Importance of not being earnest. Iran’s tune. Victoria’s complicit crossbenchers.
Wry & Dry: a cynical and irreverent review of the week in politics, economics and life. For intelligent Readers who disdain the trivial.
Investment Matters
This week Craig takes a deep, deep dive into SpaceX and, at $75bn, the largest ever IPO1:
- The importance of narrative and storytelling versus valuation and price
- Artificial demand: the role of ETFs, passive investment and limited ‘free float’
- The limits of SpaceX as a conglomerate
- SpaceX’s IPO as a litmus test
- Where will SpaceX’s IPO proceeds go?
- Valuing strategic momentum
- Markets’ capacity to absorb
Note, SpaceX will not be in the S&P Dow Jones indices for at least 12 months, and only then if it is profitable. However, it will be in the MSCI (the global shares’ benchmark), FTSE Russell and Nasdaq indices after 15 days.
Read this week’s Investment Matters.
1 The deal is the largest Initial Public Offering, almost three times larger than the previous – Saudi Aramco at $29bn, but not the largest capital raising. That honour went to Alphabet (i.e. Google), which raised $85bn last week.
1. Wry & Dry’s ponderings…
Liberal leader’s earnestness not important. Trumpster dancing to Iran’s tune. Victoria’s crossbench MPs as complicit as Premier Allan. Match the leaders: Go, Chess and Battleship. How big is a trillion? And much more.
2. The importance of not being earnest2
Liberal leader Gus Taylor’s poll numbers are defying gravity. In a negative sort of way.
Consider that Uncle Albo has broken more promises than a teenage boy on his first sneak-out-the-bedroom-window; Grim Jim’s budget caused the most tax-driven unhappiness since the Boston Tea Party;3 inflation and interest rates are going up; and consumer confidence is flatter than a lizard drinking.
With the enemy flailing like that, Gus’ poll numbers should be shooting up, not going down, down like Coles’ prices used to.
Princess Pauline’s poll numbers are also going up, defying the gravity that she, and her party, lacks gravitas. Witness One Policy One Nation’s monumental and derisory immigration/housing policy confusion of last week.
Gus’ problem is that he just cannot attract attention. Someone should tell him about the importance of not being earnest. And to smile. Wry & Dry is sure that he may have important things to say, but the words don’t matter as no-one is going to listen.
Perhaps the only thing going for him is that yesterday, Grim Jim made a ‘statement’ personal attack on him. There’s bound to be a sympathy boost in Gus’ poll numbers.
2 The Importance of Being Earnest is arguably the greatest of Oscar Wilde’s four drawing-room plays. It is a farcical comedy depicting the tangled affairs of two young men about town who lead double lives to evade unwanted social obligations, both assuming the name Ernest while wooing the two young women of their affections.
3 In 1773, American colonists dumped 342 chests of tea into Boston Harbor to oppose British taxation policy. In retaliation, the British Parliament enacted the Intolerable Acts in 1774, which included closing Boston Harbor until the dumped tea was paid for. The punitive measures further united the colonies against British rule. The American Revolutionary War began in 1775.
3. Tsar Vlad’s economic endgame
The latest report from the prestigious Kiel Institute4 bluntly states:
“Four years into Russia’s full-scale invasion of Ukraine, the contours of a genuine economic endgame are coming into view.”
Curious Readers are urged to visit www.kielinstitute.de to download the report.
The report goes on to state that Russia’s fiscal and financial buffers are largely exhausted, its asymmetric dependence on China is deepening in ways that are already costly and will become more so over time, and export revenues remain the single most important variable determining how long the Kremlin can sustain its war effort.
The question Readers may wish to ponder is whether Europe can maintain its mix of economic pressure and material support for Ukraine so as to make a durable change in Tsar Vlad’s strategic ‘calculus’.
4 The Kiel Institute for the World Economy is an independent, non-profit economic research institute and think tank based in Kiel, Germany. In 2017, it was ranked as one of the top 50 most influential think tanks in the world and was also ranked in the top 15 in the world for economic policy specifically.
4. Dancing to Iran’s tune
There’s an old stock market saw: “the market can remain irrational for longer than you can stay solvent.”
Applying this to Trumpster/Iran: “Iran can keep the Strait of Hormuz closed for longer than Trumpster can find an acceptable deal.”
Y’see, Trumpster has been dancing to Iran’s tune. Consider that in the nine weeks since the ‘ceasefire’ commenced, Iran has dictated events. It starts a ‘skirmish’, either in the Gulf or in Lebanon, waits for Trumpster to respond, which is then used as an excuse to stall peace talks.
All the skirmishes are “not a big deal,” Trumpster says. And when Trumpster says his response is ‘proportionate’, Iran hears “weak.”
On Wednesday, Trumpster lost patience and initiated “coercive diplomacy” (really, that’s what the Pentagon called it) and ordered some meaningful but not too meaningful military action. The response from Iran: the sound of crickets.
And then, this morning, TACO (Trump Again Chickens Out); Trumpster has cancelled the meaningful but not too meaningful military action. Is this a genuine TACO moment, or a genuine portent of a deal?
Who knows? But as long as Iran believes Trumpster is stuck with no alternative, it will squeeze him so his heart and mind will follow.5
5 “If you’ve got them by the balls, their hearts and minds will follow.” Attributed to former US President Theodore Roosevelt.
5. Victoria – who to blame?
The Labor Premier Allan is being blamed for the third-worldisation of Victoria. And hence the possibility that her government might lose the November election. Displaying that in the race of politics, one should always back self-interest, her colleagues in marginal seats are wanting to give her the DCM. This for no other reason than they don’t like the concept of hitchhiking down to Centrelink after the election.
Is it fair that she should get the blame? Or should her predecessor take the blame? Wry & Dry wants to add to those two amigos others who are complicit in the state’s demise.
Y’see, since it came to power in 2014, Labor has not controlled the upper house. And yet it was the cross benchers that waved through the government’s disastrous fiscal policies. It seems obvious that some of the crossbenchers inaccurately portrayed to voters their beliefs and/or deals were done to ensure concurrence with the wishes of Andrews and Allan.
As much as voters feel a desire to make Labor accountable for their sins, there is a case that the minor parties in the upper house should take some pain for their complicity.
What chance that the Greens, Shooters and Fishers, Legalise Cannabis and Animal Justice Parties will reflect upon their sins. And, come the time, vote repentantly.
6. Trumpster’s inflation pain
“I love inflation” was Trumpster’s response to US inflation jumping to a three-year high of 4.2%.
Thereby showing that his knowledge of economics is on the same level as his knowledge of the geography of the Persian Gulf.
7. Just sayin’
Earlier this week, there were riots (pogroms?) in the UK against black Muslims because a black Muslim attempted to murder a passer-by.
On Tuesday, in the UK, a South Asian Muslim, a teacher, was stabbed in the neck while protecting his pupils from a “knife-wielding” girl.
Every race and religion has its violent nutters. Every race and religion has its heroes.
Just sayin’.
8. Emperor Eleven plays Go, Trumpster plays Battleship
It’s taken almost half a year for Emperor Eleven to get out his passport and leave his Middle Kingdom for a parade of soldiers (who might very well be robots, difficult to spot the difference) and dinner in the Hermit Kingdom. This is not something he does lightly – he prefers others to come to Beijing, where he can control both the parades and the food.
Being the host also plays to his strengths. He has lots of friends (trading partners, client states or haters of the West) but few allies. Not that he cares.
Y’see, his advantage is that in a geopolitical world, he plays Go – where encirclement of territory is objective. He is building economic dependent relationships with needy countries in Africa, Central Asia, Latin America and the Pacific. Regions that others have deserted.
Go has about 10360 possible moves
On the other hand, Europeans play ‘group chess’, each country playing one piece in turn, hoping that its last move will appear as a logical successor to the previous move and part of a coherent strategy. Of course, it wasn’t. And isn’t.
Chess has about 10120 possible moves.
Separately, Trumpster plays ‘Battleship’, where the objective is to sink your opponent’s fleet before they sink yours.
Battleship has only 3.009 x 1010 possible moves. But Trumpster has only ever shown no more than 101 moves.
9. An anniversary reflection
On Wednesday, the duration of the Ukraine war passed that of the First World War (1,566 days). Wry & Dry will simply note two astounding outcomes of the latter.
Firstly, that four empires collapsed after the First World War: the Ottoman (623 years), German (i.e. Second Reich, 47 years), Russian (196) and Austro-Hungarian (51). The boundaries of countries in those former empires became a chaos of ethnic and nationalistic ambition, mostly only settled with the passage of another world war.
Secondly, that the outcome of another First World War declaration remains disturbingly unsettled. Of the three objectives of the British government’s Balfour Declaration of 1917, only one succeeded; being the creation of a Jewish ‘homeland’ in Palestine. The failed aims were (a) the retention of the civil and religious rights of existing non-Jewish communities in Palestine and (b) the retention of the rights and political status enjoyed by Jews in any other country.
The aspiration of the Balfour Declaration was shattered on the day after the State of Israel was formed in 1948, when armies from Egypt, Transjordan (Jordan), Syria, Iraq and Lebanon invaded Israel. Israeli forces were successful in defence. But the now forgotten outcome was that Gaza effectively became part of Egypt and Jordon annexed and held the West Bank, both until 1967 (the Six-Day War).
As a result of the 1948 invasion of Israel, some 700,00 Palestinian Arabs were internally dislocated or expelled to neighbouring Arab countries, and approximately 900,000 Jews fled from or were expelled from Muslim-majority countries.
It’s a counter factual question: what would the Middle East be like had the Arab nations not invaded Israel in 1948?
10. Very large numbers
As the world, or parts of the world, attempts to digest the fact that Elon Musk is now a trillionaire (following the IPO of SpaceX – see Investment Matters – and with his Tesla share-holding), Wry & Dry asks how big is a trillion?
Think about it in seconds.
- One million = 12 days (approximately)
- One billion = 11,574 days, or 32 years, give or take.
- One trillion = 11,574, 074 days, or 32,000 years.
Mr. Musk’s wealth (on paper) is very, very large.
11. Poms on the ‘juice’ have much lower grocery bills
No wonder UK snack food companies are struggling. A UK report6 says that weight-loss drugs (‘GLP-1’ drugs) have ‘wiped £780m ($1.4bn) from Britain’s grocery bills’. Chocolate and crisps are the main foods being rationed, as it were.
Results from a sample survey of some 12,000 people suggests that 1.9m Poms are on the juice.
But sales of some shopping items have increased. Apparently, there is a condition called ‘Ozempic mouth’, which is remedied by mouthwash or chewing gum.
The next question is, of course, on what was the £780m spent?
6 From Worldpanel by Numerator, a UK consumer market research company.
Snippets from all over
UK defence minister quits over weak defence spending
UK defence secretary John Healey resigned on Thursday, blasting Sir Keir Starmer’s government for being “unwilling” to commit sufficient resources to protecting the country. (Financial Times 12 June)
Wry & Dry comments: This is a unique event. UK cabinet ministers usually resign because of a scandal, not on principle. Apparently, the only opinion universally shared around Westminster (i.e. the Houses of Commons and the Lords) is that Healey was a first-class defence secretary and a first-class person.
SNP ‘sleazy’ cover-up
Scottish National Party and pro-independence Green MSPs joined forces to amend a Scottish Parliament motion, which called for an inquiry into Nicola Sturgeon’s estranged husband embezzling £400,000 of party funds. (UK Telegraph 11 June)
Wry & Dry comments: The SNP is also called for an inquiry into the Loch Ness monster.
China imports less and oil prices are lower
A sharp fall in China’s crude oil imports during the Iran war has been instrumental in holding down oil prices and keeping the global economy humming. (Wall Street Journal 12 June)
Wry & Dry comments: For how long will this last?
Another setback for Tsar Vlad
A decisive win for Armenia’s pro-western leader Nikol Pashinyan in parliamentary elections on Sunday is another sign of Russia’s shrinking global. (Financial Times 9 June)
Wry & Dry comments: To tilt the race in favour of the pro-Russian opposition and ensure Armenia’s fealty, the Kremlin closed off imports of Armenian produce, threatened Ukraine-style intervention and deployed its standard disinformation techniques. It failed.
Germany and France part way of new fighter
Germany and France abandoned plans to jointly build a next-generation fighter jet. The Future Combat Air System, which also involves Spain, had been plagued by bickering between French and German defence firms, including over how to split up the work. (Economist 9 June)
Wry & Dry comments: French pride, German precision.
It figures
- 0.25%: Eurozone. Points increase in interest rates, to 2.25%. Eurozone inflation rose to 3.2% in May.
- 75%: Elon Musk’s SpaceX. Percentage of all space launches last year. Thereby exceeding East India Company’s share of global tonnage shipped between Europe and Asia in the 1820s.
- 20%: Westpac. Fall in investor housing loan applications in the past three weeks.
And to soothe your troubled mind…
Trumpster was being interviewed on NBC last Sunday, just after it became clear that Republican candidate in the Los Angeles mayoral count would not win.
Trumpster: “The [2020] election was rigged, it was a dirty election, and it’s happening right now again in California.”
Interviewer: “Do you have evidence?”
Trumpster: “All I have to do is look.”
Interviewer: “That’s not evidence.”
Trumpster: “They’re crooked, just like you’re crooked.”
Interviewer: “To be fair, I’m not crooked. But let’s continue.”
Trumpster: “You’re either crooked or you’re stupid. Let’s call it quits because I’ve had enough. Thank you darling, have a good time.” Exits, stage left.
Wry & Dry comments: Just wait for the US mid-term elections in November.
Disclaimer
The comments in Wry & Dry do not necessarily reflect those of First Samuel, its Directors or Associates.
Cheers!