Wry & Dry: a cynical and irreverent review of the week in politics, economics and life. For intelligent Readers who disdain the trivial.
But firstly, a snapshot of this week’s Investment Matters:
The semi-annual company reporting season has begun. Several companies our clients hold have reported. This week we provide comments on key stocks:
- Macquarie Group
- SGH Limited (formerly Seven Group)
To read Investment Matters, just click on the link at the bottom of this week’s Wry & Dry. Or here.
1. Trumpster’s fiasco
A trio of monumentally brainless decisions this week led to the US’ greatest international fiasco since George Bush decided to invade Iraq.
Trumpster’s dealmaking impulse led him to bring Tsar Vlad in from the cold. He spoke to Tsar Vlad and agreed to open talks immediately to cease the Ukraine-Russian war. Err, without the President Zelensky of Ukraine? And without even telling him. Or anyone in the EU?
Tsar Vlad is now doing cartwheels in the Kremlin. And… “Putin has triumphed over everyone,” said one of Russia’s main TV anchors, Olga Skabeeva. “Trump has signed Zelensky’s death sentence,” popular tabloid Komsomolskaya Pravda said.
But wait, there’s more. In a stunningly incompetent debut, Trumpster’s newbie Defense Secretary Pete Hegseth, a former Fox News host, had earlier surrendered two Ukrainian negotiating points:
- The prospect of Ukraine returning to its pre-2014 borders is an unrealistic objective.
- NATO membership for Ukraine is an unrealistic outcome of a negotiated settlement.
So, Trumpster has made three public concessions to Tsar Vlad before negotiations have even begun. So much for the art of the deal.
Tsar Vlad will demand (a) the removal of Zelensky, and a puppet leader replace him; (b) Russian sovereignty over four regions in Ukraine’s east and south, and over Crimea and (c) Ukraine to be ‘neutral’ and forego any ambitions to join NATO.
Trumpster will demand the EU pay for Ukraine’s reconstruction and deploy troops there to maintain a peace in which they will not be involved.
Trumpster will negotiate very strongly. And declare victory for Ukraine. And then concede all of Tsar Vlad’s claims. A Nobel Peace Prize in offing?
This is Munich 1938 all over again. And Readers know how that ended.1
1 It ended badly. The Munich Agreement was between Nazi Germany and Italy, and UK, France. Nazi Germany coveted the Sudetenland, a part of Czechoslovakia. To appease Germany, the UK and France agreed that Czechoslovakia would give the Sudetenland to Germany and de facto control over the rest of Czechoslovakia. The Czeck government was not invited to the conference. UK PM Chamberlain returned to London to give his famous ‘peace in our time speech’. Five months later, Germany invaded the rest of Czechoslovakia. Six months later the Second World War started.
2. Albo Airlines
Regional Express (Rex) is a trainwreck (forgive the pun) of an airline and of a company. It is one of 43 airlines that serve only parts of regional Australia. Regional routes that are unprofitable are subsidised by the federal or state governments.
But, after avoiding collapse in the pandemic (via a generous government bailout) Rex decided to borrow $150m and compete with Qantas on the golden triangle of Sydney, Brisbane and Melbourne. After a boardroom brawl, gross breaches of continuous disclosure laws and claims of deceptive and misleading conduct, the company collapsed in July last year.
Enter Albo, who tossed in $80m to keep the company running. And then in January paid $50m of Rex’ debt to make we-the-taxpayer the company’s largest creditor.
The world only joined the dots that there was an election coming when Albo announced that if bidders for the airline wanted government support, then go ahead, lads: here’s the combination of the safe.
But wait, there’s more. Albo said that if no-one was going to buy Rex, then we-the-taxpayer would.
The reason why no-one might want to buy Rex is that its fleet is “outdated, unsupported and financially unsalvageable.” Its fleet of 57 Saab 340s has an average age of 30.6 years. As Wry & Dry writes, 29 of those aircraft were in the workshop.
3. Uncle Fester faffing around
Uncle Fester Dutton still doesn’t get it. There are times when an Opposition Leader needs to prosecute a compelling case against the government. Albo has been a duck for two years, sitting in the water, seemingly waiting to feel the 12-gauge shot strike. Any many shots have struck.
But there are times when an Opposition Leader needs to show statecraft. The polls show that Uncle Fester has locked in the right and centre-right voters. To capture swinging voters, he needs to act like a prime minister.
This week he couldn’t resist continuing his campaign that Albo couldn’t manage Trumpster. And that Ruddster was a waste of space. Both claims might or might not be true…
In baiting Albo about his ability to deal with Trumpster he was in fact undermining Australia’s foreign relations and ability to present a consistent view. He corrected later with a commitment to a ‘bipartisan position’ on tariffs. But all too late.
4. The Mouse that Roared2
The Cook Islands has a population of only 15,000. But its prime minister wants to join the big league. In front of what country could he better place his name (Mark Brown) than Emperor Eleven’s Empire?
And so it came to pass that Mr. Brown goes to Beijing this week to “seek a partnership in national development, including infrastructure, trade and the economy.”
What can Cook Islands offer Emperor Eleven in return for being tied hand and foot by loans? Well, the islands of the Cook Islands are tiny, just 15 islands totaling 240 km2. But they cover an Exclusive Economic Zone of over 2.2m km2, about the size of Western Australia.
Imagine those long-line Chinese fishing fleets scraping fish of all types from the Pacific.
2 A satirical 1959 comedy, in which a tiny but bankrupt European country goes to war with the US.
5. Spot the outlier
6. Alice in Germanland
The global swing to political parties to the right of centre continues. In Germany, Europe’s largest economy, the most unpopular centre-left Chancellor, Olaf Scholz, and his coalition will be blown out of the water in the 23 February federal election.
(Readers will know that the nature of Germany’s electoral system is that single parties never receive more than 50% of the seats, and hence must form a coalition to govern).
Scholz will likely be replaced by the old-school conservative Friedrich Merz. Merz will have to form a coalition, possibly with the Greens (a significantly more sensible collective that its Australian counterpart) or the Scholz’ socialists as a junior partner.
The world will not care about Merz, Scholz or the Greens. The focus will be on the far-right AfD (Alliance for Germany) and its very smart leader Alice Weidel.3 Y’see the AfD will likely have the second most seats in the Bundestag. And yesterday’s terrorist attack in Munich, by an Afghan asylum seeker subject to a deportation order who had a criminal record, will enhance the AfD’s prospects.
Alice in Germanland is the presentable face of an ‘ethno-nationalist and illiberal-democratic party’ regarded with suspicion even by most of its peers on the European radical right. She wants mass deportations of immigrants, possibly including those from the second or third generation; restoring the deutschmark and reconciliation with Russia.
Sound familiar? Each of the Right, Left and Greens have made it clear it will not form a coalition with the AfD.
The result? A government that will (a) turn back irregular and illegal immigrants at Germany’s borders; (b) abolishing gender self-identification and dual citizenship; and (c) simplifying and trimming the tax system.
Reforms to resurrect the economic carcass that is Germany will be lost.
3 Weidel graduated in economics and business administration and then worked for Goldman Sachs. She then moved to China for six years, learned Mandarin and wrote her doctoral thesis on the Chinese pension system. She fluently speaks Mandarin and English.
7. Meanwhile, south of the border…
…coalition talks between Austria’s far-right Freedom Party (FPÖ) and more moderate conservative parties have collapsed. The FPÖ was formed by former Nazis in the 1950s, and narrowly won most votes (29%) in September’s elections.
The short story is that the FPÖ demands, amongst other demands, the EU ends military support for Ukraine, sanctions against Russia are unwound and EU flags are removed from Austrian government buildings.
Can Readers spot a trend?
8. Emperor Eleven’s definition
Emperor Eleven, rather like the Trumpster, likes to misrepresent reality. Consider his view that there is a “universal consensus of the international community” that Taiwan is an inalienable part of China.
Err, wrong. The Lowy Institute has just analysed countries’ stance on Taiwan.4
- 11 countries recognise Taiwan as sovereign and reject a one-China policy. Mostly small Caribbean and Pacific Island countries are in this group.
- 40 countries maintain a one-China policy but do not accept China’s sovereignty over Taiwan. Australia, UK, US, India and Japan are in this group.
- 23 countries state that China has sovereignty over Taiwan, but do not support unification. France, Germany and Malaysia are in this group.
- 30 countries state that Taiwan is an inalienable part of China, but did not state how unification might be achieved. Mexico, Indonesia and Brazil are in this group.
- 89 countries endorse the one-China principle and support all efforts to “achieve national unification.” The ‘useful idiots’5 are mostly in Africa.
Fact check. Some 51 countries explicitly do not share Emperor Eleven’s view on a ‘universal consensus’.
4 Five One-Chinas: The contest to define Taiwan – Lowy Institute
5 Lenin’s pejorative term for a person or country that supports a cause without fully comprehending the consequences of their actions, and does not realise they are being manipulated by the cause’s leaders.
9. Gaza – a historical accident, but a reality
The wild, impossible, fantastic, and capricious musings of the Trumpster about Gaza (variously deport all Palestinians, give to the US, turn into a resort, etc) have proved that there is a very short distance between out-of-the-box thinking and out-of-your-mind thinking.
To provide some context to Readers, Wry & Dry presents a potted history of Gaza in an Appendix. It’s worth reading. Of course.
Snippets from all over
1. No longer cry
Prices in Argentina rose by 2.2% month on month in January, the lowest increase since July 2020 and down from 20.6% a year earlier. (The Economist)
Wry & Dry comments: In the two years since being elected, President Javier Milei has slashed government expenditure by around 30% in real terms.
2. Chinese say no to marriage
The number of people marrying in China fell by a fifth last year to the lowest level in more than four decades — bad news for a country whose low birth rate threatens its long-term economic health. (The Times)
Wry & Dry comments: Just 6.1 million Chinese couples married in 2024 – the lowest level ever recorded. In China, people have to be married to register the birth of a child.
3. Tackling the big issues
President Trump said Sunday that he had asked the U.S. Treasury Department to stop minting new pennies (i.e. one cent coins), part of an effort to cut down on what he called wasteful government spending. (Wall Street Journal)
Wry & Dry comments: It costs $0.037 to make $0.01 coin.
4. Japan’s interest rates surge
Japan’s borrowing costs have soared to a 14-year high as rising interest rates, sustained inflation and a potential wave of wage increases this spring fuel a relentless sell-off in its government debt. (Financial Times)
Wry & Dry comments: Benchmark 10-year Japanese government bond yields have risen to 1.31%.
5. She had “had her lips done”
A lawyer caught drink driving told police she couldn’t take a roadside breathalyser test because she had ‘had her lips done’, a court heard. (UK Telegraph)
Wry & Dry comments: She also refused to provide a blood test because of her fear of needles. Nice try, miss. But still guilty.
It figures
- 3.0%: US – inflation in year to January. An unexpected increase. Expect US rates not to decline.
- 0.5%: China – inflation in year to January, up from 0.1% in December. Blame Chinese New Year spending.
- 5.7%: US – unemployment rate in the IT sector in January, up from 3.9%. Blame AI.
And to soothe your troubled mind…
“I’ll leave him alone. He’s got enough problems. With his wife. She’s terrible.”
The Trumpster, on stories that Prince Harry was to be deported for lying (about his use of drugs) in his US visa application form.
Wry & Dry comments: Perhaps the first accurate statement ever made by the Trumpster.
Appendix
Gaza – a historical accident, but a current reality
The wild, impossible, fantastic, whimsical and capricious musings of the Trumpster about Gaza (variously deport all Palestinians, give to the US, turn into a resort, etc) have proved that there is a very short distance between out-of-the-box thinking and out-of-your-mind thinking.
So, to provide some context to Gaza, and so Readers can show deep knowledge in those interminable dinner-table/ Friday night drinks’ debates, Wry & Dry presents a potted history.
1918. The Ottoman Empire’s rule over the area of Gaza ended. Gaza then became part of the League of Nations ‘mandate’ of Palestine, under British rule.
1947. The General Assembly of the United Nations voted for the Arab-Jewish partition. Under the plan the town of Gaza and the surrounding area were to be allotted to Arabs. A civil war then broke out between Jewish and Arab communities.
15 May 1948. The British mandate ended. The State of Israel was established. On that same day armies of Egypt, Jordon and Syria (aided by Iraq) declared war and invaded Israel. The invaders were eventually routed, and an armistice agreed in early 1949.
1947-48. About 700,000 Palestinian Arabs fled, were expelled or forced from their homes into land allocated to the future Jewish state, as well as to parts of the future Arab state. They were mostly relocated into the area around Gaza. This became known as the ‘Nakba’.
1949. The Gaza Strip, as a political entity, was created as part of that Israeli-Arab armistice. Its boundaries were demarcated and eclosed an area of about 365 km2 (some 50% of the size of the Mornington Peninsula). Under the armistice, Gaza was under Egyptian military rule.
The Egyptian government did not consider Gaza part of Egypt and did not allow the refugees to become Egyptian citizens or to migrate to Egypt or to other Arab countries where they might be integrated into the population. Israel did not allow them to return to their former homes, seeing Gaza as being Egypt’s to manage (which it was).
The 700,000 Gazans were stuck.
1949-67. Gaza was under Egyptian military rule (except for a 4-month period 1956-7).
1959. The Gaza Strip was officially merged with Egypt and then the short-lived United Arab Republic (a union of Egypt and Syria).
1961. Syria became independent again. Gaza remained part of Egypt (then called UAR).
1962. The UAR established a Palestinian Legislative Council, elected by Gazans. Nasser said it would control Gaza, but was never given that authority.
1967. UAR (i.e. Egypt) closed Israeli access to the Straits of Tiran and mobilised its military, preparing to invade. Israel pre-emptively attacked Egypt. Jordon and Syria invaded Israel, but were routed. Israel also routed Egypt, and occupied the Sinai Peninsula, the West Bank and also Gaza. Gaza thus came under Israeli control for the first time.
1978. Israel and Egypt (no longer UAR) signed the Camp David Accords, part of which was Egypt renouncing territorial claim for Gaza.
1987. Hamas formed. The First Intifada against Israeli occupation commenced. It concluded in 1993 with the signing of the Olso Accords.
1994. A phased transfer of governmental authority of Gaza to the Palestinians took place. The Palestinian Authority, led by Yasser Arafat, chose Gaza City as its headquarters.
2000. The Second Intifada commenced with the beginning of rocket attacks and bombing of Israel localities and civilians from Gaza (and also the West Bank), especially by Hamas and Palestinian Islamic Jihad movements.
2005. Israel withdrew from the Gaza Strip.
2006. In the Palestinian parliamentary elections against its rival Palestinian faction Fatah, Hamas won 56% of the seats. Israel, the United States, the EU, Russia and the UN demanded that Hamas accept all previous agreements, recognise Israel’s right to exist, and renounce violence. Hamas refused.
2006-2022. Ongoing rocket attacks and kidnappings from Hamas led to responses from Israel, including airstrikes and intermittent incursions.
2023: The paramilitaries in Gaza, led by the Hamas’ Al-Qassam Brigades, invaded southwest Israel, targeting Israeli communities and military bases, killing at least 1,300 people and taking at least 236 hostages.
Summary
The creation of Israel, like many national and border re-alignments post 1945, was chaotic. Much of Eastern Europe was reconfigured. And millions died in the partition of India into essentially Hindu India and Muslim Pakistan.
The British, exhausted after the war, were not able to properly enforce its mandate and refused to enforce the partition. The UN did nothing to assist in the execution of the partition.
The Jewish Agency for Palestine accepted the partition and went about organising a new country.
The Palestinian Arabs rejected the partition and endorsed a military solution, i.e. civil war, instead of organising a new country.
Israeli paramilitary forces were ruthless in their occupation of land assigned to Israel.
The fate of the 700,000 refugees in Gaza was worsened with the invasion of Israel by its Arab neighbours. The armistice turned Gaza into a refugee camp as a part of Egypt. Egypt did not and does not want subversive populations crossing its borders.
The history of Gaza since has confirmed its artificiality, its lack of any economic basis; and its susceptibility to terrorist control.
Palestinians have a right to Gaza as much as Israel has to its territory. But Hamas has and will compromise that right with its ideological battle to eliminate Israel and Jews. Palestinians have not sought to create a viable economy and have been used as a tool by Iran in its own ideological battle with Israel.
Israelis have a right to peace.
Someone needs to shout in Trumpster’s good ear that there is no such thing as an ideal solution to any international conflict. Only a least-worst solution.
Disclaimer
The comments in Wry & Dry do not necessarily reflect those of First Samuel, its Directors or Associates.