reducing the world population to 2 billion people, which involves forced sterilisation etc.

        I have NEVER advocated for forced sterilization, you arse. 😡 But yes, we need a smaller population, most sensible people agree.

      • Whatever challenges we face, we solve inspite, not because of government.

        You can tell, by the rousing success of anarchist societies throughout history.

        Good to see you admitting to your real motivations, that have nothing to do with the science.

  3. The evidence is clear that ZIRP and QE have been ineffective and a net negative for economic growth….(It) speaks for itself: the Fed cannot print money. The Fed does not have the authority or the mechanism to print money. They have not, they are not and they will not print money under present laws…..The Fed has the authority to buy certain assets, including government bonds, in the open market, but that is where their authority starts and stops. They create excess reserves by buying securities in the open market, which are then owned by the depository institutions. However, the Fed does not have the direct capability to move these funds and therefore place them in the hands of households, businesses, and other nonbank sectors. It is this transaction that creates money. Keeping short-term interest rates low for an extended period of time will not change the trajectory of the economic growth path as long as the massive debt overhang persists…..The drop in velocity to a six decade low is consistent with a misallocation of capital and an increase in debt used for either unproductive or counterproductive purposes.


    (PS: If you do venture into that PDF note how Australia’s Total Private & Public Debt/GDP is almost the same (~375%) as the one for the USA!)

    • “The ZIRP policy allows low quality borrowers access to debt markets, creating untenable balance sheet exposure when economic activity slows.”

      This was really what QE was all about – propping up seriously impaired balance sheets, partic in the finance sector (tbtf banks). It probably did its job pretty well, but the next step was to put a leash on the banks and bring some controls in to stop the mess just being reborn in the endless quest for finance bonuses. Not done, QE has done nothing more than allow impaired assets to be rehypothecated back into the system.

      The failure is political with a healthy dash of voter stupidity.

      • Yes, it is essentially the same problem as the asymmetric application of the Keynesian policy which is supposed to be counter cyclical – loosen when times are tough and tighten when times are good.

        Instead, the asymmetric neo-Keynesian policy loosens when times are tough and loosens even more when times are good. No wonder we all end up in a deep shit.

        The independence of the RBA was supposed to prevent this from happening because populist pollies would never tighten. Alas, the RBA was not much better.

        But don’t worry, voters are now beyond stupid, no I mean reached a new paradigm, so it is all good!!!

      • @ D. It amazes that private debt is still swept under the carpet so easily. New paradigm indeed.

        Government creates money, spends = bad
        Government lets banks create money, spend on realestate = good

      • I would make adjustments as new evidence of paradigm shift arrives. Perhaps you may wish to do so, too. After adjustments, I am no longer surprised or amazed at what I see.

      • Once the monertists became domanate in the 70s with the corporatist free market supply side marketing narrative the die was cast. That they blew themselfs up only to tweak things a bit and call themselves Neo -new in a rebranding excercize is just “self evident” of the group think this cult is institutionalised in-buy.

    • Interesting! “The FBI and other officials here think that bribery goes with almost all Chinese….This story is likely to have much more to tell, while we all learn whether the extraordinary Kingold kingdom of Australia and China relations was built upon illicit payments and hot air.”

    • GunnamattaMEMBER

      …and furthermore…

      Australia-China social queen Sheri Yan arrested for bribery


      more on that

      Chinese businessmen seek distance from corruption case


      Some of the people festooning Australian political circles (not just Chinese) are seriously sleazy. But this woman (who is Chinese-Australian) would appear to have good access…

    • Guanxi.

      Pretty customary. Anyway, no problem would exist if recipients in positions of power declined generous offers, not sure what all the fuss is about in cases like the ones above.

      • GunnamattaMEMBER

        ……..were you posting under someone else’s name there for a second 3d? You naughty boy!

        call it what you like – corruption is corruption….and it stinks….and we encourage it….and the players arent solely foreign nationals….(with a hat tip to Australian resources companies)

      • Yeah, that’d be right, business as usual for you and you paymasters!

        If people/business stopped offering bribes so as to enrich themselves we wouldn’t need to concern ourselves, but greed like you exhibit will always remain a big problem.

        Again you show you only have regard for yourself.

      • Guanxi… lol

        They’ll tell you it’s just guanxi, but if you talk to their countrymen they will say it is corruption. There’s a major difference between building relationships / your personal brand and outright corruption, even in China.

    • Can you imagine the Australian authority’s doing this? Nah, not a hope in hell.

      I used to get annoyed about comments on Australian mentality and our convict past as I thought it all bs, but for some time now I’ve believed it’s pretty well spot on.

      All her Australian connections will feign surprise….”what, NO, I don’t believe it, must be a mistake…”

  4. GunnamattaMEMBER

    I think there s a fair bit in this. For October Victoria is seriously dry and I understand its the same all the way up the inside of the divide through into Queensland……

    Goldman Sachs says El Nino could force RBA to cut interest rates


    Big dry crunches crops and farmer earnings


    • In southern Queensland having irrigation weir water will be more important than ever. The CSG people will be blamed if the bore levels drop away much more. Can’t seem to find any results for CSG water re-injection but the water table had dropped around the heavily drilled areas and despite what the CSG people say there is hydraulic connectivity, nobody really understands the detail. The natural refilling process is only about 2.5 m per year linear movement, not a human time scale.


      • Yes, used to have an uncle in Yelarbon, as kids fished most of the weirs around St. George and Goondiwindi etc., There were still native Murray Cod in the Condamine then, though us kids couldn’t catch them, they were cunning.

    • On local Tele here in Townsville cought a bit about the need for a desalination plant so locals could keep their backyards in good nick, RE valuations could be adversely affected-!!!!!!!!

      • It would be cheaper to duplicate the pipeline from the Burdekin. People are also complaining about the cost of pumping, but at about $0.20/person/day, it strikes me as good value.

    • The vampire squid says too dry cut rates …I’m shocked!
      sun shining cut rates
      rain falling cut rates
      MP working cut rates
      MP not working cut rates
      Prices falling cut rates
      Prices rising cut rates
      Record malinvestment cut rates
      Worldbeating mortgage debt cut rates
      At least the squid is consistent

    • Gunna, you’d be surprised just how far the dry spell reaches. I was up in Townsville and it hasn’t rained there for almost a year now. Absolutely crazy.

  5. GunnamattaMEMBER

    Home and Away: Where the Turnbulls invest their millions


    I find some of the focus on Turnbulls wealth a tad mystifying. Certainly he would minimise taxes, but that would put him in a boat with 99% of uber wealthy types. If parliament wants to get upset about him using Cayman Island domiciled entities then why not lets have a discussion about all tax shelters used by all politicians and I think the negatively geared piece of real estate here in Australia would figure prominently in that discussion.

    While I dont doubt there is a fair bit of seediness about his wealth he at least has earned it in the public eye for the most part, and I tend to the view that him being wealthy will have him at least looking beyond real estate as a driver of wealth, and fully understanding how woefully uncompetitive Australian capital management processes, taxation policies, monetary policy and investment positioning has us (as opposed to labour).

    • What labor are too gutless to address is its all just another good reason for a wealth tax. It’s very clear that wealth is not passive, and that it has significant advantages over labour. In other words you can more easily get richer being rich than working.

      As wealth coagulates in the 0.1% the voters may need to address their ‘new paradigm’

      • GunnamattaMEMBER

        I tend to be an adherent to the Monopoly Capital way of seeing things – I tend to see stagnation as the stable state of capitalism, possibly its ‘normal’ state, and the one it drifts towards without intervention to ensure that it doesnt, and the state it is shifted from by technological shocks and social/demographic shocks – and I suspect that at a certain level of concentration capital simply becomes rent seeking and tapers expectations across almost every field of human endeavor – from the arts to technology to financial – to those activities which pay a rent to the capital.

        This is where I see a ‘wealth’ tax as being desirable. Forcing wealth (ie capital) to be doing something productive and not simply bottom feeding (rent seeking) on others seeking to do productive things. Where we are at the moment (particularly in Australia) the vast bulk of the ‘wealth’ everyone seems to think they are entitled to is simply avoiding paying taxes (fully supported by policy) speculating on rising asset prices fueled by debt, or quite literally seeking rents from those with no other option but to pay them, and seeking to ensure that they are paid rents prior to anybody getting the chance to do something productive with their lives or capital accumulations.

        But the status quo has a shelf life which is measurable in days and weeks from here I reckon, and a wholesale roasting of the rent seekers is nearly upon us.

        To get the economic future it needs Australia has to free up people doing something productive and to do that it has to shred some rent seeking….

      • Agree completely. It’s not actually that complex.

        A wealth tax could be recast as bottom-feeder / rentseeker tax. It’s not wealth, it’s the tendency of unregulated wealth to seek easy rent seeking gains that have negative impacts socially and in terms of the productive economy.

        That is probably the big q over MT – he made his money being at the top of the rentseeker tree. I’m sure he gets it but does he really want to admit to himself that it hurts many and helps a few?

      • I view Rent-Seeking as a form of bludging. Looking at how upset people get over the pittance ‘dole bludgers’ get, and quite frankly I think there a very few true ‘dole bludgers’, you’d think the majority of the population would be out in the street with pitchforks and burning stakes over the obscene levels of parasitism by the financial elites…

    • The fund is in the Caymans for the benefit of the fund – not Malcolm.

      It allows flow through taxation for all LPs regardless of respective domicile. There is no tax benefit for Malcolm assuming he declares his returns.

      It is like investing in shares of Google or James Hardie for that matter. They are ‘offshore’ domicile. No difference.

      This whole thing is more embarrassing for the ALP. Are voters meant to be more impressed by parasitic politicians expecting the government purse to sustain their lifestyles to the grave than of a man with a few dollars in a hedge fund?

      • I thought the idea about tax havens like the Caymans was due to it’s opaqueness, thereby being able to hide your investments from tax authorities (not suggesting that of MT)?

    • It was a pretty weak attack vector to be honest. How many Australian super funds (and thus Australians in general) are invested in international funds domiciled in the Caymans? More than a few I would imagine.

    • few interesting notes: less than 30% of his wealth is in real estate as opposed to 45% for an average household and almost 60% for median household. If we introduce broad land tax his wealth would be taxed significantly less than the averaged bloke’s. Land tax is very regressive wealth tax.

      He also doesn’t invest much in Australian productive economy. Very low percentage of his wealth is invested in Australian shares. He doesn’t believe much in our entrepreneurship skills.

      He doesn’t invest (directly) into Australian bonds – maybe he has some inside info about our government ability to repay the debt.

      He is also very exposed to USD – he doesn’t have much trust in AUD.

      in other words, he lives here but keeps his money somewhere else. He directs our economy but he doesn’t have much faith in it.

      • I think MT chooses not to invest in Australian businesses in order to avoid, as much as possible, any perceived conflict of interest with decisions he might make as PM.
        By the way, Kevin Rudd was also a very wealthy man (maybe not quite as wealthy as MT, but same order of magnitude).

      • buying AUD bond vs USA bonds would not spark controversies, in fact it would paint better picture of him.
        Rudd is equally detached but as opposed to Turnbull he was all vested into Australian speculation dream. He will lose half of his paper wealth in just few months.

  6. Looks like bold is hitting a resistance at circa 1630 AUD over the last few months. It is already within 10% of the all time high, but it still needs to break through this resistance.

    • I’m wondering if it’s just dumb, risk-on more QE money coming in advance and not sustainable. Possible time to get out of gold miners.

      • Yes, it may be time to start looking to offload a portion of gold miners. It is hard to believe that AUD can hold its ground in the 70s, but the fall of the resources currency may correlate with the fall of gold, so the all time high could prove to be elusive.

      • I’m absolutely on board with the MB guess of a 45c dollar. This quote from the J Hoisington link above is a good one:

        “It is unlikely that QE4 would result in any significant short-run decline in the dollar since the effect of QE3 on the dollar was almost nil due to the learning curve. Weak economic conditions in major trading partners suggest that another round of QE might evoke a much faster retaliation, particularly by the Chinese who have already taken small steps to stimulate their economy through currency depreciation. This might risk a round of currency moves like those that resulted in a “race to the bottom” from the mid-1920s until World War II.”

        I reckon gold miners will do well in the end but hard to see an emerging market rout not sinking all ships…

    • Don’t worry about car makers. They are yesterday’s industry.

      SA can redeem itself by becoming the nuclear industry hub of Southern Hemisphere. That is the industry of tomorrow. Australia’s stable continental plate makes her an ideal place to be one. Then SLX can sign an exclusive license agreement with the SA government to be THE supplier of the enriched uranium from the nuclear waste around the world. Heck, SLX may even be able to hire and re-train the sacked car workers.

      If everything goes well, which is a big if I might add, SLX may even come up with a new technology that will enable extracting nearly all the remaining nuclear energy from the nuclear waste. If they can do that then the process would render the resulting nuclear waste harmless (i.e., its residual radioactivity is no greater than the environmental background level).

      Then you and I (and pantone) can retire in Bahamas!!

      • GunnamattaMEMBER

        Believe it or not I am still there on SLX – havent looked at them of late though I assume they are getting some upside from the Japanese reopening their reactors.

      • Of course I assumed that you still hold SLX – or my post would be irrelevant to you, no?

        When SLX announced the terrible news about the closure of the Solar Systems at the end of July, I braced for impact. It turned out that I braced for nothing, which in turn spelt the bottom for SLX in my view. I mean, whenever a stock refuses to go down upon disclosure of negative news of that magnitude, what else can make it go lower?

        Looking at the SLX chart now, it looks set for a major breakout upward. There may be a minor drop to circa 45c first, if only to complete an inverted head and shoulders pattern to keep technical analysts happy.

      • I might get me some of that retirement fund too if the TA sticks to the plan……….. Liftoff from next pullback fits most of my criteria.
        Keep talking it up D 🙂

    • Gunna,

      I really enjoyed that ‘The Death and Life of a Pub’ piece you linked to on Thursday but a piece of that magnitude should be linked to on the weekend.

      In regard to Ford in Geelong, I’m told that the Siemens guy that comes over every now and then from Germany to look at the machinery and the technology considers it a museum. Ford seemed to have given up a long time ago there.

    • Great piece on the end of cars. Disturbingly, from my time in the vic gov bureaucracy, the issue is hardly discussed. It is going to hit Victoria like a wave, yet there is nothing concrete to address it, bar carpet bagging for more handouts and industry schemes.

      If anyone is interested, the Victorian Competition and efficiency commission started a report in the first months of the Napthine government. It was a broad exploratory piece and they were given carte blanche. It was never released, containing too many good ideas. This is as close as the vic gov has got http://www.vcec.vic.gov.au/Inquiries/Completed-inquiries/State-based-reform.

      And federally, the current mob are incapable of thinking past the end of their nose. And why bother, when the shadow is one Kim Carr, one of the laziest thinkers around, mostly concerned with keeping his union base happy to stay on the senate ticket.

      Post 2017 in Melbourne is going to be grim.

  7. GunnamattaMEMBER

    Very good read on how crazy some of the financial viability fundamentals are of Australia’s LNG expansion

    Oils ain’t oils, gas contracts ain’t gas contracts


    …..anyone thinking the massive gas plants we have built are generating or likely to generate a significant national economy supporting return needs to go back and think it over again….

    Two enormous gas pipeline deals will have most of the Chinese market for Australian LNG sucked away by China’s Western neighbour after 2018 when the pipelines are built.
    Russia’s No. 1 gas producer, Gazprom, expects to ship 30 billion cubic meters (bcm) of gas a year under the deal between the two nations, on top of an agreement in May for Russia to supply China with 38bcm a year after 2018.

    According to the Reserve Bank, China was importing 25bcm of gas in 2013. Each Russian pipeline deal is larger than China’s entire importation of LNG in 2013. This is a colossal supply risk to Australia’s LNG export future.

    They are likely to keep the lid on global LNG prices for the foreseeable future. Piped gas is inherently cheaper than LNG because LNG must be liquefied in an energy -intensive process that uses expensive plants.

    While Australia is rich in energy it is poor in energy policy. The spectre of having three profitable LNG plants operating at Gladstone in 10 years is diminishing quickly. The economic fundamentals simply do not stack up.

    and what he hasnt picked up here is the massive deal already in play with Turkmenistan (and the mooted idea of Iran slinging a pipeline over the border to Turkmenistan and supplying China too)

    Chinese CNPC’s current Turkmenistan gas imports reach 35 Bcm/year


  8. VW:


    “More than two, but a lot fewer than 10 people” masterminded the emissions testing scam apparently. How many is that; three? Awsure. Whatever.

    Just like Wall Street after the GFC, a few obvious suspects will probably become the scapegoats that allow the diseased culture within the company to carry on as usual. Given the importance of this business to Germany there are no doubt some powerful forces who are looking for the biggest rug they can find to sweep some shit under.

    • That piece made my jaw drop.
      Not because of what was in it, but that it was allowed to be published.
      Especially the little points on negative gearing and the CGT discount combining to cause an problem.

      A recent turning point in the discussion for me was when a wealthy widow I know, who props up her generous super income stream with work in real estate, said that housing was going to turn. She also did say recently that it was a mistake to vote for Abbott. Both signs to me that a shift is finally occurring here.

    • I think this was the most illuminating quote from the article
      “Among households headed by Australians aged under 35 an extraordinary 63.4 per cent rent.”
      It really shows the transition that is taking place that quoting statistics for the entire population tend to obscure. New entrants have been priced out, largely by incumbent owners who can exploit tax laws that advantage them over the new entrants.

      • +1 the misuse of statistics disgusts me. great article, can’t believe it was published as said above!

      • That statistic strongly implies that suburbs where renting is dominant already exist leading to the possibility that there will soon be marginal electorates where the majority rent.

    • there is nothing inherently wrong with renting, some of the most successful nations are nations of renters, while some of the worst have home ownership over 80%.

      On the other hand everything is wrong with nonproductive housing debt – it produces nothing, it startves the productive economy while it creates for life slaves. Our main problem is $1 500 000 000 000 housing debt


    Wages, house price horror – National – NZ Herald News


    … extracts …

    … Auckland’s median house price added $156,000 in the past 12 months – a 25.4 per cent jump. Workers’ median annual income in the Super City was $48,204, up 2.8 per cent year-on-year. …

    Prices are being driven by a severe shortage of properties, record high inward migration and historically low interest rates. Auckland Council and the Government are pinning hopes on the Housing Accord to fast-track thousands of new homes, while new measures will restrict the impact of investors and keep tabs on foreign speculators.

    … Meanwhile, an Auckland Council committee agreed this week on a new affordability target that would halve the ratio of household income to house prices by 2030 by making it simpler to get new projects off the ground.

    “This would be achieved primarily by reducing costs to deliver housing and increasing the scale and breadth of housing options – including attached dwellings – for the bottom half of the market,” council chief economist Chris Parker said. …

    … Hugh Pavletich, co-author of the annual Demographia housing affordability study, called for the release of more city-fringe land to enable more residential development. Better infrastructure financing was also needed to prevent the cost of connecting new subdivisions to key networks being front-loaded on the price of new homes, he said. … read more via hyperlink above …

    • Auckland Council wants to halve median house prices | Stuff.co.nz


      Auckland Council has set an ambitious target to improve the city’s housing affordability.

      It wants to see median house prices in the city fall to five times media household income, which in today’s terms would be about $400,000.

      The target was set by the council’s development committee, after receiving a hard-hitting housing report from its chief economist Chris Parker.

      “At the moment, it takes nine to 10 times your average salary to buy a house in Auckland. The average household salary is around the $80,000 mark, average house prices around the $800,000 mark,”‘ committee chairwoman and deputy mayor, Penny Hulse said.

      “We’re saying over the next 10 or 15 years we want to bring it down to one in five, which means in today’s figures an average household salary of $80,000, average house price down to $400,000.”

      Hulse said the target would not be easy to hit, and would involve a continued focus on working with the Government, developers, and community housing providers. … read more via hyperlink above …

  10. Here you go Notes for the budding entrepreneurs out there. (just dragging my projects into shape)
    Innovation to Commercialisation Plan

    Concept development
    Early stage design and prototype
    Commercial technical feasibility

    Market Research
    Refine and Design the Prototype
    Product Testing
    Intellectual Property Protection

    Early Market Testing
    Business Planning
    Forming a Company
    Venture Financing

    Licensing or Selling

    Market Entry and Promotion
    Evaluating the IP
    Identifying the Buyers
    Negotiating a Deal

    1. In no more than 10 words describe your invention
    2. Is your invention already in production and on the verge of market launch
    3. Has your invention already been launched and is generally available
    4. Describe the key benefits to users of your invention Notes
    5. Describe the functionality of your invention. Notes
    6. Describe the physical properties of the product incorporating your invention.
    7. Describe the unique and protect able features of your invention.
    8. Describe the testing that your invention has undergone, by yourself, your colleagues, or others.
    9. Describe the testing process including the frequency of tests conditions and results.
    10. Describe the current condition of your latest prototype and any intentions for re prototyping.
    11. Provide your best estimates of what you think the end user price of your invention will be.
    1. When it first appears in limited production and
    2. When it is geared up for mass production
    (Detail how you arrived at these prices.)

    Describe your current situation regarding meeting Australian or International Standards and relevant statutory approvals.

    Commercialisation Steps

    1. Intensive research to ensure your product is worth developing.
    2. Write up an initial business plan. (to see if the idea even looks like being profitable)
    3. Develop your product until it is fully evolved (to the limit of your capability)
    4. Construct a working prototype (Looks Like, Works Like, Feels Like)
    5. Develop a presentation package (For handover to the persons who might be important to the commercialisation of your product)
    6. Take out basic Intellectual Property protection of your idea (So you can start showing your product around)
    7. Obtain any approvals needed from regulatory bodies and note Standards compliance.
    8. Seek assistance from other Service Providers
    9. Upgrade the initial business plan
    10. Seek finance or investment as needed
    11. Research potential licensees for the product
    12. Research the self manufacturing options including the costs of establishing a small manufacturing business or on a larger scale with all the overhead issues.
    13. Prepare the product for retail sale. (Presentation and Packaging)
    14. Obtain a bar code and determine which sales tax applies
    15. Trial on a small scale to determine production issues and confirm sales
    16. Upgrade the business plan
    17. Full establishment of self manufacturing
    18. Launch and distribution of your product
    19. Find potential licensees
    20. Negotiate with potential licensees on actual approval of the product or from the point of their expressed interest
    21. Finalisation of the licensee agreement with the licensee
    22. Manufacturing of the product by the licensee
    23. Launch of the new product into the marketplace by the licensee

    • Way too old school WW.

      1 – See the opportunity but only act if you personally have the skills to execute the technical solution

      2 – Scratch together a prototype using digital fabrication

      3 – Launch on Kickstarter and give yourself 30 days to find a market

      4 – If the market appears write business plan and sort out compliance while you ship your first batch

      • MM thanks, This surfing project is full disruptive technology of Unicorn magnitude.
        Have the equipment fully drawn on 3d Autocad and the patents written for the apparatus and business enabled. For widgets your advice is correct.
        Just pulling my concept together for the TV broad casting and the streaming the branding and advertising
        Readers should be taking all these notes, and adding their own advice. In the future you will need it.

    • all those steps are the easy and fun part, actually selling your product and making enough money to cover production and rent is when shit gets real, as a manufacturer i will have at least one budding billionaire per month come through the door with dollar signs rolling around in their eyes wanting to know how quick can they get 1000 of these made….. ahhhhh ……in 15 years i have seen one success story, its really hard, specially in straya where people like the european snob factor of goods.

      one tip i can give people is give your invention an italian or german name

    • Far too proscriptive for todays world I think Wiley. These days it’s all about keeping it simple, agile and iterative.

      As far as your question re: my movements earlier this week, I am heading abroad soon to NA. My clients at the moment don’t want to let me go so I have to slowly ween them off me to make the move. Even then, I might end up still doing work for them, but on a remote basis since 90% of what I do requires only a laptop and solid internet connection. Not sure what the tax implications of that would be though.

  11. Absolute hilarity in the sydney morning domain, that genius baby boomer gittins is out calming the nerves of his fellow boomers with a wonderful story about how unemployment is nothing to worry about as production of unicorns will start to pick up pace and the unemployment rate may even fall a little… yippee, so turn the page and oh no warnings of an employment wipeout as up to 200,000 jobs could be ripped from the economy as the car industry closes in 12 months, oh dear, what to believe, both strong cases

    • And so it begins … have been waiting for the dam to break. So much commercial realestate available in Perth and no one is willing to tell the emperor his bits are dangling there for all to see.

      • Yes indeed, the emperor will not be happy about this! Will he bitch and moan to the Federal government again? But alas, his last sycophantic fawner is no longer in office! Whatever will Colin do to save his muddy pond?

    • The next hurdle after that is “Eagles & Dockers in bottom 4, no-one going to the footy leaving shit expensive stadium empty!”

  12. In regard to ChAFTA

    Whether or not Labour’s suggestions are implemented, anyone who votes for this agreement betrays Australia and its workers.

    Any agreement that allows buildings to be built and businesses to operate in Australia using foreign workers instead of using willing, able, and available Australian workers is completely treacherous.

    This is especially so where there is practically no skill shortage in Australia and Australian unemployment figures are only going to rise at least over the next two or so years.

    • Tell me what you would do as an employer.
      You can manufacture locally using an Australia worker and pay them $80,000, and build that cost into your finished products’ pricing and try to sell it against…….
      The same product being produced in (one of many other countries here!) with a labour cost of $40,000.
      Now ask yourself “If I could use that same foreign labour here and pay it $40,000 as well, what should I do?”
      You might suggest that “Buildings can’t be built somewhere else, so we don’t have to use foreign labour!” But that cost of the building also gets priced into whatever business that uses the structure ( via rent or acquisition), and ultimately into their finished goods final pricing.
      The lower the finished price of goods that are Made in Australia is, the more of them that will sell and crazy though it may seem, the more jobs that will be created for local workers. Yes, they might end up being paid less, but less pay is going to be better than, no pay…..(Ask a worker at Holdens if you doubt me!)

      • My main point is that it will not mean more jobs for Australians because foreign workers will be used. The only benefit I see is for the shareholders of the corporations that set up the business and possibly some tax revenue for governments. I have no problems with foreigners conducting businesses in Australia and using foreign labour, but only where there are no willing, able, and available workers to do the work. The Government goes on about bulgers on the dole where the real problem is that there are simply not enough jobs to go around. Any work on offer needs to be advertised though out Australia, not in some local newspaper, but in all major newspapers across the country and to all job seeking agencies. Many Australians are willing to move to somewhere else to work. In my opinion, if someone on the dole is not prepared to move to do such work and there are not extenuating circumstances, that person should not longer be eligible for the dole.

      • The dole isn’t really enough to live on so of course people on the dole are reluctant to move away from the family and friends who are ensuring their survival.

    • If it’s your job that’s being ‘threatened’ by another worker – no matter where they come from, but let’s stick to imported labour, what are you going to do? Go without a job, or work for less? In essence, that’s what is going to have to happen – to all of us! We have priced ourselves out of our own jobs by decades of non-productive wage rises, and when that wasn’t enough, we borrowed tomorrow’s wages by going to the bank and getting a bigger loan. The day of reckoning has come for labour rates in our protected neck of the woods, and if we don’t see it, we will have 100% of our current wages being paid to 0% of workers – because whatever work we think we can do here, will be done somewhere else. Only by growing our businesses will we create more employment, and if that is done by the threat of foreign labour coming in to recalibrate of bloated wage rates, so be it.
      Change rarely comes easily, Tim. Something has to make us see the light, and if it isn’t foreign labour, it will be something else. Competition on labour rates is something we can adapt to. No businesses left here doing anything makes it pretty nigh impossible. Foreign labour is pretty simple really. Why would a, say, Chafta company bring in labour if it could find a similar worker, here, at the same price as there? It wouldn’t! So it’s not the amount of labour available or where it is, but the cost of the wages of that worker.

      • Example, Tim.
        60 years ago Ford opened a new factory, a big one, outside Melbourne to make cars. Why? Because the cost of the components of making those cars – including the labour content – made a profit for Ford in doing so. Do you think Ford would open up in Melbourne today, given the same production inputs costs versus the choices it has as to where it can manufacture its current models? The answer, is pretty clear…..

      • Janet, please correct me if I am wrong, but I infer from what you have wrote that you believe that the government should not set any minimum to a wage a foreign worker needs to be paid?

        You ask [w]hy would a, say, Chafta company bring in labour if it could find a similar worker, here, at the same price as there? I’ll answer using a hypothetical. Chinese corporation finds a sympatric Chinese Government to pull a 7-Eleven type scam. Chinese workers that donate say 50% to Party allowed to work in Australia where those who don’t are not allowed to work in Australia. Also, communication problems and cultural differences, jobs for friends and family, etc.

        Also, it seems to me that you are not bothered that work is only advertised in a local paper as opposed to being advertised nationally, etc?

    • Tim and Janet are talking at cross purposes. I largely agree with Tim; foreign labour should be regulated. But given Australia’s massive imports and meagre exports, that will result in a collapse in the AUD and a collapse in Australian purchasing power… for everybody. Which is probably the best case scenario. A society living within its means and a more egalatarian one at that, because EVERYBODY’S purchasing power will be hit. The poor probably less so than average, because poor people consume a higher local percentage of goods and services than wealthier people.

      But by all means, let’s delude ourselves that importing foreign workers will work, resulting in a high local unemployment rate, civil strife, and an insufficient tax take. It won’t work; it will fail, but only after extreme damage has been done.

      I’m more of a crashnik than anyone, but it’s because Australia needs the crash. Foreign workers are yet another artificial means to kick the can down the road. They can’t vote. They aren’t exposed to local costs of living over the long term (most of them forego lifestyle to save money, which goes MUCH further in their home countries than it does here).

      Supporting low cost foreign workers is simply being a traitor to our kids, and selling out their future to prop up the exchange rate. It’s as simple as that.

      • You have made a very important point. They are here to save and send back money to their families overseas. In other words, to spend as little as they can in Australia.

      • Tim: yup! This is why 457 visas without labour market tests are evil. There is a limitless supply of 457 workers who will work for below any reasonable living wage because they’re willing to tough it out for a short period, to remit as much as the earnings as they can.

        Australia is going through a very stupid and dangerous period… and unfortunately I can’t see it changing in the near future because the average Australian wants this. Which is why I’m on the green card track in the USA. At least my sector here grows faster than they can import workers to supply it.

      • An important consequence of the low cost workers using australia as means of obtaining funds to spend in their home country is that Australia’s usefulness to them is measured in US dollars.

    • Ha ha ha! Northern Queensland looks NOTHING like Florida at all… except that Florida actually has a population and some industry.

      The more idiots who pour money into real estate in that area, the better. I for one am perfectly happy to sit back and laugh as their financial lives are utterly destroyed, because they are stupid, greedy people. Ha ha ha!

      • Haha you are a proud crashnik. Whilst north qld is counter cyclical (with tourism) it is mostly very low socioeconomic. Anyone who has spent some time there might realise that Bently Park has a heap of social housing and the typical renter is (to put it politely) not going to enhance the capital value of the property.

        Paradoxically, last time I was in Bently Park I was staggered by the beauty of the location, tucked up in the valley of beautiful rainforests. There’s worse places in the world to be on struggle street.

      • Come on, LD, you should instead start practicing how to shed crocodile tears. If you start practicing now, you may be able to master the art by the time the shit hit the fan.

    • I have an old workmate who has lived in Cairns for close to 20 yrs and reckons the RE area is dead.

    • “Our investment is interest-only (mortgage payments) and we buy for capital gain, so it’s a positive return,’’ he said.
      Good luck with that… NOT!! Specufestor POS. Stop calling your speculative, risky, tax-payer funded, owner occupier denying, bubble contribution gamble an investment.

    • SS, yeah, just like the RE “expert!” 🙂

      As I type he’s told me he bought his Trinity Beach 2 bed unit for 204k in 04 and now worth 230k. His advice was keep clear of it. In 22 yrs he’s seen prices go all over the place.

      • Mining BoganMEMBER

        Cairns has only struggled back to 2006-7 prices. There’s been plenty having to sell at a loss over the years. In 2000 people were still getting less than what they paid in 1990 and didn’t turn a profit until the mid naughties. Your mate is right, the place is all over the shop. Probably peaked again now.

        It gives a good insight into what is coming for the rest of Oz. Seen it all…the bankruptcies, foreclosures, family breakups, suicides…that’s what’s coming. The sad part is that it has to happen and we have no one to blame except ourselves.

    • Townsville looks like a sitting duck, just waiting to be sunk by torpedoes of rate hikes, from WBC or other banks. How can I short Townsville?

      It won’t be long before international bond holders of Big 4 refuse to roll over the maturing bonds. What will the banks do to fill the hole? Launch more torpedoes to the housing market?

  13. The comment at the end about the strategy being based on interest only borrowings made my blood run cold.

    • https://en.wikipedia.org/wiki/Minsky_moment

      A Minsky moment is a sudden major collapse of asset values which is part of the credit cycle or business cycle. Such moments occur because long periods of prosperity and increasing value of investments lead to increasing speculation using borrowed money. The spiraling debt incurred in financing speculative investments leads to cash flow problems for investors. The cash generated by their assets no longer is sufficient to pay off the debt they took on to acquire them.

      • The term of art known as cycles fails to granularly specify the key agency e.g. fraud.

        Skippy…bonus points for identifying the primary agency behind it…. Clue…. See Bill Black….

      • I would say recency bias alone would be a far greater driver of cycles than control fraud.

        You can guarantee that pretty much every player in the crazy real estate bubble in Australia from investor, to banker, to financial adviser are all smoking their own dope and have equally stupid levels of debt fueled exposure to the bubble.

        Fraud is a strong word.

  14. http://www.bloomberg.com/news/articles/2015-10-16/credit-suisse-clients-are-more-confused-than-ever-and-are-cashing-out

    “Following meetings with clients in the U.S., Europe and Asia over the past few weeks, we make the following observations: Confusion: Never have we seen so many clients who just do not know what is happening and have cashed up. … The wall of bearishness was extreme in the US – roughly 80 percent of meetings – but much more balanced outside the U.S. (maybe because markets started to rally in the meantime). Often in the U.S., the question was ‘why isn’t this a bear market?’. In Asia, on the other hand, most investors were less concerned about China (though, we have always found the closer you get to China geographically, the less concerned investors are about China).”

      • Just need another outrageous bubble in NASDAQ stocks to emulate the 1998 experience…

        I think we may have already used that rocket.

        Or maybe 5 times sales becomes 10 times sales and Tesla takes over BMW with production of 50,000 cars vs a couple of million?

      • It’s different, but there is extreme negativity, and as Cullen points out this has been a unique year where cash has exceeded the returns on everything. If it’s not 2008…

  15. There is an article in smh that we are heading for a decline in house prices … And the last decline happened in … 2012 (Sydney). Is that for real?

    • I do concur with the general sentiment. But, the Domain article neglected to mention that the Birchgrove place had only two bedrooms. And, let’s face it, that Redfern place is so totally over-built that it looks ridiculous next to the neighbouring houses.

    • Was resorting to Withnail on Friday, seeking a temporary reprieve ffrom madness at work – solution was to take some sedatives and miss out on Monday & come up smiling on Tuesday.

      • Edit- to be clear, this was my proposed solution, a light-hearted means of dealing with the madness.

    • Asian buyer, overpriced tiny box high in the sky, dodgy developer, dishonesty, disappointment, frustration … this is the Australian big city real estate scene in a nutshell. 🙄

  16. WW made a valuable contribution above, as he does quite regularly. His effort inspired me to take the trouble of writing a longer post than usual.

    Long time readers know that I draw many hints for stock trading from Moneyball (http://www.macrobusiness.com.au/2013/09/the-history-of-australian-property-values-redux/#comment-281349) or classic WW2 war movies (http://www.macrobusiness.com.au/2012/09/asx-shares-daily-20th-september/#comment-178203). In fact, I find that stock trading is not dissimilar to the player development of an MLB franchise.

    As I had stated a number of times, many past World Series Champions had winning percentages well below 60%. If I recall correctly, the worst in history had the winning percentage of just 52%. Likewise, in the player development, a few prospects in your farm system blossom to become All Stars while others flame out. In an amateur draft, if one player develops to become an All Star then that particular round is considered a huge success.

    A tricky bit is how much benefit of doubt I should give to each prospect. If a player was good enough to be drafted by me, I should not cut him loose after he struck out in his first few at-bats. On the other hand, I cannot afford to keep giving him at bats if he keeps striking out for years. Another tricky bit is whether I should trade a player who is good enough to reach the majors before he may become an All Star. Yet another is if I should demote an All Star from the majors when I spot him underperforming. In a real baseball front office, they have to worry about keeping their fan base happy. At least I don’t have that burden which should make investment easier by that bit.

    I use the 80-20 rule; 80% of my holdings are for a long haul. They comprise of All Stars which I intend to hold for as long as I can. In short, this is where I park my money. The other 20% are for what Warren Buffett calls cigar butts; speculative stocks whose composition changes all the time. For now, they consist of SLX, SLR, MSB, FWD, CAB, MTS, BKN, SDI and most recently, STO. If some of them make a great leap forward, I will call them up to the majors; i.e., upgrade them to the 80% by selling a fraction of the holding to free up fund for fresh speculation, and keep the rest for a long haul. I will sell regardless of the loss when I think a prospect is going to flame out.

    For cigar butts, I use a probabilistic approach. For the current roster of cigar butts, I can lose if I go 0 for 9. But then again, if I were that hopeless in drafting players then perhaps I would deserve to lose money. It is difficult to explain. Perhaps a hypothetical example best illustrates my point?

    Suppose you find a hypothetical stock which has the following characteristics;

    Probability that it goes bust: 50%
    Breaks even: 10%
    100% gain: 10%
    200% gain: 10%
    300% gain: 10%
    400% gain: 10%

    Believe it or not, the most probable return of the above stock is 150% (i.e., 50% gain). Of course, if you only bet on a single stock, it will be all or nothing. But if you strategically spread your risk over several prospects, then the group as a whole will perform more or less as expected. After all, Warren Buffett used the cigar butt approach back in the 1950s when he made his greatest returns.

    • Dont undertake share market trading unless you are very capable and very brave.
      Trading is like Lion taming, but more dangerous. Every day the trader has to enter the cage, often with a different Lion. Every now and then the Lion will get a paw on you, scratches, you learn a lesson and carry on, but if he ever bites you, you’ll wish you were dead. (really)
      But……..it takes a couple of deaths to become a savvy Lion taming trader and master the market.
      One cant just start as a day trader. The desire to day trade stems from an interest in the share markets that develops as the involvement and understanding of the market grows
      The trader has to monitor the market regularly, is able to analyse market and company performances, can understand the greater economic and business issues affecting industry sectors and is comfortable with trading stocks regularly.

      You also need to be self-directed and disciplined.
      With a strategy or plan based on lessons learned based and on technical triggers,

      Buying and selling shares to make money from changes in the price of a stock over a short period is challenging. Trading requires a unique set of personal qualities.
      Using normal business practices and rules will send you to the wall.
      Trading is mostly a sport; it is the fast moving action of the share price which provides the opportunities to trade and fast moving buying and selling responses of the trader are required to make the most from the price action
      To win, it is all about winning, you have to perform at the highest level of competence.
      Trading is about instinct.
      When the market is open there is little time for thinking and no time for emotion.
      To put funds in the bank you have to instinctively, correctly, trade the action. Strategies, plans, tactics are best considered on the weekend or after trading

      Because of the rapid outcomes that are possible, day trading can be either extremely profitable or unprofitable, and high-risk profile traders can generate huge returns or huge losses.
      The first step for any trader is to learn the game. (Next installment)

      • Thanks WW for your supplementary note – it is difficult to cover comprehensively in a post. I totally agree that day-trading is certainly not a place to start – I haven’t done it yet and nor do I intend to.

        Do research of what you intend to buy first. And the next step is watching or monitoring. After you have seen long enough you may get a feel that you are ready to get in. If you don’t feel comfortable then don’t buy.

        I forgot to mention that what I stated above is for a longer time horizon – not measured in hours or days but in months or quarters at the shortest.

        I also forgot to mention where the term “cigar butt” came from. According to Buffett, the term refers to a stock that may not have a long-term future but today’s offer price is so compelling that it essentially constitutes “an offer one cannot refuse”.

        Once in a while, one may need mental fortitude or equanimity to keep one’s cool beneath a sword of Damocles – just remember it is ok to lose money which you are already prepared to lose.

        It is also ok to make mistakes – just don’t make stupid ones (or uninformed ones).

        The key is you need to know what you are doing all the time, which incidentally is the point of my Battle of the Bulge analogy.

      • I would suggest that the game is a lot easier if you consider companies beyond the confines of the ASX.

        Companies in the US and Europe are just as easy to analyse and you see a lot of their product in your daily lives. There are not a lot of ‘global leaders’ in the ASX and this sees a bunch of stocks that trade at valuations well above their relative risk/quality profile.

        If you are scared of currency – learn simple options strategies for hedging. The options premium you give away for FX hedging will be paid back in spades over time from having a superior quality, lower risk portfolio. For example – a AUDUSD 75 call for August 2016 costs about 1.5c

        The platforms for execution of such portfolios are so cheap now there really is no excuse.

      • I assume you guys are talking about day trading not long term investing (very different beasts).
        What do you think about the common consensus that most day traders eventually lose money?
        I personally favor more medium/long term investing.

      • @88888

        Global markets are certainly on my wish list. I would love to add Berkshire, Nestle and others when I have more capital to work with.


        I don’t do day trading so I haven’t looked into the odds. Even for the cigar butts, my time horizon is at least quarters and usually a few years.

    • PS

      I realize that there is a flaw in my approach; I don’t have enough funds to diversify within a sector of my cigar butt roster.

      I am reluctant to commit funds to more than one stock from the same sector – because if the components of the roster were highly correlated with each other then the probabilistic approach wouldn’t work.

      Then, when the whole gold mining sector fell though the floor I had to make a choice, and made a wrong one. For the 80% it was easy; I bought NCM and didn’t think twice. For the 20%, I eventually chose SLR. In hindsight, I should have chosen NST or SBM instead.

      This will become a recurring theme in future unless I make an adjustment and opt for a sub-index fund that covers the whole sector. I hate the idea of owning a fraction of a company which I don’t particularly like (I mean not so much as to commit my money), but maybe that’s something I need to overcome.

      • D, these notes from my past are the origin of my trading strategy.
        They may not appeal to all, but to all survivors they will!
        Manfred von Richthofen (the Red Baron), wrote in his book The Red Fighter Pilot, “The great thing in air fighting is that the decisive factor does not lie in trick flying but solely in the personal ability and energy of the aviator. A flying man may be able to loop and do all the stunts imaginable and yet he may not succeed in shooting down a single enemy. In my opinion the aggressive spirit is everything and that spirit is very strong in us Germans. Hence we shall always retain the domination of the air.”
        Von Richtofen was tutored by Oswald Boelcke. (already an Ace)

        Dicta Boelcke (Boelcke’s tactics).. This list of 8 fundamental strategies of aerial combat formulated by the first German Ace of the WW1, Oswald Boelcke. (40+ shot down ) died after his plane crashed after a collision with another German aircraft. (He broke of one of his own dicta,> never to close in on a single combatant when others are also pursuing it.)

        1. Try to secure the upper hand before attacking. If possible, keep the sun behind you. Remember also :
        Speed: the pilot with the faster of two machines has control over the combat. He has the choice to break off combat and retire. The slower machine cannot catch him. The pilot of a slower machine must stay on the defense. He cannot run. A fast aircraft can perform maneuvers, giving its pilot many options. A machine flying close to its stall speed can do little beyond wallowing in a more or less straight line. Speed is critical.
        Altitude: From the advantage of flying above his opponent, a pilot has more control over how and where the fight takes place. He could dive upon his opponent, gaining a speed advantage for a hit and run attack. Or, if the enemy had too many advantages a pilot could escape.
        Surprise: getting the first shot before one’s opponent is prepared to return fire was the ‘safest’ and preferred method for attack. Most air victories were achieved in the first pass. A pilot could approach his foe stealthily, Use the sun, the clouds, haze or even the other aircraft’s wings or tail to conceal his approach.
        Performance: Knowing the strengths, weakness and capabilities of your own aircraft, and that of your foe, is also critical. Know who is faster, who can turn tighter, how many are there, etc.
        Don’t be a Hero>>>If you can not ‘secure advantages,’ do not attack.
        Manfred von Richthofen, a student of Boelcke, was WW1’s top scoring ace.(80 confirmed and over 100 plausible aircraft shot down)

        2. Always continue with an attack you have begun. Some pilots would start a fight, but fear would convince them to break it off and run. This inevitably presented their rear to his opponent’s guns.
        Boelcke taught that it was better to stay and continue mixing it up — waiting for his opponent to make mistakes or flee — than to break and run.
        To turn tail and run was to surrender most, if not all, of the advantages a pilot might have.
        When Manfred von Richthofen met British ace Lanoe Hawker in November 1916, each persisted in trying to get on the other’s tail. When their endless circling brought them down near the ground behind German lines, Hawker had to choose between landing and capture or fleeing. He chose to flee. Richthofen then shot him.

        3. Open fire only at close range: and then only when the opponent is squarely in your sights.
        Shots made at ranges of 500 to 1000m have little chance of hitting their mark and the rattle of machine gun would alert the intended target and give them time to react.
        Boelcke preferred to fly to within 100m or less before firing, to ensure hitting what he aimed at with his opening burst. Once his guns were heard, the advantage of surprise was gone. Shoot the observer first then the pilot.

        4. Always keep your eye on your opponent, and never let yourself be deceived by ruses.
        In the hustle and bustle of a fight it was easy to lose sight of your adversary. A restatement of this rule might be: never assume you know where your opponent is or will be. If a pilot ‘lost’ his foe, the advantage shifted to the foe. A successful pilot did not allow himself to be distracted from his opponent.
        As for ruses, it was not an uncommon practice for a pilot to feign being hit, in order to exit a fight that was not going well. Boelcke recognized that too many enemies were being allowed to escape and return to fight another day. He taught his pupils to follow their opponent down, and make sure they were out of the fight.

        5. In any type of attack, it is essential to assail your opponent from behind
        Firing at a machine flying across one’s path required ‘leading’ the shot—aiming ahead of a moving target to compensate for its speed. While a few pilots were adept at the mental calculations necessary and good aerial marksmen, most were much less adept. In deflection firing, the target could cross the stream of fire whose bullets were 50m or more apart. Such crossing gave less exposure to the bullets.
        Head-on attacks or head-to-tail attacks required little or no calculated deflection in aim.
        A head-on attack, however, exposed one directly to the enemy’s guns. It was far safer and more effective to have one’s target and bullet stream all traveling in more or less the same direction. This exposed the target to a greater concentration of fire.

        6. If your opponent dives on you, do not try to get around his attack, but fly to meet it
        An instinctive reaction was to turn and flee from an approaching attacker—especially a diving one.
        This simply presented their tail to the attacker, usually with disastrous results. Boelcke taught to conquer that instinct. Turning to face the attack could force the attacker onto the defensive, or at least keep the situation unsettled, which was far better than presenting your tail.
        Even though climbing to meet an attack would reduce speed, it was better to try to bring one’s own guns to bear than to flee, and approaching the enemy still increases the relative velocity between the two fighters and thus reduces the time during which the enemy can fire.
        Furthermore, if both fighters miss, the diving attacker must now pull out of his dive, while the defender is now in position to circle around and counter-attack with his own dive.

        7. When over the enemy’s lines, always remember your own line of retreat
        If a pilot chose to flee a superior force, or was coming down with a damaged machine, it was critical to spend what little time left going in the safe direction. Many pilots came down behind enemy lines because they got confused and lost their way. Taking regular note of landmarks helped a pilot get his bearings quickly, perhaps making the difference between safety and captivity.

        8. Tip for Squadrons: In principle, it is better to attack in groups of four or six. Avoid two aircraft attacking the same opponent. Boelcke recognized that the days of the single pilot were over. Many young pilots, however, still came to the front expecting to dash valiantly into battle as a Knight, alone, but in reality they would be quickly overwhelmed by multiple enemies. Boelcke lectured his pupils on the need for teamwork—sometimes scolding them for acting too independently. Attacking in a group allowed the leader to concentrate his attention exclusively on his target, while his wingmen protected his tail.
        Doubling up also left an enemy machine somewhere unbothered and free to tail one of your side’s machines.

        Mannock’s Rules : Major Edward Corringham “Mick” Mannock VC DSO MC (24 May 1887 – 26 July 1918) was a British First World War flying ace. (61 shot down) Mannock went into combat on the Western Front on three combat tours. After two months back in England, he returned to France as a Flight Commander in the fledgling 74 Squadron. He returned as Officer Commanding of 85 Squadron in July 1918; just days after warning fellow ace George McElroy about the deadly hazards of flying low into ground fire, Mannock did just that on 26 July 1918. He was one of the first theorists of aviation tactics, and was renowned for aggressive leadership in the air. Mannock won the Military Cross, twice, was one of the rare three-time winners of the Distinguished Service Order, and would be posthumously awarded the Victoria Cross.

        1. Pilots must dive to attack with zest, and must hold their fire until they get within one hundred yards of their target.
        2. Achieve surprise by approaching from the East. (the German side of the front.)
        3. Utilize the sun’s glare and clouds to achieve surprise.
        4. Pilots must keep physically fit by exercise and the moderate use of stimulants.
        5. Pilots must sight their guns and practice as much as possible as targets are normally fleeting.
        6. Pilots must practice spotting machines in the air and recognizing them at long range, every aeroplane is to be treated as an enemy until it is certain it is not.
        7. Pilots must learn where the enemy’s blind spots are.
        8. Scouts must be attacked from above and two-seaters from beneath their tails.
        9. Pilots must practice quick turns, as this maneuver is more used than any other in a fight.
        10. Pilots must practice judging distances in the air as these are very deceptive.
        11. Decoys must be guarded against — a single enemy is often a decoy — therefore the air above should be searched before attacking.
        12. Machines should be turned with as little bank as possible, otherwise the sun glistening on the wings will give away their presence at a long range.
        13. Pilots must keep turning in a dog fight and never fly straight except when firing.
        14. Pilots must never, under any circumstances, dive away from an enemy, as he gives his opponent a non-deflection shot — bullets are faster than aeroplanes.
        15. Pilots must keep their eye on their watches during patrols, and on the direction and strength of the wind.
        WW2 Aces, such as Bader and Johnson, acknowledge that Mannock’s tactics served as inspiration to them.

        TEN RULES. Adolph Gysbert Malan DSO & Bar DFC (24 March 1910 – 17 September 1963),
        “Sailor” Malan, was a South African World War II pilot who led No. 74 Squadron RAF during the height of the Battle of Britain. Malan’s simple rules for pilots, were eventually used by Fighter Command:
        1. Wait until you see the whites of his eyes. Fire short bursts of one to two seconds only when your sights are definitely “ON”.
        2. Whilst shooting think of nothing else, brace the whole of your body: have both hands on the stick: concentrate on your ring sight.
        3. Always keep a sharp lookout. “Keep your finger out”.
        4. Height gives you the initiative.
        5. Always turn and face the attack.
        6. Make your decisions promptly. It is better to act quickly even though your tactics are not the best.
        7. Never fly straight and level for more than 30 seconds in the combat area.
        8. When diving to attack always leave a proportion of your formation above to act as a top guard.
        9. INITIATIVE, AGGRESSION, AIR DISCIPLINE, and TEAMWORK are words that MEAN something in Air Fighting.
        10. Go in quickly – Punch hard – Get out!

      • Thank you, WW. Your post has a lot of similarities to what is described in the art of war. Ideally, you would want to place yourself in a winning position first and then commence a battle against an enemy who is already in a losing position. Then you can never lose in theory.

  17. Maybe the latest Chinese credit creation figures aren’t all they seem to be


    Punchline : The recent data on rising Chinese credit creation had nothing to do with an improvement in the economy and everything to do with covering the discrepancy between the official ( declining ) capital outflows and the unofficial ( increasing ) capital outflows.

  18. Predictions of house price falls of 7.5 per cent have brought back not-so-distant memories of the last property slump of 2012, when values in marquee suburbs plunged by up to 28 per cent in a year….Prominent suburbs such as Woollahra (down 28 per cent), Palm Beach (down 19 per cent) and Neutral Bay (down 18 per cent) were among the top 10 biggest falls across the city.


  19. Funny how Oz and NZ are carrying on excitedly about how tourism will save them as their currencies crash through the floor. Tourism is a low skill, low wage, low productivity, low innovation industry. It’s what backward countries resort to as a first step towards development. If people want to understand why Ireland and Spain now have the most dynamic economies in the developed world, and not Greece, it’s simple, there’s a hell of a lot more to their economies than their large tourist sectors, whereas in Greece, there’s not much more than tourism. Oh, and the destruction of their respective bubbles cleared the way for investment in real productive and innovative industry.

    • …and…what are the two item first on anyone’s household expenses bill when times get tough? Insurance payments ( go from Comprehensive to Third Party etc for the car ) and…tada….holidays, especially foreign holidays to exotic and far away places like Oz and NZ….Just lucky for us that there isn’t going to be another leg down in the global slowdown….

    • Correct and don’t forget ‘agriculture’ – an industry with razor thin margins and low wages that essentially accumulate to a small number of families that inherited their assets, seasonal migrant workers and some foreign trading firms.

      Name a wealthy country with agriculture as a key wealth driver?

  20. Does anyone know anything about Bank Australia? It is a customer owned bank based in Kew, Victoria. I’m interested in leaving the Big 4, and these guys are currently my lead candidate.

    Edit: https://bankaust.com.au/

    • Don’t they simply re-invest your money in the big 4? From their site:

      We must manage a diversified investment portfolio across a number of authorised deposit-taking institutions (ADIs), including the four major banks and regional banks. This portfolio includes fixed term deposits, negotiated certificates of deposits, bank bills, bonds, covered bonds, mortgage backed securities and floating rate notes.

    • There’s a heap of “Bank Australia’s’ about – they just still call themselves what they are though, Credit Unions – “Bank Australia, formerly the Members and Education Credit Union ”

      Australian Bank Ltd, though, was the first attempt by Mark Johnson the early 80’s to get his investment bank ideas going. As those floundered he went back to help get Hill Samuel get going as Macquarie Bank and saw Australian Bank get taken over by State Bank of Victoria ( in an attempt to quarantine that banks losses from lending in its TriContinental Corporation subsidiary) and when that failed the CBA took SSBV over/rescued the Victorian taxpayers, for the grand sum of….$1.

    • TailorTrashMEMBER

      Bank Australia …..formerly Bank MECU ………Melbourne credit union ……..they are on the list of APRA ADI’s …….as bank MECU ……
      ……..Changed their name recently to Bank Australia …apparently” owned by their customers “

    • Not much of a spruik if they are advising first time buyers to wait “First-time home buyers finally have time on their side.”

  21. GunnamattaMEMBER

    A strong moral imperative to add to the Australian carbon imprint
    A strong moral imperative to add to this nations pathetic dependence on resources in the face of woeful competitiveness elsewhere
    A strong moral imperative to sell off cheaply yet another Australian asset in order to provide a payoff for those in the FIRE world
    A strong moral imperative to create another couple of hundred jobs digging and carting the stuff to a shipping terminal

    For mine there is a strong moral imperative to take politicians like Frydenburg (and they are the same both sides of mainstream politics) and smoke the bastards….

    ‘Moral’ imperative in Australia’s biggest coal mine, says Resources Minister Josh Frydenberg


    • Echoing former prime minister Tony Abbott’s insistence that “coal is good for humanity”, Mr Frydenberg said the “most important” result of Australia’s largest coal mine is that it would help pull millions of people in India and other countries out of energy poverty.

      Won’t somebody please explain this to the 150-million strong population of Bangladesh, whose country faces obliteration due to global warming caused by the burning of this “morally good” coal? 🙄

    • TailorTrashMEMBER

      Typical modern Australian dickbrain politician …………moral imperative to have foreigeners dig it up and sell it with pennies coming back to us …..
      ………..just spent a week in the snowy cruising around ……first time I really got my head around that project and the scale and magnitude of it . What vision ……what engineering ……..what planning …..what leadership ……….what nation building ……….trapping the water …..running it through granite from one power generating plant to another ………and the on to irrigation………..
      ………..the old photos are sad to behold ……ghosts of an Australia lost …………..and there in one of them sitting quietly ………..my favourite labor man …….a train driver and a great Prime Minister ………Mr Ben Chiefly ……………Australia lost indeed !! ………………he would roll in his grave to see his country now ……….

  22. Josh Frydenburg is dumber than dumb, it would appear any moron should be capable of a position in Cabinet if he’s anything to go by!

    ‘Moral’ imperative in Australia’s biggest coal mine, says Resources Minister Josh Frydenberg


    I can understand that he has to push the gov line, but you’d think he’d be too embarrassed to allow shit like this to spew out of his mouth.

  23. What is it about Putin that gets far-right Westerners excited? Is it that he’s like a more competent George W Bush? All the militarism, religion and Muslim-slaying, but less of the malapropisms?

    Anyway, keep up the chest-beating celebrations of Russia’s new-found military might DE, makes for entertaining (and revealing) reading.

    • What is it about Putin that gets far-right Westerners excited?

      He might finally deliver the war they’ve been fantasising about for half a century.

      • ever tried to catch an eel with bare hands?

        Putin will dwell on the edge (of the brink of the war) but will make sure he cannot be tipped over.
        He needs not confrontation, only plain information and scrutinisation of westworld’s MSM – cannot be easier.

        A good sarcastic comedy tv show:
        The Brink (2015)

    • It’s not Putin or Russia. The Yanks have shown the cloven hoof continuously since 2003 and we have been weak enough and stupid enough to go along.

      It is relief that it is no longer possible for the Washington — London–Tokyo axis to dictate to the rest of the world. Although our generation is lost, it is now evident that the US no longer disposes of the natural resources and mass production to form mass armies. It needs to threaten high tech television wars or nuclear destruction to get its way in extremis. Russia is becoming a match for them in these pursuits and is so cut off from our financial system that we can’t hurt them critically with funny money .They will bring China along with them, so the world has changed fundamentally but it will take a while for this to become evident to those in power. Once we get rid of the present load of corrupt political parties we could become once again a sovereign state, as can any other country if they take the trouble.

      • Right. So Putin is replacing the Washington-London-Tokyo axis with the Moscow-Beijing axis. How will a global order remade in Moscow and Beijing be superior to one made in Washington and London and Tokyo? Why will it be a relief being dictated to by Russia and China instead of the US, the UK, and, err, Japan I guess?

      • @MJV Sorry to disappear on you, getting the Sunday Roast ready. I am not hoping for a Moscow-Beijing axis in charge, notice the Chinese still lack self confidence ( no presence in Syria ), this is just a small flowering of independence from US dollar hegemony, hopefully it won’t get snuffed out, who knows where it will lead to.

        The real problem is the lack of moral leaders in the US, always in the past when they have lost their way a great man has arisen to show them the way back, but looking at their political scene, no such leader is in prospect. If you told me I would advocate Mr Trump as US president even a year ago I would have laughed in your face, but now I see little else the least bit hopeful but him.

        I am not worried about anyone ruling the world on a 40 year timeline because lack of useable resources will make us localise our economies which will all be command and control economies because of the enforced rationing of the available resources. No, I do not expect a Mad Max scenario, while I have a poor opinion of human nature I think we are better than that.

    • GunnamattaMEMBER


      More than a year ago I left a spiel here in the weekend links column about Putin and the West and why he represents a sore point for them. It isnt him it is them (which isnt to say I think he is a great bloke), the uber set in the western world (particularly in the US and UK) support some serious ugliness in Putin’s world and he gets good mileage out of pointing that fact out……….

      Around the buoy nyet again in dealing with the Russians – The Russians, Ukraine, and the West in the age of Putin


      ……..When it comes to Syria Putin would see Assad as just another regional despot, and the US support for the Anti Assad freedom fighters there (who have been amply demonstrated to be closely linked to Al Quaeda and of whom it is know they are providing arms to) represents to some extent an investment in a future unstable government which might potentially foster the usual batch of extremist fruit loops wanting to export their sentiments, or facilitate the advent of IS running Syria……

      Dont get me wrong, Assad is an utterly contemptible prick who has murdered zillions of his own people. It is just that the tragedy of the situation (and I tend to be with the Russian line here) is that he may well be the lowest cost (in terms of human life) and least contemptible plausible option when it comes to running Syria.

      There isnt going to be a clean way to bring about positive change in Syria, which probably means that utter bastardy will win out – if anyone could explain to me why it is that the RAAF is flying missions there, and how that is in Australia’s strategic interests I am all ears. All I am getting is that it is laying the basis for accepting refugees from there when the wave hitting Europe decides to try somewhere else.

  24. “They are in the 45 to 60 years age bracket (and) there have been a lot of parents getting their children to rent back from them.”

    So does rental return really matter when you can make up the difference from negative gearing?

    edit: don’t know how this comment ended up here. Supposed to be under the Cairns post link.

  25. SMH religious like fixation with property and its focus on attention grabbing empty stories designed for clicks and no substance is turning it into a cult publication and not a national newspaper. Compare SMH to some national US newspapers (Boston Globe, Washington Post), and you will see a striking difference in quality and depth of articles. Where the US papers add value and informative analysis, SMH sole purpose seems to be to make us dumber and at the same time enrich the property owners club.

    • TailorTrashMEMBER

      “Snap up” a copy now ………”don’t miss out” …..It has “never been a better time ” to get yourself “on the property ladder” with a great little crumbling dump in Redfern …….
      ………There ………I think I could write for SMH ……doesn’t seem to take much skill …………..

    • Yes: afflicted by parochial smugness, utter mediocrity, and a lack of ability and imagination.

  26. Fairfax broadsheets were in the top echelons of quality newspapers internationally ’80/’90s with classified revenues and good quality journalism. Now the journalism has been compromised by both lack of income and obsession with real estate, and AFL/NRL, politics as infotainment, culturally specific and/or conservative journalists/management looking backwards to the ’50s, ‘human interest’ stories, click bait etc., with the papers in a seeming death spiral, while The Guardian and other non mainstream blogs etc. taking audience share with better journalism?