Radio Australia Today Editorial
Archive for September, 2008
Malcolm Turnbull’s Dream Team
23 September 2008
He still hasn’t put a foot wrong, this new Australian Opposition leader.
Since his shock election last week, Malcolm Turnbull has taken his time formulating his shadow ministry. And it shows. Like the lawyer he is, he has been strategic, putting the pit bulls in positions where he needs to make hits, namely places the prime minister has considered his own; foreign relations and commonwealth-state relations.
Former leaders have put attack dogs to cover economic portfolios, with mixed success. The public knows when politicians are attacking for the sake of it. Turnbull has placed two people who he considers to be strong economic minds into the treasury and finance posts. They are not rabid, but smart. It’s a move that could be decisive.
I said in an earlier blog that it is now game on for the next election.
I also mentioned though that the Australian people have not known out a new government after only one term since 1932, and that was in the middle of the worst economic depression the world has seen.
I have one of those deja vu feelings.
The U.S. government is doing everything it can to fix the market woes, but there would be no shortage of people who think that pumping almost a trillion dollars into the economy is going to cause the U.S. and the incoming president great strain when it comes to payingg for it. Remember that the U.S. is already a deficit spender.
What does this have to do with Malcolm Turnbull? Simple. The chances are that there will be more bad economic news to come, and as the U.S. economy deals with its huge spend policy, this will cause problems in Australia, including the prospect of lower commodity prices. Lower commodity prices means lower prices for our mining exports, which means lower Australian income, and thus a lessened ability to deal with economic woes. That will be the prospect that PM Kevin Rudd faces as he leads into the next election.
The Australian people will probably be hurting as a consequence of today’s economic flails. They will blame, and they will blame the PM. If Malcolm Turnbull plays his cards correctly right now. He will be in a position to offer an alternative package that might, just might, appeal to a disaffected electorate.
And we know what that means.
– Phil
The Islamabad Bombing.
22 September 2008
The world has been lulled for some time now.
Do you remember after 9/11 when the world was waiting for the next huge terrorist attack? There were some smaller bombings, anthrax scares and warnings, but nothing happened that was anywhere the scale of the US attacks. There were the isolated bombings in Jakarta, Bali and the London tube attack, all one-off attacks. Governments around the world, including here in Australia kept warning that more attacks were inevitable. Security tightened at airports and hotels, and here in Australia citizens were given those tiny emergency refrigerator magnets that urged us to report anything suspicious.
It’s fair to say that as the years went on, we have stepped down from the high-alert status that we had after 9/11.
The Marriott Hotel bombing in Islamabad reminds us that the bad guys are still out there, those extreme-minded people who care not a bit for the lives of innocents. They attack people when they are most vulnerable (in this case, when they are having breakfast in a hotel restaurant). Note that these terrorists do not attack military bases or anyone who can fight back. These attackers use their power in the easiest possible way. Indoctrinate some young mind into killing themselves and taking as many doctors, children and mothers with them as they can.
The message here is that terrorism has not been defeated. It only takes some weird dude with a hate complex to commit an act of terrorism. America knows this only too well. Remember the Oklahoma bombing and the Columbine High School shootings?
There will always be terrorism. It is not a war that can be won. We can make the world better and safer, of course, but as long as people want to enjoy a breakfast with a street view, or a cafe al fresco. They are potential prey.
I for one will not be giving up my kerbside lunches.
– Phil
The World Financial Meltdown. It Freezes. A Little.
19 September 2008
There’s been some pretty good news overnight out of the US financial markets. Not only did the markets go up, they shot up with the highest single day rise in six years.
The rise was attributed to the US government injecting 180 billion dollars into the system, some of it to encourage banks to invest in other banks. The US government knows that when small banks fail, people start hurting. That would be bad for a whole lot of reasons. So far, the financial market woes have been largely confined to companies. If more people start losing their homes, then the crisis takes on a whole new, frightening, dimension.
So will the huge jump on the Nasdaq, Dow and S&P continue?
Who knows? Our analysts can’t say what will happen in the US tonight. They are hoping that there will be more improvements. All they could suggest was that the US jump should filter through to the rest of the world today.
I’ve mentioned in the blog a few times this week that the underlaying strength of many of the companies affected by the crisis is fairly solid. Morgan Stanley in the US, which our analysts all agree is doing nothing wrong, took another hit overnight, despite the overall market lift.
It doesn’t always make sense this market business. Trying to read it is proving impossible, even for seasoned stockbrokers.
Speaking of stockbrokers, I haven’t seen my neighbour Charlie for some time. Usually we catch up while I’m out taking Bella for a walk. I think he’s probably spending a few hours longer at the office, just like the workers at Singapore’s AIA (the local arm of AIG). They’re being kept on at work until after midnight, ringing customers, talking to them, trying to avoid panic decision making. So far they’ve kept the defecting customers numbers down to two thousand. Those ex-customers probably would be kicking themselves when they saw that AIG did okay overnight. In fact very well.
Well well well. As we’ve said before. Knee jerking never comes to any good.
– Phil
AIG: When a Bailout Doesn’t Work
18 September 2008
Yesterday I had a meeting with my bank manager to discuss the home loan and our other finances.
After we had finiahed with all the depressing news about our over-spending, I asked him what he thought of the US federal Reserve bailing out AIG with an 85 million dollar loan.
His reaction surprised me to say the least. He said he was opposed to it.
Now let’s get this in context. Here was a banker, a man at the coalface of investing, a man who stands to lose a lot if the market drops, being opposed to a massive effort to stop the investor panic.
All I could ask is why?
He said, first of all, that it wouldn’t work. Secondly, a company that is teetering should be allowed to go with way of any weak company.
So what do you know, my banker is a Darwinist.
He was also right about it not working. The bailout didn’t stop the market dropping hugely overnight. Our financial analyst on the Breakfast Club this morning, Juliette Saly from CommSec told us that the fear is there, and a bailout of one company is not going to make a huge difference to the market. It certainly is not going to make people all brave again. She said that fear is causing bizarre behaviour, inlcuding last night’s 24% drop in Morgan Stanley, a company that she says is operating really well. There is no sense to Morgan Stanley losing its value, but again fear makes no sense anyway.
US president George W. Bush is keeping a low profile, a stance applauded by analysts this morning.
I don’t know. When the US was in the Great Depression in 1933, the new president Franklin Roosevelt made the famous statement that Americans had nothing to fear but fear itself.
A similar sentiment from George W. probably couldn’t hurt right now.
– Phil
AIG: Market Jitters Continue
17 September 2008
The U.S, markets made a recovery overnight.
It needed to.
After massive falls on Monday, the largest falls since 9/11, analysts were watching to see if the problems would be continuing today. Another set of falls would be a great indicator that America was in a depression-style conundrum, albeit a much slower one.
But the rebound of the market overnight points to the U.S. economy’s underlying strength. After all, beofrew all this turmoil, the western world had been going through a long period of growth.
So the market recovers. Then along comes AIG, the American insurance group that has 74 million customers worldwide. It has a trillion dollars in assets. It owns 900 aircraft. A couple of years ago the company made a 14 billion dollar profit. Last year the profit 6 billion. It’s just been reported that the company has lost 13 billion in the first two quarters of this year alone.
So powerful is this turnaround, that there were scenes of people queueing up at AIG’s Singapore offices yesterday wanting to get out of the company.
Some years ago there was a TV mini-series called The Moneychangers, in which there is a run on a bank. Banker Kirk Douglas, complete with dimpled chin, is trying to settle a crowd that is demanding its money back. One old woman asks him: Is my money safe? Douglas, torn between loyalty for his bank, and for the savings of this elderly woman, takes a moment, and answers “yes”. The crowd disappears. The bank is saved, and more importantly, the savings of all the investors are safe once more.
The moral here is that pulling together will save the day. Panicking never solves anything and destroys everything.
People here in Australia are asking about their superannuation investments. With the market values lower, superannuation values are lower. They will recover, and I suppose you’ve got to ask what would you do with all that dosh if you took it out of companies panic-style. You’d probably feel pretty silly once the share values go up again, and they will. Meanwhile your money is earning nothing sitting in your mattress.
So there was Freddie Mac, Fannie Mae, Lehman’s and now AIG. If what our analyst said yesterday was true, and the inefficient dead wood is being cut in a ‘survival of the fittest’ sort-out, there are a lot of unlikely’s that are proving to be unfit. There will be more to come.
Just don’t panic.
– Phil
