Ponzi Empire Update August 28 -

The good news is coming in spades; the Chinese have arrested the journalist responsible for their market crash,and he is charged with all manner of mischief; 'market manipulation' and spreading general panic with fabricated lies. How lucky for the incompetent Chinese Communist Party to have a handy supply of capitalist running dogs and their 'agents provocateurs.' And in the west, the New York Fed governor has delivered joy with his cryptic statement that the long-heralded September rate hike is no longer 'compelling' and share prices have responded accordingly. Market manipulation is not a crime when engaged in by the authorities. But there is a downside to these things; the expectation means that having now been discounted by the market, official cancellation of the hike will be treated as a non- event on the day and to the surprise of all, the market will stand logic on its head and resume its downward slide. It's such an old story; buy the rumour, sell the news.

If any market bull out there was actually smart enough to have sold at the peak and has cash reserves to redeploy he would NOT throw it into the flames of high volume panic selling. But it had to come from someone somewhere with very deep pockets. A cynic would reasonably assume the US government has spent tens of billions to stem the tide and almost all the disastrous drops have now been repaired, but how much ammunition is still available? Those buys also have to be unwound at some point.

Technical analysts would have noted the 'gaps' in the pell-mell downhill sharemarket debacle which are the overnight drop by which miserable closing indices are fondly recalled relative to the even more dismal openings next morning and they nearly always herald a reversal that will 'fill' the same. And the reassurances of those in the public eye with most to lose prove wise; those brave and smug souls who held the fort have recovered most of their notional losses. And so the universe unfolds as it should in a bear market and it's called 'the ladder of hope.' That means that each upward blip is heralded as the resurgence of the bull market and there is a short term notional reward for the brave souls who kept the faith.

Then it reverses to new lows at which the same folks swear that if it ever comes back to that last high, that missed opportunity, they are going to get out, but then there is yet another reversal and the manic- depressive 'ladder of hope' continues all the way to the bottom. At which point there is

a. no money to mount a new assault on Mt. Improbable

b. no interest in doing so and the charts flatline like in the Intensive Care ward when all is lost, at which point recovery is no longer 'Mt. Improbable' but a dead cert. (one day) And then fortunes will be made by those with long memories, cash and self discipline.

This is a great opportunity to panic but that may not be obvious for some days or weeks.

Sept.10 Update:Charts

http://www.kitco.com/commentaries/2015-09-08/Bulls-Set-To-Be-Tasered-Again-By-Imminent-Severe-Downleg.html

The Entirely Unexpected Crumbling of the Ponzi Empire continued

"Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew,

And the hearts of the meanest were humbled and began to believe it was true

That All is not Gold that Glitters, and Two and Two make Four―

And the Gods of the Copybook Headings limped up to explain it once more."

"As it will be in the future, it was at the birth of Man―

There are only four things certain since Social Progress began:―

That the Dog returns to his Vomit and the Sow returns to her Mire,

And the burnt Fool’s bandaged finger goes wabbling back to the Fire." From 'The Gods of the Copybook Headings' by Rudyard Kipling

And so it has come to this. Kipling had it pegged over a century ago. After all that zero-interest rate manipulation of the world economy to maintain the 'recovery' for the last 7 years, this is the direction of CCC ie. junk -rated corporate paper yields – that's the cost of money for corporations deemed most at risk of default; now 16%. Twelve months ago it was 5% and things were looking rosy according to official statistics; Janet Yellen gave her coy assurances, recovery was on track although rates wouldn't be lifted until the time was ripe.  And now the market has decided the wizards have maybe just lost control although the Irving Fishers and Joe Hockeys are johnny-on- the- spot to soothe the fearful.
They claim(ed) that all the conditions for prosperity are in place and there is nothing to worry about.  

"The stock market has reached a permanently high plateau." Irving Fisher, 1929

But there really is something to worry about and it's not the sharemarket so much as the bond market.  Since bank account returns were/are zero or less in some cases (you are CHARGED to keep your money in the bank), all bonds, especially junk was very much in demand amongst savers seeking some kind of a yield.  They hedged risk by buying into ETFs (exchange traded funds) in which they didn't need to fear just one corporate bankrupcy; the ETF owned a BUNDLE of this stuff, and you could trade in and out of your ETFs very easily. Unfortunately there is very little liquidity in the underlying bonds which have to be added or subtracted to the inventory of your fund according to investors cashing in or out. And of course as ever-reduced corporate circumstances are super-charged by fear, yields must rise as sales or purchases of existing bonds compete with new issues. Thus a 7% hit per annum reflecting on the total capital value over several years is a fast trip to poverty for your 411k or whatever you call the saved assets that will see you through your old age. And if you think you don't own this crap, your super fund probably does or barely better- rated, seeing as they are competing with each other to headline great quarterly results.

And none should forget the 2008 debacle where ratings agencies lost most of their credibility, having been paid for their efforts by the borrowers themselves and inexplicably failed to downgrade that debt even when the companies were technically insolvent and it was too late. Once again the taxpayer manned-up to ensure the stability of the global financial system and the silver-tongued wizards mostly hung onto their jobs; most famously amongst or regarding mortgage providers. And so there was one more heading for the British schoolboy's copybook; Dutch Tulip Madness, Mississippi Bubble, South Sea Bubble, Crash of '29, Hitler's Defeat in the East, End of Empire, Savings and Loan Disaster, and then U.S. Housing Crash. A page or two follows each, sometimes only a paragraph will suffice.

Exacerbating the whole affair is the chart of world sharemarkets, vaguely the inverse of junk bond yields. That means many more corporations are coming onto the list of notable downgrades. Even gold-standard industrial shares like Caterpillar was down 25% before the latest swoon.  (Luckily for Burnie we no longer depend on them.)   At some stage CAT will certainly be joined by loss-making speculative marvels like Netflix and with the decline of the real market leaders faith will die and yeah, this be the beginning of the end times when all shall be lost, for there is nowhere for interest rates to go but up where the real market leads and no-one is fit or crazy enough to borrow the banker's free (to them only) monies beyond the walking dead who have nothing left to lose but their credit ratings.

It is only now that the West has actually begun noticing; disaster has been the lot of the BRICS, Cypress, Greece and finally China which puts the whole mess suddenly on our own doorstep. And for Greece the rest of Euroland is throwing new money down the rathole each time a payment comes due. 'To give them time'; but it isn't the Greeks who are being saved, it is the biggest banks in Europe who had noticed an anomaly in bond yields over the EC average, ie. Greek debt paid higher yields on all that free money and they are loaded up the wazoo. When the smoke clears all those derivative contracts that protected big bondholders will be humongous new debt, owed by bankrupt counterparties.

The ancient Greeks had their own headings; and knew that hubris is inevitably followed by nemesis and nothing much can be done about it other than bitch and write tragic (unfunny) plays about people who fall into holes of their own making. But with the intellectual backing of the best and brightest at the US Federal Reserve, its associated institutions and the economic grunt of all Euroland behind modern Greece maybe it was going to be different this time, and prosperity would come to stay on their little, used-up peninsula.  Had not the world's bankers graduated from fraudulent coin- clipping and banknote printing to fool-proof high- speed computer- algorithm- hedged 50 -fold capital leveraging honestly designated as debt (which all currency is acknowledged to be these days) rather than something (anything?) more substantial? And by generating so much money and charging so many smart bankers with flinging it out there while it has some value could the whole world not enjoy the pleasures of exponential growth and consumption brought forward? Why not the folks in Saloniki?   Like they had done in Dublin (there's a missed heading there) and they want to in Burnie and Irishtown (Tasmania) at any cost when pigs shall fly.  But that won't crimp anybodies' election campaign, and the bankers didn't get to put the money out there, their trading divisions were pleased to get it instead and wrote those same derivative contracts knowing the EC would never let a member down.

Prognostication is such a gas. 'The seven headed beast shall arise from the sea,' 'how art the mighty fallen!'  But to make it stick there has to be a sweetener that people can apply to themselves; 'the meek raised up,' the other infidels or iniquitous confounded, the chosen people attain to the land of Israel, North Dakota or some hellhole relatively better than Damascus or Los Angeles.   So there is a slough of books out there about the coming religious come economic catastrophe which really gives me pause. If all those morons foresee disaster maybe I should hedge for the same old by sticking with the one sure-fire recipe for the ignorant which we all are at our core.  There is just too much information out there and the worst category (that never made the Dick Chaney taxonomy ) is the 'unknowns thought to be knowns.'

The formula is so simple.   In love, business or investing always target the unloved.   Your chances are better if only because your entry level risk and outlay is relatively very low and you have little to lose but your self-respect.

And the trouble with Biblical Prophecy and the like is that it is only obvious in retrospect, which is not much use. 'The sea shall deliver up its dead' could mean the resurrection of  all us munchkins for another bite of the cherry or just stinky global warming-delivered gigantic methane farts from icy muck on the freezing bottoms of the deepest oceans that will tip the planet into a human-free Venusian hell-world.  There is quite a discrepancy here so these things would be good to know. The cold war soviets were involved in all manner of think-tank operations, psi-war and metaphysical research that would keep them ahead of the west, and of course the CIA had to match them wherever and however insane. They also decided to analyze the bible as if it were an actual piece of secret code to be broken and perhaps thereby discover something concrete to work with.   Many thousands of hours of supercomputer calculations with billions of iterations generated a lot of English phrases but most were as cryptic as the original book. The only one that was truly close to having spoken to us in our time was “Bobby, don't go to Dallas.”

That's probably my joke, but nothing is certain these days.

http://seekingalpha.com/article/3450566-if-history-is-any-indication-junk-bonds-and-copper-are-telling-us-exactly-where-stocks-are-heading-next

And for a really good analysis of the share market and where its heading try this link.  Remember there is a limit on the depths of disdain and the contempt that may yet be visited upon the unloved; it is absolute rejection and ultimately total disinterest.  It is  there the foundations of great fortunes shall be built, but never exempt fraud, faith, theft and nepotism.

http://davidstockmanscontracorner.com/forget-the-dips-sell-the-rips/?utm_source=wysija&utm_medium=email&utm_campaign=Mailing+List+AM+Tuesday

Does God or Anybody Else Really Want a Plebiscite?

            "Matin's one thing the Lord and I see eye to eye on but

             durned if I can figger why He went and created them      

             consarned green-gutted turnip worms!"
                          from 'Tobacco Road' by Erskine Caldwell

The logical thought processes of children and simpletons are such a hoot; so guileless in their innocence. It's not until they grow up and start dealing with the broader social consequences of their own damnfoolery that it isn't funny anymore.

That is especially true in politics; always in the public eye; utterly dependent on a fickle and diverse constituency, and burdened with the co-incidental bonehead ideology of your faithful support base who understand your silence perfectly well as long as they get an occasional wink and nod.   One wink too far and the whole farce unravels in a twinkling of an eye.  But there may be a way out: if the will of the people on gay marriage rights reverts back to the people then let hellfire or a more temporal embarrassment fall back on their own heads for a change.  “Let a thousand schools of thought contend” as Chairman Mao famously wrote, but they really mean it this time.   Let the people decide the fate of same sex  couples, and having been tossed the hot potato we have no choice but to rejoice.

Most of us won't. We didn't elect these people to shirk their responsibilities. We, the vast silent majority who are so cavalierly claimed as everybody's constituency might rather take our cue from the Book of Job and silently endure our many pestilences as we await our chance to turf these fools.   It might be thought that the writer here is outside the box for having opened his mouth, but it isn't so.  This isn't part of a debate on the mechanics of marriage equality because I don't give a rat's if gays and lesbians marry or how people define their marriages, partnerships or whatever.   As a liberal it isn't my business how other people pursue happiness and fulfilment as long as it doesn't actually impinge negatively on someone else's, which is something Tony Abbott and a fraction of his brain-dead big L essential partisan support base can't comprehend.  The thing is, regardless of our own orientation we all know someone and the polls are unequivocal.

In my extended a family a young woman in another country has married her girlfriend, and they organized to have a baby. Her (highly educated, professional - probably a negative in the all- important numbers game) mother says “It isn't what I would have chosen for my children, but they are deliriously happy, and who could stand in their way?”

A rhetorical question this; in which 'who' translates as 'what kind of slimeball.'

And the other thing about it is the same old which is always money. The unravelling of the great united Liberal party leadership has shown up another glaring disconnect which is the way these people handle public funds. They came in not only as our bright-eyed saviours replacing a dysfunctional Labour government but as angels of probity and thrift to repair the budget.  That's something all of us great unwashed sympathize with even though we like to be personally exempt where belt- tightening is concerned.  Yet most of us man- up to our patriotic duty; not that you are given much choice if you have left the workforce.  There is an army out there in the CES scrutinizing every receipt of yourself and the housemate that regularly or once shared your bodily fluids.  They don't care about sex or marital status.  There is no hypocrisy in the bureaucracy when it comes to  your hip pocket.    They have lists of everything you own and they insist on regular asset revaluations if to their advantage.  They subtract deemed receipts on investments, losing or otherwise which include a pound of flesh from whatever you might be so stingy or cunning as to have given away in the last decade.   My own part pension has been cut off nearly as many times as it has been received at God knows what cost to public finances and now its gone which must double the savings to the public purse.   A stinking $90 a week came at compliance costs of time and travel that would have paid the same had I continued dragging myself to work.  Most of that was due to government IT failings.  If the cheques had continued to   arrive regularly it would have been worth about $4500 a year which isn't quite enough for the speaker's famous short helicopter ride or a half a holiday in Kakadu for the elect and their families.   And now we are being offered a 100 million dollar exercise in futility to haul the monkeys down off their own petards.

In terms of budget repair that's TWENTY THOUSAND TIMES worse than the helicopter ride which inspired an inquiry to redefine 'the rules' (for them) which will take a committee of appointed experts several months and many millions of dollars before they can report their findings. But it really shouldn't be that complicated; all these problems could easily be resolved by leadership with the 'ticker' to take a moral stand or come down a tad from 'ticker' to the more descriptive Spanish term 'cojones' as in "a weakling without cojones who has never seen his wife's privates".   Anyway why should we need rules on this matter?  If your moral code is the criminal code, please do the world a favour; step in front of a bus, resign or start by staying out of public life. There are more suitable professions like 'share market tout' although that seems be part of the political job description these days as our elected house of reps morphs into some redundant, impecunious and noisy department of the Commonwealth Employment Service.   The CES will NOT be valuing their own incomes, assets and chopping political pensions accordingly. 

So there's an absurd gap between public and political entitlements and they just don't get it. Some of the back-benchers might and Malcolm Turnbull certainly does. Unfortunately he can't hide his contempt in the party room and they hate his guts or he would have been drafted for the leadership months ago. 

It's the first time in ten years we have had snow and it has been bitter for a week.  There hasn't been any grass growth this winter and we are facing the mother of el ninos this spring.  We have been adjured not to politicize these things by talking climate change; maybe it's just part of the natural variation by which species are regularly swept from the world.  Two days ago I noticed a ewe in labour down the wet and wind-swept paddock.  It's unmistakable even from a long distance,  they lay on their sides with a hind leg stretched straight out off the ground and muzzle in the air.  The lamb was only partly born and I walked the ewe up the hill to a small shed, being regarded the whole time by this vaguely familiar, prick-eared, demonic, tortured little face staring out at me; just like on TV.  She had twins, tiny and premature, hardly bigger than puppies and I helped pull them out because she was too weak and they were too immature to present their forefeet first.  One still had its eyes sealed.  Even with food for the ewe and shelter they were dying for lack of milk she couldn't produce, and a surfeit of milk substitute which they couldn't handle.  

This morning I got out of bed certain of the worst.  Michael Roche of Queensland Resources Council is on the radio crying for the 14000 desperate Townsvillians who were so looking forward to working at the Carmichael coal mine, going beyond the government's 10000 job figure even, while Adani Corp. has claimed to need only 1464 people.  Of course there is a long-term small multiplier and a short construction surge.  Perhaps there are also thousands  of people in other towns from Bowen to Brisbane who are also looking for work.  Absolutely everyone in the world was so keen to cash in on the rewards of growth and development; high prices inspired huge capital expenditures with accompanying huge debt burdens and now the inevitable oversupply means no-one can prosper.  Some casualties of the commodities bust are gone now; some as big as Glencore are hypothermal but still breathing sonorously. 

http://www.smh.com.au/business/mining-and-resources/glencore-billionaire-club-loses-half-its-members-as-stock-dives-20150820-gj3uka.html

 And the last lamb was dead, even as its mother had finally come into milk.  I looked on Gumtree to find an orphan and there it was. 

"Spots, an adorable healthy week-old orphan lamb happily adapted to the bottle.  This little fellow will take a lot of attention.  $100."

Maybe there are people out there without some kind of life partner but lots of leisure, money and undirected love to give, but a grown sheep in good condition is barely worth that kind of money.  I would have taken the skin off the tiny corpse and tied it over a ring-in, which the ewe would have accepted as her own in an  instant.  Or if  the situation was reversed given the lamb away to save knocking it on the head.  Notch up yet another 14002 people out there with sh** for brains.

Deconstructing the F 35 Boondoggle

"Eekoff!  Eekoff!"

"That naughty Tubby Bear has put ginger beer in the tank of my car instead of petrol!"

                                                             from "Noddy and the Aeroplane" by Enid Blyton

And so Noddy's car coughed and was still.  It was thanks to Big Ears (and the bear) that little Noddy got the use of an aeroplane in the last book of the series.  Unfortunately this is unlikely to be Tony Abbott's last disaster in his own series but he is in the good company of several nodding little wooden men; heads of government who couldn't say no to our great strategic patron.  But some are smarter than others and are furtively seeking the exits. 

"It's a great plane, great plane!" he exclaimed stepping from the cockpit of a mock-up.  Maybe it had been planned as a photo- op with a real one but they aren't quite flying properly yet, nor will they ever in any satisfactory sense.    Of course it isn't all his baby but he knows you have to go along if you want to get along.


http://davidstockmanscontracorner.com/the-military-industrial-complex-finally-did-it-invented-a-trillion-dollar-plane-f-35-that-will-add-zero-value-to-national-security/


http://www.ausairpower.net/jsf.html

So how did it come to this?  Better yet to ask how does mediocrity defend itself in a communal milieu; be it kindergarten, a political party, corporation or civilization.  Tubby Bear was only supposed to wash the car but turn your back and the cunning little bounder is servicing it for his own ends.

Firstly an admission that I have no experience with aeronautical engineering, hardly knowing a flap from an aileron.  But the methods, tools and principles are the same and I could confidently build an aircraft in my garage.  That's something every musician understands.  They can all play Beethoven.  Some play it well, but only Ludwig Van could compose it.  As a self-taught engineer of one-offs for myself and others I am in the enviable position of never having had to get anything off the ground.  It's when you are airborne like on a bridge or held up by wings that the mathematics counts to the nth degree.  My own work requires none of that, it rests firmly and humbly on terra firma; sleek and  functional; well beyond the standards of health and safety or the penny-pinching economics of mass production.  And humbly because as a non-visionary who can actually do things I understand that in everything we do we stand on the shoulders of giants - from smaller men who built the machines that roll and weld perfectly square and dimensioned, straight hollow steel members, and the geniuses who worked out how to produce the perfect super-hard spheres and cylinders and races that constitute the bearings we take for granted and buy off- the- shelf for a pittance.  Without these my work would be uncertain and clunky and our civilization would grind to a halt.  On the upside the German blitzkrieg could never have rolled over Poland.  And somehow that took a while to sink in; the allies never got around to bombing Schweinfurt until 1943.
http://www.thirdreichruins.com/schweinfurt.htm

And at the top of the hierarchy stand the men who discovered the boxes - the ones that ridiculous dreamers think outside of which are also known as the laws of nature.  That's where our calculations come from and no-one with an education wastes time imagining anything outside of that.  We don't write off the possibility of the supernatural absolutely but life is short and your chances are shite.  But you see these fantasies all the time in glossy magazines - the artist's conception of some giant airliner -as big as an Airbus 380 with  solar panels covering the wings, and through the picture windows happy passengers stroll or lounge in the comfort of some stratospheric saloon that makes today's first class look like a cattle crush and there is a headline: "The Future of Civil Aviation".  Hey they make kid's solar toys that fly OK.  Which is true and so would this if it could be only a single millimetre thick and fly around at walking speed with no payload whenever the sun peeked through.  A principle isn't enough, the metrics have to be possible.

"But solar panels are getting more efficient, now up to 27 %."

So at 100 % efficiency the toy could go 15 km an hour.  The extra lift can float lots of extra weight per square centimeter; maybe you can four times the thickness/strength and thereby double the dimensions of the craft.  And that last is roughly the mathematics of the problem.  When I was a boy some of the comic books had a single page in every issue; Ripley's 'Believe It or Not'.  The most famous item was "If a flea were the size of a man it could jump over the Empire State Building."   In fact a flea  has an exoskeleton and couldn't even jump if it was any bigger than a bumblebee.  Everything is competitively constructed and in all ways bounded by the limits of possibility. The exoskeleton is obsolete above the waterline long before you get to mouse size, and if you are going to go scaling you have to get it right.

In those years of innocence there was a service station near home overlooking the Trans Canada Highway run by some Jehovah's Witnesses.  They had wearied after living through a couple of unmet deadlines for Armageddon and while remaining ever hopeful, had grudgingly settled down to a life of ordinary toil.  Outside the shop, standing proudly on the tarmac and proclaimed by signage stood the "Do-All Jack" and it was visible to the entire nation as it passed by.  It must have belonged to one of the congregation.  At that time automobiles had frames; and this was an old Ford or Chevvy frame with the mechanicals intact and a short boom pivoted from vertical off the back end.  Cable wound pulleys replaced the back wheels and the hydraulic brake system had been split by adding another brake cylinder which gave fairly precise control of the operation with a clutch pedal and the two joysticks braking either side of the differential.  More cables somehow rigged to those and other pulleys held up the boom.  You could see that it was a second-rate crane and might be used to hammer in fenceposts or drill a well; perhaps it could pull out small stumps.  Perhaps a careful,  lucky operator could work it successfully without anybody getting killed or maimed.  I never learned how it was to be moved about to do those things because it had no wings or wheels.  To the most casual observer it was obvious that it did absolutely nothing very well.

And so with the help of Ripley, the Jehovah's Witnesses and Tubby Bear we can reconstruct the development of the F35.  It might have been a great concept and will go down in history as might-have- been a great aircraft.  The thing on the drawing boards in the engineering department at Lockheed Martin was a sleek and stealthy twin engine fighter/bomber with a great power to weight ratio that would exploit the latest new lightweight materials for the skin and airframe and could thereby have room for some extras and still fly right up beside the hottest conventional machinery for a long time to come.  Of course there might have been unexpected structural problems with the new technology but that's to be expected and it was nothing that couldn't be rectified.  As in Darwinian theory the unviable permutations are removed by sexual selection or death and it's not often you get get to choose without running the program.

It happened something like this.  Lockheed-Martin's aging, glad- handing General 'Tubby' Olsen (USAF, ret.) who owes his position to called-in favours met with the rest of his marketing staff and asked themselves some searching questions.  Like 'what has our plane got that General Dynamics doesn't have in spades?' and more important the unspoken one of 'how do we make our mark on this thing and  continue to appear indispensible?'  And they spoke to the bean counters who knew that volume sales to their allies were the only way unit costs could be kept down and validate their own positions and prestige via the balance sheets.  So it had to have sex appeal or the operational equivalent.

"We toss a few cookies to the allies.  They get some jobs.  We got stealth.  We got.....uh.. what about STOVL like that Harrier thing?"  They had never forgiven the Marines for going to the Brits over that one.

"Christ that's an idea.  You could fly the b**** out of any field or off a barge.  Even the Greeks could afford a carrier."  The massive general appeal would leave the sales competition in the dust and although the Greeks could have their carrier; cost overruns would ensure it would be forever planeless.

The Harrier is small and old and ugly.  As a short take-off vertical landing aircraft (STOVL) it has directional jets and a lot of power for its substantial weight.  It can lift off virtually straight off the ground, is incredibly agile and a great attack aircraft.  But it doesn't fly far and fast and you couldn't sell Australia or Canada on it.  When the engineers heard the news they were ropeable.  One of them screamed, tearing at his hair.  "Both those f***ing engines have to be at full power each end of the flight.  You can't wind turbines up and down against each other in this kind of thing.  We can't write the software!  Where and how the hell with everything else do you propose we put in the ducting?"

But management was convinced and  adamant and tossed them a billion dollars and gave them a year to look into it.  And once you have spent a billion dollars it's just like home at which you can look back but you can't ever go back.  And meanwhile the marketeers had wasted no time pulling out all the stops with the customers who were already convinced.  So Short Take-Off and Vertical Landing was written in stone and there was only one way out, one more compromise.  The concept was heading for the special rendezvous the gods of hubris save for so many technical wonders of the world:  the Titanic with its iceberg, the Hindenburg with its mooring mast, the Do-All Jack with destiny.   It had to be a single engine aircraft.

That would have been alright if it was as small as the Harrier.  But it couldn't be because it is also a long range fighter/bomber and the concept has been scaled up so now there are 15 tonnes of this pig to boost into the air, twice the weight of the Harrier.  Ripley's flea was not a goer because weight hence structural and energy requirements run away exponentially against a linear increase in size.  The engine has to produce a minimum of 1:1 thrust to aircraft weight,  to bring the thing straight down successfully,  and is itself a prisoner of the same principle.  At full power the turbine blades are stressed to the edge of failure.  It produces the highest thrust to engine weight ratio of any jet engine ever.  It can't be pushed any harder, so far engines last about 15 hours and still can't power the plane abreast of the competition.  Nor are there  runways that can take all those tonnes of super- heated blast on the tarmac. So we have bought into something that will carry all that junk with it but nonetheless be limited to ordinary landings on ordinary runways.   It will be fully operational as such for pilots presently being born, which gives time for 2 more world wars with a re-construction of the U.N. or its successor in between.   Worst of all a quantum leap in metallurgy is required to begin to make it a threat to someone else and nobody knows if that is possible.  If not, Australia's security AND budget have been compromised for the long term.  In rational markets nobody buys into things like that, especially with an open-ended price tag.  Unless.

Back when the Witnesses came around on Saturdays in the course of their duty they used to say"We are the generation that will never taste death."  Nevertheless the service station proprietor died, and it must have been quite a surprise.  But that's alright, everybody miscalculates occasionally and most people do little harm thereby.  The business was demolished to widen the highway and the Do-All Jack disappeared at the same time, having sat those many years doing nothing.  They managed to carry it off for scrap in the end.

And Prime Minister Tony Abbott has so much to deal with, he can't keep his finger on every pulse.  The natives are restless over trade deals undealt, the price of coal and iron ore, treatment of the desperate dispossessed who risk death in our blue ocean, the squeals of cut-off part pensioners; hibernating in their crumbly, mouldering  little Sydney biscuit-boxes with unlikely, eye-popping million dollar price tags and they are still too self-serving to rejoice that their stinking stipend is freed up for national defense and budget repair.  At every venue he faces some noisy and unruly circus of the disaffected with signage and funny clothes.  Heading homewards one afternoon he encounters another lot -  it seems to have a 'Wizard of Oz' theme.  There are the usual college kids with funny hats, lollipops and streamers.  A big bloke is dressed badly as the cowardly lion, the Wicked Witch of the East is there with her broomstick, helicopter and jet plane toys, and there are other animals.  The car slows and stops.
"Shall we move these silly people along?" the driver asks impatiently, tugging distractedly at his protruding earlobe.
The PM silently gives his assent.  The driver leans roughly on the horn.

 "Parp parp!" 

The Joe Hockey Real Estate Primer Part 3

Lemmings have had really rotten press for a long time and it's all Walt  Disney's fault.  It seems like forever that  his name has been synonymous with clean and cutesy family entertainment, but in hard times he was just one more moneyed sociopath out of a number of power and nubile- obsessed swine who could make and break careers at a whim and in the McCarthy era it became deadly serious.  Between Disney,Tail Gunner Joe, Richard Nixon and the president of the screen actor's guild Ronald Reagan, dozens of supposed communist sympathizers in Hollywood and elsewhere were blacklisted including Charlie Chaplain.  So no-one was too big except Allen Ginsberg who didn't give a damn and taunted them at the hearings.  "You should have seen me reading Marx!"
But as for lemmings as a metaphor for mindless public hysteria -  that well- known clip on Disney Studio's nature series where the lemmings; desperately trying to escape the Malthusian horror of close  contact with their fellows, arrive finally at an oceanside cliff and throw themselves over into the icy water.  This was later admitted to have been fabricated.  In fact they are a timid and conservative creature except where mating is concerned and they were trapped, corralled and pushed off the cliff with a low scraper.  Likewise the little black bear; tumbling endlessly down the hill had been thrown over for our amusement.

If the social  and financial ruin of human beings isn't enough to damn someone, the lemmings and bear cub ought to suffice.  Walt is presently in cryogenic storage awaiting the scientific advances that will see him thawed and returned to wealth and influence in some time and place where posterity requires another narrow, nefarious and self-serving jerk.  In the meantime it's colder than hell.

I had planned to argue that lemmings were not an appropriate metaphor for the pursuit of home ownership in the face of an increasing disconnect between renting and ownership cost.  But the housing bubble has been going on forever here and expectations of capital gains have become part of our birthright.  So with an ever- increasing majority willing to take on magnified risks and the subset of smug investors willing to subsidize rentals; prices have reached nosebleed levels in the major cities and only a highly- skewed conventional wisdom and record low interest rates could possibly lever those whining and envious Gen Ys onto the merciless 'home ownership ladder;' with an average mortgage of three hundred thousand dollars for any low- grade biscuit box in the city.   But Disney changes all that.  They and all of us are victims of a pyramid of invisible context; the basis of which is the necessary death of money.

Why did something so desirable and convenient have to die?  Many books have and will be written on the subject.  But for those of us with a long-term memory it started with personal experience in childhood; faced with those difficult decisions about immediate or delayed gratification.  Did you save a dime for college or spend it on an ice cream bar?  At the time college was presented as the virtuous alternative but by the time we got there, 10 cents didn't come close to buying an ice cream bar anymore even if it had been gathering compound interest for ten years.  We would have been ahead if only we had bought blue chip shares, houses, art or antique motorcycles, and so our indoctrination was begun at least fifty years ago.  Only a schmuck saved money; in half a century that  10 cent ice cream bar became a $3 ice cream bar which is a 97% capital loss on your piggy bank's contents whatever the cant about 'hedonic deflators' which is the dubious proposition that today's ice cream bar isn't 30 times the price because you are purchasing a BETTER bar with waffle cone and crushed peanuts.   Money is dying faster than we ourselves, but however fast it is NEVER enough. 

It's Economics 100!  Supply and demand!  If you satisfy demand via increased capacity and inventories especially for capital goods and enduring, worthwhile things beyond food, Catherine wheels and MIRVed warheads, you can't keep those factories humming, workers employed and paying rent and taxes and spending, spending, spending, driving money velocity and borrowing to drive money supply ever upwards; motivating everyone to dump this crap from your wallet while you can still  find a taker at the old price.   And so demand is raised and consumption of all things is brought forward because everyone knows it will cost ever more in the future.  One consequence however is the boom and bust cycle and in the slowdown the eventual failure of neo-Keynesian theory when no-one in the real world who needs to borrow can borrow; nor does anyone who can borrow have  a reason to.

And beneath all that glisters and froths in the sunlight come the low growls and squeals of the contextual machinery driving the juggernaut:  the corporatization of the world of business where those magical market mechanisms ideologues pray to also happen to include the market for power and influence by which competition is for little people only, who still by some odd mental gymnastics identify themselves and their grocery or stationery shops with the titans; Henry Ford, Warren Buffet; ubermenschen even unto the fictional John Galts of the world.  All our cabinet ministers too have cut their teeth on Ayn Rand, a sociopathic little jezebel who never invented anything beyond her characters and some variations on pole dancing.  She was fascinated by psychopathic criminals and Allen Greenspan studied at her feet.  Maybe he was one of her lovers, whichever he found the inspiration to do whatever it took to transform himself from an unknown little Jewish saxophonist and hard money theorist to the financial genius 'Easy Al' who presided over the Federal Reserve, strutting the world stage during those golden years when clueless school kids and starlets made share market fortunes-they were better at it  than anybody - and the ultimate end of American financial primacy was written in the bedrock.

The bubble economy was engineered via liberalisation of the banking system; including the repeal of the Glass Steagal  act which then allowed bankers to leverage themselves and profitability to new heights without the old prudential regulations that protected their capitalisation and customer's deposits.   It was as if you couldn't write loans if you had to actually determine your customer's creditworthiness and this has been taken to the final extreme in the Over The Counter derivative business where esoteric financial agreements are constructed, bought and sold with incredible leverages and liabilities to ultimately god knows who.  And when still- existent laws are purposefully or inadvertently broken, token fines are agreed upon that inevitably fail to match the magnitudes of the resultant profits and become simply a cost of business.  And should all this ever have to be unwound it will take 20 years of legal wrangling between non-existent entities and money and the world as we know it shall come to an end.  Or maybe we do know kind of; via George Orwell and Robert Mugabe.

Next The Mathematics of the Fall

The Joe Hockey Real Estate Primer Part 2

"So it has come to this."  (Last words or something similar of just about everyone from Ned Kelly to Homer Simpson)

http://seekingalpha.com/article/3264325-housing-starts-unexpectedly-plunge-11_1-percent?ifp=0&app=1

Or note the item about real estate in China in the following - all Australian markets are especially vulnerable to downturns in our #1 trading partner although they and a more muted mortgage availability saved our own housing market in 2008 from the US experience of the 'jingle mail.'

http://seekingalpha.com/article/3268035-now-is-not-the-time-for-greed


It starts with unease, something has been too good to be true and it falls over.  But there are millions of believers waiting anxiously in the wings; fretting that there would never be a pullback to let them in.  It happens and their capital emerges to put a floor in the market and a new burst of momentum drives it to new heights.   But sellers flush with paper profits have been rattled and  re-emerge and a fresh new panic begins but is halted (whew!) at the previously defined floor that proved ironclad last time.   More capital emerges from the last emboldened hold-outs and again it levitates but barely makes that first turning point.  And by now  there are no more savings or untapped creditworthiness out there.  Again it turns and if it's the share market, governors rush in with legislative packages like the outlawing of shortselling to stem the losses in the near term even as it removes the last floor, which would be those same sellers ultimately covering their short sales.   Central banks drop interest rates to institutions again but where can you go from zero?  And from there on the poison gas of leverage finds it way into every crack and crevice and boardroom and bedroom on the marketing planet and the virtuous and profitable wall of worry gives way to the downward ladder of hope wherein the exit opportunity of each small respite is ignored in case it is the start of a new bull, and promptly regretted as a lost opportunity to get the hell out as it all grinds lower.  Desperate bankers call in margin loans before they are themselves forced to the wall, home owners watch plunging valuations and it becomes obvious that their own equity has evaporated leaving only the mortgage which they were already paying with their credit card anyway.
They called it the 'jingle mail' in 2008 when distressed homeowners left their keys in the mailbox and drove away into the sunset; mattresses tied to the roof like the westward flight of the Okies in the dustbowl days or the Jap attack on Santa Barbara a couple decades later when they fled inland to the Mojave desert.

It having come to this, Chart Reading 100 shows a perfect 'head and shoulders' formation that is the signature of life and then death.  Or it can be a slow upward churning within an ever narrowing bound that eats up all the supportive capital until the shoeshine boy gives Rockefeller the heads up, he gets cold feet and cashes out.  It's a formation suspiciously like todays' S and P 500 share market index.  Whichever, a drop below the trendline is the signature of doom; there is no more easily available personal savings out there and even if the Fed buys their own bonds and lends to JP Morgan at zero percent -  no-one dares or wants to borrow it, or at least no-one with a credit rating.  But life goes on for a while; Morgan's is a playground of Gen Y or Z in-house trading monkeys at their screens, as yet unblooded and busting for the bonuses they will gain for putting the bank's free money to work at 90 to 1 leverage; playing for pennies front-running retail share investors, churning out 'credit default swaps' or interest rate hedges that take for granted a future of seamless ZIRP (zero interest rate policy) from the Fed.  They are backstopped by iron-clad warp-speed computer programs, the fact it is not their personal fortunes being gambled, and the only real known amongst unknowns; that the government will step in with a rescue plan if they inadvertently break the bank when everyone tries to get out the same exit in the same microsecond. 

That's called a 'Black Swan' these days.  Once it referred to a San Francisco earthquake or the Yellowstone volcano - the pending thirty thousand  year on average global disaster that FBI-infiltrated- and- encouraged jihadist groups plot to trigger with Federally- supplied bundles of dynamite so they can be arrested with appropriate fanfare.  The last swan  can be blamed on the Swiss for reneging without notice on their commitment to peg to the Euro; without notice to all those leveraged hedge funds who had been bleeding them so mercilessly.   So the hedgies didn't get bailed nor have time to find  the bigger fool and can be forgiven for feeling betrayed.  But that was chicken feed, the quadrillion nominal dollars of OTC derivative 'value' worldwide hasn't been closed out or in any way reduced; just re- estimated to a mere $750 trillion.   So you don't need a really black swan; it just goes to show that with enough risk on the books anything with webbed feet can toddle out of the pondscum to shake the world.

Holy Mary, Mother of God, pray for us sinners now and in the hour of our death.  Amen.

The trouble began a long time ago with modern banking - speculative booms and busts have always been with us but it was only in the last century with fractional reserve banking that interest rates began to be set by governments rather than markets.  Previously they had to make do with coin clipping and other confidence games and thereby exploit a time lag in market smarts.  But now we have easy money; it's  always a crowd pleaser and boosted GDP by twice the amount thrown onto the bonfireway back when but was kind of like drug addiction - it stopped being productive or pleasurable and became a necessity.  The world was hooked and we need free money now just to keep our heads above the water, puddling around as we do in our oceans of debt.   So with exponentially growing populations needing employment to pay for exponentially growing consumption while money supply  and velocity and credit facilities have to grow similarly; eventually consumer and national debt; bloated inventories and productive capacity can be pushed no further and there has to be a breather.  Normally this is recession and bankruptcies but that is politically intolerable and so we  have to dance with the protracted death of money.  Fed Chairman Bernanke famously promised to throw bundles of it from helicopters if necessary.  But that doesn't mean the lucky finders can use it to buy anything.

Hard money theorists have a smug answer that gold and free markets will solve the problem of inflation and the boom/bust cycle.  Maybe it did once outside of the Spanish anomaly when they plundered the new Americas and forged their own social ruination in the process.  Maybe it could do now with a limited  human population  in an infinite world of resources but even gold has hit the wall - we are now mining half a gram per tonne of the stuff where once mines needed grades 20 times better than that.  And as before, its scarcity is a function of depleting mines and rising mining costs  For those low grades costs and profitability is increasingly being defined by the rising cost of energy.  There has to be a better safe harbour  for our diminishing fortunes.

Next to come on the Joe Hockey series: "Safe as Houses."

Buy! Buy! Buy! The Joe Hockey Real Estate Primer Part One

Normally you think of shills and touts as those shifty, hard- living sociopaths in the movies; drinking their  endless cups of coffee in some sleazy boiler room, shouting into phones; living their hard, hedonistic amphetamine-fueled, licentious  lives.  And on the other end of the line you and I; decent and honest joes with no more than the usual streak of larceny in our hearts.  It is usually dormant except when you are surprised in your home or workplace with a great script and you don't get a chance to get a word or thought in edgewise and it rises up; the brain is put on hold and you are only a schmuck who is going to get lumbered with a time-share in Oklahoma; a ridiculous piece of mining moose pasture or an IPO of some revolutionary piece of crap like Twitter or pets.com.

Who were going to make billions selling dog food and cat scratchers on line, and you could get in right at the bottom!  And after you have been taken down once or twice you come to understand that these people rank well below pimps, who will at least see you get your money's worth.

Maybe you even heard those three little words from familiar, eminently- respectable and besuited characters on TV in your home -or in a home belonging to some other schmuck who is working two jobs to make it his one day and who DIDN'T get in at the bottom and your rent isn't a patch on his mortgage.

From the treasurer Joe Hockey: "Real Estate is not a bubble!"
"It's supply and demand; It's Economics 100! Get out and build. build, build.  Interest rates are at record lows!  There's never been a better time to buy!  Get a good job and buy a good home!

The last is especially poignant as he not only has a good job, his special parliamentary living-away-from -home allowance is going as rent to his wife in HER home where he stays when he is in Canberra, and no doubt that goes a long way to paying the mortgage, and perhaps that means there is a 2nd capital gains tax- free residence for the Hockeys, with each having a different 'principle residence.'   And some of us remember how Joe's Liberal predecessor Peter Costello taunted Senator Nick Sherry for claiming his allowance when he stayed with his mother in Opossum Bay back in Tasmania.

"What does mum say when Nick walks in the door?  Oh, Possum!"

And Sherry, even though he is/was a politician had some residue of conscience and shame and had the human decency to go and cut his wrists.  Joe just shrugs it off, all these guys do it or some permutation - it's allowed by the fully independent Remuneration Tribunal and not covered by the criminal code so its not his problem.  But is the tribunal really independent, like say Gillian Triggs, the Human Rights Commissioner who has been mercilessly hounded by cabinet heavyweights for her own independent moral stand on conditions for asylum seekers in our own little Guantanamo.  I wouldn't even ask why a prison corporation can be paid more to brutalize people behind barb wire than I would need to make a profitable business out of it by giving someone a house of their own, living allowance, car and a college education.  Maybe this has implications for future conflicts; if we could have corporatized the Japanese Imperial Army, they would have met their Waterloo years earlier, broken and bankrupted at Changi and the 'co-prosperity sphere' laughed right off the world stage.

But back to housing prices and bubbles.  Firstly it is self-evident that since real estate prices are at record highs there have been better times to have bought, ANY other time would have been better. I have seen a few bubbles over my lifetime and have done very well by doing precisely the opposite of the tactics touted by our esteemed treasurer.  It's Economics 200!  You buy low and sell high!  And when mortgage rates are at their highest that's when houses are cheapest!  But you have to have some capital because nobody wants to lend!  So maybe you rented for a while in the boom and saved while  the other schmuck paid out the vast difference between the capital value and enterprise value of the house.  So you have money when the time comes and its harder to borrow BUT you don't need a big mortgage and no matter what happens you aren't going to lose your butt!  And it's stress-free after you have completed the contract it feels comfortable and you don't need to work two jobs!  And with "animal spirits" at their lowest ebb you don't expect to make a killing but you probably will! And you can easily hedge against falling rates in the face of your fixed rate mortgage by insisting on a clause by which you can pay more off at any time without a penalty.  If it starts looking too uncompetitive just pay it out or refinance with someone else!


Even Economics 100 dopes know that markets tend to revert to a mean so if interest rates are at record lows they will probably go higher.  Even if inflation draws a line under the book value it might still see you s****ed.  So let's go from Economics 200 to some really basic accountancy to glaze over your eyes and tickle your funnybone when you look at the real, enterprise value of a house as a business venture which is a wake-up call if you have been counting capital appreciation chickens on your fingers.  Strings of words with capitals denote a popular acronym.

Generally Accepted Accounting Practice defines earnings as  Earnings  Before Interest Taxes Depreciation and Amortization, all of which have to be paid off from the rent except for the 'negative gearing' tax loophole for investors by which they can apply the generally negative earnings figure after expenses to their other income, like those his and hers night cleaning jobs where you roam the CBD office buildings with your backpack vacuum cleaner while the kids are asleep.  You only  get to use negative gearing if it ISN"T your actual primary residence and  you sacrifice the tax free capital gain status.  But that's no problem, there is unlikely to be anything to worry about when it's all added up at the end.  Save your dockets.
 Firstly interest on your mortgage: there is a set-up fee after which you have to pay say 4% every year on an average $300 thousand dollar housing loan which is $12000 per year after-tax money for the non-investor  which is eating up your ultimate capital gain.  And you still have to pay off the whole 300 thousand dollars of the loan on top of that over the period of the mortgage or when you sell the thing.  That's the amortization and they generally structure it so you pay the same money every month from start to finish.  There are tables you can access.  And there are council rates, land taxes, stamp duties in the 'taxes' bracket and depreciation too which means houses and fixtures have a lifetime just like human beings; the house is growing old and frail and slowly falling down around your ears (deep-sixing capital gain) and if you don't do something expensive about it on a regular basis, renters will dodge their responsibilities and it will eventually be condemned as 'unfit for human habitation' and serve only as shelter for itinerants and drug addicts while waiting to be demolished despite your protests.

In the lead-up to the 2000 Olympics I did like a lot of Tasmanian tradies and after a marital tiff loaded my tools in a van and drove up to Sydney.  On arrival it took about 4 hours to get work, firstly doing fit-out out  above Grace Brothers at Centrepoint for Fairbrother and when that was finished I was everywhere; working for subcontractors on projects run by most of the big general contractors like Multiplex and Horniblow and even some residential work, pubs, the Leichardt Cathedral, Kell and Rigby, shop fitting, you name it.  So I was  there putting some of the biggest and smallest Sydney real estate projects together in the biggest boomtime ever, and in spite of that every subcontractor I worked for was going out backwards.  The big guys would get eight or a dozen quotes for every aspect of a job and some newbie or fool or general optimist could always be counted on to make some glaring mistake or cut it too fine in the competitive catfight.  And it is then that you come to realize a fundamental law of business: whatever you have to sell from your own labour to boiled lollies-unless you enjoy some kind of protected position - that the return on   all endeavours subject to market forces has only one direction which is downwards towards the fine line between life and death.  A month after the races were run I was given a day's notice at Kell and Rigby (I was first to go being a subbie with my own tools on $10 an hour more than everyone else) despite being very well thought of, having had the drive and imagination to be seen always beavering away flat out at the German Club; the foreman and I; getting double pay knocking out 'foreigners' when there had been delays at the factory.  Of course the clueless occasional supervisor had no idea or maybe there are times when  everybody looks so much better if they know when to keep their mouths shut.

But I could see the writing on the wall and went home for good.   Kell and Rigby, the oldest joinery firm in Sydney, lasted another five years or so.  In other words there are NO intrinsically good jobs or businesses that someone else who is hungrier or younger or more or less indebted than you cannot do as well in the fullness of time in the hard light of Struggle Street as touted by our political geniuses.   Economic rationalism is best born by some other guy.  So we seek safe harbour, be it bad ones like the CFMEU or good ones like the AMA, a Macdonald's franchise or the 'independent' Remuneration Tribunal.  And if you do too well selling Big Macs they squeeze your territory and sell a closer franchise to another hopeful.   Or used to, things have not been going so well as tastes and styles change and that ugly word competition comes ever closer.

Every time I went home I would move out of some shared accommodation and find another on my return, mostly in the inner west.  On the job or in accommodation: wherever; I always took note of the particulars of the real estate market.  Retirees were selling multi-million dollar north shore homes to vie with Chinese investors and move into something like our Anzac Bridge faux Italianate waterfront units which were essentially stacked two and three bedroom frame or cement block white-trash small town ranch-style pieces of crap or Renzo Piano's supposed masterpiece on Macquarie Street which has top end beautiful apartments but they were very expensive including an extra $10 thou for every layer of persons below. 

I stayed in Marrickville with an extended family of kiwis for a while in a four bedroom federation brick terrace which cost $100 per week per person.  Somebody I never met was gearing it.  He received $400 per week and this place needed $30-50 thousand worth of work which was typical for that vintage.   The market value would have been $600 thousand, now around 1 million 15 years later.  If he owed 400 thousand then interest at 5% was $20,000 per annum and he received that but with no return for his 200 thou equity except a leveraged capital gain potential and nothing for depreciation, repairs, rates or amortizing the 400 thou.  There is a rule of thumb for enterprise value of a rental property.  Purchase price equals 100 monthly rental payments which gives you a few percent on your invested funds and enough left to cover all the rest of the taxes, repairs, depreciation etc.attached to your investment.  For the Marrickville home that would have been $160 thousand.   So supply and demand has engendered this crazy disconnect with reality.  The why has to do with old simple-stupid Economics 400!  Interest rates define the value and future of ALL OTHER investments whether you like it or not!  It's all about rational markets as a price discovery mechanism.   If  you could get a low risk return of 8% (a real 5% after inflation) on your government bonds or bank account;  mortgage rates in a real world would be correspondingly higher and NOBODY would be sticking their necks out to pay more than enterprise value for some decaying little working-class rabbit hutch.

So is there a bubble?  The maestro Allan Greenspan said you can't tell until it pops.  Which allowed him some margin for error and public approbation all those years until it or they did.  Similarly the man who in retrospect won't have been up to turning back used-car odometers much less Treasurer of Munchkinland will do all he can to hold the day of reckoning beyond another election or better yet his retirement to that great inflation-indexed Pollie's Paradise in the Sky.  He might stay lucky for a time so go for it kiddies.

Mining the Tarkine Part 3 Extra. Stop the Presses!

These things happen; your story has just gone to the press and something earth-shakingly relevant comes on the screen.  This time it's ex Tasmanian Premier Paul Lennon appearing on the Queen's Birthday Honours list.

 My father had an old army saying that I heard many times in my childhood, more rarely as I grew older and  had come to understand that stamping a foot and yelling how I damn well knew something didn't make a good argument.   His stock riposte was always; "You wouldn't know if your arse was punched, bored, tapped or reamed out with a big stick."
He had me there and got the last word in every time; something so simple and yet I could never figure out an  answer.  But it wasn't a bad antidote to intellectual vanity.  Maybe it might help sort out the queen.

Paul's ten second sound-grab was that his reign had been controversial "but I gave people hope." 

Hope along with faith is something we all need, especially if we are determined to be taken down by persons of low character.  But as for making any real improvement to a community's prospects there are those laws of unintended consequences by which hope will most certainly put us ever deeper in the sh*t.  If the previous story of the little town of Stewart, B.C. and its top-notch mining experience that generated so much development; new homes, expanding businesses and private indebtedness to bankers and the cruelly drawn-out and painful crash that took them back to square one has been unconvincing perhaps we might look closer at the Lennon era.

There was such a swag of memorable plans!  An oceanside residential canal development, the doomed-from- the-beginning Dismal Swamp, and of course there was the Tamar Pulp Mill, wherein  he in concert with that fearsome little hillbilly John Gay (from whom a tongue-lashing was rumoured to bring grown men to tears) were going to leverage themselves into our hearts and the boardroom of a world-class industrial behemoth with billions of borrowed, kamikaze investor and public dollars and the rest of us gratefully tagging along for the ride.  But the one I liked best was a mining story in my own backyard and so over-the-top you could sit back and chortle if you had no pity for a gaggle of local hopefuls; investors and the usual legion of the damned that naturally included most of our bright-eyed, born-and-bred small-business local government officials at the time.

Golden Triangle Mining was going to transform the magnesite karst at Takone into a giant open-pit with hundreds of jobs and a river of cash, and there would be another huge Comalco- type electric smelter in our own little Burnie and somehow it all came together almost overnight (it seems in retrospect) in a major fireworks display where everything was happening at once.  Time was of the essence- I knew that because as a Normandy shareholder I had received a prospectus for Australian Magnesium, in which a star consortium that included Ford Australia, Normandy, and the Queensland government were colluding to put together a similar package at Gladstone, and it was similarly big enough to supply all the magnesium for the Asia Pacific at least.  So there could only be one or none, and the credit worthiness, expertise, resource and government backing were already in place but somewhere else.  The Queensland government was going to do much more than facilitate; they guaranteed a dividend to all investors for the first three years.  Which they gamely paid out in full even though the project failed upon which the share price fell to reflect the remaining dividends owed.  But back to Tasmania.

The climax here happened with the drillers; uncertain whether to laugh or cry as their rods punched into the mud-filled voids that would let the Flowerdale River straight into proposed pit while mining industry people who actually knew how things are done looked on at the roadshow in horror.  Paul Lennon took a helicopter ride over the  proposed railway route which surveyors were busily marking out through Colleen Dibley's chestnut orchard.  The CEO Peter Salter was off on a whirlwind tour of the world at investor expense to line up the billions of dollars that  would be required; giant financial corporations were thought to be out there somewhere just waiting for people like him to knock on their doors and put all that unwanted cash to work.  It was at this time that the share price peaked and this is also the time when clairvoyant friends, touts, children, wives, relatives and associates of company directors dump their cheaply- acquired shareholdings on the market; and didn't he return empty- handed.  Years later there was a small item about him in a mining newsletter, some purported misdeeds had seen him thrown off the board of some gold explorer but where he is concerned all seems quiet now on the western front; where all you need is a Perth shop-front, chutzpah, a dog and a pick-up truck.

So how do these ridiculous loss-making machines actually benefit political people?  It pertains to something called 'moral hazard'.  They don't put their own money on the line - that would be corrupt and a violation of their oath of office if not the criminal code.  Rather it is YOUR money that gets thrown down ratholes and there is an unintended consequence here; a conflict of interest by which a rational market analysis and studied economics of a project are not a necessary consideration of the person doing the investing.  His being seen to be battling for your future prosperity, however hopeless the odds and unlikely the prize; confers electoral advantage.  If he simply banged your money straight into his own account it would be fraudulent, but it would be a bargain against the squandered millions that it takes to be re-elected and don't you know it comes right back as the pay and perks of public office; all perfectly legal and in order.

So he gave a lot of people hope, and took it away from a lot of others.  I hoped that democracy and education might occasionally deliver enlightened leadership.  That maybe our species can cut a balance with the world and survive with everything else for the long term, possibly even as a civilization.  Or are we just an insensate cancer or unschooled tribe of Polynesians,  setting out in the dim hope of making one more killing; another breast or liver or bejeweled string of tiki-scattered islands in the sun where naive birds and fish will fatten another aristocracy and feed another vulgate for a few more generations before they have to eat each other or move on.

Mining the Tarkine Part 3

                                        Hope springs eternal within the human beast
                                        Don't mind much if it makes no sense
                                        If I grab some crumbs at least.
                                                                           Apologies to Alexander Pope
                              
Anyone stupid enough to invest in mining the Tarkine or anywhere else in Tasmania is going to have their heads handed to them on a platter.  That is one of the laws of nature around here.  Basically there are three kinds of people in the industry.   There are working people who get their hands dirty making a basic living for a time.  There are the experts - geologists, mining engineers, consultants and  accountants who do the smarter tasks which are absolutely necessary to gather the body of information that will progressively de-risk a project so as to allow serious investments by sophisticated investors.  And if you are in the mining business and fit in neither of these, there is only one category left which is that you are a filthy little tout.  As I have previously explained 99% of these projects fall flat and people fail to realize the multitudinous ways they can and will take you down with them.  Shareholdings for yourself, the wife and kids, and your mum are only the most obvious and most likely to generate life-long family splits and recriminations.

Back in the late sixties I spent my summers working at mining exploration in northern Canada.  We were looking for base metals and our company was doing contract work for very big corporate names.  We went through the motions of minefinding, but what we were really doing was eliminating hundreds of small prospects over huge areas.  Copper stains were here or there on rocks, lumps of galena in glacial float, whatever and the first stage was to take sediment samples from lakes and streams throughout the watersheds which were first tested by colourimetric means then chemical analysis in Vancouver.  Anomalies were plotted on maps and if they were significant then gravitational, magnetic or electromagnetic surveys were done accordingly from the air or on the ground over lines which I and a couple others would have cut or at least marked; up hill and down dale over our staked claims.  And then we did the right thing which was to disappear because we had already spent large sums of money and the probability of doing better by tearing the place up was negligible.  Or at least Newmont Mining thought so.  All our efforts only generated one drill program in three years as far as I know.  They plopped a rig in by helicopter, we put the crew up in our camp, they drilled a few holes up in a cirque and we pulled out in the autumn never to return.  Especially the cook who went early; he was supposed to be a reformed drunk but he had taken it into his head to poison the drillers; none of whom were as punctual, clean or nice as us college boys.   Whatever demons had taken temporary or otherwise possession of the man, the drillers were unwilling to test his veracity and a plane was sent in especially for him.

Someone else found a mine nearby that we had walked over.  We had spent a couple of our days off  working an old placer deposit for gold with a sluice box we had banged together.  The mine-to-be was the Golden Bear, further up above the creek where the placer gold had originated and it was one of the first successful low-grade heap-leach operations in the world.  But Newmont or whoever hadn't been seriously looking for precious metals so neither did we.  And it was there I met the geophysics boffin who had found the huge lead- zinc deposit at Pine Point.  He was flying an EM survey for us and he had seen the numbers coming up as they flew over the thing and he put everything he could get his hands on into it on the share market and had made over a hundred thousand dollars.  After such an easy score he decided to snowball it into a million and put it all back and more into the share market.  By the time I met him he had nothing left.

At the end of my third summer up there I was finished with school for a time and of course I wanted a job in Vancouver with girls and a social life but there wasn't much employment around, and I found myself going FIFO for the winter with thousands of others to remote projects in the north.  The FO part of it didn't exist in those days and I spent 12 months mill operating in a brand -new copper mine.  It was quite well known; no-one else had yet attempted such an audacious project is so inhospitable a country.   The mill was situated between a couple glaciers a twenty mile bus ride up from the coast, the mine was another 10 kilometres away and accessed by an underground railway that went right through the mountain, underneath one or more glaciers.  It had been a very expensive proposition.  We were processing about 1500 tonnes per day of 1.5% copper on two grinding circuits and after a few months I was running the mill from a control room on my shift; earning $5 per hour plus one flight in and board and I knew the sound of every mill and pump and bearing and destination of every pipe and conveyor in the place which had cost 120 million dollars for the mill alone.  That would have to be over half a billion now; god knows how many died; me almost once or twice or what the whole shebang was worth and world copper demand was booming.    

So it was nothing like Tasmania.  Without the aforementioned de-risking and slow process of delineating reserves and expertly engineering the development it could never have happened.  If a government has some expertise or integrity they don't grant a mining lease, talk up some future financial disaster to squeeze money and indignation from the locals and let some dipshit in with little more than a Perth shopfront, a dog and a rented bulldozer.  Tasmania is so much older and worn down than the Canadian west.  Everything worthwhile has even bigger exposure and geochemical signatures and has been discovered a long time ago.
But yes I have (stupidly) put small amounts of money in mining investments here.  Western Metals was interesting; they wanted to reprocess the Hellyer Mine tailings which supposedly contains over a million ounces of gold..  But I had a job at a local engineering firm and we built the tanks and stairs for Intec, who were the brains behind the pilot plant that was going to make it all happen.  I was in there one day to install something and I noticed a row of pumps like nothing I had seen before - the workings were behind glass and they were beautiful peristaltic things like our own guts with rubber tubes that were compressed by moving rollers.  A light came on in that  instant - obviously they were using powerful reagents you wouldn't want touching the inside of a normal pump -they were cracking walnuts with a sledgehammer.  That meant the gold would stay in the tailings because it wasn't worth the cost of getting it out , just like millions of tonnes stays in the ocean where it will also stay forever.  A lot of people I know had money in it, but there is nothing you can say.

But up in northern Canada I just saved my pay and then I was gone but a lot of my workmates married a local or office girl and did things like buy a house or small supermarket on the coast like it was going to last forever or ten years according to the inventory of mineable ore.  Two years later the price of copper collapsed and the mine and mill were put on care and maintenance and everyone tried to get out.  But it was too late and many spent another three or four years up there with mortgages and milk bars or supermarkets or homes that couldn't be sold in a ghost town.  And then the price of copper went up again and it was all restarted but that didn't last and a year later it closed again and this time everything went for scrap.  And so it can all go wrong with the best of procedures and intentions: the only certainty is that nothing is certain and if you come in at the top of anything you are going to get burned; big time; Shree Minerals being a local case in point.  I wish I had bought one of those T-shirts.   Back in the sixties after the summer of love and its ugly aftermath you could get 'Free Manson' bumper stickers and T-shirts.  They would have to be worth a fortune now in the original packaging.










                            

The Picker's Tax Hike

                             

If you have been following the great Australian Budgetary Emergency its great to know the cavalry have arrived, better late than never.   Rorting double-dipping new moms and part-pensioners will get it in the neck and now those back-packing international fruit- picking tourists can pick up their share of the tab too.   Er...after the election anyway.  They come here and supply their labour when and where it is needed, cheaply and under minimal living conditions, then they spend all that money or send it to destitute families overseas and bugger off.  So how can the tax office get its fangs into that? With the tax-free threshold they would be unlikely contributors so the simple solution is to abolish it for anyone on a working holiday. Here I will declare a personal interest in two categories: firstly I am an uncertain part - pensioner; having had it cancelled almost every second fortnight due to non-compliance with reporting requirements. That's to say the understaffed public servants charged with doing the sums on my wife's income can't manage it in the appointed time so my pension gets automatically cut off. Anyone who deals with Centrelink has to have some empathy with Franz Kafka.  Its as if you know the guy personally; long dead though he be.  And I have done casual agricultural work in Australia from the top end to Tasmania when I was young, single, looking for fun and didn't need much money.

We lived in the Okanagan Valley for a couple years when I was a boy. It is British Columbia's major fruit-growing area, and we used to wander about the dry pine and sage brush- covered hills, armed with primitive weapons. The irrigated orchards were on the flatter country surrounding the lake. Once I was cutting across a neighbour's property and came on a picker's cabin hidden among the apple trees. It was a hovel, just like now, about 5 meters square with a dirt floor, rough bunk-bed frame and a rusty stove. But what most impressed my ten-year-old mind was the décor.

The walls were covered with small pictures of beautiful girls, mostly in black and white; carefully cut from the (free) Eaton's catalogue along the lines of their perfect figures. All the girls offered delighted, come-hither smiles in spite of their cropped legs and arms as they posed to show off their massive inventory of old-lady type undies and unnecessary foundation garments. I must have had a social conscience at the time because I wondered how the hell could so much deprivation exist right under our bourgeois noses – Playboy type magazines and Vargas girl calendars did exist. My dad had been a newsboy in LA during the depression and they had that kind of thing back then too.

Well up in the hills was the ruins of a fabled hermit's hut. He lived along the railway line in a little shack made of salvaged material and how he had survived through the years was not well known. But he picked fruit in season, perhaps side by side with the catalogue cutter.  There was nothing else for people like him.  Further up the track at a handy distance was a steel railway trestle that crossed the creek at a dizzying height – about a hundred metres below, and if you plucked up your courage and walked out over the void  between  rare trains, not daring to come too close to the edge but looking between the ties, you would see substantial Trout Creek as a tiny stream of water; far below and winding through huge boulders on its way to the lake. This is where the hermit had suicided, throwing himself over and been dashed on the stones shortly before we came. My friend next door claimed to have seen it happen but I didn't believe it – his version supposed the hermit to have had second thoughts, successfully breaking his fall by grabbing the bottom girder six or seven metres below the rails and he had hung there by his fingertips, struggling for a while to climb back up before he lost his grip and fell. The funny thing was that his shack and small yard had then been completely torn up by treasure hunters. Obviously anyone who had so disliked and avoided humanity and its institutions; lived so poor and died so desperate must have buried a substantial horde of money.  But if anyone found it they weren't saying.

In the seventies I took the ferry from Melbourne to Devonport, bought a smokey and creaking old EK Holden for a hundred dollars and drove slowly down the east coast to Huonville where I worked for a while on apples for Clements and Marshall. They let me stay in a little unpainted unheated one- man shed behind the factory.  I was the only non-resident and hence occupant of their cabins and was befriended by two of the local boys.   One was a sad loner who filled my ear with stories - he had an ongoing feud with a copper who had taken his girlfriend and intended to kill or maim the guy up in New Norfolk and make a clean escape back to Huonville thanks to the incredible speed of his hot V-8 Monaro which I never saw.   One morning on the job he was leaning on the steering wheel of his forklift while I stacked apple boxes on a pallet and he said "Get a move on; yer slower than molasses in January."

I answered something to the effect of what he should do to himself including where he could ram all his bulls**t and he never spoke to me again.  And there was a nicer kid, who looked (in 1974) like he had been transported in a time warp from 'sixties Haight-Ashbury but his stories gave him away.  He was very local, and the stories were mostly about his soft-spoken hero, another forklift driver who punched the sh*t out of people at the pub and was infinitely virile - how they drove up to Hobart in his panel van, drifting around the corners trying to roll the guy off one of his female victims.   I similarly tired of him and spent several more nights in that freezing shack, with its single lightbulb and no-one at all to talk to.  During the day you could look out the single window and see sheep in an adjoining paddock. 

So I left and drove north; back up through Queenstown, during which I had picked up a couple hitch-hikers at a youth hostel.  One was a brain-damaged speech-impaired local whose life had been transformed in a car accident.   Of course he wanted to drive but I wouldn't let him.  We limped along; stopping regularly to add engine oil and water and it was doubtful sometimes whether I was ever going to make it back to civilization.   We laboured through Hellyer Gorge and finally arrived back on the coast.  When I reached the Bass Highway I turned right onto the main road and pulled over on a wider section of the verge to check the engine again.  I had stopped about 50 yards behind a police cruiser, parked close behind a previous motorist.   While I was perusing under the bonnet the first car drove away and this plump little cop waddled over and said “You were speeding back there”. 

He proceeded to write me a speeding ticket.   Flabbergasted I began to protest and he said “If you give me any lip I'll take this heap of sh*t  off the road!” I knew he could do that; hardly anything worked. So that's how it goes, the squeezables get squeezed, by hook or by crook – as Mr Hockey says; “We want everyone to pay their fair share.”

It would cost me about a third of my Tasmanian wages, almost exactly the treasurer's 32.5% from day one on the job.  I took stock - the weather had been crummy, the accommodation was crap, my workmates in the south were drunken ignorant little turds and according to their hilarious scuttlebutt would soon join the ranks of embattled family men struggling their whole lives on the same process lines to feed their families.  Vowing never to return I left the heap on consignment at the same car yard in Devonport where it all began and scarpered to the mainland; my market logic presaging not-yet-a-twinkle- in the- eye- of-Steve Jobs' Apple Computers and so many other good corporate citizens safely hunkered down on low-tax foreign soil like Singapore or the Irish Republic. 

So the cavalry may have finally arrived with an iron-clad means to screw over the unfortunates- but too late; the Indians have already scattered.   Or will scatter.  Those with means will have a revenue-neutral holiday on the beach in Bali instead. The poor from Asia or the islands will stay home or go to Saudi Arabia to be robbed and brutalized by an even more evil and indolent people. 

“Its a good budget. Last year's budget was a good budget for last year; this is a good budget for this year.” In the meantime last year's plans for a balanced budget within the decade have blown out beyond my lifetime into the never-never.  Joe Hockey's eyes were dull and his voice was flat and devoid of any conviction.  It felt like the last words of eternal allegiance a condemned lord might have made before the block for his family's sake. So go his own leadership aspirations. Because the forward estimates are crap again even as last year's forward estimates were crap. The end of the commodity boom took these know-nothings by surprise. And similarly Joe Hockey's glorious dawn of a broader- based economy (go out and spend, spend all ye small business people and consumers, drive our ridiculous debt to GDP ratio even deeper into the hole along with your personal liabilities) will also be impossible to wash off the blankets. 

That the Shanghai share market index has doubled in the last twelve months thanks to easy credit and margin lending to first-time investors, our share market is vulnerable along with the US market also; which seems to have reached once again a 'permanently high plateau' as famously announced by economist Irving Fisher in 1929.  With interest rates still at zero from the 2008 GFC; the neo- Keynesian central bankers are snookered with no downward wriggle room outside of more money printing.  Keynes would have puked to see his name so reviled.  The US, Euro and everybody elses' bond markets sit at impossible highs such that when yields are forced up by a couple % to normal levels all the major financial institutions in the world, leveraged to buggery as they are, will be underwater when their assets are marked to market; and 'that is all ye know on earth and all ye need to know.'*

Does our entitled leadership actually know anything at all about the macro and microscopic facts of life in business or otherwise?  Have any of them ever gone beyond fitting straight lines to  crooked charts or actually got their hands dirty, even in their youths - beyond enjoying free higher education, schmoozing at Young Liberal fundraisers or risking the accidental begetting of bastards in the manner of weak but deeply- committed ....  uh, well, you know.  Someone once said 'the future is another country'.  Or maybe that was the past.  I used to think it was this one.

* from Keats; 'Ode to a Grecian Urn' 

Update: 2016 
The share markets really have arrived at that permanently high plateau that normally lasts until someone starts cashing out.  The solution has been to push the reverse Midas touch lever into full throttle, rendering cash into sh*t and sending whole desperate generations fleeing into property or something, anything; even if dicey speculative possibilities far outweigh the logical maths of an acceptable business return.  Which is to say capital gains are an illusion that Labour hopes to target anyway; their interest a certain indication of a major peak having arrived.  So (as usual) there may be a new tax but there will be no capital gains.  Their other target; negative gearing will also be eclipsed by events.  It is after all only a symptom of the monetary madness - an opportunity to 'get on the property ladder' now may very well turn out to be an albatross for a couple generations of necks.  But it's too late too change it, and in the end the blame will fall on 'animal spirits' when it really is about 'animal instincts' like self-preservation; cynically abused by people who should know better if they are worth their maxi-salaries.  

A prediction:  Our rulers of whichever barely distinguishable stripe will be caught entirely off guard.  As Kevin Rudd said; "No-one could have predicted yada yada yada...." but they will instantly know what to do and small checks will rain down like pennies from heaven to revitalize the economy and so evade any personal blame.  

Meanwhile back at the ranch the chains of tax reform and budget balancing seem to have dropped off nearly everybodie's pre-election shoulders.  Somehow a corporate tax cut can still be funded, a boon that will supposedly devolve to everyone.  It's almost a replay of those legendary free- spending and wasted Howard years.  It's almost as good as that original GST and without any of the pain-  except for those rorting fruit pickers;  the most hapless and vulnerable group we could possibly target without an electoral backlash.  And even they have a six month reprieve lest ANYBODY be offended.