Grubby fingers on the scales

For those not normally exercised by the parochial freak show that is Australian politics, “the Morrison government” is a coalition of two parties that pitch themselves as being on the side of free markets and smaller government.

Obviously, as they say in Tasmania, “it’s all relative”.

The Greens are, well, what Greens are the world over; water melons.

The Greens are willing to help the Morrison government pass contentious new laws to make global digital tech giants pay local news media companies for content, but its Senate support will be contingent on the inclusion of both public broadcasters in the mandatory industry code.
Under the proposed laws foreign technology platforms such as Google and Facebook would be forced to pay news companies for use of their articles, share key data and warn them of any changes to their algorithms or face fines of up to 10 per cent of local revenue.

Prima facie, these are curious bedfellows.

Some understanding of the nature of Australian politics is required to make sense of this.

First though, read this sentence and see whether it makes any sense to you:

“There is no reason for the ABC and SBS to be excluded … public broadcasters deserve a fair return for what they produce and what the tech platforms benefit from. If the aim of this code is to ensure the viability of Australia’s media, then the government should ensure ABC is included, that AAP doesn’t fail and that small and independent publishers don’t miss out.”

For the benefit of our overseas readers, the ABC and SBS are government broadcasters. The concept that a government department “deserves” revenue from its competitors in the private sector tells you everything you need to know about Senator Hanson-Young’s understanding of commerce, economics or, indeed, the correct limitations of government.

Obviously, that we’re even talking about taxing one company to pay a competing government department is ridiculous, but the conversation started without anyone challenging the idea of taxing a company to pay for the failings of another.

Why are Facebook, Google, et al going to be clobbered with this potential tax? Because the local Australian media haven’t managed to get a viable subscription service in place to replace their century old paper-based revenue stream.

Did the Pony Express receive tax subsidies from the telegraph once the lines were laid?

Bill’s Opinion

Three things can be correct at the same time; the Australian political landscape can be populated by bedwetting collectivists and crony capitalists, the Australia legacy media can be incompetent and venal AND the big tech companies can be run by utter cunts.

Witness today’s auto-fill suggestions:

And yet:

When the facts change

“……I change my opinion. What do you do, sir?”.

If not for Kung Flu, we’d have spent last week skiing down this slope and its neighbours:

That photo was from today via the webcam here.

At this time of year, there’s usually about a metre of snow where you can see grass.

Interesting. Shocking, actually.

The trap to avoid here is falling into the confirmation bias fallacy.

There’s several possible explanations that may be all playing a part.

1. Climate change. So much, in fact, that over a metre of snow hasn’t arrived compared to last year. We’re definitely into Al Gore/Saint Greta territory, if so.

2. It’s a cyclical bad snow season. Again, though, so bad that a metre’s worth hasn’t fallen? Sceptical.

3. Something else.

Bill’s Opinion

A little research suggests option 3 carries most of the blame: the resort manufactures most of the snow for the ski season (via those red machines in the picture). Because the resort is in Victoriazuela, Chairman Dan has shut it down for the season. That’s what the slopes look like without the machines running every night.

I’m actually shocked by this; I’d always assumed the machines topped up a pre-existing base level of snow, but certainly weren’t responsible for layering a metre of depth onto the slopes.

I don’t have the subject matter expertise to calculate this but it would be fascinating to learn what the emissions per skier are to make all this snow compared to, say, flying that skier to a natural snow field in New Zealand or Japan?

If a politician were genuinely concerned about climate change, that’s the sort of data they’d be seeking to publish to enable people to make the correct environmental choice.

Flat lines, flat out lies

Those of us old enough to remember the days before Kung Flu might recall the original reason we had our liberty, income, mental health and freedoms massively impacted by our elected leaders.

Do you remember the reason?

Let me give you some clues; it was late March when Australians were instructed to stay home. The reason given was to…..

What’s the word?

Flatten.

That was it! “Flatten the curve“.

And why did the curve need flattening?

To not overwhelm the hospitals

There was even a pretty chart to illustrate the concept:

At some point between March and June, important factors changed.

Firstly, we flattened the curve. Has a political leader confirmed that explicitly? If they have, I’ve missed it.

Secondly, as a consequence of flattening the curve, we didn’t overwhelm the hospitals. We didn’t even use the emergency field hospitals set up and the regular hospitals weren’t overwhelmed, not even close to it.

Thirdly, and more worryingly, quietly and without any acknowledgement, the policy was changed from flattening the curve to completely eradicating all cases everywhere.

Let me repeat that; we are now clearly attempting to prevent anyone at all ever catching the virus.

Don’t believe me? Please explain why the state of Victoria has just re-implemented it’s lockdown due to 25 new cases being discovered?

A quick reminder, in case you’ve forgotten, there is currently no vaccine for the virus. Also, we’ve never found a vaccine for a coronavirus in the history of humankind.

Bill’s Opinion

The year 2020 is the year we collectively forgot many truths we’ve known for centuries. One of these is the fact that we have accepted the risk of illness and death from seasonal viruses for the far greater reward of all of the benefits of living in a highly connected global economy.

Without seeking our permission, our politicians have reversed this situation and have implemented a policy of zero harm.

Of course, it’s a false choice; harm is occurring as a consequence of their response to COVID19, we just haven’t started the reckoning process yet.

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?“.

Faulty maps have brought the earth to a halt

Caught between the twisted stars the plotted lines the faulty map that brought Columbus to New York

Betwixt between the East and west he calls on her wearing a leather vest, the earth squeals and shudders to a halt.

“Romeo had Juliette” Lou Reed

The Drake Equation was created by Dr. Frank Drake. From wiki:

The Drake equation is a probabilistic argument used to estimate the number of active, communicative extraterrestrial civilizations in the Milky Way galaxy.

The equation relies on 7 variables to produce the answer to the question, how many alien civilisations are there out there?

The 7 variables are:

R∗ = the average rate of star formation in our galaxy.

fp = the fraction of those stars that have planets.

ne = the average number of planets that can potentially support life per star that has planets.

fl = the fraction of planets that could support life that actually develop life at some point.

fi = the fraction of planets with life that actually go on to develop intelligent life (civilizations).

fc = the fraction of civilizations that develop a technology that releases detectable signs of their existence into space.

L = the length of time for which such civilizations release detectable signals into space.

Depending on the estimated values of each of these variables, we find that the number of alien civilisations in the universe sits somewhere in a range between zero and 50 million.

Let me repeat that. Between zero to 50 million.

So, the Drake Equation is an interesting intellectual exercise but of absolutely no use in determining any kind of tangible action to be taken. We’re not going to start sending Matthew McConaughay out light years away to make contact. Similarly, it’s probably a waste of time and resources building global defences against invading Martians.

Which brings us to the infamous Imperial College computer model used to produce the report which the UK and many other world governments relied on to determine their response to the China Flu.

Spoiler alert; the model is shit.

You didn’t need a programming expert to tell you that though, the evidence is flooding in from around the globe.

The model’s predictions are falling apart wherever we look. Hospitals are not overwhelmed anywhere. No, not even in New York City.

Awkwardly, Sweden seems to have magically saved tens of thousands of predicted fatalities despite ignoring the report’s recommended actions.

The holy church of the UK’s National Health Service is being applauded every Thursday evening like an inverse Emmanuel Goldstein whilst having barely any of the predicted volume of patients.

What’s going on? Well, one possible explanation is that we’ve made the biggest peacetime policy decision ever, based on shit maths.

How shit? Really fucking shit.

But it’s ok though, no need worry, the UK government have a plan out of this mess. Boris Johnson is basing his decisions to release the public and economy on the “R number”.

Great!

Curious minds might have one or two questions perhaps, such as:

What is the R number currently, and how is it measured?

To which the answers are, dunno and using guesswork.

Bill’s Opinion

The infamous pederast, John Maynard Keynes, said, “When the facts change, I change my opinion. What do you do, sir?“.

My current opinion is that the initial responses to close borders and enforce some restrictions on public gatherings was correct and rational behaviour in the face of a new virus that has reached pandemic status.

However, the justification given for these suspensions of freedom was that we couldn’t afford to overwhelm our hospitals.

Tick. We didn’t overwhelm the hospitals.

It is not at all clear how using the R number as a reason to release restrictions can be reconciled to that original justification.

If we have managed to flatten the curve (remember when that phrase was fashionable?), it doesn’t mean the area beneath the curve has reduced. To be clear; the same number of infections and deaths occur under every model where hospitals are not overwhelmed.

Has any politician had the cojones to come out and say that yet? Of course not.

And this is the problem; going into lockdown was easy by comparison with the political courage required to end it.

As the Chinese (oh, the irony) proverb says:

He who rides a tiger is afraid to dismount.

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“.

Morality in the time of Coronavirus

Imagine yourself in the following scenario:

You are working as a relatively well-paid consultant, on a precarious day rate contract. Your client is a large government agency. You’ve been hired to bring commercial acumen to a project that, by any reasonable measure, has been an abject failure (a year overdue on an 18 month timeline, tens of millions in overspend).

The supplier has a global track record of sharp practice and, a few years ago, was found guilty of bribing public officials.

In your work, you find two major errors or omissions in the supplier’s work and recommend these are used as commercial leverage to improve the outcomes for the taxpayer.

A peer actively works against this advice and commences a campaign of attacking you personally.

In your experience, this behaviour is highly suspicious. The best explanation is incompetence and commercial naivety, but there is also a not insignificant chance of corruption.

A cursory background search of the individual reveals almost a decade working at an organisation that was shut down due to deep and systemic corruption. The individual also has an active Ltd company, despite being a salaried public servant, with a contractual restriction against “moonlighting”.

What do you do?

Bill’s Opinion

At any other time of my career, I would be gunning for this person using the auditors and whistleblower legislation.

In this time of COVID19 shutdowns and imminent recession, I’m less keen to put my family’s financial well-being at risk however.

Any suggestions on how I can manage my way through this without utterly compromising my personal values?

Down is up when you’re in “The Club”

Remember our explanation of “The Club“, that part of the world you and I can’t visit, where good things always happen to the members?

When you’re in The Club, other members of The Club will plant sympathetic stories in the press on your behalf, such as this one (paywall).

“Scapegoat”.

Obviously Lord David Steel is the victim here, not the vulnerable young children he suspected this sweaty fat bastard was sexually abusing:

That’s right, David Steel, who by his own admission had strong suspicions Smith was abusing children and didn’t mention to anyone, might be expelled from a political party from which he retired over a decade ago as punishment.

That’s it.

Yet some of his friends think it’s worth planting sympathetic stories to prevent this minor and inconsequential slap on the wrists.

Bill’s Opinion

When you’re in The Club, you never need to feel shame or regret for past actions; the greater good and your inherent righteousness balance out any minor transgressions you may have made, obviously.

Your actions don’t have consequences, your failures are forgotten, your errors are forgiven. It’s a great club!

In other news, Lord David Steel’s entire adult life has been spent achieving absolutely NOTHING at the UK taxpayers’ expense.

40+ years in opposition. What an utter waste of carbon, oxygen and water.

Somewhere in the world, there’s a tree working really hard. I think you owe it an apology“.

You gotta know when to Holden

Prime Minister Scott Morrison has declared Australians will be fuming after Holden allowed its business to “wither away” even as it pocketed $2 billion in taxpayer-funded subsidies.

For non-Australian readers, Holden is was the brand name for General Motors in Australia and New Zealand, just like Vauxhall in the UK and Opel in Europe.

And, just like all the other brand names, the build quality of the vehicles was woeful. By which I mean, when compared to the overseas competitors’ products, the vehicles were like British Leyland’s Austin Allegro compared to the Toyota Corolla of the time; expensive, fewer features, less reliable, lower prestige.

Given the choice between a German, Japanese, Korean or even a French or Italian car, nobody with the mental age above a fish would choose to buy a Holden. Those few who did, did so out of some bizarre patriotic pride…. bizarre, because what’s the point of being proud of a shite product built by a foreign company?

Of course, this axiom played out over the decades in the Australian car market while market share declined annually as consumers bought every other vehicle brand rather than those locally-produced.

Politicians being, by their nature and the system within which they operate, incentivised only in the short term, pumped ever greater sums of taxpayers’ money into subsidising a company those same taxpayers (as consumers) were voting against.

Both sides of the political spectrum were guilty of this pointless profligacy, citing various fallacious arguments to justify their buying of votes with other people’s money; “saving Aussie jobs”, “ensuring the survival of adjacent industries”, etc.

Perhaps the most laughable reason was “strategic nationally”, by which people meant, “if China or Indonesia ever decide to invade, we can repurpose the Holden factories to make tanks in time to mount a credible defence”.

Yeah, just as long as the tank drivers had been trained in how to replace a faulty gear box ten minutes after driving out of the barracks.

Bill’s Opinion

Holden lingered on in stasis for at least 25 years longer than it should have been allowed. Every taxpayer dollar pumped into the balance sheet of General Motors or added on to the import cost of a foreign competitor, delayed the inevitable and cost Australians twice; once in tax and again in increased prices for a better quality Mitsubishi or Toyota.

Given a choice, politicians always do what’s expedient rather than what’s right.

Lessons children learn

…seem hardest for activists masquerading as journalists.

For example, noting the difference between an expressed and revealed preference.

One such example would be this, where Charlotte Grieve seems confused that, despite loudly banging the climate change drum in public, large pension funds still heavily invest in the industries that make profit pollute the most.

Four of the nation’s biggest industry super funds have billions of dollars invested in coal producers and other fossil fuel companies despite taking a vocal stance on climate change and pledging to support emissions reduction.

Research exclusively obtained by The Age and The Sydney Morning Herald also shows support among super funds for shareholder resolutions that would force companies to take tougher action on climate change has fallen.

One must chuckle at the dressing up as “research” the process of browsing the funds’ websites to view the publicly-available information on investment allocations. They must have had a team working round the clock on that.

Of course, such an easily-written piece is the gift that keeps on giving for Charlotte; on its anniversary she can toss up a follow-up describing her horror that, despite the scandalous exposé of the mealy-mouthed funds and their double standards, the general public haven’t all rushed for the door and moved into a virtue-signalling “sustainable” fund.

Bill’s Opinion

People generally act rationally and in their own interests. This neatly explains making loud public noises suggesting concern over climate change whilst also investing in assets that produce a reasonable return on one’s investment.

As we’ve explored previously, the difference between a “green” fund and a regular fund is the latter has a reasonable chance of being an providing an income in retirement. The green fund doesn’t even track inflation.

Watch what people do, Charlotte, don’t listen to what they say.