Breakfast Club Blog
The Bailout Package. A Bailout We Had To Have.
3 October 2008
While we were on air yesterday we got the news through that the US Senate had passed the 700+ Billion dollar bailout bill.
As I write, the House of Reps is considering the motion.
Our financial correspondents are expecting the package to pass. If it doesn’t, well, expect the market to react particularly poorly. If it does pass, no-one knows what the market will do. Will investors see this as a delaying move, pushing the inevitable further down the track with an extra trillion dollar debt burden attached? Possible, dear friends. Possible.
Just as the vote was being taken in the Senate yesterday, we were speaking to the man who has held the treasurer’s role here in Australia longer than any other, Peter Costello (a man who might, just might, still become Australia’s next prime minister).
His prognosis for the financial world was not a happy one. He saw problems right across the world, although he says Australia is pretty safe since it has no federal government debt, has been producing huge budget surpluses, and has been stashing money away for years.
The US though, he says, is in no such fine state.
You’ve got to feel for Barack Obama and John McCain. The phrase ‘poisoned chalice’ comes to mind here.
Back in the days of the Clinton administration, Big Bill made a priority, at least for a time, of producing budget surpluses. Since then it’s been a case of deficit after deficit after deficit.
Remember, these were in relatively good economic times. While some countries have set themselves up for the bad times, the US hasn’t. There has been plenty of dead wood in the banking and investment system, and companies that have been allowed to finance bad debt. To let these problems go on, has been to allow them to fester and to allow the problem to permeate further into the financial sector. meaning that if those businesses go down, so do a lot of innocent people.
Someone had to deal with this stuff. The politicians in the House of Reps know it’s all being left to them. Bailing out companies is on the nose of the voters, but the politicians also know that if the package does not go through, then those same voters will suffer. A short term appeasement of anti-corporate voters is not to appease anyone.
That is why the bill will pass. If not this time, then next time.
And Barack or John will have tio pick up the tab. Just don’t expect a tip.
- Phil
Vale Rob Guest. Australia’s Phantom of the Opera
2 October 2008
Rob Guest died last night after suffering a stroke. He was due to get ready to go on stage in the mega-musical Wicked in Melbourne when he succombed. He never regained consciousness.
As you would expect, his fellow cast members were distraught last night. They were shown on television in tears as they went in to get ready for the show. He role as the Wizard of OZ was played by an understudy, and in the best traditions of ‘the show must go on’, it did.
I knew Rob Guest. He was the longest serving Phantom in the Australian production of the Webber musical. My wife played one of the principal roles opposite Rob, and acted with him across Australia and in the New Zealand season of the show in the 1990s.
Rob was a private man. Some of it might have had to do with the fact that he was playing a murderous disfigured psychopath, but he was not one to be swishing the champagne around after the show. Rather, he would go home to come down privately.
But it is in the small things that you get to know a man. And through sharing a love of the same brand of computer, at a time when that company was really on the nose, were became a sort of comrades. I remember particularly running into Rob on a street corner in Auckland. I showed him my new laptop, and the Phantom disappeared, the shy man disappeared and he was like a small boy at Christmas.
As I said, it is in the little things that the character of a man comes out. He helped me in the way he knew how. I liked Rob Guest very much, and when the show goes back to Auckland next week for the return season after 11 years, I know that my wife and the other couple of cast members from last time around will remember Rob fondly, especially since they will be in the same theatre as in 1997.
I certainly will visit that street corner. I might even take my new laptop. For no good reason.
- Phil
Peter Costello. Economic Roosters Coming Home.
1 October 2008
Peter Costello is the man who can take a lot of credit for the way the Australian economy is weathering the financial storm. With the ructions in the US market causing huge problems across the world, Australia appears to be fairly well insulated. As senior finance writer Terry McCrann wrote today in the Melbourne Herald Sun, the government and the reserve bank here have armouries bristling with ammunition to fight any shocks from across the Pacific.
A lot of that can be put down to Peter Costello’s stewardship for 11 years. He saved heaps of dosh, put a lot of it in future funds, and encouraged people to forget their heavy-spending ways.
There is a couple of ‘buts’, however.
He resided over an extended period of econimic boom. During his time as bank manager supreme, very little went wrong with the world financial markets (except in some parts of Asia, and of course in the temporary falls that followed 9/11).
Most jobs are rather easy when everything’s going right. So let’s be aware of this before we go making ‘greatest-ever treasurer’ pronouncements.
Then there was superannuation. This is the forced retirement-savings scheme that the government has been pushing for more than twenty years in Australia and in many other countries. In short, people are forced to put part of their weekly wage into investment funds. Employers are forced to make co-contributions. That’s all cool because it takes the pressure off the governments to provide for retirees, and workers (and their bosses) are providing for their own retirement funds.
But when the stockmarket falls, superannuation funds are hit hard. Their returns drop because they invest in the share market. Your hard-earned dollar earned from working twenty-three hours a day at a bakery is suddenly not earning what it was.
Peter Costello made contributing to superannuation much easier by heavily reducing the tax on those contributions. So it’s a weird day when he tries to say, as he did this morning, that he and his government never ever encouraged people to increase their super contributions.
He did and they did. It’s a fact of life. No amount of wishful historical revisionism is going to change that. Sorry Peter. You were a supperannuation superhero. Fact of life.
He shouldn’t be too sorry though. The increase in super contributing has served Australia well. It has forced saving. It has helped people prepare for their retirement. There’s no need to be ashamed of that Mr ex-treasurer.
By the way, we’re speaking with Peter Costello on the program tomorrow. We’ll talk about this and a whole lot of other topics. Have a listen if you can at 0100 GMT.
- Phil
US Bailout Fails. Market Falls. Seatbelts Fastened.
30 September 2008
The thing about hosting a breakfast program in Australia is that we, along with Tokyo, are the first big market to open every day.
So with the US700 billion dollar rescue package failing a few hours ago, we will be the first ones outside of the US to feel the effect.
The Futures tell us that it won’t be pretty. Expect a seven percent fall, at least initially. This was bound to happen. I’ll give you a apocryphal note to explain why. Yesterday, almost as an afterthought, I asked one of our market analysts on the program what would happen if the US Congress changed its mind and refused to agree to the rescue (or ‘buy-in’ as the US politicians tried, hopefully, to call it). The analyst laughed a little and said it would be disastrous. The little laugh was indicative of her view that the rescue package was a certainty to pass.
She’s not laughing now.
There will be plenty of panic in financial circles right now. Advisors are seeing their clients’ portfolios lose real money minute by minute.
My stockbroking neighbour Charlie, who has been lamenting the stockmarket of 2008, will be suffering, I know. But even though his head gets lower everytime I see him in arriving home late from work, his advice is always the same: don’t get out of the market; this is a terrible time to pull out shares. They have lost 30% or more of their value this year, so pulling them out of the market when they are at their low ebb is hardly the most bright financial move. (”Hey guys, let’s invest in some companies. When they lose heaps of value, we’ll pull them out!!”)
The bottom line always has to be that if the economy is strong, and most of ours in the Asian region are strong, and if we are investing in reasonably strong companies, then be like the Doors’ Jim Morrison and be Riders on the Storm.
There may be bad to come, but there’s plenty of good to follow that.
- Phil
Scarlett Johansson Gets Married and the World Goes Crazy
29 September 2008
Scarlett Johansson was pretty good in Lost in Translation. She was as bright and refreshing as Bill Murray’s character was perfectly played as jaded and disillusioned. I think it was that point in her career when Scarlett became the world’s darling, kind of like how Sandra Bullock won our hearts the moment she tripped over on the tarmac in Miss Congeniality (the first one, the good one).
But you’ve got to ask, why is her wedding such a big interest thing today? She’s married Ryan Reynolds who, we are told in all the news bulletins is thirty-one and Canadian..
To be honest, I thought Scarlett was already married. Or divorced. Or a mother. Or something.
For those thrilled by the nuptuals of someone they don’t know, I have to ask you, what is her latest film? If you know that, then maybe you will be enough of a fan to really be thrilled by the fact that she’s thrown a garter.
There really is a fixation, perhaps on obligatory fixation in the media to announce weddings, engagements, rehab check-ins, affairs and divorces.
Does it really matter? Paul Newman died on the weekend, and Hollywood press did what what it does best: celebrated the life of a great actor. He and his wife Joanne Woodward was not a couple that brought gossip. Reporters, out of respect, stuck to reporting their work, not trying to find personal stuff to fill the pages of the glossies. It was refreshing.
Personal lives can be interesting (see Amy Winehouse and Britney Spears), but they are just people who do a job for a living. Maybe we should just think, for a second, about how gossip pages and TV segments, are taking away from that. Amy Winehouse is a great singer. Why should be care about the rest of her life.
Or even more: why should we even be talking about the rest of her life. It’s her business. Really.
Meanwhile, I’m going off to see what Scarlett Johansson’s latest film is.
- Phil
