“On the beach” in Australia and New Zealand

Here is the plot summary of a 1959 film you may not have watched or indeed heard of. It has a stellar cast, including Gregory Peck, Ava Gardner, Fred Astaire, and Anthony Perkins.

I have a vague memory of watching this on BBC 2 one rainy Sunday afternoon in the late 1970s.

On The Beach

In early 1964, in the months following World War III, the conflict has devastated the entirety of the Northern Hemisphere, killing all humans after polluting the atmosphere with nuclear fallout. Air currents are slowly carrying the fallout south; the only areas still habitable are in the far reaches of the Southern Hemisphere.

….The Australian government arranges for its citizens to receive suicide pills or prepared injections so they may end their lives quickly before there is prolonged suffering from radiation sickness.

…..Within a few days, the last pockets of humanity are dead. The empty, windblown streets of Melbourne are punctuated by the rise of dramatic, strident music over a single powerful image of a previously seen Salvation Army street banner: “There is still time…Brother”.

“How, pray tell, does this have any relevance today?”, you may ask.

Well, the movie is based on a time disparity between the Southern and Northern Hemispheres in terms of their consequences from the nuclear war. It’s happened up north and they’ve taken the pain, whilst the south is watching and waiting for the inevitable impact to arrive.

At the time of writing, Australia’s official death toll from Covid19 is 208 and New Zealand has had just 22 deaths. The USA, meanwhile, is 157,000.

Well done Antipodeans, eh?

Hmm. Depends, doesn’t it.

The first point to note is ALL data on Covid19 is utterly unreliable for the purpose of comparison. Not only are deaths reported differently across countries, but rates of testing is nowhere nearly equal, and local circumstances are wildly different too.

The USA numbers with New York removed are very similar to other countries with good health care systems. What happened in New York? Only the minor issue of old people being relocated from hospital to aged care facilities without being confirmed as free from infection.

Imagine the movie On The Beach with a slightly changed plot where the north didn’t get wiped out but took a bad (say about 200,000 deaths) and immediate hit and then the south were told they would have to suffer the same relative fate (so, about 5,500 deaths in Australia and about 1,200 for New Zealand) BUT must decide when they would take it.

What would Australia and New Zealand decide?

Bill’s Opinion

A friend of mine recently posted the economic data from Sweden on social media, claiming that people who were happy to kill off the old and infirm for the sake of the economy had been proved wrong.

That’s the false dichotomy fallacy. I’ve never met anyone who wants to sacrifice members of the community for the sake of the economy.

I’m aware, therefore, my question above asking what Australia and New Zealand might do if told they’d have to accept 5,500 and 1,200 deaths respectively is also a fake dichotomy. By delaying the pain, both countries have learned lessons from Governor Andrew Cuomo other countries and could now make a third choice of re-opening their economies with very specific and targeted actions to protect the vulnerable.

However, we aren’t seeing this level of nuanced discussion being had in either country. Instead, we are still acting as if a tacit target of zero infections exists. It is my opinion this is delaying the inevitable.

Meanwhile, a new report in Science Magazine suggests T cell immunity to coronavirus already exists in many people and therefore the “herd immunity” (remember that policy?) could be far lower than previously thought.

So, while Head Girl Jacinda and Property Scotty vacillate on how to break bad news, please don’t gas yourself in the garage with your sports car.

Eliminator

….was a great album by ZZ Top. Their first

three albums are their best, however.

Tap, tap, is this thing on?

Apologies for the hiatus. I suspect, as for all of us, life has been a little strange recently. But I’m ok, and so is everyone I hold dear.

I hope you are also still close to the top of the Hierarchy of Kung Flu.

Over a month ago, we discussed the tacit scope creep that had occurred since the lockdown commenced.

If you recall, “flattening the curve” was the mission statement in order to not overwhelm the health services. Nobody in authority ever stated a policy of total elimination, probably because that’s a metric that’s guaranteed to be missed.

In the meantime, there’s been much handwringing in Australia at every new case that discovered, domestic borders closed, out of state visitors shunned, etc.

Reading the media, one could have been mistaken in thinking the tacit mission for a while back there was to get to zero cases.

Thank goodness then, somebody has said the quiet part out loud:

There, that wasn’t so hard, was it?

Bill’s Opinion

We’ve mentioned several times here that l:

1. The decision to close an economy is far easier than the subsequent decision to re-open it.

2. That decision was made using a cost/benefit analysis without really understanding the full costs.

The true costs are going to start revealing themselves soon. This report in the UK suggests 200,000 early deaths might occur as a consequence of lockdown, not Kung Flu.

Let’s hope it is wildly inaccurate, like all the other expert models we’ve been subject to recently.

Lastly, sorry again for the absence. I’ll get my mojo back now.

Hubris in a “post experts” age

Experts, eh?

Remember when we outsourced so much of our key life decisions to “experts”?

“We lied about the effectiveness of masks, sorry ’bout that”.

“The USA will be 6 degrees warmer by 2020”.

“The USA housing crisis is contained”.

Etc. etc.

So, ladies and gentlemen, drum roll please….

Here’s the “experts” who will guide you out of these difficult and febrile times:

Stop laughing at the back.

The beard on the left is Ross “dress for the job you want, not the job you have” Gittins, of whom we’ve written previously.

Pole position is Jess “I’m smarter than you proles” Irvine. Again, she’s not escaped our attention, in fact on multiple occasions we’ve laughed at her ridiculous Facebook posts masquerading as journalism and her heavy reliance on feelings over data.

I’ve no idea who the other chap is, so I assume he’ll be the one made redundant in the next round just like the nameless crew member who is transported to the planet with Captain Kirk.

Bill’s Opinion

Seriously, who in their right mind would listen to anything these clowns say?

They’ve predicted nothing other than sunrise and sunset. Worse, they’ve had no actual useful experience of a recession outside of the lecture theatre of a university.

Jess Irvine bought her first property at what was clearly the very tippety top of the market. She needs an excel spreadsheet to lose weight and run a marathon at a pace that put her behind the team clearing up.

No, but thanks Sydney Morning Herald, our economic advice is in safe hands. What next, Pirate Pete lecturing us on virtue signalling?

Send in the clowns. Oh look, they’re already here.

The Dreamtime Phoney War

On the June 1st episode of the podcast, TRIGGERnometry, Peter Hitchens made an interesting observation on the the current attitude of many people in the UK (but it applies equally to any other country undergoing government Kung Flu largesse):

He describes many people as living in a happy dreamtime where most, if not all, of their wages are being paid for by government relief schemes, the weather is pleasant and the consequences of incurring the biggest peacetime national debt have not yet been felt.

His opinion is this cannot continue and, when the plug is pulled on these various furlough schemes, there will be a difficult and tragic reckoning to be had.

The likely timeline for this mean reversion differs by jurisdiction but the 3rd and 4th quarters of 2020 is generally when these government cash drops are due to either finish or begin to taper off.

I say this without any hint of glee, but there are individuals and entire industries that are going to experience the financial equivalent of cold turkey.

What’s cold turkey feel like? Let’s ask a professional:

I can’t imagine what other people think cold turkey is like. It is fucking awful. On the scale of things, it’s better than having your leg blown off in the trenches. It’s better than starving to death.

But you don’t want to go there. The whole body just sort of turns itself inside out and rejects itself for three days. You know in three days it’s going to calm down. It’s going to be the longest three days you’ve spent in your life, and you wonder why you’re doing this to yourself when you could be living a perfectly normal fucking rich rock star life.

And there you are puking and climbing walls. Why do you do that to yourself? I don’t know. I still don’t know. Your skin crawling, your guts churning, you can’t stop your limbs from jerking and moving about, and you’re throwing up and shitting at the same time, and shit’s coming out your nose and your eyes, and the first time that happens for real, that’s when a reasonable man says, “I’m hooked.” But even that doesn’t stop a reasonable man from going back on it.

Keith Richards

Bill’s Opinion

Governments and central banks are about to discover restarting an economy is a significantly different prospect to stopping one.

I have no doubt our money, our children’s money and our grandchildren’s money will be generously thrown at the problem.

Some of it may even stick.

In fact, the Australian Government is mooting plans to throw figures like $20,000 at new home builds or to renovate existing homes. Obviously, this will have the effect of increasing the price of everything by a leveraged ratio of $20,000.

I understand the Keynsian theory is it doesn’t matter what the money is spent on but, now we’ve just run the biggest experiment to prove most people don’t need to live 8km from the CBD to be productive, why are we installing granite kitchen worktops in Mosman rather than building high speed rail links to an open plain in the middle of nowhere for developers to build around?

In the meantime, this organ has been sadly missing a previous regular commentator from Brisbane who frequented this place with gleeful tales of his investing prowess and acumen.

If he were to return, we might ask him to review this updated chart and answer the question, “what happens next?“.

Don’t ya know that it Hertz so good

… to paraphrase Susan Cadogan.

One of the first corporate dominoes fell this week as the car rental company, Hertz, commenced the bankruptcy process in the USA.

That a car rental company might file for Chapter 11 after 6 weeks of almost total cessation of global and domestic travel might not be so surprising, perhaps.

There’s an analogy to be had here though, which can be summarised by one question.

Before I pose that question, I will explain that this is the second time I posed it. The first was last night when we finally managed to visit friends for dinner. One of the couple was very much of the “one death is too many, regardless of the economic and long term social costs” attitude, so prevalent in all of the media class and nearly every national government.

She was also absolutely certain the published figures for fatalities from around the world were 100% accurate, despite also conceding the data collection methodologies varied by country and local jurisdiction.

Her reaction when I asked the following question was visceral; she physically moved and paused in her conversation. Depending on which psychology source you read, this can sometimes be an indication of a moment of cognitive dissonance. The question was this:

“Over recent years, Hertz has taken on $19bn of debt, so do you think Hertz died of the virus or simply with it?”.

Bill’s Opinion

The virus might have hurried Hertz and Virgin along to an early grave, but the debt level both companies had taken on was unsustainable by any objective measure.

What do we think will the Receiver will write as the cause of death on their death certificates?

Freedom ‘20

1993

Many lifetimes ago, a young worker in the City of London watched as, in response to a large IRA bomb attack, armed police officers were deployed to patrol the streets and the road entrances to the area had permanent checkpoints installed and manned around the clock.

That young worker watched in horror as his fellow citizens happily accepted this radical change to the method of policing in response to a single event which, arguably, was a result of a multiple failures of policing and intelligence-gathering (for example; how did a purchase of 1 tonne of ammonia nitrate go unrecorded?).

2001, 2005, 2006

Eight years later, further radical changes were made to anti-terror legislation following the 911 terror attacks in New York and Washington DC. A further increase in powers was implemented in 2005 and yet again the following year as a reaction to the London attacks in 2005, including the ability to hold suspects without charge for 28 days and impose house arrest without a conviction.

Similar legislation was passed in other countries throughout this period.

Australia, for example, has passed 82 anti-terrorism laws since 2001. It might be argued that, given the comparative low level of attacks since 2001 (12 deaths, including the perpetrators) in Australia, this legislation has been incredibly successful. An alternate opinion might be that there’s been significant overreach relative to the low level of domestic threat.

2018

A decade following the financial crisis of 2008, Australia passed the Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Act 2018 creating further powers to handle future financial crises.

The media scrutiny of this legislation was woefully shallow, otherwise you might have read somewhere, anywhere, that the legislation allows for “bail-ins”. That is, the funds in your bank account can be accessed by the Reserve Bank of Australia to bail out the retail banks.

2020

In response to the unclear threat of the China virus, legislative and policing precedents were overturned in a matter of days by governments around the world. In the largest abuse of Eminent Domain since 1066, businesses were ordered to cease trading, police were given powers to fine and arrest those who were not complying with highly dubious and contradictory guidelines for social distancing.

Social and tradition media has plenty of examples of police overreach as a consequence, from police drones buzzing hikers in the Derbyshire Peak District, to Yorkshire police threatening, “to make something up, who they gonna believe, me or you?”, and a lone swimmer manhandled and arrested in Bondi for the crime of exercising alone.

The Australian Prime Minister expressed a desire for a social tracking app to be made compulsory for all citizens (and then changed his mind after some horror was expressed by anyone with the IQ above a gnat).

Many of these emergency measures will eventually be challenged in the courts and will be overturned or reduced in severity. The precedent suggested by the chronology described above is the legislation will then be amended to a form less likely to fail in the courts. i.e. the powers will remain, just with tighter legal wording.

Bill’s Opinion

As far as I’m aware, none of this legislation has ever been wound back. For example, the UK’s prevention of terrorism acts were initially designed to be temporary and had to be frequently renewed by Parliament. These measures are now permanent.

Similarly, financial and taxation legislation has only moved in one direction since, well, since the creation of the concept of income tax to pay for the Napoleonic Wars.

It is looking increasingly likely the fatality rate of this virus is nowhere near that predicted by the experts (who’d have thought that multi-variable computer models might not give accurate results?). Potentially, the final fatality rate is going to fall within the range of 0.1 – 0.6%, or about as bad as strong version of the seasonal ‘flu.

In which case, the global governmental response is disproportionate and should be wound back immediately.

But that’s not the point. Even if this virus was as dangerous or worse than, say, the Spanish Flu (2.5% fatality rate), there’s a bigger question you need to ask yourself:

“Am I OK with all of this?”.

Well punk, are ya?

The death of Princess Diana, 2020 reboot

Initial results are in from a programme of antibody testing.

The first large-scale community test of 3,300 people in Santa Clara County found that 2.5 to 4.2% of those tested were positive for antibodies — a number suggesting a far higher past infection rate than the official count.

Based on the initial data, researchers estimate that the range of people who may have had the virus to be between 48,000 and 81,000 in the county of 2 million — as opposed to the approximately 1,000 in the county’s official tally at the time the samples were taken.

Early days, first proper study, risk of confirmation bias in terms of selection, etc. BUT…..

This takes us closer to learning at least the order of magnitude of the critically important denominator; how widespread is this virus already?

Extrapolating the mid-range of the estimated scale (50-80 times greater than originally thought), the UK’s infection rate might be 7 million (65 x 108,000).

With an idea of the denominator, we can apply the numerator – the official statistics suggest 14,000 COVID19 deaths. Assume it’s more than that due to a lag in reporting, let’s say 20,000.

20,000 / 7,000,000 x 100 = 0.3%

A “regular” ‘flu has a fatality rate of around 0.1%.

Bill’s Opinion

The probability of COVID19 killing millions in a short period of time is looking increasingly unlikely.

The probability of increased deaths, long term harm and hardship due to shutting the global economy is absolutely certain.

Which is more likely to be worse? Last week, we might have said the effects of the virus. This week, that’s not such a compelling argument.

The reasons given for the suspension of economic activity and personal freedoms were twofold; this is highly contagious and highly fatal and due to this, our health systems will be overwhelmed.

It’s starting to look like the “fatal” part of that argument was incorrect. Excess hospital capacity isn’t even close to being used in most locations. Our numerator/denominator question is starting to be answered.

In a moment of collective madness based on mendacious Chinese statistics and by listening to an Imperial College academic with a dubious track record, we’ve created The Great Depression 2020/21.

The antibody testing must continue in other locations and rapidly so we can make informed decisions about rebuilding what is left of the spark of the miracle that has saved more lives than any other invention; a freely moving economy.

In the meantime, reopen and keep a close watch on hotspots of infection as they arise.

There is a war….

There is a war between the rich and poor,

A war between the man and the woman.

There is a war between the ones who say there is a war

And the ones who say there isn’t.

Why don’t you come on back to the war, that’s right, get in it,

Why don’t you come on back to the war, it’s just beginning.

Leonard Cohen 1974

Modern wars are funny beasts; they happen all the time but very rarely does anyone ever bother to formally declare it.

In the USA, Congress has the Constitutional duty/sole prerogative to declare war. Did you know that? How many times do you think they’ve done so since, say, 1942?

That part of the USA Constitution was broken once intercontinental ballistic missiles were capable of delivering nuclear warheads and a 3 minute warning was not long enough to hold a vote.

To Marxists, the real war used to be between the workers and the owners of capital. Since the Soviets lost the argument, many Marxists pivoted to looking for wars between ethnicities and gender, resulting in much of the lunacy in which this organ finds hilarity.

In the meantime, a massive war is playing out, hiding in plain sight, as illustrated by our Hierarchy of Kung Flu:

Where do you sit on this scale? Have you been Instagramming pictures of inedible home-baked sourdough and stodgy cakes?

Chances are you’re currently on the winning side of the war.

Now flip all of those statements upside down and put yourself in the shoes of that person. Obviously, the lower levels regarding health are universal, they could happen to all of us.

The real point of bifurcation between the combatants is the level 3rd from top; “I am a keyboard warrior; my income is unaffected“.

Depending on whether this is true for you is the difference between this period being a relaxing skive on your sofa, consisting of lazy mornings, online yoga, perfecting your barista technique on your Gaggia, chatting with your colleagues on Zoom, baking sourdough like an 18th century crofter, some online shopping, an early start on the Briar Ridge rosé and a pleasant evening with the significant other binge watching a streaming series OR absolute desperation as you deplete your sparse savings and watch your livelihood destroyed in just a few days by the stroke of a ministerial pen.

At its bluntest level, this is war between white-collar and blue-collar workers. Sure, it’s a fuzzy line; there are previously well-paid office workers who are now unemployed and wondering why they took out such large mortgages and there are blue collar workers who are still building and billing for their time.

In general though, the metropolitan types are having a lovely war, the people in the ‘burbs are staring down the barrel of destitution.

Magnify that out from your comfortable 1st world reality and look at the less developed countries.

India has hit “CTRL C/V” on the western world’s approach to COVID19 and enforced a 21 day lock down. Millions of the lowest paid workers have been told to somehow travel back to their home villages and have no additional source of income.

The human cost to this, in terms of malnutrition, riots, suicides, murders, etc. will clearly not be zero. Quite the opposite, in fact, it is probable there will be an appalling increase in harm to the population.

It puts the current 1st world problems into context but they are versions of the same issue.

Bill’s Opinion

The modern global economy has a complexity that is beyond the reach of current human understanding. Dismantling it at the stroke of a government pen has unintended consequences. It is not yet obvious from the available data which is worse; the effects of the virus or the consequences of the lockdowns.

It’s possibly a false dichotomy anyway. The choice isn’t and shouldn’t be framed as binary. Shutting down India as if it had an economy and society that operates like Switzerland seems like a regrettably poor choice.

Similarly, shutting down an economy in a consistent way across an entire national geography without reference to the multiple differentiating factors between regions isn’t logical.

The result is highly likely to be a continuation of the decades-old wealth transfer from the poorest to the richest. If you think you’re in the second category, I would warn against complacency; this trend is coming for you and yours.

Have a look at your luxury car, 2nd home, children’s private school, photos from expensive overseas holidays, etc. and take a moment to appreciate what might prove to be a view of the past during the “Roaring 2,000s“.

Orange Spaceman Bad

Donald Trump signed an order authorising future mining activities in space.

This is a very bad thing, apparently, because something something colonisation.

Imagine suffering from Trump Derangement Syndrome so severely that you’re upset about space exploration.

Worse, imagine being concerned that the space exploration might upset other countries and this prompts them to do something hostile.

Really?

What other acts of human endeavour and exploration should we avoid due to the possible and imagined sensitivities of third parties?

Should we stop seeking a cure for cancer, investigating fusion energy, fixing the connectivity issues with Microsoft Teams, etc.?

Bill’s Opinion

The term terra nullis has a bit of a chequered past in places such as Australia, but it’s fairly safe to use it wth regards to the Moon, Mars and passing asteroids.

The idea that President Trump is being a warmongering meanie for suggesting the USA might go into space and mine some useful minerals is bordering on delusional.

Not least because the USA is the only country with a realist chance of actually being capable of doing it on a sustainable basis.

I look forward to hearing about the Peruvian, Nigerian or Cambodian space programmes in the comments.

We went to the moon, and you know what we got?

Bored.

Left a car up there with the keys still in it. Why? ‘Cos we’re the only ones going back there.

Bird? Plane? No, Superhubris!

Pension funds in Australia (or “Super”, in the vernacular) are, obviously, a big deal.

To a large degree, they are a captured market as legislation requires all employers to contribute 9.5% of salary into an employee’s chosen fund.

Typically, there isn’t much movement between funds, you are offered one when you start work and many people don’t pay attention to which is good, bad or mediocre.

Similarly, and like passive investors the world over, people don’t tend to pay much attention to what investment choices their Super fund is making on their behalf. One occasionally hears horror stories about people close to retirement in 2008 suddenly discovering they were all in on USA CDOs.

One such Super fund is Hostplus, the “industry” fund for people working in hospitality. Obviously, one doesn’t have to sign up to Hostplus, but I assume it’s one of the main options offered when you start a job.

Hostplus’ members are worst hit by this virus-induced recession and presumably most likely to want to take advantage of the changed rules allowing early access to $20,000 of their money.

Hostplus have a problem though;

They’ve slipped a clause into their product disclosure statement preventing members from withdrawing funds. It’s not clear whether this is even allowed under legislation such as the Corporations Act, but regardless, it’s a bad precedent and one that won’t give people much comfort in the security of their pensions.

There is a some mild amusement to be had at the directors’ expense (well, ultimately the members’ expense, poor bastards);

This from those heady days of January 2020;

Bill’s Opinion

What follows is not financial advice, and you should never seek financial advice from pseudonymous bloggers on the internet.

However if you are young enough for this current crisis to not completely destroy your imminent retirement plans, may I suggest taking a far more active interest in the following elements of your finances;

  1. Is a single managed fund really the best option for you, or should you consider diversifying across funds (e.g. via a self-managed fund)?
  2. If you are staying in a managed fund, are you really invested in diverse (asset class and geography) assets?
  3. Are the management fees fair value?
  4. How quickly can you pivot your investments if required?
  5. How is your financial advisor paid and by whom?

Feed the birds, tuppence a bag“.