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:
- Adjusting for risk and return
- Member of the 3-4% club – reviewing some larger holdings
To read Investment Matters, you can still just click on the link at the bottom of this week’s Wry & Dry. Or here.
Wry & Dry’s musings
Difficult to decide who enjoyed more adulation this week. Albo who didn’t seek it, but got it. Or Trumpster, who did, but didn’t get it.
Elsewhere, France’s PM wants to slash two public holidays – where is Tom Cruise when needed? And would celebrity add glamourazzi to the AFL Grand Final?
1. Albo goes the full tourist
Wry & Dry regrets to observe, but he can only but use the term ‘useful idiot’. Incorrectly attributed to Lenin,1 the term refers to a person who does not realise they are being manipulated by political players to support a cause.
Even in black and white photos, Albo blushed, as the Chinese media gushed. Photos of the Great Wall walk will make the front pages of the glossy magazines. Albo was well fed, well flattered and well photographed. He met Emperor Eleven. He had a grand lunch with Emperor Eleven.
There were no surprises about his questions. Nor the answers he received. The only thing missing was three rounds of ‘Kumbaya’. Oh, yes the trade outlook was pumped up (as it should be). And the right noises made. High fives all round.
Last week Albo was speaking in the voice of former Labor Prime Minister John Curtain. This week, he made it clear that he was walking in former Labor leader Gough Whitlam’s size 12 shoes as he strode along the Great Wall.2 Doubtless, old timers will say, “Albo, Gough Whitlam was a friend of mine. You’re no Gough Whitlam.” 3
And Albo’s suggestion that photos of him on the Great Wall in Chinese media would increase Chinese tourism to Australia revealed at great deal about himself. Really, not quite a Whitlamesque observation.
Realists know that China’s Potemkin welcome of Albo will not change the transactional nature of the relationship. Emperor Eleven put on a happy face, but he is a ruthless autocrat. Chinese warships will circumnavigate Australia so often one will be named the Matthew Flinders.
It is folly to think that Emperor Eleven’s relationship with Australia is any more than a mercantile one.
A five-day Grand Tour? Really? When Albo next goes to Washington it will be a three-hour tour. And BYO lunch.
1 The term useful idiot was first used in a British periodical as early as 1864.
2 Former Prime Minister Gough Whitlam was Opposition Leader when he became one of the first Western politicians to travel to China during the Cold War. And he walked along part of the Great Wall.
3 Unarguably, the best riposte made in US presidential/vice-presidential debate was made during the 1988 United States vice presidential debate by Democratic nominee Senator Lloyd Bentsen to Republican nominee Senator Dan Quayle in response to Quayle’s comparison of his experience in Congress to that of John F. Kennedy. Bentsen responded, “I served with Jack Kennedy. I knew Jack Kennedy. Jack Kennedy was a friend of mine. Senator, you’re no Jack Kennedy.” The audience went nutzo. But Quayle ended up VP to George H.W. Bush.
2. The penny is almost dropping
After 179 days of his presidency, Trumpster is beginning to realise that not only is Tsar Vlad playing him like a kitten playing with a dead mouse, but that the whole world is watching the play.
Readers know that Tsar Vlad will not be persuaded by threats, tariffs or Trumpsteronian insults. Tsar Vlad is happy to keep tossing young Russians into the meat-grinder to achieve his goals of hegemony. He understands only one persuader.
So, Trumpster’s latest twin moves are not worth a hill of beans. Firstly, the threat to increase tariffs to 100% on Russia (and also on suppliers of produce to Russia e.g. China, India and Brazil) if there is no peace in 50 days gives Tsar Vlad 50 days to find a variety of work-arounds.
Secondly, the sending of billions of dollars of defensive military kit (paid for by Nato countries other than the US – doubtless Trumpster gets a sales bonus) is nice. But Ukraine needs offensive kit.
3. Lose two public holidays? Non!
France’s finances are in a mess. Government debt is exploding because of extremely generous pension and welfare systems. Its budget deficit is 5.8%, the highest in the EU. Australia’s budget deficit is 1.5%.
And France’s unemployment rate of 7.4% and GDP growth of 0.1% suggest that something is not working…
So, the new Prime Minister, François Bayrou, wants his countrypeople to work more. And pay more tax with less welfare spending. Of course, France being France, the focus has been not on higher taxes or less welfare spending. But on the possible loss of two public holidays. Mon Dieu!
M. Bayrou proposed axing Easter Monday (‘no religious significance’) and VE Day (too long ago to remember)4. And he certainly caused howls of horror when he said, “As a nation, we must work more…”
But, allow Wry & Dry to observe that the French worker is reasonably productive. Not as much as those in Switzerland or Germany. But certainly, well ahead of both Australia and Italy.
M Bayrou’s targeting of public holidays is a tactic, and is a distraction from his main focus – to reduce welfare payments. He will concede on the former if he gains ground on the latter.
Good luck with your projects, M Bayrou. Before the IMF comes knocking.
4 Victory in Europe Day, i.e. the end of the Second World War in Europe.
4. Trumpster and inflation
Inflation in the US is rising. In the year to end June, it rose to 2.7%, up from 2.4% in May and above market expectations. The effect of Trumpster’s tariffs is seeping into consumer prices. So, the Fed’s resolve in not further lowering interest rates looks wise. Trumpster will have to own this problem. But won’t. It will be Sleepy Joe’s problem
Of course, the inflation increase should temper his threats to the Chairman of the Fed to lower interest rates. But it probably won’t.
5. Trumpster and Epstein
HRH Prince Andrew could never shake his relationship with Jeffrey Epstein. Could the same fate befall Trumpster?
Y’see, one of Trumpster’s ways to get attention in his early days was his spouting of conspiracy theories. The most famous was that O’Bama was not born in America. And so, it was on the campaign trail that Trumpster promised, once elected, to release ‘the Epstein files’. His MAGA base loved the idea – conspiracy theories are their meat and drink, their reason for living, their tribal totems, etc.
MAGA people are hyperemotional; they feel and rarely think. Yes, wind turbines do cause cancer.
But now the US Justice department has stated “nothing to see here,” that there was not any incriminating evidence and “no further disclosure would be appropriate or warranted.” Attorney-General Bondi agrees. And now, so does Trumpster.
MAGA folk are furious. Right-wing social media has gone nutzo, led by Tucker Carlson and former Trumpster adviser Steve Bannon.
Their hope is that there is/was a ‘client list’ with famous names who preyed on young women. The world knows about Prince Andrew. But MAGA has gone the full the-moon-landing-was-a-hoax and wants to know that the Epstein list includes O’Bama and Sleepy Joe.
And this morning, the Wall Street Journal has published a letter allegedly sent by Trumpster to Epstein. See “And to soothe your troubled mind” section, below. Trumpster has gone the full nutzo.
Stop press: Trumpster has ordered the release of grand jury testimony relating to Jeffrey Epstein.
6. Wimbledon celebrity example?
It was in 1961 that the Academy Award’s ‘Red Carpet’ had its first outing.5 All the celebrities would have a squillion photos taken. As still happens. By the time the media publishes the photos, 80% of the men’s photos are erased and the publicists of the women advise that Ms. Wannabe Famous was wearing a turtle green kaftan by Aldi.
The Red Carpet has been slavishly followed the world over, with the aim of adding some glamourazzi to an otherwise boring event. And always for an evening dinner or award’s event. But no longer. The All England Lawn Tennis and Croquet Club (aka Wimbledon) is now The Place for the celebrities and wannabe celebrities to be seen, whether they know or otherwise that a first service is not a waiter bringing an entree to a dinner table.
This is a trend that the AFL should follow. The problem with its Red Carpet event is that it precedes a sporting awards’ night. Hence the Red Carpet Wannabes are athletic blokes and WaGs, with the latter often wearing well engineered outfits with just enough material to make three handkerchiefs. And not a celebrity in sight.
So, why not have an AFL Grand Final Red Carpet? Instead of the usual one-game/one horse race-a-year-business executives and politicians, why not some serious smile-ready celebrities. A red carpet could be laid outside the players’ undressing rooms, to infuse celebrities’ coiffures with the sporting scent of Deep Heat and other body-preparation oils.
Imagine Nicole Kidman, Cate Blanchett, Chris Hemsworth and Margot Robbie all glammed-up, adding celebrity to an otherwise celebrity-less event. The Red Carpet photos might be better than those on-field.
5 The Apartment won Best Picture, Burt Lancaster was Best Actor and Elizabeth Taylor was Best Actress.
7. Productivity
Many economists, especially Saul Eslake, have been noting for years that government funded jobs in care and bureaucracy are dragging down overall labour productivity.
Some 80% of jobs created in the past two years are in the ‘non-market’ sector, a sector heavily influenced by government regulation. The blowout in costs of the NDIS is a case in point.
And Albo’s Department of Employment, in an internal brief to new Minister for Employment and Workplace Relations Amanda Rishworth, has warned its mistress of the problem.
As Readers can see from the above chart, private sector productivity has a general upward trend, whereas productivity in government funded industries (e.g. education and health) has flatlined for two decades, and, in fact has crashed post-covid. Mining productivity is a volatile case because of large project lead times.
Wry & Dry just cannot understand why government ‘industries’ are so much less productive than private sector industries.
8. Private charities pressured
Readers will know that a private ancillary fund (‘PAF’ i.e. a private charity) allows a philanthropic person to donate a tax-deductible lump sum to a trust that itself can give funds only to charitable causes (i.e. so-called deductible gift recipients).
Currently, a minimum of 5% of the value of the PAF must be given away each year. The balance can accumulate into perpetuity, if the investment return is greater than 5% (or the amount gifted away).
For inexplicable reasons, the new Assistant Treasurer Andrew Leigh is pondering raising the minimum annual gifted amount to 8% of assets. This is daft.
PAFs work better than post-mortem munificence as there is no tax deductibility for the latter. Hence the phrase that it is better “to give with warm hands than cold hands.”
There is no tax revenue difference for the government between a 5% or 8% gifting minimum. Wry & Dry cannot see a winner from an 8% annual gifting minimum. The losers will be PAFs that will find themselves paying out funds from contributions rather than retained earnings. The capital of many PAFs will be exhausted.
What’s going on?
9. Data miscellany: R&D
Many Readers would identify Israel’s R&D prowess with its Iron Dome air defence system. The Israeli designed system intercepts and destroys short range rockets and artillery shells the trajectory of which land them on Israel’s populated areas.
But there is much more to Israel’s R&D than the Iron Dome. If R&D expenditure is a leading indicator of economic success, then Israel has a good future. It’s R&D spend is by far the world’s largest, as a percentage of GDP.6
Israel has more start-ups per capita than any other country, with the third largest number of generative AI companies in the world.
This high technology focus may have something to do with Israel being the only country in the Middle East that is classified as both ‘developed’ by the IMF and a developed financial market by MSCI, the global stock market index provider.
Like Singapore, it has no natural advantage other than its people. But, weirdly, Singapore’s R&D spend is modest, being only just above Australia’s.
6 Certainly, about 30% of this is on defence R&D, compared with 25% in South Korea and Taiwan, 10% in Sweden, and a massive 47% in the US.
Snippets from all over
1. Trumpster goes to London
Donald Trump’s second state visit to Britain will take place from September 17-19, Buckingham Palace has announced. But he will not address both houses of parliament during his visit, avoiding the possibility of political protests at Westminster. (Financial Times)
Wry & Dry comments: Reagan, Clinton and O’Bama have addressed UK MPs and peers. But Trumpster will be the first US president to undertake two state visits. A ‘state visit’ is a formal visit by the head of state of one country to another country. Trumpster is both head of state and head of government of the US. Not because he is good at both roles, but because the US Constitution says so.
2. Air India crash – pilot error?
The senior pilot of the Air India jet that crashed and killed 260 people last month was responsible for cutting the flow of fuel to the plane’s engines shortly after take-off, US authorities believe. (The Times)
Wry & Dry comments: It has been confirmed that the were not any mechanical or maintenance faults with the B-787.
3. Caught on ‘Kiss cam’
The chief executive of a US tech company has been caught in a suspected affair with a colleague after the “kiss cam” at a Coldplay concert broadcast them embracing to a crowd of thousands. (UK Telegraph)
Wry & Dry comments: Okay, it’s a slow news week.
4. Ultra-Orthodox exit
Six members of an ultra-Orthodox party said they were quitting Israel’s government over a long-running dispute about proposed changes to conscription laws. (The Economist)
Wry & Dry comments: The United Torah Judaism party wants exemptions from military service for ultra Orthodox Jews to continue.
5. Less oil demand
The International Energy Agency has said it expects global oil demand to grow at the slowest pace since 2009, outside of the coronavirus pandemic, amid early signs that US tariffs are weighing on economic activity. (Financial Times)
Wry & Dry comments: How dare it suggest that Trumpster’s tariffs are causing a problem!
It figures
- 4.3%: Australia. Unemployment rate in June, up from 4.1% in May. Expect a rate cut in August.
- 4.7%: UK. Unemployment rate in June, highest in four years.
- 5.2%: China. GDP growth in year to ends June. Frontloading exports ahead of tariffs helped.
- US$586bn: China. First half year trade surplus. A record. Exports to US fell (tariffs) but those to Sout-East Asia more than made up.
And to soothe your troubled mind…
“This is not me. This is a fake thing. It’s a fake Wall Street Journal story.”
President Trump, referring to a letter he is alleged to have written to Jeffrey Epstein for the latter’s 50th birthday. The WSJ states “It contains several lines of typewritten text framed by the outline of a naked woman, which appears to be hand-drawn with a heavy marker. A pair of small arcs denotes the woman’s breasts, and the future president’s signature is a squiggly “Donald” below her waist, mimicking pubic hair.”
Wry & Dry comments: Trumpster has lawyered-up.
Disclaimer
The comments in Wry & Dry do not necessarily reflect those of First Samuel, its Directors or Associates.
Cheers!