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:
It’s all about Trump’s tariffs:
- Ignore the preposterous comments in Trump’s announcement. Parse the underlying message.
- We are not convinced of a permanent loss of value.
- Clients’ Australian shares sub-portfolios are well positioned already with many stocks that are ‘adaptable’ to change, and with most holding over 10% cash. We will be patient.
- Critically, the long-term challenge will be how to respond to what is a changing world order. Again, the winner will be those countries and companies that can adapt.
To read Investment Matters, just click on the link at the bottom of this week’s Wry & Dry. Or here.
Wry & Dry’s rant
Trumpster’s Tariff Tree had beautifully wrapped boxes scattered at its foot. Trumpster looked as if he has been bouncing off the walls with excitement. He had probably hardly slept the night before. And likely jumped out of bed at 5am and cried, “Melania! Is it time yet? Can we start opening our tariffs?”
He had to wait until later in the day, filling in time by attending his barber and having his orange make-up made especially deep. And come opening time, there they were: a tariff box for each country, territory and dependency on Earth. Cambodia and Vietnam had the largest boxes. In a lesser, but still large box was China. Australia’s box was, with many others, the smallest.
The question no-one asked was what will be the subject of his next theatrical presentation? As he gets bored with tariffs. What could be bigger? Wry & Dry’s suggestion: a massive geopolitical statement.
1. Trumpster’s tariffs – Cry “havoc!” and let slip the dogs of economic war1
Never in the field of human activity will so much be blamed by so many on so few.2 In fact, blamed on one person. Trumpster’s delusional economics will cost the world’s trading economies plenty.
Acknowledgement: The Economist
It remains to be seen how bad will be the economic and personal outcomes. The initial reaction is that they will be massive and deleterious. However, Readers might expect an evolution of an easing of tariffs as individual countries negotiate reduction in their tariff and non-tariff barriers to trading with the US.
Moreover, agile countries, agile industries and agile companies will adjust, but that adjustment will take time.
As for Australia… of the course the sky is falling. Armageddon! The apocalyptic end of the world as we know it!
Err, no. Albo and Top Gun Pete (and the media) should take a Bex and have a good lie down. The political aim should be to get results, not try to yell the loudest at Trumpster. As with other countries, agile companies and agile industries will adjust, albeit there will be some pain.
The possible good news will be that Readers should expect interest rates to be 1% lower in 12 months as the RBA moves to defend the economy.
Critically, Readers should hope that whichever government wins the election will not toss billions at threatened industries, companies or interests, if Readers follow. But, oh, the temptation.
Politically, Top Gun Pete lost this election battle. The facts show that he could not have done any better than Albo and Albo’s team. His impulse to make every issue a binary one, especially foreign affairs, is not helping his desire to have his people measure up the curtains in Kirribilli.
See article 10 for Trumpster’s Tariffs 101.
1 Shakespeare’s Julius Caesar: “Cry “Havoc!” and let slip the dogs of war/ That this foul deed shall smell above the earth/ With carrion men, groaning for burial.” Mark Antony, as he seeks to arouse the public to support his call for revenge for Caesar’s assassination.
2 To paraphrase Churchill in a speech to the house of Commons in 1940: “Never in the field of human conflict was so much owed by so many to so few.” He was referring to the efforts of Fighter Command of the Royal Air Force, which fought and defeated the Luftwaffe in the Battle of Britain (10 July to 31 October 1940).
2. Message missed
The key message from the Chief Teller of the RBA on Tuesday was missed by the tabloid media, either print or video.
That message was not about interest rates being unchanged. That stasis was widely predicted. It was a later comment from Michele Bullock about wage rises and productivity growth.
“If productivity didn’t pick up, the rate of nominal wage growth that can be sustained is lower.”
This is a direct criticism of the government. Good grief. Don’t seek excessive wage growth unless it is matched by productivity growth. But this is exactly what the government did, in seeking a national wage rise in excess of inflation, no productivity improvement required.
Productivity in Australia has been flat since 2016.
Ms Bullock added, “Productivity is how people can get real wage rises.”
Sigh.
3. Protest and you will be tortured
It is strange that many people believe that Palestinian misery seems to matter only when the blame can be pinned on Israel.
This week, a Palestinian man joined protests in Gaza last week to demand an end to 18 years of Hamas’s violent misrule in the territory. In retaliation, he was kidnapped, tortured and murdered by members of Hamas’ Qassam Brigades. Then his body was dumped in front of the family home.
Wry & Dry has scanned the Australian media for the outrage from the pro-Palestinian/ free Palestine movements. And the Greens.
The sound of outrage was… the sound of crickets.
4. No appearance, your worship
The four key decision-makers in Victoria’s 2026 Commonwealth Games cancellation refused to appear at the public hearings investigating the fiasco.
The state parliament select committee reported on Tuesday and put blame for the fiasco squarely at the feet of the four key ministers:
- former premier Chairman Dan Andrews (now retired)
- former major events minister Martin Pakula (now retired)
- former treasurer Tim Pallas (now retired)
- former Commonwealth Games minister Jacinta Allen (rewarded with the state premiership)
The parliamentary committee also accused the state government of impeding it from collecting vital evidence.
The findings were not a surprise. The bid for the Games was a political decision; it used flawed modelling; proper due diligence was not undertaken; warnings about costs were ignored, etc. And cost over $600m directly, not to mention the cost to Melbourne’s reputation as the sporting capital of the globe.
The only outstanding matter is how long before the remaining incompetent gives herself the DCM. Doubtless, the Labor government’s chances in the 2026 state election can only be enhanced by her making alternative employment arrangements.
Which untainted fresh face will next take the poisoned chalice?
5. The best judge that money can buy
Voters in Wisconsin turned out on Tuesday to elect a judge for that state’s supreme court. The race was technically non-partisan, but, in reality, it was anything but.
Y’see, the state supreme court needs to approve new congressional maps (i.e. electorate redistributions). If that approval is given, Republicans could lose two seats in Congress. Wisconsin is a gerrymandered state: the Republican-controlled State Legislature drew electoral boundaries that delivered six of eight House seats to the Republicans. The state is politically evenly divided.
The centre-left candidate, Susan Crawford, had to defeat the US$25m tipped into the race by Elon Musk. Muskovite was determined to spend the dosh to support Trumpster’s thin Congressional majority, notwithstanding the diminishing revenue from his diminishing motor vehicle company.
Voters were paid $100 to sign a petition denouncing “activist judges” (that is, Ms Crawford); Muskovite personally handed over cheques worth $1m to two petition signers.
But Muskovite’s millions returned a null set. Ms Crawford won by 10 percentage points.
And now Trumpster has effectively given Muskovite the DCM.
6. Massive by-election swings against Trumpster
…two Special Elections (i.e. by-elections) in Florida in very safe Republican House districts (seats) returned Republican members. But with massive swings against the Republicans.
The Republican candidates endured a 14% swing in one district, and 20% in the other.
Of course, Trumpster will say that both elections were fought on local issues. Of course.
7. Croesus’ RDS still not cured
It’s so sad. Croesus Turnbull’s recent RDS has not abated. In fact, it’s worse.
Croesus arranged a well-publicised one-day ‘security forum’ on Monday. The aim was to hear expert views on defence. Predictably, the speakers were carefully chosen by Croesus to present world views that essentially reflected his own.
Firstly, that AUKUS is bad idea. Croesus’ decision when Prime Minister to award Australia’s submarine contract to France was overturned by Miracle Morrison and affirmed by Albo. Croesus is a good hater – revenge, served either hot or cold, is always on his life menu.
And so, his life mission is now to destroy AUKUS. The facts that (a) he is unable to do this and (b) he is also smart enough to know that he cannot, suggests (c) that the sole issue is his RDS.
Secondly, that Trump’s foreign and defence policies mean Australia should re-calibrate its relationship with the US. This view is somewhat naïve: Does he really think that he is going to change a geo-political and symbiotic relationship that is over 70 years long on the basis of one US presidential term? No, he doesn’t. But that’s not the point.
He wants the media attention to say that he can.
8. US consumers – not happy campers
Not wishing to blame any one person… Okay. Wry & Dry will. It’s Trumpster’s fault that US Consumer Confidence Index (measured by the University of Michigan) is at its lowest since 1980, aside from covid and the GFC aftermath.
The implication is that the US consumer consider that he/she is feeling that Trumpster’s tariffs are causing as much concern as covid or the GFC.
Trumpster’s has done this in three months. All by himself.
Y’see Trumpster sees life as a fixed sized pie. He only gets more if someone else gets less. So, the US can only get richer if other nations get poorer. He’s nutzo.
9. Location. Location. Location.
Top Gun Pete’s announcement that, if he got the top gig, he would live in Kirribilli (Sydney) just cost him thousands of votes in Melbourne.
Melbournians are indifferent about Canberra. But Sydney is another matter. TGP’s active decision to favour Sydney will not go unnoticed.
He would have done better to select a WFH arrangement in Brisbane.
10. Trumpster’s Tariffs 101
Readers might want to read between the lines. A lot of Trumpster’s tariff revolution is all about China. Which explains the large tariffs on Vietnam and Thailand.
Y’see, much of what is exported to the US from South East Asia is sourced in China, to a greater or lesser extent. After Trumpster hit China with tariffs during his first term in 2018, hundreds of manufacturers, notably in electronics, shifted production to Southeast Asia. Over 30% of new investment in Vietnam is from Chinese companies.
Source: Financial Times
But it’s not only China. Consider Japan’s Nintendo, which ships its Switch 2 game consoles to the US from Vietnam. Or South Korea’s Samsung, which has 45% of its mobile phones made in Vietnam.
Of course, a lot of Trumpster’s tariffs are nonsense. Consider Heard Island & McDonalds Islands, sub-Antarctic territories of Australia, with zero population, has been hit with a 10% tariff. A bit hard on the penguins.
Norfolk Island is worse off. Its exports to the US of about $200,000 p.a. have been hit with a 29% tariff. Has it been confused with A Nother Island?
And the Vatican got hit with a 10% tariff. In God we trust, all others pay tariffs.
PS: To save Readers trying to work out how the ‘reciprocal tariffs’ were calculated, allow Wry & Dry provide you with an explanation.
- Start with a base tariff of 10%;
- Recognise that trying to assess the effect of non-tariff barriers is fruitless; so…
- Assume that a combination of tariffs and non-tariff barriers cause trade not to balance between the US and a country;3 so…
- Take the US’ trade deficit with a country (e.g. China: $295.4bn), divide that by the US imports from that country ($438.9bn); and divide by two (Trumpster concession) the answer is…
- 34%.
- QED.
3 The assumption is fallacious. Trade balances are driven by a host of other factors.
Snippets from all over
1. Chinese banks’ profitability falls sharply
A key profitability indicator at China’s biggest lenders has fallen to its lowest levels on record as a slowing economy and an official push to boost credit weigh on the country’s banking sector. (Financial Times)
Wry & Dry comments: They live in interesting times.
2. Tsar Vlad drafts 160,000
Vladimir Putin has ordered 160,000 men to be drafted into the Russian army by mid-summer despite claiming to be working towards peace with Ukraine. (UK Telegraph)
Wry & Dry comments: In Russia, conscription is mandatory for all men aged between 18 and 27 and they are drafted for 12 months.
3. Hungary exits international court
Viktor Orban has said he will pull Hungary out of the International Criminal Court, becoming the first European Union member to do so and creating a deeper division between Budapest and Brussels. (The Times)
Wry & Dry comments: The international court, to which Israel and the United States are not signatories but all EU countries are, announced in November it was seeking the arrest of Israel’s PM Netanyahu over Israel’s war in Gaza.
4. Anti-Hamas protester tortured
Hamas has been accused of beating a man to death and leaving him on his family’s doorstep in a warning against any further protests against its rule in the Gaza Strip. The terror group was the subject of rare public demonstrations against it in the territory last week. (UK Telegraph)
Wry & Dry comments: confirming Hamas inhumanity.
5. US to upgrade military resources in Japan
US Defence Secretary Pete Hegseth said America had begun upgrading its military forces in Japan to set up a “war-fighting” headquarters, as the allies attempt to build a more formidable deterrence against China. (Financial Times)
Wry & Dry comments: The announcement was not made on Signal.
It figures
- 4.1%: Australia. RBA cash rate was unchanged.
And to soothe your troubled mind…
“There was nothing but enthusiasm for Mr Trump’s aggressive trade policies.”
JD Vance, US Vice President, commenting in a Fox News interview on reactions to Trumpster’s tariffs.
Wry & Dry comments: There was little enthusiasm shown on Wall Street: the S&P500 Index (the key market benchmark) fell almost 5%.
Disclaimer
The comments in Wry & Dry do not necessarily reflect those of First Samuel, its Directors or Associates.
Cheers!