So what you’re saying is…

….Japanese men compete hardest when there is more cultural “face” to lose, particularly when competing against women?

Here’s an insight from the economic heavyweight that is the Sydney Morning Herald’s Economics Editor, Ross Gittins.

To be fair, he’s achieved one requirement of journalisming; to inform. I, for one, had never heard of this Japanese sport before;

He also explains that there is a vast database of to be mined about how men and women compete in single sex and mixed sex races, both in terms of results and penalties for aggressive fouls.

What does this data tell us?

Wait for it; men are more aggressive than women, even more so when they are competing with women.

Which surprises no-one who has a passing knowledge of Asian culture.

There is then a whole bunch of word salad about something called “gender identity“. 

Bill’s Opinion

Japanese men in competitive sport don’t like losing.

Japanese men in competitive sport really don’t like losing to women.

Japanese women in competitive sport take fewer risks than men.

This research and Ross Gittins’ subsequent regurgitating of it is analogous to the discovery of the double helix by Watson and Crick in it’s importance to the human species. 

It’s possible that blog posts here may reduce in frequency soon, depending on how successful I am in my application for a 3 year research grant to investigate why men and women tend to urinate standing up and sitting down, respectively, and the influence of the cis-heteronormative patriarchy on the cultural appropriation of gender norms in the use of toilets.

In related news, if you want to understand how completely arrogant and boorish Gittins is, risk your mental health by listening to this podcast where he is interviewed by our friend Jess I can use a spreadsheet to diet, and you proles can’t Irvine

Gittins may be hugely qualified in his profession but, my goodness, when speaking he sounds an awful lot like every old bloke in the office you’ve ever met who’s close to retirement and wants to give you unsolicited advice at each opportunity that seems more about explaining how smart he is than being of any practical use to you.

 

 

We’ve always been at war with the Eurasia Group

The usually sound Ambrose Evans Pritchard regurgitates a press release from the Eurasia Group risk report in the Telegraph (Sydney Morning Herald paywall avoidable version here);

The answer to questions like this in headlines is almost always, “No, you’re just trying to get eyeballs“.

Oh, that’s worrying.

By that I mean, it’s worrying that the UN isn’t also in the list of global institutions past their sell-by dates that are in crisis. In the words of Saint Augustine, “Oh Lord! Make me pure, but not yet!“.

Bloody hell, we’re almost on the brink of another world war? There’s no way the government will allow that, just think what it would do to their plans for annual skiing holidays and the values of their Caribbean villas.

It all sounds very worrying though, whatever might be the cause?

Ah, it’s just another #OrangeManBad #LiterallyHitler article.

One of these political thinktank pieces isn’t compete without an economic prediction, of course;

Sure, the EU is going to have a few challenges ahead, especially if the UK is lucky enough to exit without a deal and gets to keep the £39bn ransom, but we’re heading for deflation, are we?

Given that the USA inflation figures for 2018 were 2.54% and projected to be ~2.44% this year, I wouldn’t go holding one’s breath for it to turn negative. Something like a meteor strike would have to happen in 2019 to turn that into deflation.

Oh goodeee, another article telling us the reason why we voted to leave the EU.

Personally, it was Magna Carta, 800+ years of Common Law, legislative sovereignty, the right to determine our own immigration laws and the fact that calling 73 MEPs for a population of 67m “democracy” seems like a sicker joke than anything Louis CK could come up with. But no, Eurasia Group, do tell us why we voted Brexit.

As for the problems between China and the USA, yes sure China is not running as hot as before (-16% sales of smartphones was an interesting recent data point), however, Xi looks to be trying to rapidly build bridges with Trump. It’s almost as if, I dunno, Trump’s strategy is working. Perish the thought.

So, after you’ve scared us half to death, what’s the chances of any of this happening?

“Muddle through”.

We do like a good old fashioned muddle.

Bill’s Opinion

As you were, platoon. We’ll be just fine.

Sometimes “free” is more expensive in the long term

On my Creepbook for Business feed, the following paid content appeared today;

This piqued my interest because I’ve long suspected that, if species preservation of the “big five” in Africa was agreed to be an important aim (excuse the pun), then making hunting an efficient and sustainable industry would be the most probable route to success.

Certainly, if observable results were something one took seriously, nearly every alternative that had been tried so far hasn’t worked effectively

Similarly, if we wanted to significantly reduce the impact of poaching of elephants and rhino for ivory, flooding the market with cheaper farmed ivory might well be the only solution.

I suppose there are two other alternatives; either raise the standard of living in sub-Saharan Africa to a level where there were plenty of other employment opportunities that didn’t involve killing elephants or persuade a billion Chinese people that ivory powder doesn’t cure bone tumours.

Ockham’s Razor suggests farming is the most likely solution.

I’m not an expert on the complexities of African hunting economics, politics and species protection so I’ll defer to others with more insight.

However, the link to ENergise REsources was intriguing. Firstly, that’s a really annoying capitalisation of the 2nd letters and secondly, who are they what are they all about?

From their website;

Ok, on the one hand it’s admirable that they are offering services pro bono to charities. On the other hand, they are clearly quite choosy about which charities they are going to help.

Which charities?

Basically, any that work in the fields of the Guardian’s favourite cause célèbres.

Exhibit A;

Exhibit B;

Exhibit C;

The website shows a list and the profiles of the current members (about 25 of them) and, frankly, there’s nary a single private sector worker amongst them. If you were a charity looking for some pro bono advice from an IT professional with exactly the same ideas and experience as every other IT professional who’s ever worked for you, you’ve come to the right place.

What’s really amusing though, is the unthinking acceptance of the Guardian/BBC/NY Times prioritisation of issues to be solved. If you hadn’t read the previous paragraphs on this page and I had asked you to write a list of the top 10 priorities for left wing charities, I imagine you’d have repeated nearly all the content on their website.

This is an alternative approach that they have not considered however;

Bjorn Lømborg’s Copenhagen Consensus.

Bill’s Opinion

The refreshing thing about the Copenhagen Consensus is their recognition that, when talking about about finite resources, environmentalists almost always forget that economic resources and human hours are also finite; a dollar spent on the solution to a problem cannot be spent on another problem. Similarly, an hour of your time spent on one solution can’t be re-spent somewhere else.

In fact, it’s worse than that; there are a myriad of potential solutions to the same problem, and logic states these should be prioritised by likely success and impact.

In effect, what the Copenhagen Consensus recognises that few others in the field do, or choose to ignore, is the concept of opportunity cost.

Once you apply that economic lens, our old friend Vilfredo Pareto can bring his ruler into play and measure which activities we should do first and which we should drop because they only feel nice rather than doing any good.

But if you really want to confirm that Lømborg is an outcome-driven, facts don’t care about your feelings sort of chap, sign up to the website; when you’re asked to select a country of residence, they list USA first, not Afghanistan.

This is a group that logical thinkers can get behind without having to suffer the ideological crap.

How refreshing.

Incentives matter, #7538

How on earth will I manage to find something to be cynical about this?

Greece has awarded citizenship to three migrant fishermen – two Egyptians and an Albanian – who rescued Greeks from a devastating fire near Athens last July.

At a ceremony the Greek President, Prokopis Pavlopoulos, thanked the fishermen for showing “solidarity and humanity” by rescuing dozens of people.

“You are now European citizens too, and so you can teach all our partners who don’t realise the values of Europe, to do what they ought to do,” he said.

Bills Opinion

The three men did a great thing and deserved a reward.

The problem is, the Greeks have just indicated to the market that the price of a European passport is to heroically save a life from a fire.

Most illegal immigrants won’t do anything malicious based on this price signal.

There will be some who will, however. My prediction is that there will be at least one fire set simply to enable an illegal immigrant so “save” a life. Let’s hope nobody dies as a consequence.

The Kouk; troll or fool?

One of the Australian Labor (sic) Party’s advisors on matters economic is a shy and retiring character by the name of Stephen Koukoulas, AKA “The Kouk”.

I don’t tend to waste spend much time on social media these days but, in between large meals and long walks, I came across this provocative tweet by the person who, should Bill Shorten become Australia’s next Prime Minister for the obligatory 18 month term, will be whispering sage advice to the highest office in the land;

If, like me, you aren’t a professional economist, you will be wondering why this claim simultaneously seems to make sense but also seems like it shouldn’t be correct.

We’ll explain why it’s wrong shortly, but first, let’s recall an old brain teaser that used to go around in the school playground in various versions;

Three friends decide to split the bill after a meal at a restaurant. The waiter says the bill is £30, so each guest pays £10.

“Later the waiter realises the bill should only be £25. To rectify this, he takes £5 from the amount to return to the group.

“On the way to the table, the waiter realises that he cannot divide the money equally. As the customers didn’t know the total of the revised bill, the waiter decides to just give each of the three friends £1 and keep £2 for himself.

“Each guest got £1 back: so now each guest only paid £9; bringing the total paid to £27. The waiter has £2. And £27 + £2 = £29 so, if the guests originally handed over £30, what happened to the remaining £1?

If you haven’t come across this puzzle before the explanation is here.

It’s a classic misdirection.

Which is precisely what The Kouk is doing with his tweet.

The explanation as to why his statement is incorrect can be found here in an excellent and highly-recommended free PDF of a classic and easily read lesson on economics for mere mortals such as you and I. Treat yourself to a quick education before opening the next festive bottle.

The mistake or misdirection Koukoulas is guilty of is, helpfully, described in the very first chapter. In it, Hazlitt re-explains Bastiat’s Broken Window Fallacy and the concept of “opportunity cost”.

The explanation is so precise and economic (pun intended) in its use of words that I won’t recreate it here, but hope you follow the link and see it for yourself.

Bill’s Opinion

It is almost inconceivable that a professional “economist” is not aware of this fallacy (the first in the book!).

I can think of three possible explanations; either The Kouk is playing a festive game of trolling OR he’s deliberately misdirecting his followers for some other reason OR he’s not a very competent economist.

Of course, economics is a pseudoscience anyway. For proof of this, one only need look at the history of the so-called “Nobel Prize” for the subject; it was created as an effort to lend the subject some scientific credibility.

Brexit BATNA

The suggestion that Brexit negotiations are going poorly for the UK is a difficult one to refute.

By any objective measure, the “deal” Theresa May has been touting as the best possible outcome clearly doesn’t implement what the voters demanded she implement; The United Kingdom would still be subject to the majority of rules and regulations of the EU institutions but without the current ability to influence (albeit fractionally) the creation and amendment of said rules.

Negotiation is a very specific skill requiring a thoughtful strategy, access to as many relevant data points as possible and the maturity and strength of character to compromise or hold to key principles.

Many professionals earn a good living from undertaking the role of negotiator on behalf of clients; depending on the transaction one is undertaking, a lawyer, for example, is acting as your negotiator.

However, the one aspect a professional negotiator or, in the case of Brexit, a huge army of negotiators, can’t control is the competence and moral character of the “client”.

Imagine, for example, if the Prime Minister and cabinet were firmly of the opinion that the British public had chosen the correct option in the referendum and that the EU was a corrupt den of anti-democratic authoritarians who couldn’t be trusted to negotiate in good faith. The Brexit negotiations’ timeline might have looked something like this;

– 24th June 2016 – Article 50 delivered to the EU along with a telephone number printed on a business card with the words, “Your call is important to us. Please do let us know if you have an offer which you feel may be of interest to the people of the United Kingdom. Please note, this number will only be staffed between 2pm and 3pm on the first Tuesday of each month“.

– 24th June 2016 – The “Direct Debit” arrangements from all UK government bank accounts to the EU are cancelled.

– 24th June 2016 – The responsibility for the detailed planning for a move to WTO rules on 24th June 2018 is delegated to the relevant agencies and peak industry bodies. Note; delegated not micro-managed, as this is what they get paid for.

– That’s it. If the EU offered any deal that improves on WTO arrangements whilst still resulting in the UK leaving, a separate team would be tasked with reviewing and comparing it. However, work on the WTO option would continue at full speed.

That this, or a version thereof, wasn’t the approach tells us (and, more importantly, told the EU negotiation team) one crucial fact. The UK government has never had a credible BATNA. There was no palatable Plan B ready in case the EU negotiated in bad faith, nor was one even contemplated.

The EU haven’t played this particularly well, they didn’t need to, the UK negotiators were hamstrung from the start by a clear requirement from the “client” that a deal must be done at all cost…… which is the equivalent of trying to negotiate the price of an ice-cream while you have a crying child with you.

Bill’s Opinion

In years to come, Theresa May’s incompetent handling of the negotiations will be seen as a case study in what not to do.

That statement assumes, of course, that she really did intend to implement an exit from the EU, its rules, regulations and institutions.

Many observers might question that assumption.

Pips preparing to squeak

House prices are a matter of opinion whereas debt is real.

Mervin King, former Governor of the Bank of England.

The fun continues apace in Australia as people too young to have ever experienced a significant downturn are coming to terms with the first in their adult lives.

Our old friend, The Pwoperdee Doctor, is calling on the Reserve Bank of Australia to cut interest rates, not for him, you understand, but for the sake of the kids;

And later this week, more questionable content from The Doctor;

His content sometimes seems suspiciously like financial advice. This, for example, seems to be encouraging first time buyers into a falling market;

Since when was instant negative equity ‘The Great Australian Dream’?

Here’s a question for The Doctor; would you advise a close relative of yours to buy their first property today or wait a while for the falls to flatline? If not, be prepared for a little legal action in a year or two seeking a contribution from you for giving poor advice when someone sitting in a 2 bed apartment finds it’s now worth $100k less than they paid for it.

Over at the Sydney Morning Herald, a media outlet that previously relied almost entirely on its property listing subsidiary for any chance of making a profit most years, reality is starting to sink in.

One has to enjoy the circular nature of Finder’s Graham Cooke’s logic and his demonstration of a Nobel Laureate’s mastery of mathematics;

Yes folks, that’s right; if property falls by 20%, people who bought recently with a 20% or less deposit will be in negative equity. I bet he had a team of monkeys up all night with calculators working that out.

Actually, it’s worse because stamp duty is several percent depending on the jurisdiction so negative equity is achieved earlier.

This is all so unexpected, of course. Nobody could have seen this coming.

Which reminds us of Taleb’s classic chart from ‘Black Swan’;

Meanwhile, theres an interesting bet on between the Kouk and Tony Locantro;

Specifically, we are wagering $15,000 to $2,500 that Sydney or Melbourne or national wide house prices will or will not fall by more than 35 per cent from their peak at any stage before and up to the December quarter 2021.

 

Bill’s Opinion

 

At the current trajectory, Stephen Koukoulas will lose $15,000.

Of course, no market ever moves in a straight line and, as we saw in 2008, expecting any government to simply let markets run their course in a downturn is a very naive position to take.

It’s far more likely that interest rates will be cut, regulators will be told to ease lending restrictions, banks will be reminded who really owns them and the Millennials will be encouraged into another generational wealth transfer over to their parents’ generation.

By the way, this is all happening at a point in the economic cycle where money should still be made. The USA is unlikely to go into recession in 2019 and that should have been good news for the Australian economy. That the mood seems not so cheery in the “Lucky Country” speaks volumes.

If you’re about to buy your first property, why not wait until you’ve seen 3 to 6 months of no falls in prices, just to be certain you’re not jumping in a year too early?

Ask a financial planner (a good one, not one who relies on selling you “products”) whether some physical silver or gold might be a good thing to own right now, perhaps? Ask also about uranium mining shares.

After all, there’s always an inherent risk to catching falling knives…..

Who bears the cost?

This idea seems to pop up every few years and then sinks without trace; birth control for men being trialled.

The treatment is a gel that’s applied to the skin. It reduces testosterone production to a level where viable numbers of sperm are no longer produced.

Here’s an interesting admission though;

But so far, the new gel has yet to pique the interest of a pharmaceutical company that wants to take male birth control to market.

Why might that be, do we think?

Could it be that commercial organisations make informed decisions based on which products might be popular? And, if so, why do they believe a male contraceptive won’t be particularly popular?

As an aside, the article offers a statistic that condoms are effective barriers to pregnancy only 85% of the time. Hmmm, does that pass the sniff test do we think?

All is revealed when the source link is followed to the Planned Parenthood website! For those who are unaware, Planned Parenthood is hugely discredited and is primarily an abortion on demand service. It’s origins are mired in eugenics and a desire to sterilise those deemed unfit to reproduce. To this day, black women are disproportionate (to their numbers in society) clients of Planned Parenthood abortion clinics.

So, let’s treat the 85% statistic with some scepticism.

Bill’s Opinion

Female birth control and condoms are popular forms of contraception because of one very important factor; the woman knows whether it is being used or not.

A male birth control gel or pill does not have that transparency for the woman.

Why does this impact the popularity of the method of birth control?

Well, who bears the most immediate cost of an unwanted pregnancy? In whose best interest is it to not conceive a baby if that isn’t a preferred outcome?

Obvious really. The pharmaceutical companies aren’t stupid.

Capitalism and democratic choices are a distant memory in Australia

Remember how, back in the mists of time there used to be a clear choice for voters; a party of the free markets and less government spending versus a party representing the working class and unions?

Perhaps we’re looking back with rose tinted glasses and t’was always thus. Nonetheless, Australians were given a very clear glimpse of what lies ahead should the economy take more than a minor dip over the coming months and years; the federal government becomes lender of last resort to crap businesses.

No. Really.

Treasurer Josh Frydenberg and Small Business Minister Michaelia Cash will announce the small business funding policy on Wednesday, promoting the soon-to-be-established Australian Business Securitisation Fund as a way to overcome banks typically only lending to the self-employed when they pledge their personal home as collateral.

To summarise the announcement; “if the banks looked at your business and decided it was a poor bet and you didn’t have enough skin in the game, we’ve just decided the Australian taxpayer and their superannuation funds will lend you the money anyway“.

It’s very easy to be generous with other people’s money, isn’t it?

This is bound to end well.

The irony is that this policy wasn’t announced by either of the openly Socialist parties but by one of the two parties that historically claimed to be champions of free markets and minimal government intervention.

At a state level, similar disconnects have been shown between expressed and revealed preferences. Here’s a “free markets” politician bailing out rent-seeking taxi medallion speculators.

The $2bn fund to lend money to businesses judged by commercial lenders to be poor risks is an interesting development though, coming as it does so soon in to the worst housing crash in a generation, but particularly after this little legislative gem was snuck through onto the statute books with hardly any media coverage or explanation; insolvent banks can be rescued by confiscating deposits.

Bill’s Opinion

Will a “bail-in” of superannuation funds or bank deposits ever happen in Australia?

Unlikely, but not impossible. The risk isn’t zero.

There’s a great and often quoted dialogue in Hemmingway’s The Sun Also Rises;

‘How did you go bankrupt?’ Bill asked.

‘Two ways,’ Mike said. ‘Gradually and then suddenly.’

Perhaps this is the “gradually” part for Australian depositors. If so, it might be an idea to know how quickly you could act to not be caught out by the “suddenly“.