18 December 2008

Commonwealth Bank dribbles a bibful

What do bankers get paid for again?

Yeah, I know there's an element of schadenfreude in commenting further on this parochial little cock up by the Commonwealth Bank in fumbling its $2 billion excluded-offer equity placement to institutions on Tuesday afternoon, but it truly shows again how "experts" can stuff up.

What is it that all those thousands of spectacularly highly paid executives, lawyers, corporate governance consultants and compliance advisers at Merrill Lynch and the Commonwealth Bank do for a living when a mistake as fundamental as this can occur during a placement of this size in a market as skittish and as vulnerable as we have at present?

As I understand it from the press:

On Tuesday afternoon, with CBA stock still being traded on the ASX at around $29 a share, Merrill Lynch received acceptances to place $2 billion of CBA shares from institutions at $27 a share. This placement was apparently to top up CBA's tier one capital adequacy levels to bring it in line with its major Australian banking peers, so as to keep perceptions of its stability in tact in the current international credit crisis. The placement seems to have been completed at around 4.30pm after the ASX market close at 4pm . At around 7.30 pm CBA announced a successful $2 billion placement in a media release. The release also had tagged on to it disclosure of a material downgrade in CBA's bad debt provisioning for 2009 (apparently partly arising from its contemporaneous decision to continue to extend credit to the struggling Centro Property Trust).

All hell then apparently broke loose amongst the institutions who had taken shares in the placement during that afternoon, without knowledge of impending material change in CBA's bad debt provisioning. Overnight a significant number of them withdrew from proceeding with the placement on the basis that there has been a material change in circumstances not disclosed to them. At some point overnight Merrills advised CBA that they were not proceeding with $1.6 billion of the placement (approx $400 million was locked in).


On Wednesday morning the CBA board , understandably, had an emergency meeting and UBS (who had previously unsuccessfully tendered for the placement) were, amazingly, on hand to offer an alternative placement for $1.6 billion at the lower price of $26 a share. UBS apparently successfully placed the CBA stock with institutions at this lower price during Wednesday morning.

At this point all you can say is "shit", what a stuff up, and "boy", how lucky were CBA that UBS could step into the breach and raise $1.6 billion in such a short time?

But here's where it really gets interesting for a ghoul like me, looking at the entrails of this near catastrophe after the event. Sure Ralph Norris the CBA CEO is hunting for culprits for this monumental stuff up, but it is possible that he is directly implicated in what may be the biggest stuff up of all here. This is not the astonishing failure to disclose the market sensitive information before the placement. That was indeed an act of stupidity. But worse, in pointing the finger of blame at Merrills after the event this is what CBA apparently said: ...

"Merrill Lynch did not inform potential investors of the various disclosures made by the Bank in its announcement to the ASX at 7.30 pm on Tuesday", it said. "The Commonwealth Bank is disappointed Merrill Lynch did not meet its obligations."

Is this an admission by CBA that CBA actually knew what it disclosed at 7.30 pm on Tuesday, earlier in the day when Merrills were putting the placement away at $27/share, and expected Merrills to tell the institutions this news then? It sure looks like it. If so then CBA appear to be saying that it had planned for the institutions to apply for shares at a price below the prevailing market price, with different and materially adverse information about CBA, that CBA had not disclosed to the market. Who knows? I'd have thought their easiest defence to allegations of impropriety by CBA would have been for them to claim it did not know the adverse position on bad debts 'til after the market closed and the Centro financing had finalised. But they seem to have taken that line of argument away from themselves by suggesting that Merrills had already been told the bad news by CBA, and CBA expected Merrills to pass that bad news on to the instos, when pitching the placement to them.

Although you may be forgiven for thinking otherwise, my experience is that, thankfully, this not how private securities placements are normally done on the Australian market.
Selective disclosure of market senstive information by or on behalf of a listed company to potential placees of its stock whilst the market is open is not customary and is seldom if ever admitted to.

The biggest stuff up therefore may, yet again, lie in the attempted cover up. The haste with which CBA have decided to place the blame for the absence of disclosure on their broker, may have seen them stumble even deeper into hole that they are digging for themselves.

08 December 2008

Weatherman: cold weather is not climate related

Just who is it that is denying climate change here?

James Randerson in The Guardian tells us:

"The relatively chilly temperatures compared with recent years are not evidence that global warming is slowing however, say climate scientists at the Met Office. “Absolutely not,” said Dr Peter Stott, the manager of understanding and attributing climate change at the Met Office’s Hadley Centre."

That "Absolutely not" is crying out for an exclamation mark, but it also lends the "Hadley Centre" an appropriately Alice in Wonderland feel. Let's just slip down a credulity hole into some playful Lewis Carroll universe if the going gets awkward. As the people at Climate Resistance point out, Dr. Stott is more than just over-egging the pudding a bit with this stentorious absolutism.

In what universe does the experience of colder weather this year than last year, that most of us have just lived through, not constitute, like you know, actual evidence that global warming is slowing? I suppose it could be a universe in which global warming is not a description of a planet that is experiencing steadily higher temperatures, but a universe that prefers acting out the very human condition of not liking it when it gets colder.

Even if you believe that the globe is warming, as many quite respectable people seem to, then you are not compelled, by the holding of that belief, to also say that data showing lower temperatures compared to a previous corresponding period, is not evidence of cooling. That is just silly. If temperature goes down then that is evidence of a temperatute drop, otherwise known as, cooling. Surely, even in these fractious times, it is not too contentious a propostion to suggest that we and Dr Stott can together agree that cooling slows warming, since cooling is the opposite of warming? If so, what's absolutely clear here is that Dr. Stott is absolutely wrong when he says "absolutely not".

Dr. Stott's predicament is delightfully dramatised by Alex Cull, the commenter at the Climate Resistance post, where he says:

.
"The Hadley Centre’s attitude reminds me of being in a car driven by someone who is stubbornly refusing to admit that they are lost, someone who cannot even contemplate the idea that they might be horribly wrong…


Kids: Are we nearly there yet?
Dad: Yes, we are - we should be arriving at Global Warming any minute now. We’ll be reaching the first tipping points in a moment, you’ll see.
Mum: Honey, I think we passed the turning to Global Warming some time back in 1998. I don’t think we -
Dad: We are definitely on the road to Global Warming. Just let me drive without your constant -
Mum: Well, I don’t think we’re heading towards Global Warming. We missed the turn! And look, you’re holding the map upside d-
Kids: Daddy’s lost, Daddy’s lost, nyah nyah ni nyah naa!
Dad: Shut up, everybody just shut up!! Who’s driving this car? I am! And if I say we’re on the road to Global Warming, that’s exactly where we are! It’s settled! I don’t want another word from anyone else, you hear? The debate’s over."

01 December 2008

Westminster: truly a Mother of a Parliament


UK Government uses anti-terrorism police to arrest shadow minister of immigration over a leak of government information about immigration

Even the leaders of the oldest democratic institution in the world no longer seem to have even the vaguest notion what freedoms the West is fighting for in resisting terrorism. In the same week that Pakistani Muslims invaded India on a carefully planned and executed suicide terrorist raid targeted at western tourists in Mumbai and killed and tortured over 180 people, the Speaker of the Parliament in Westminster allowed an anti-terrorism police unit to raid an Opposition parliamentarian's Westminster offices. This was apparently because he was getting access to public service information leaks on immigration data.

Of the many things that really stick in my craw about this astonishing descent into totalitarianism by the UK Government, the one I'm having most difficlulty dislodging is that this police operation was presided over by the Assistant Commissioner Specialist Operations with the Metropolitan Police Service, with responsibility for Counter-Terrorism, a Mr Bob Quick.

From this distance:

Either: the Metropolitan Police treats leaks of Home Office information about immigration statistics in the same Police department that deals with Anti-terrorism operations, which itself is an amazing conflation of responsibilities, that belies a profound misunderstanding of the comprehensively different character of the exceptional use of intrusive anti-terrorism powers from the democratic process which countenances and protects political challenges to a government by an opposition without access to taxpayer funded government department information.

Or: the Commissioner of Police or a Minister specifically ordered that the Counter-terrorism Chief oversee a Home Office immigration department leak investigation.

Which ever way it is, it looks conspicuously like Westminster democracy has just entered the latest version of of an early form of totalitarianism.

The arrest of a member of Parliament for embarrassing a government with the Government's own information is an act of totalitarianism by that government.

This seems even clearer now that the Met Police have indicated that they were advised by the Cabinet Secretary that this leak enquiry into Home Office immigration information was a matter of "national security". This was said apparently to explain away why they used "counter terrorism" police on the investigation. But this only confirms that the executive government were responsible for directing the way the Police were to handle this enquiry. The idiot British journalists are suggesting in their oh so clever parsing of this development that it puts pressure on the Tories trying to make too much fuss over a police bungle. The bloody press can't even recognise that this line of defence from the Met points the finger at the Government, not the Opposition. And the idiot Fleet Street journalists can't even see the consequences of this spin for what it is. No wonder British democracy is in such peril when even the fourth estate (or should that be fifth?) can't do its job.

The fact that the Speaker of the House of Commons gave approval for the Seargent-at-Arms of the Palace of Westminster to allow the Metropolitan Police access to a member of Parliament's office, over an enquiry into a politically embarrassing information about immigration held by that member of Parliament, means the Speaker has no conception of what fundamental liberties and constitutional protections his role entails.

If, as seems inevitable, even the Speaker of the House of Commons was complicit in this travesty of constitutional principle, then British democracy and freedom no longer have any real guarantors or protectors in its system of government.

Westminster democracy has suffered a mortal blow. Whether it survives depends on whether this is seen by its participants (including the press) for the shameful travesty that it is. Many of us who first learnt the shape of our ideals and aspirations about government and democracy by studying British parliamentary history and its traditions, feel a deep sense of foreboding that society's persistent trivialization of principle and constant elevation of the trivial, may have finally fatally undermined constitutional protection of individual freedoms in the birthplace of modern democracy.

11 November 2008

Homily on heuristic hubris

Humility, Hardwork, Honesty, Honour and Humour

After reading in Jonathan Haidt's wonderful book, The Happiness Hypothesis, about Benjamin Franklin's daily self scoring regime to make himself better practised in behaving virtuously, I have been mulling over how an attention-span-challenged modern like myself might successfully implement a similar system, adapted for our times.

Choosing which of the many possible virtues to measure oneself against is fraught with challenge and all the inherent perils of wanton list making, so my criteria, for the moment, has been reduced to ease of recall in a tight spot, hence a resort to onomatopoeia. I can just remember 5 things, sometimes, so here is my new ready reckoner to arm myself with as I prepare for my daily engagements with my fellow humans. Remind yourself, the 5 aiches:

" humility, hardwork, honesty, honour & humour"

As a boy I was subjected, through a school cadet corps, to the gross stupidities of mass produced military training techniques. One of the more endearingly dumbfounding of the mnemonics our superiors imposed on we putative sentries, were the then famous (and now no doubt long since abandoned) "Five Ss and the M".


This was presumably designed to assist we greenhorns to know what to look for during the tired watches of the night, whilst on sentry duty or reconnaissance, on the basis that we trainees had no prior experience in seeing things and needed pointers to identify what was happening in our field of vision. From memory the "Five Ss" were: "Shape, Surface, Shadow, Silhouette and ....?... (help!) " and the "M" was "Movement". You can see how indelibly this etched itself into my brain. Its principle actual use for we cadets was however the endless other daily rituals or prosaic events to which we could now assign "Five Ss and an M".

My favourite to this day remains our description of how to restore yourself after a hard day's yacca:
"shit, shower, shave, sex, sleep, and a meal".

We riffed on this and other variations endlessly as adolescents. But I have remembered it to this day, so something worked.

If I can now only remember to apply my newly minted "5 Aitches ", in action, half as well as I have applied our favourite mock version of the "Five Ss and the M", I might yet become a better person.


What were those 5 aitches again?
Humiliate, Hardarse, Hollowness, Hypocrisy and Highhandedness".







07 November 2008

Decision elision elects Obama

McCain loses when he shows the content of his characterisation

It's an inspiring and historic thing that America can transcend race and elect a black man to be its president. My residual concern is that however storied this triumph of the great American experiment in democracy may be, they may not have got the right guy for the job.

It is not enough that he is black. He really does need to be good enough too. If America is to live out the true meaning of Martin Luther King's words that a man should be judged, not by the colour of his skin, but by the content of his character, it seems quite possible that America has again chosen poorly.

If McCain had won instead, we might also have had cause to have doubts on this too. I know that the conventional wisdom is that McCain's true mettle for this job was already tempered and battle tested as authentic by his experience as a POW and as a working Senator with a real resume of achievements. How can one not respect and admire this courageous and stalwart individual? But McCain did not deliver on the most highly visible and proximate test that came his way during the campaign: the Bailout.

A true measure for whether a person is fit and proper for this highest of offices is whether they have enough intellect, moral fibre, good judgment and humanity to make difficult and important decisions correctly. By my reckoning neither of these guys measured up in this true test, though Obama deftly ducked the opportunity, so we don't actually know about him yet, even if his evasion is not a good portent.

These thoughts were prompted by an insightful post of Todd Zywicki's at The Volokh Conspiracy entitled "Was the Bailout the Turning Point in the Election?"

Todd Zywicki agrees with Dick Morris:

I agreed with Dick Morris then and agree with him now that if there was a turning point, that was it. Would McCain have won had he followed Morris's advice? My intuition is that it very well might have. That he didn't seize this opportunity, however, might speak to why McCain lost and what it revealed about why he shouldn't be President. He may be a leader and he may be decisive, but that doesn't mean he actually understands what is good or bad policy to be decisive about.

And I agree with Todd. Though from this distance and with my very inferior perceptions of what actually took place in a political campaign in another nation on another continent, my view remains completely derivative and necessarily malleable. Zywicki's and Morris' view does however capture my disappointment with McCain that he didn't take the opportunity as a leader with a grasp of the essential issues and the courage of his convictions to step in and re-fashion Hank Paulsen's legislation and message for the "Bailout". It needed to be focused on and sold as a regulatory adjustment to facilitate the specific task of buying back badly infected securitised housing loan instruments held by institutions, at a deep discount, with the dual intention of injecting liquidity into these financial institutions and the holding of these instruments for re-sale in calmer times at a profit. This was not how it was packaged or marketed. We got some generic mush about giving a discretion to experts in Government to spend $700 billion as and when they saw fit and a clear message that it was too important to sweat any details because of the urgency. As a consequence the world now sees the Bailout solely as a market failure . And it is already being used around the globe to justify all kinds of other government interventions in a similarly generic way in all manner of other areas of life. Authoritarian collectivists thus garner still more irrevocable power to extend their amorphous tentacles into the community and to suck a bit more of the marrow out of individual human freedom.

But, as my posts here at the time show, I too was scared that the system would meltdown, at the time the package was rushed through Congress. And although it seems we have been spared an immediate financial conflagration, the economic and cultural toll has been awful. The prevailing perception has become that the government was required to squander $700 billion of taxpayers' hard earned to keep banks in business. The reality is that there has been a structural adjustment to the way capital adequacy and liquidity in credit markets are going to be maintained in major financial institutions by the regulators for a few years, and that taxpayers money is being used for the very purpose that we have central banks and governments, to keep the essential infrastructure intact and maintained. A true leader could have and should have changed the perception development, so that whilst affirming the role of Government as a protector of community infrastructure, the understanding that people and enterprises need to take responsibility for their own poor pricing decisions needed also to be reinforced. Free markets must allow investment decisions to play out their consequences for the dispassionate force of price discipline to benefit society.

A clearly articulated expression of the specific course required and taken was needed. McCain didn't do this. He took the opportunity, a plus (and more the Obama did) but he failed his own test. He muddled through to a poor outcome driven by other players. It's not enough to want to be in the position to act and to put yourself there. You have to also make the right decision when you get there. He didn't. He was seen not to make a difference. He lost.

But as Todd Zywicki goes on to say:

On the other hand, I'm not sure that the experience told us much about Obama's ability to be President--other than that he was savvy enough to stand back and let McCain drive himself off the cliff. (It is also interesting that Obama coasted when he was elected to the Senate because his opponent self-destructed). Obama did remain cool and above the fray throughout that time. At the same time, one of my biggest concerns at this point is that the flip side of Obama's coolness and desire to form consensus is his possible tendency toward indecisiveness and undue compromise and to avoid being pinned down and taking responsibility for difficult decisions. I'm not sure that his response to the financial crisis provided much insight one way or the other in determining whether he was cool or just indecisive.


Obama has by his clever elisions on this, like so many issues before, reinforced a real suspicion that he has prospered to date simply by not being found out. It seems pretty clear that pretty soon the fawning media will no longer be able to protect him from being tested, and we will see whether or not he is up the task of making hard decisions correctly.

A greater fear however is that he may be so inexperienced in taking responsibility for decisions that he may not even fully appreciate the magnitude of the decisions he must make, and the toll they will take on him. From the little we know of his past it remains possible to project that he might just blithely continue to believe that making compromises that keep his constituency happy, just as he has done as a successful community organiser and campaigning politician, is all that will be required of him.

Surely the searching examination that Obama has undergone from the media and his opponents during this hard fought election campaign has preserved America from electing such a feckless individual to this highest and most powerful office? Yes, we can only hope.

30 October 2008

Ascendancy of the "Half-blood Prince"

A story of O

If you remain curious about this still opaque individual who seems imminently to become the leader of the free world, you might want to go to the link below (Hat tip: Eric Falkenstein) to peruse and ponder a detailed third party account of his personality and proclivities.

PDF Format

It is a free 240 page self published online PDF written by a conservative US journalist named Steve Sailer .

My initial browsing of it for about an hour found it a sympathetic if unfiltered telling of Obama the man, based mostly on O’s first autobiography: “Dreams From My Father: A Story of Race and Inheritance”. It seems refreshingly non PC and direct on racial issues.

I am linking to this interesting tract now ahead of next week’s election because there seems to be some unfulfilled appetite for real attempts at discovering the character of this emerging potentate. It at least gives us an opportunity to focus on something other than the deluge of bilge from US news anchors and ecstatic or rancorous media commentators, who will bombard us in coming days (when we are not watching the Bledisloe, Derby or Melbourne Cup). You can thereby try to distance yourself from seeing this momentous event solely through the prism of the current mono-focused partisan agenda of the world’s media.

Otherwise just enjoy the incomparable week of drama that now lies in store.
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17 October 2008

In. The. Tank.

Get Palin. Get the Plumber. Just get Obama the Presidency.

An understanding of what constitutes fair play had, within tolerable limits, quite wide common ground in the communities I grew up in. That includes the books, newspapers, magazines, television programs and radio broadcasts that have shaped my perceptions, as well as my homes, schools, teams and workplaces. I'm certainly not the first to say this, as a parent of teenagers or as an ageing adult, but I am still genuinely surprised I have to say it. This is no longer the case. "Fairness" has been captured by post-modernism to such an extent that it has become a casualty of the culture conflicts of contemporary society, the same way that "truth" has.

Just look at the media reporting of the Obama and Palin phenomena. Reporters and commentators (they are now the same thing) no longer feel the need to even be seen dealing fairly with the subjects of their news reports about unfolding political processes.

Check out this from a report in the Sydney Morning Herald on the last Presidential candidacy debate the other night from Fairfax correspondent, Anne Davis in Washington:
"McCain slips up on road to Whitehouse

....Senator Obama tried to rise above the fray, refusing to criticise the Republican vice-presidential candidate Sarah Palin's experience and even praising Senator McCain's stance on torture. But where Senator Obama was devastating was in repeatedly tying Senator McCain to Mr Bush's policies..."

Senator Obama may have refused to criticise Governor Palin's experience, but Anne Davis wasn't going to let the opportunity slip. But where Corespondent Davis is devastating is in repeatedly tying her commentary to the prevailing overarching media narrative: the Republican is unfair and partisan, the Democrat is fair and above politics.

This is unfair reporting for an Australian without a stake in their game in the US, but the journalistic standard in play here seems to be:

"Hey, truth is relative after all, so who's to say that the perspective of my story is unfair. I'm just reporting it as I see it, and what I see is that one candidate was noble and has got what it takes and the other is negative and unworthy, so that's how I'll report it."


Who are these folk kidding? It has become so obvious, even from this distance, that the media in this presidential campaign have abandoned all pretence of impartiality and fairness, that I am not the only one who thinks that this could create a major backlash electorally. This could be the best "get out the vote" incentive the Republicans could have conceived. Except that it will be an entirely inadvertent outcome of the media's overt push to install their favoured candidate in the Whitehouse. Ah the law of unintended consequences again. It will be a marvel to behold the media's incredulity if McCain does manage to sneak home under their very noses in November. And the latest tracking polls from Gallup suggest this remains a real possibility: Obama 49%, McCain 43% (and look at the traditional "likely voter" poll: it's within the error margin).

And this obsessive outbreak of media victimization of an Ohio plumber who dared to ask Senator Obama a question about tax, that the media itself couldn't ask, is more icing on this huge unpalatable pudding being cooked up by the media for our forced consumption, with the Governor of Alaska already baked inside. The cherry will come later with their retching it all back up if their amateurish concoction of bile bombs when finally consumed.

But so much more can happen in a week in politics online (see Mickey Kaus's "Feiler-faster thesis") that this could all still turn on a top in a trice.


Maybe truth and fairness have meaning and consequences after all. Ah, the joy of it all.

15 October 2008

All experts stuff up.

And I am an expert at criticism ...

Eric Falkenstein has again given us some gristle to chew on:


"The sad fact is that experts are often more wrong on facts in their field than the average person. They are able to create a highly scientific rationale for their belief, and deflect criticism from 'conventional wisdom' because most people with mere common sense do not follow the academic protocol of the field that sets the standard for accepted expert opinion."

After what we have all been through recently; with economists and market analysts being made fools of by financial markets and with scientists and environmentalists looking sillier by the year when the planet openly defies their decrees to heat up; this is a very appealing observation. The items of evidence that Falkenstein offers for this proposition are illuminating ...
.
And I will store them up here, for my own future reference:

Anthropologist, Elizabeth Thomas, acclaimed author on prehistoric cultures ("Harmless People" 1959) , getting it completely wrong, expertly declaring that, notwithstanding our ignorant prejudices against the natives, hunter gatherers lived lives of peace and co-operation, without war. More recent experts like Lawrence Keeley suggest that homicide rates per capita for pre-lapsarian primitives were much higher than those in civilized societies. Who are we to believe?

Sex experts telling us in the 70s that we are all to a large degree bi-sexual, when our own intuition and experience suggested that most us have pretty pronounced gender preferences regarding sex. Well who was right about this, we rubes or the experts? (I fancied the inference that these sex experts had secumbed to wishful thinking; there's a bit of that about in sex.)

Dietitians with many degrees and multiple publications in peer reviewed journals, fatuously formenting a fatwa against fat as a first order factor in fatness. But now the much derided populist Atkin's hypothesis that carbs are the main enemy of weight loss, looks like it is closer to the truth than the academicians' pronoucements.

Doctors and the American Medical Association declaring that steroids had no effect on athletic performance. Pure Gold.

Psychologists suggesting that delinquency was caused by a lack of self esteem. It seems now that it is an excess of self worth that is our major worry from these folk.

I will try to remember to add to this list from time to time. It could be fun. I'll start though with another recent event: Paul Krugman, the intemperate economic opinion writer and Democrat Party shill at the New York Times, has just been awarded the Nobel prize for "economic science". What is it with these Scandinavian scolds in recent times?

First the Norwegians give the 2007 Peace prize to Albert Gore junior and the IPCC for their raising of awareness about climate change(Peace is such an inconvenient title).

Then the head guy at the Swedish Nobel literature institute comes out in September this year and tells us all that Americans are too insular to write sophisticated enough fiction for a Nobel prize. These people are really trying hard to reposition the objectivity credentials of the Nobel brand with this kind of manipulation of their mandate and PR spin.

And now they give an economic Nobel to an openly partisan liberal media commentator, weeks out from a US Presidential election!

I guess it's just a sophisticated post modern resignation to the inevitable: "what's the use of having a reputation for objective impartiality unless you can use that reputation to influence events towards your desired objectives"? Ruling elites always culturally skew towards self perpetuation anyway, so why be coy about it?

No wonder respect for expertise is no longer quite what it used to be. These dynamite endowed melancholics from the hydrocarbon rich Arctic's edge, again demonstrate by their selection, all the passion and sense of entitlement of oil rich sheiks choosing new wives for their harem.

08 October 2008

The Earth has become poorer and colder

The economic modellers and the climate modellers were wrong.

We were told by Glenn Stevens, the Governor of the Reserve Bank of Australia (RBA), in August 2007 (during a Federal election campaign):

"...developments to date do not appear to have changed significantly the broader global outlook. Even with the US slowing down, forecasts of global growth have recently been revised upward. "

We were told by the United Nations' Intergovernmental Panel on Climate Change (IPCC) in its Summary for Policy Makers in 2007 that:

"[Most] of the observed increase in global temperatures since the mid-20th century is very likley due to the observed increase in anthropogenic greenhouse gas concertrations."

So how have these statements of such august and responsible public institutions in economics and climate respectively, stood up in the light of the implacable gaze of history?

The RBA's Glenn Stevens told us yesterday that:

"The recent deterioration in prospects for global growth, together with much more difficult market conditions even for creditworthy borrowers, now present the risk that demand and output could be significantly weaker than earlier expected."

And, according to UBS, the US is currently in the middle of two quarters of negative growth. The just completed September quarter has seen a contraction in US GDP of 1% and the current December quarter is expected to contract by 1.5%. Two quarters of negative growth is the text book definition of a recession. The US is in the middle of a recession right now.

The IPCC's assertive certainty about the contribution of GHGs to global temperature increases are also now looking pretty silly. We have been told often enough by a strident media that there has been a massive acceleration in atmospheric CO2 concerntrations in the last decade, and yet, over the same period, global temperatures have fallen. David H.Douglas of the Department of Physics at the University of Richester and John R. Christy of the Department of Atmospheric Science at the University of Alabama, published a paper in Energy and Environment in August 2008 showing that the contribution of greenhouse gasses to temperature increases in the second half of the 20 century have been at best marginal. Will we get an apology or a retraction from the IPCC?
So we shouldn't trust anyone, no matter who they are, who predicts for us tomorrow's weather or next year's climate or tomorrow's stockmarket or the next quarter's economic outlook.

But where does that leave people who pontificate about the future using economic models of climate models? (or is that climate models of economic models?) Belief in such predictions would surely require a leap of faith of religious dimensions. But these are scientific processes, so they must be right. Right? There's no religion to be seen here. Move along.

01 October 2008

The darkest hours

We wait on feckless populists & reckless opportunists in Congress

Now that the Democrat controlled US House of Representatives has voted down Treasury Secretary Hank Paulson's "$700 billion bailout package", there is a palpable sense of fear in world securities and credit markets. The US Senate reconvenes on Wednesday to try to pass an amended package, which is to be resubmitted to the House on Thursday in the US.

In the meantime the world just watches and waits, paralysed.


If the new package is voted down again, then the market could crap out again and, worse, credit could dry up to business. This is as bleak as it gets. If the axe falls then we know we are in the abyss and can adjust our expectations. If we get a reprieve then, we muddle through as before. But at present there is only the powerlessness of waiting on others to determine our fate.

Some plan Bs and plan Cs are emerging as the world faces the unthinkable, financial meltdown. The US Federal Deposits Insurance Commission can apparently be empowered by the Administration to inject comparable levels of liquidity into the US banking sector without Congressional approval. The SEC can and has eased the requirement that corporations mark their securities to market where there is no real market for those securities. This might allow some vulnerable institutions to keep compromised debt portfolios on their books at higher levels than would otherwise be the case.

So there still seems to be the semblance of a muddle through available, even if Paulson's package is rejected, but it still looks bleak. The erosion of confidence and trust in credit markets does not seem likely to heal quickly.

There are many curious and interesting features of this crisis. Not the least of which is the attitude of the media. Because it is occurring in the white heat of a US Presidential election campaign, the morons in the media don't seem to be able to segregate the substantive issues at stake here from the political appearances. The posturing of the candidates and the congressional leadership has been fascinatingly shallow and reckless.

Another feature has been the clear disjunction between the populist view and the political leadership view of this "bailout". It has highlighted a real dilemma and potential weakness in open democratic societies. It seems that a significant proportion of the Representatives of both parties who voted down this legislation, were those who anticipate close congressional races to get re-elected in November. This suggests that where a legislator has real cause to be sensitive to and feels answerable to their electorate, then they do not want to be seen by voters to endorse legislation granting vast sums of taxpayer funds to prop up insolvent financial institutions. On the other hand, legislators with a safe margin who feel comfortable about re-election, seem to feel free to substitute their personal "leadership" judgement over the objections of their electorate. Democracy in action can be a cruel, fascinating and irrational thing at times. Just who is leading whom here?

I also harbour a deep fear that command economy control freaks, who neither understand nor trust markets, will further exacerbate and perpetuate this unholy mess. The cry has already gone up from Sarkosy, Pelosi, Obama, Biden and McCain and the Moron Surfing Media (MSM), that this crisis is a creature of market failure. They cannot see it for what it is: the market's delayed, but inevitable, judgement on a profound failure of earlier passionate government intervention in disspassionate process. These reflexive control freaks who can't bear a situation that they do not have command over, will not recognise that government intervention was the cause of this problem. It was Government who pushed Freddie and Fannie to lend to poor credit risk home buyers, who the market would never have lent to. The lesson that should be learned here is that when government tells business who to do business with, there will eventually be hell to pay. We are paying for decisons made in the 1990s now. But I fear that the easy, superficial, and partisan response: that we need more control over markets, will prevail. We are therefore likely to have to pay a lot more for a long time to come.

24 September 2008

ASIC's shorts exposed

The long and the short of it

It has been a curly week for the Australian Securities and Investments Commission. ASIC has made a right hash of a decision about what to do about short selling of securities quoted on Australian securities markets.

Setting aside the content free dialogue that has been going on for over 6 months in the media; prompted by throw away remarks from our Federal Treasurer, Wayne Swan, about the Government's forever imminent legislative crack down on "short selling"; now that the Government and ASIC have had their hand forced by international attempts to act in a co-ordinated way to stabilise markets and reduce panic, ASIC stuffed it up.

A brief chronology:

  • Thursday, 18 September US Treasury Secretary Henry Paulson announces an $800 billion liquidity injection into the for the US financial system, in an attempt to restore confidence in the US banking system after the failure of Lehman Brothers, (amongst other stuff).
  • Friday, 19 September, ASIC issues Media Release 08-204 , "Naked short selling not permitted and covered short selling to be disclosed", this effectively announced two things:

    (i) A new
    ASIC Regulatory Guide 196, making it clear that ASIC considers naked short selling is illegal under section 1020B. Naked short selling being selling securities without "a presently exercisable and unconditional right to vest the product in the buyer"; and

    (ii) ASIC has exercised its power under section 1020F of the Corporations Act to modify section 1020B, relating to short selling, by
    class order CO 08/751, adding a new provision, section 1020BC which had the effect of requiring stock brokers to ask their clients when receiving orders to sell securities whether they were selling borrowed securities, rather than ones they owned outright, ie covered short selling, and if so reporting that to the exchange. That is they beefed up the disclosure obligations on covered shorts.

  • Sunday, 21 September, ASIC issue Media Release 08-205 which announces a change to the position announced on Friday 19 September. Instead of just requiring covered shorts to be reported, it now issues a new class order CO08/752, modifying CO08/751 of 2 days earlier, to make all short selling, even covered short selling illegal for at least 30 days.

  • Monday, 22 September, the Australian Securities Exchange (ASX), is unable to open at its scheduled 10 am opening, because of unresolved issues about existing short positions in the market, whether the writers of put and call options are shorting if they don't hold the stock, whether funds who hedge and arbitrage with short positions are able to continue, ...etc..etc

  • Tuesday, 23 September, ASIC issue Media Release AD 08-22, which seeks to clarify and create a number of exceptions to the previously announced blanket ban on covered shorts. In order to to this it issues another two new class orders CO08/753, and CO08/764 , further modifying CO08/751 to accommodate these hastily conceived exceptions.


In addition to the simply ham-fisted chopping and changing which makes them look like a bunch of badly informed and incompetent amateurs, it also looks like ASIC has also ended up getting it wrong anyway, with its general prohibition on all short selling on Sunday 21 September.

If, as seems to be the case, ASIC felt the need over the weekend to change the position it had announced on Friday 19 September that banned only naked shorts, because of the broader position being adopted in the US, UK, Ireland, Canada, France and Germany, then why didn’t it do the same as they did, and just extend the prohibition to covered shorts over securities in financial sector stocks ? ASIC instead extended its prohibition to shorting of securities in all listed companies and managed funds, stapled products.

ASIC seems to little explanation for this dramatic difference in its approach from the rest of the world other than the suggestion that the size of our market made us vulnerable to predatory shorters. Such an explanation is decidedly thin since it has been going on under ASIC's nose without intervention for years. In the circumstances it can be legitimately speculated that ASIC’s singular change over the weekend, occurred because it, or its masters in Canberra, were lobbied hard then by the likes of Macquarie and Babcock & Brown, who were vulnerable to shorters, and who also had a range of securities quoted on the ASX in addition to shares in themselves, such as hybrid, stapled, and managed fund combinations. ASIC was apparently unable in the time available to figure out an appropriate and logical mechanism to identify by category or by a list which stocks in quoted on the ASX were at risk from aggressive shorting and whose failure as a consequence might effect our financial system. ASIC accordingly seems to have resorted in the circumstance to just banning all short selling rather than try to finesse this important distinction. ASIC’s extended position otherwise doesn’t seem to have a good rationale.

The market’s price discovery process are not ordinarily interfered with just because regulators don’t understand them fully or disagree with the prices arrived at by traders. Prudent regulators might, just, justify an intervention in dispassionate market price setting processes where the integrity of the financial system may be imperiled by pricing irrationality, resulting in a run on a bank or a panic external to the actual market for a particular financial sector firm’s securities. This suggests however that any such intervention should be confined to stocks that have those characteristics. Does it really matter to market regulators if XYZ Teaching or Blue Sky Mining is aggressively over sold by shorters? It’s either a very cheap buy or it dies. That’s the market’s verdict.

Some one needs to grab ASIC by the shorts to sort this mess out. It needs to be bring itself back into line with the rest of the free world at the earliest opportunity, presumably when the inital 30 day period of this general prohibition elapses.


14 September 2008

Pat Snowden - remembered


Patrick Snowden, a dear friend, died of a brain tumour at the age of 47 on 5 September 2008. Jack Snowden, Pat's 16 year old son, Jeb Carroll and Pat's brother, Peter, each gave magnificent eulogies for Pat at his funeral service on the morning of 12 September 2008. This is the text of the brief remembrance I gave later that day at his wake, along with others, at the Longueville Pub in Sydney.


PATRICK JOHN SNOWDEN

Patrick was the truest of friends.


Like many here today, Pat and Tracey have been an indelible part of the fabric of our family's life for decades. My wife, Susie, met the inseparable pair at Macquarie Uni Law School. Pat gave us the most valuable wedding gift conceivable: he passed up the opportunity to play for the 1988 Club Championship at Oatlands to attend our wedding; an act of self sacrifice in the interests of friendship that was typical of him, and for which we revere him.

We have been on family holidays with the Snowdens, staying in the same apartment with all of both our families' then very young children, and Pat has volunteered to take all six of them fishing! And what's more "alone and unassisted, brought them back".

Pat and Tracy have been the bedrock of reliability, the bricks of personal responsibility and the mortar of community mindedness that many of us mortals have looked to, to help reinforce meaning in our confused lives. And Pat, by the way he lived his life, bridged a gap that is seldom bridged, except in epic poems and ballads, that between the ideal of classical manhood and the modern Aussie bloke.

He lived a life of honour, humour and virtue.

When you were with Pat it was easy to feel you could be the best person you could be, because of the living example of chosen excellence that he so unassumingly projected. He made things that are hard for many of us, like engaging optimistically with complex clerical tasks or intimidating officials, easy and natural. And the effect of his positive personality spread to all those around him.

And there's almost no where in this state and beyond that Pat hasn't been and made friends. Anywhere in fact that that now legendary old silver Toyota Cressida of his could take him. With Pat a passing encounter with the person serving him in a milkbar in Tumut or a servo in Lithgow or a baitshop in Port Stephens, could easily, and did under Pat's orchestration, become a collective discussion involving everyone in the shop, about the special qualities of the meat pies or the vanilla milkshakes or the frozen prawns being sold there. And next year, when he next passed through, he would pick up that conversation again, as if he had just ducked out for a moment, and they would remember him, often by name, and treat him like a returning prodigal son. No-one else I have known could do that with such unaffected charm, and everyone always felt the happier for it.

My fondest memories of Pat are goatbusting. Many fellow goatbusters are here today, and although we have not all met before, we all know each other. Patrick has sent us all photos and emails of his many expeditions with each of us, and we have heard him tell the stories. I went goatbusting with him and his son Jack and and my boy, John, on trips to the hills west of Mudgee. Pat, whose call sign on our two way radios was "Goatbuster 1", always made a special point of looking out for John. He mentored him and Jack subtlety; demonstrating by his actions the delayed rewards of discipline, meticulous preparation, focus on the task and the importance of consistency and follow through.

Pat simply loved scrambling up and down that steep rocky country chasing goats. He was plotting their downfall from the moment he woke; musing on their whereabouts aloud even whilst doing his ridiculous but invariable morning stretch routine. We spent hours scouring rocky outcrops and ridges with binoculars, and then painstakingly stalking goats spotted on some distant hillside, for up to half a day or more, implementing his carefully laid plans that, often as not, came to nothing, but of which we never tired, so engrossing was the company and the task. Friendships formed in such adventures never wane, even when like me you are a lousy shot and your companions are such fine marksmen.

For Pat knew a thing or two about trajectories. He was a single figure handicapper at Concord, Oatlands and Cromer, but he still had time for hackers like me. And a round of golf with Pat was one of life's great pleasures, as all those who have had that privilege will testify.

But he lives on. He lives on in Lucy's beauty and intelligence; in Jack's competence and sense of honour and in Hannah's generosity and graciousness. And above all he loves on in Tracey's love.
And he lives on in the hearts of each of us, whose lives he touched.

03 September 2008

Beyond the rainbow: yet another Dorothy?

Who's Judy Garland now ? Barack or Sarah ?

Phew! And I thought the Democratic primary race was a blast. Following the hopeful innocent along the winding road with scruffy dogs, straw men and the heartless, whilst battling a wicked witch, to his ultimate nomination, became an almost undreamed of adventure for us rubes in the 'sphere.

But now, incredibly, another Dorothy with ruby slippers has dropped out of the sky in a hurricane and rudely intruded on our dream. And it looks like she may have finally killed off that wicked witch too. You couldn't script this, even in Oz. But it is becoming a tad confusing. Who is the real Judy Garland now?

This whole identity thing has become very messy, but what a spectacle to behold. It seems improbable now that the world could just go on supporting kindly grey haired old white guys hiding behind curtains. But who can predict anything anymore in populist politics.

This US presidential election could just be the best Olympics ever! Roll on November.

21 August 2008

It's impossible to be mates with celebrities.

If only I knew some

I'm tempted to say I wholeheartedly agree with this alluring new heuristic, from Sathnan Sangera of the Times, except I don't know any celebrities, so how would I know?


It would probably be truer for me to say that I adhere to the smugly self satisfying belief that people who believe in the importance of celebrity are intellectually impoverished fashion victims. If I knew any celebrities who thought their celebrity was important to our relationship other than as an irritant, then I would find it hard to be their mate. And for the very reason that Mr Sangera speculates: they would be over sensitive to having the piss taken out of them for having feet of clay.

But what of his other suggested life lessons:

Never brush your teeth if you're dressed in black.
Don't trust a man whose eyebrows meet in the middle.
Always put the shower curtain inside the bath.


Only the last one of these holds water for me. I obviously don't get out much, because I also don't know any blokes whose eyebrows meet in the middle, so I don't know about that one. And as for brushing when dressed in black, I'd be more inclined to suggest that this applies to one's hair than one's teeth, but that's probably more information than anyone really needs to know.


12 August 2008

Threalmic pseudism

Stephen Potter redux


ALDaily pointed me recently to a type of article I haven't seen for yonks: a self-mocking parody on the latest fads in pseudo intellectual one-upmanship. And here was me prematurely grieving at the apparent passing of this eternal game.

David Brooks in the New York Times writes:

" Dear Dr. Kierkegaard,

All my life I’ve been a successful pseudo-intellectual, sprinkling quotations from Kafka, Epictetus and Derrida into my conversations, impressing dates and making my friends feel mentally inferior. But over the last few years, it’s stopped working. People just look at me blankly. My artificially inflated self-esteem is on the wane.
What happened?

Existential in Exeter

Dear Existential,

It pains me to see so many people being pseudo-intellectual in the wrong way. It desecrates the memory of the great poseurs of the past. And it is all the more frustrating because your error is so simple and yet so fundamental.

You have failed to keep pace with the current code of intellectual one-upsmanship.
...

It's a tonic to read old Stephen Potter principles from my undergraduate days getting a re-working in our on-line universe. It was a partial throw back to when I first stumbled on Pseuds Corner, the apparently still extant pricker of pretensions in Private Eye.Brook's gambit is to proffer that today's status rules have reached a new meta-context. Instead of being in front of the pack by having adopted the latest technology or cool posture, you can only pretend to be in the race if you can claim to have already tried and abandoned such tiring triffles. Gattling-Fenn might well have approved. But they'd both be behind today's real game. To be truly one-up you have to be without anyone knowing.


08 August 2008

The curmudgeon's Olympics

08.08.08

The world will shortly simultaneously sit down to watch the same circus act together and feel the inner glow of connectedness. I can hardly wait. What am I to do between now and 10 pm here when the global telecast is scheduled to kick off?

I already feel a breathless anticipation for my pointless despair at the intergalactic disconnection between the hyperbole of the commentary and what the ceremony will actually be communicating. At least with the Eurovision Song Contest or America's Next SuperModel or the World Darts Tournament there is some refuge in unintended irony and self parody that permiates the execrable excess or frivolity of these events. Not the Olympics. We are exhorted to take this mush completely seriously and are hushed if we demur. Ughh!

I will watch some of it though. Initially mainly to see if any of the teams or athletes are brave and clever enough to outsmart statist officialdom and make an effective protest against China's repression. And later to have some currency in the schoolyard of polite discourse about our nation's competitive progress in the global battle.

The monumental hypocrisy and dishonesty of this orgy of nation state propaganda is however summed up by this, apparent apology issued by the US cycling team after being photographed arriving in Beijing with face masks on:


“The wearing of protective masks upon our arrival into Beijing was strictly
a precautionary measure we as athletes chose to take, and was in no way meant to serve as an environmental or political statement,” the athletes said. “We deeply
regret the nature of our choices. Our decision was not intended to insult BOCOG or countless others who have put forth a tremendous amount of effort to improve the air quality in Beijing.”

“Those athletes regret that action and have written an apology to BOCOG on their own behalf,” Scherr said. “They now realize and understand how their actions were perceived by the host nation and by the organizing committee.”


As if the sense of entitlement China has expressed about it's sensitivity to open discussion of Tibet or Muslim minorities or Falun Gong or the Church were not objectionable enough, the Chinese dictatorship has now been enabled by the BOCOG to compel young athletes honestly protecting their capacity to compete in an endurance sport, to humiliate themselves to the word to appease the sense of self worth of an authoritarian regime.
Which Maoist re-education text did they copy to compose this press release about what "they now realise and understand"? Do you laugh or cry? It seems that the Olympics is only serving to reinforce a contempt for freedom that the mono-focused glory seeking disciplinarians who pursue Olympic ideals seem to feel so comfortable with. Can this be a force for good in the world?





05 August 2008

Gulags, Lileks and holidays

Solzhenitsyn's passing

James Lileks struck a chord with me when I first read his blog 4 or so years ago. Along with his narrative skills, I think it is the way his startlingly familiar suburban world is conveyed with such unapologetic dignity and humanity, that makes him read so true. He is such a contrast to the over intellectualised strivings of most of us baby boomers towards urban sophistication and academic hauteur. You feel refreshed and uplifted at his ease in aptly capturing significance in minor insights gleaned from the ordinariness of his days.

Alexander Solzhenitsyn died yesterday. The extraordinariness of this once ordinary maths teacher, lies in his survival through an ordeal of suffering at the hands of implacable oppressive cruelty that might otherwise have defied words, were it not for his great courage and literary genius. A greater contrast with the glossy material mid-western prosperity of Lilek's existence and Solzhenitsyn's tortured spiritual and corporeal Siberian hell, would be hard to conjure. Lileks could easily symbolise all that Solzhenitsyn came to despise in the materialism and seeming superficiality of the West, but there is also a curious parallel between them: their ability to show us how to "hold infinity in the palm of your hand". They both speak to us in a way that William Blake suggested: one a song of experience, the other a song of innocence .

It is fitting therefore that the best tribute to Solzhenitsyn that I have so far read on his passing is by Lileks. It's probably because my experience of the revelations of the almost incomprehensible scale of totalitarian inhumanity under communism through Solzhenitsyn eyes, were not completely dissimilar to Lilek's. I too was a curious but feckless undergraduate whiling away an angst ridden university vacation in suburbia, quietly fuming at an uncaring universe. Here is how Lilek's ineffably puts it:

"In the summer of ’78 I was back home in Fargo between college years – exiled from the civilized world, cast into barbarity. During the day I labored under the hot sun painting giant fuel tanks in the hot sun, next to an auto-body shop that exhaled poison and Eagles all day. A sensitive soul, cast into such grim circumstances. A noble soul, a poet, reduced to living on the gruel of hometown “culture,” almost unable to stir himself each day to face the hopeless allotment that stretched forth until the sun turned its face away.
Naturally, I was in the perfect mood to read the entire Gulag Archipelago. I got all three volumes from the drugstore – which should have told me something about the land in which I lived, that one could buy this work from a creaky wire rack at the drugstore – and it taught me much about the Soviet Union and the era of Stalin. After that I could never quite understand the people who viewed the US and the USSR as moral equals, or regarded our history as not only indelibly stained but uniquely so. Reading Solzhenitsyn makes it difficult to take seriously the people in this culture who insist that Dissent has been squelched. Brother, you have no idea.
The great brooding man is
dead – all those years of trial and disappointment done, ..."

Go Lileks! Thank you Alexander Solzhenitsyn. May your troubled, courageous and sublime soul find true peace at last.

30 July 2008

Most stuff is mostly alright most places


The above header is probably not going to sell many page views. But it is newsworthy, in the sense that it would be a novel observation for a news organisation to publish. It's a species of what I recall Dr Don Stammer aptly describing in the 1980s as the most likely outcome of any problem: the "muddle through". It has been prompted by another delightful piece that the InstaProf has nudged my way by John Tierney in the New York Times' Science section on 29 July. After the deluge of disaster that the media tips on us every day, I reckon this piece should have been given lead item status by every media organisation on the planet (and now even Memeorandum's algorithm and ALDaily has picked up this piece, so it's sure resonating with someone other than me and the Prof).

The header the NY Times uses is:

"FINDINGS: 10 Things to Scratch From Your Worry List"

And, along with confining it to the deep innards of the journal by placing it in the mostly unread "Science" section, the header sufficiently contextualises this item, and neutralises its potential impact on the media's credibility, by letting the reader know early that what they are about to read is some quaint, quirky, faintly amusing, life style stuff from a possibly off-beam science type, that we can all laugh at and move on from comfortably, knowing it isn't serious or real news.

But wait; is this the case? Here's what Mr. Tierney says definitively (? ) we don't have to worry about because the concerns expressed are mostly bunkum:

- saturated fat,

- CO2 emissions from car air-conditioners,

- food miles,

- carcinogens from cellphone microwaves;

- plastic bags;

- poisoning from polycarbonate water bottles;

- shark attacks;

- North Pole ice;

- dark matter; &

- worm holes.

After all the stories that both serious and the sensational media outlets have scared us with in recent times about these issues, it surely is news that, on sober reflection, perhaps the media beat ups on these issues were just plain wrong. The big question this observations begs is what else that the media has been scaring us with might also be mostly bunk? An awful lot of the items in Tierney's list seem to be a reaction to greenie alarmism. Could we be "being led a merry dance" on the bigger issues as well, by the democratic, trend picking, fashion responding imperative of the mass media's need to get high numbers of views ?

It is curious too that there is just the hint (in the UK Sunday Times) of a suggestion (hat tip to Samizdata) that the bleeding edge of hip environmentalism might just be beginning to lose its grip in the opinion making urban fashion elites.

Could it be that the zeitgeist on planet saving is just perceptively shifting somewhere on its high exposure surfaces? (as we actually live through cooling seasons, that weren't supposed to be?) Will it soon be hip to be sceptical rather than credulous again? Or will we have to wait until after Obama's ascension to power?

There do seem to be an awful lot of people who have staked their reputations and positions on this global warming malaki being credible, though. And 'twill take a while for many of them to backslide away. Sheez Australia's ABC is even spruiking its alarmist piece for next week's 4 Corners faux investigative journalism program on ... disappearing North Pole ice! I wonder if they'll tell us about polynyas (a term adopted in the 19th century by polar explorers from the Russian word for this persistent phenonema).