Wry & Dry: a cynical and irreverent review of the week in politics, economics and life. For intelligent Readers who disdain the trivial.
But first, a snapshot of this week’s Investment Matters:
Craig Shepherd, Investment Matters’ author is unwell. And so there is a gap in Readers’ reading.
Wry & Dry suggests that instead, this week Readers read Wry & Dry twice.
1. All the Trumpster decisions now are ex cathedra
The Trumpster’s etchings this week confirm that he is a latter-day Pope Alexander IV. And infallible, to boot. Y’see, when writing on his Truth Social social-media platform, it is clear that he sees his etchings as being ex cathedra i.e. infallible.1
In 1494, Pope Alexander IV decreed that the world would be divided between Spain and Portugal, with a line down the middle of the Atlantic.2
In 2024, the Trumpster decreed that the world be economically divided between the USA and the Rest. Those wanting to export to the US will have a tariff placed on their goods. And initially all goods from Canada (25% tariffs), Mexico (25%) and China (10% on top of the existing 15%) would suffer.
What is the Trumpster up to?
Is his reason to use the tariffs as levers to get these countries, especially Mexico, to control the flow of drugs and migrants into the US, as he says? Nuh.
Or does he wish to rebuild America’s manufacturing base, as he says? Nuh.
Readers should remember Trumpster the Man. Firstly, he loves the drama. Secondly, by putting up a tariff wall, he can selectively give his friends a ladder to climb over the wall.
Of course, ‘friends’ is not an emotional relationship. It is a fiscal one, if you follow. The ladder will come with a price. A form of simony. Much like the papacy under the Borgias.3
There is a mosaic forming: the Trump family will be the latter-day Borgias.
1 ‘Ex cathedra’ means ‘from the chair’ i.e. with the full authority of office (especially that of the Pope, implying infallibility as defined in Roman Catholic doctrine).
2 The Treaty of Tordesillas arose because Castile (Spain) and Portugal were squabbling over which should have the newly discovered and yet to be discovered lands around the Atlantic. The line was 100 leagues west of Cape Verde Islands: Portugal got the east, Spain the west. The line was later moved westward to allow Portugal to claim what is now Brazil. The Spanish assumed that the meridian line ran around the world, not just the Atlantic. Which is why the Philippines were Spanish.
3 The Borgia family was a noble line from Valencia that established itself in Italy. It became prominent in political and ecclesiastical affairs in the 15th century, with a deserved reputation for corruption, treachery and immorality. It produced two popes, and its members were suspected of many crimes, including adultery, incest, simony, theft, bribery, and murder.
2. Superannuation tax increase: all too hard
It may be too early for Upgrade Albo to run the white flag up the flagpole. But, if he has any political judgement, he should immediately quit the plan to levy a 30% tax on some superannuation fund members.4 And retain whatever economic credibility he has remaining.
Leaving aside for the moment (a) the merits or otherwise of a way to increase tax on large superannuation balances; and (b) Albo’s election promises not to increase taxes on superannuation, the proposed 30% tax had all the hallmarks of the design of a users’ manual for a Trabant, the East German smoke-belching two-stroke motor-vehicle hallmark of communist ingenuity.5
The plan was administratively incomprehensible, internally inconsistent, double taxing, misleadingly presented, selectively punitive and expensive to manage. Thereby failing every test of legislative reasonableness.
The plan has happily become bogged in the quicksand of the Senate. The world hopes that it soon sinks without trace.
4 The plan was to tax, in addition to the base 15% superannuation tax, for where the balance was greater than $3m, the annual change in the value of a member’s fund – thus capturing not only income and realised capital gains but also unrealised gains. Defined benefit funds would have an imputed taxable amount. The $3m floor would not be indexed, meaning for example, that in 5 years’ time at a 7% earning rate the $3m would have real value of just over $2.1m.
5 It had no tachometer, no turn signal, no seat belts or fuel gauge, no trunk liner, and used an oil/gas mix. It became obsolete on 9 November 1989, when the Berlin Wall fell. Its place in history is that “it gave Communism a bad name.” Which is the joke the car was.
3. Lebanon ceasefire: everyone’s a winner
The diplomats were giving high fives all round. The politicians were dictating their pivotal roles straight into their AI-driven autobiographies.
Peace in Lebanon. Who would have thunk it? And Sleepy Joe called it: “… an end to the fighting and displacement.”
Err… reality check. This is not a peace treaty. It’s a 60-day ceasefire, much like that of 2006. That ceasefire was UN Resolution #1701, which called for the Hezbollah to disarm. Hezbollah ignored that edict and the Lebanese army, which was meant to patrol the region that separated the two sides, was too weak to enforce it.
And look how that worked out.
For this week’s ceasefire, the IDF is a big winner: Hezbollah has been disembowelled. Lesser winners are the (a) hundreds of thousands of displaced Lebanese who now can return to their homes, if those homes still exist and (b) 60,000 Israelis who were forced to move from their homes in northern Israel, so as to escape Hezbollah’s relentless rocket attacks.
But Hezbollah still exists. It has survived both politically and militarily. It will explain away its losses and those of the Lebanese people through the self-serving prism of martyrdom and resistance, just as it has always done. And Iran’s motives, money and military support remains.
Writing of self-serving prisms, of course the ceasefire is because of the Trumpster. Mike Waltz, his chosen national security adviser said, “Everyone is coming to the table because of President Trump.”
“His resounding victory sent a clear message to the rest of the world that chaos won’t be tolerated. I’m glad to see concrete steps towards de-escalation in the Middle East.”
Good grief. Is there a Nobel prize in the offing?
4. Power down
It’s a mystery to Wry & Dry. In what the politicians were calling a heatwave (max 33C), the premier of New South Wales called on the good folk of his state to switch off washing machines, dryers, pool pumps and dishwashers. The state was running out of energy.
The bigger mystery was for an energy rich state (coal, natural gas, hydro) and boasts of renewable energy, there just wasn’t enough electricity to go around.
Apparently, the use of air conditioners in Sydney on a hot day was something that hadn’t happened before.
Much like rain causing potholes in Victoria’s roads.
5. Inflation: on the one hand…
Politicians like choice. So, given to choose between 2.1% or 3.5% as the inflation figure for the year to end of October, which did both Upgrade Albo and Treasurer Grim Jim select?
- 3.5%, as this is ‘underlying inflation’, the RBA’s preferred measure of actual inflation;6
- 3.5%, as this seems about right, given all of the comments about cost-of-living pressure;
- 3.5%, as this inflation in, err (pick a country), Netherlands; or
- 2.1%, as this is headline inflation.
Close. But no cigar. The correct answer is d. Obviously, as it is lower than 3.5%. It is lower mainly because of a record 36% fall in the price of electricity because of government rebates.
The bad news for Upgrade Albo is that the team of economic boffins that controls interest rates is not interested in the 2.1% figure. In fact, underlying inflation rose from 3.2% in the year to September to the 3.5% in October. Interest rates are most unlikely to fall before mid-2026.
Upgrade Albo, of course, put Australia’s inflation into a global context: “Australians understand that inflation is a global problem.” Conveniently forgetting that all G-20 countries except: Argentina, Brazil, India, Mexico, Russia and Turkey have lower inflation than Australia.
Albo surely cannot be happy to keep such company. Surely?
6 Called the ‘trimmed mean’.
6. ICC’s shambles
Readers will be aware that the International Criminal Court has issued an arrest warrant for Israel’s Prime Minister Netanyahu.
But as Wry & Dry noted in article #38-24 of 24 May, when the ICC’s Chief Prosecutor announced that he was seeking arrest warrants for Israel’s Prime Minister, the ICC has become a politicised, virtue-signalling body.
The ICC has imposed an esoteric legal overlay on a moving ground of a highly volatile conflict that has massive international political ramifications. The problem is not only that the charge conflates Hamas’ atrocities with Netanyahu’s attempt to crush a terrorist organisation within his country. There are two structural problems.
Apologists for the ICC clearly do not understand its operation or history, merely seeing it as an international judicial body, steeped in the rule of law, that will prosecute its admirable aims.
Firstly, the prosecutors and judges are elected by representatives of the 125 countries who have signed up to it. Most of those countries do not have a tradition of the rule of law and/or would have, shall Wry & Dry say, an institutional bias against a country like Israel.
Consider the countries that requested the ICC to investigate alleged Israeli war crimes: South Africa, Bangladesh, Bolivia, Comoros and Djibouti. Note too, that request was made on 17 November 2023, a mere 21 days after the IDF invaded Gaza, following Hamas’ pogrom that commenced on 7 October.
Secondly, the ICC’s foundation statute created a self-initiating prosecutor, answerable to no state or institution other than the Court itself. Without such an external check on the prosecutor, there is insufficient protection against politicised prosecutions or other abuses. Henry Kissinger wrote that the ICC’s checks and balances are so weak that the prosecutor “has virtually unlimited discretion in practice.”
This means that an ambitious or headline seeking prosecutor could fulfill both needs with a timely and prominent defendant.
Is this what happened? The prosecutor selected the members of the expert panel to advise him on the case. One is President of Medical Aid for Palestinians; three others are human rights activists. Some were on record as accusing Israel of the crimes they were asked to investigate.
Wry & Dry predicted in May that a likely outcome of the ICC’s actions would be an explosion of anti-Semitism, now more self-justified by the ICC. Which is what has happened.
7. In defence of 2% defence
The Trumpster wants America’s military allies to pay for their own defence. For too long, he shouts in upper case, members of Nato in particular have kept their hands in their pockets. He has threatened to give the US the DCM from Nato.
This changed with Tsar Vlad’s annexation of Crimea in 2014. A defence-spending floor of 2% of GDP p.a. for each country was agreed. Then, only Greece, the UK, and the US met the requirement. Clearly, Tsar Vlad parking his tanks on a neighbour’s lawn galvanised action, especially those closest to Tsar Vlad.
Those further away, e.g. Spain, Belgium, Canada and Italy, moved their needle a little, but not enough.
Of course, a 2% of GDP spend doesn’t indicate that the 2% has been wisely spent. Perhaps a capability metric would be more useful, if less understandable.
Readers well know that America is preoccupied with confronting Emperor Xi. Tsar Vlad will seek any opportunity to divide and weaken Nato. He will start at the top of the decision tree.
8. Germany’s mother of Europe
Angela Merkel’s legacy of 16 years as Germany’s chancellor is not what she wanted. Which is probably why she has penned her memoirs, a 700-page retrospective justification of her errors.
The principal of these is leaving Germany in the crippling grip of a trio of dependencies: protected by Uncle Sam’s military, powered by Tsar Vlad’s fossil fuels and funded by Emperor Xi’s consumers.
Readers will remember her two most disastrous policies: Shuttering Germany’s nuclear power in 2011 (thereby increasing Germany’s dependency on Tsar Vlad) and allowing over 1.2m refugees to settle.
Blend the economic cost of the former and the fiscal cost of the latter and Readers can see the economic consequences.
9. Getting to No
One of the earliest business negotiation books was Getting to Yes, first published in 1981. This little tome was all about successful negotiation without giving in.
Wry & Dry has just reviewed COP29, the fossil-fuel-emission-reduction-jamboree that has taken on a life of its own, and one quite separate from the practicality of achieving its objective.
The reality is that COP exemplifies Getting to No.
It is the turn (under UN rules) of the ‘Western European and Others Group’ to host the COP summit of 2026, logically termed COP31.
WEOG consists of 28 countries mostly from Western Europe. But for reasons lost in the mists of UN administrative history, there are Others clearly not in Western Europe. Namely Canada, Turkey, Australia and New Zealand.
Canada, Australia and New Zealand have a modest claim as modern western democracies. Turkey is an outlier on both counts.
Australia (and the Pacific Islands) has bid to host the 2026 boondoggle/ COP31. So has Sultan Recep Tayyip Erdoğan. The Sultanate was under pressure to give itself the DCM from the bid, leaving Australia as the Steven Bradbury winner.
But the Sultan was not for turning. Which means a decision delay, probably until June 2025, at a COP ‘intercessional’ in Bonn. Which will be well after the upcoming federal election.
There goes Upgrade Albo’s how-do-we-get-votes-from-the-Greens strategy. He found himself Getting to No.
Snippets from all over
1. Coffee prices up
Coffee futures rose to their highest level since 1977, extending a rally that has pushed prices up by 70% since January. (Financial Times)
Wry & Dry comments: This is a tragedy.
2. Crime pays – for those collecting the fines
The [US] Securities and Exchange Commission said it collected $8.2 billion in monetary penalties for the fiscal year 2024, the highest amount for the fines in the regulator’s history. (Wall Street Journal)
Wry & Dry comments: And the world will never know of the possible fines for those companies that were not caught.
3. Sleepy Joe’s weight-loss move
President Joe Biden announced a plan to lower the cost of weight-loss drugs for Americans covered by Medicare and Medicaid, two government-run health-care schemes. (Financial Times)
Wry & Dry comments: This would mean some 7m people would be eligible for the drug.
4. Tsar Vlad acolyte wins in Romania
Calin Georgescu, a hard-right, Russia-friendly nationalist, won a shock victory in the first round of Romania’s presidential election, taking 23% of the vote. (The Economist)
Wry & Dry comments: This is bad news. Romania has long border with Ukraine and also Moldova.
5. We’ll always have Paris
France’s borrowing costs have risen above those of Greece for the first time, as investors fret that Michel Barnier’s government could fail to pass a belt-tightening budget. (Financial Times)
Wry & Dry comments: Embarrassment.
It figures
- 4.25%: New Zealand central bank cash rate, down by 0.50% points.
- 91%: USA, the increase in the price of shares in GEO Group, a firm that owns and operates prisons, after the Trumpster’s election win.
And to soothe your troubled mind…
“It must be embarrassing for Victorians that it now has lower per capita income than Tasmania.”
Saul Eslake, independent economist, in an article in the Financial Review, on Monday 25 November.
Wry & Dry comments: It’s not the embarrassment; it’s the higher tax Victorians now have to pay. And Victoria no longer has assets to sell to pay off the massive debt.
Next week…
…Wry & Dry is on vacation. But Investment Matters will be published.
Disclaimer
The comments in Wry & Dry do not necessarily reflect those of First Samuel, its Directors or Associates.
Cheers!
And the author of Investment Matters finds himself bedridden with a bug. Investment Matters will return next week. Read last week’s investment matters here.