24 September 2008

Blackmail And The Catholic Church

YAAAAAAAAAAAAH! Oh, this makes me sick.

The catholic church, possibly drunk on power after World Youth Day, have signalled that they will close their obstetrics wards if the abortion bill passes through state parliament.

Not content with this, they have effectively told their doctors to consider breaking the law if it is passed.

I sent this complaint to Catholic Health Australia, and have crossposted it to the complaints blog:

Dear sir/madam,

I write to you with more than just a small degree of disgust over the blackmail stunt that you pulled today. I wish to complain about this as it is clear that you are behaving with an infantile level of dignity, decency and decorum.

Your board member Bishop Joseph Oudeman's threat to close your obstetrics wards in your Victorian member hospitals if the abortion bill successfully proceeds through state parliament is a national disgrace. Possibly even an international one. I cannot believe that you, in good conscience, would even consider resorting to blackmail to try to get this law stopped.

I can't even comprehend how you would even find blackmail to be appropriate.

All the bill requires is for doctors with a conscientious objection to abortion to refer women to doctors who do not. And yet, this isn't good enough for you: You have to enforce your concept of "life" on to the rest of us. Whether we're religious, specifically Roman catholic christians, or not.

How could you possibly do this?

All over the state, there are women who are going to need to give birth. According to stats on The Age's website, your hospitals deliver one third of them. Are you going to deny them assistance in a hissy fit over the laws, if they even become that? Law, that is?

And I read that your CEO, Martin Laverty, has stated that you will not require your doctors to comply with the law on this. This is a disgrace, and is completely irresponsible.

I can only conclude that you have the mental capacity of an eight year old who is threatening to take the bat and ball and go home if by chance he is given out. Please confirm when Mr Laverty and your board will be resigning over this matter.

Should you carry out your threat, I wish to advise that my wife and will have no alternative but to use condoms and birth control pills.

Yours sincerely,


Catholic Health Australia may be contacted here: secretariat@cha.org.au

21 September 2008

Brutal carnage!

We've seen a lot of action on the markets in the last few weeks, and I suppose that some of my regular readers are probably wondering, "Hey Dikkii. You've been awfully quiet on this."

And I suppose that I have. The thing is, I'm neither greatly spooked, nor am I greatly interested. I've had more important fish to fry at this point in time, but I have been following at a distance.

So I thought that I'd get my thoughts down on paper and attempt to try to put together some thoughts on the week that we've just had, because it has been a doozy. I'm not about to go the way of the financial media and suggest that the global market slide that we saw represents the death of capitalism, though. This has been some disgraceful irresponsibility coupled with a complete lack of knowledge about what capitalism really is. However it is interesting to note that where chickens have been coming home to roost, this blogger did see some of it coming.

1. The "Death of Capitalism"

This is just plain lazy reporting.

Capitalism is just the interplay between those two non-physical forces, Supply and Demand. Nothing more, and nothing less.

Supply and Demand, in turn represent the twin human emotions of greed and laziness.

Note that I haven't mentioned fear. Fear certainly impacts on Supply and Demand, but it is not an emotion on what they're built. Allow me to demonstrate:

Imagine that you are a buyer of something that we'll call "doo-hickeys". Greed and laziness suggest that you'll be more willing to buy more doo-hickeys when prices are low, rather than when they're high. Or to put it another way, you are susceptible to a good bargain, and you're turned off high prices. This, folks, is how the force of Demand works.

Let's now switch roles, and suggest that you are the manufacturer of the aforementioned doo-hickeys. It's via greed and laziness that you are willing to pump up production when prices are high, rather than when they're low. Essentially, you're paying in doo-hickeys for money, and when you can get more money per doo-hickey, you want to make the most of it. Which really makes Supply a sort of inverse Demand priced in commodities rather than money.

So how does fear impact this?

Essentially, fear attacks in waves. Usually, fear inhabits a small corner of one's mind, and is not sufficient in its own right to interrupt the greed and laziness emotions.

However, every now and then, the amount of fear that is there reaches a critical mass in an individual, and this will override the greed and laziness to the point where they fail to register. This is called panic.

So for a buyer of doo-hickeys who's financially fearful, they're going to not be so keen on buying those doo-hickeys, because the fact that they're parting with actual cash to get those doo-hickeys becomes worrying. They'll be worrying about the re-sale value of those doo-hickeys. They'll be worrying about whether the doo-hickeys are any good. In short, they'll be worrying. Or fearful, if you like.

Fear affects suppliers of those doo-hickeys as well, but in a different way. Remember how I said that Supply is a kind of inverse Demand? Well, imagine that you're seeing less and less dollars per doo-hickey sold. You may eventually start fearing that doo-hickeys will eventually be worth nothing. You might choose to dump your entire stockpile on to the market, as you fear that to delay might result in this stockpile eventually becoming worthless.

And even though prices are falling, you may even choose to ramp up production in the hope that prices fall even further, allowing you to buy some back later on to sell when prices stabilise, allowing you to realise a small profit for them.

You can see, just from these examples, that Supply and Demand morph into almost entirely new animals as a result of the introduction of fear, however at no point do they go away. Fear just causes greed and laziness to take on lesser importance in the whole system.

Fear also seems to throw rational thought out the window.

And so it is with assets as opposed to the commodity that we've called doo-hickeys. Supply and Demand work in almost entirely the exact same way. Except when fear comes along, and then it's panic stations.

Supply and Demand will not go away. They'll just take on a different shape for a while. The same can be said about capitalism - after all, it's really the same thing.

2. Complex financial instruments

A little while back, I bemoaned complex financial instruments, and how they appear to exist only to generate fees for the issuers of them.

Since then, we saw one capital guaranteed product issued by Macquarie Bank hit the wall and announce that under the rules that it operated under, investors would get their money back. In 2013. But no additional returns would be paid.

No returns at all until 2013 is a frightfully long time for your money to be going nowhere.

Elsewhere, outside these complicated little instruments that are designed to prey on investor fear, we have lovely little terms permeating the financial department stores, and catching investing novices and veterans out alike.

Frankly, people should fucking well go to gaol for Collateralised Debt Obligations, because these little bastards were designed to mislead. How the fuckety fuck can one bundle up a bunch of bad loans as an AAA-rated security I'll never know.

In Australia, we had all these capital guaranteed funds out there that were marketed a bit like this:

You could earn as much as 20%* (*based on market performance). What's more, we'll capital guarantee them, so if they haven't performed in ten years, you'll get your money back.

Investors now are pretty much locked into things that will now look only as good as what they paid for them in the first place. Which makes only the capital guarantee worth something - the representations on returns were something that should have never appeared in print to begin with.

Contracts For Difference - oh these are going to be fun. I'll come back to these a little further on, but I suspect that we're going to hear a lot about these in the months to come.

Look. The upshot of all this is this: If you can't get your head around how a particular financial product works, then for heaven's sake stay away from it.

3. Derivatives, Sub-Prime Loans and the US Housing Price Crisis

In March 2007, I made a throwaway comment in answer to a comment left by Einzige at this blog that we were yet to see the effects of the US housing price crisis.

I was not looking into a crystal ball, people. I was reading newspapers and watching TV, and if people were talking about it back then, then we knew that there was a problem.

Fast forward to September 2008 and we know now where this has lead. Sub-prime loans have basically now brought down nearly the entire US financial system thanks to an oversupply of housing and a sudden rise in interest rates. Is Alan Greenspan to blame?

Hardly, at least in the first instance. What is to blame is a banking sector that assumed that property prices never go down.

Property prices, just like shares, derivatives and commodities go down sometimes. Can you believe that?

Warren Buffett made the bold assertion back in 2002 that the sudden explosion in derivatives was playing with fire. Why, oh why, can't anyone see that if Buffett, the closest we have to evidence of minor deities, is critical of something then it must be bad?

I mean really. Did Orange County, California file for bankruptcy for nothing?

Hmm. Contracts For Difference. Why did that thought just pop into my head again?

4. Freddie, Fannie, Lehman and AIG.

This month has seen bailouts on an unprecedented scale.

Companies should not be being bailed out. Companies should not be so big that they need to be bailed out by governments.

If there is near total domination of a market by a particular company, this is bad. Back in the early part of this century, Standard Oil was broken up. It was too big to allow the market to operate effectively.

We haven't learnt anything from that. In financial planning, a lot is made of diversifying your investments in order to spread your risk. And granted, Standard wasn't about to go down, but no one benefits from this degree of market dominance.

Economies should also learn from this. How the hell could the US mortgage sector be dominated (I nearly wrote "denominated") by just two companies? Just like investors, economies need to spread their risk.

In Australia, banking is dominated by four companies. Five if you count St George Bank, but it's about to be consumed by Westpac, so really, it only is just four.

Once again, this lot are bleating about being allowed to merge further. This certainly shouldn't be allowed. "But it allows us to build scale in order to become globally competitive," they say.

"Go out and build scale in the rest of the world," I say, "You'll have to eventually."

A free market might be about letting companies build this kind of dominance over time. "Free market economics" also suggests that companies genuinely want to pay tax voluntarily, rather than being made to do so. I think you know where I'm going with this.

5. Stock borrowing and short selling

It's been argued that eventually, short-selling en masse will cause even respectable firms to be completely frozen out.

I applaud the efforts of some countries this week in banning the practice.

In Australia, naked shorts were banned. Rather than something out of Benny Hill, this now means that you cannot sell shares that you don't have. In other words, you will now have to borrow them or, gasp, buy them first.

I'm not actually sure how much naked shorting was going on. It must have been quite a bit because on Friday, the market reacted as though share prices had had a bomb fuse lit underneath them. In any event, I'm not sure that hedge funds are solely to blame.

Let's talk Contracts For Difference. Or CFDs, if you like.

In the early noughties, these were introduced on to the market as a mechanism for "spread betting" on the market. You could go long or short, and in later versions, you can now trade them on the market, rather then selling them back to an intermediary and you can get paid dividends on CFDs that you own if a dividend gets paid on the underlying security.

How do the intermediaries who underwrite the CFDs do it? Well, one would expect that they dabble in the market themselves.

And if there are suddenly a lot of their clientele shorting BNB, doesn't the underwriting institution have to short BNB as well?

What I'd really like to know is this: How many short positions on close of business Friday hadn't been closed out when the ban on naked shorts went through? And how are brokers, in the short term, anyway, going to police the ban?

Folks, we are going to see more carnage hit the markets in a big, ugly and undignified way. And even though we consider ourselves immune in Australia, we're certainly not.

I plan to be getting in and cleaning up on the mess that's left behind. But I don't mean fixing it.

Disclosure: This blogger owns shares in Macquarie Group Limited.

Standard but necessary disclaimer: This is not advice. Only a complete idiot would think that any of this constituted advice. It's not even vaguely reasonable to consider this to be advice. If you are in any doubt as to the content of this, see a good, independent financial adviser immediately. They do exist.

18 September 2008

Vale Rick Wright

The world lost another great rock icon this week with the passing of Rick Wright.

Wright was a founding member, and keyboardest of Pink Floyd, along with Roger Waters, the late Syd Barrett and Nick Mason. In the early days, he was the "other" songwriter, after Barrett. About the time that Barrett left the band (OK. Was booted out) he started to take more of a back role in the day to day songwriting, although he's probably best remembered for a piece off The Dark Side Of The Moon called "The Great Gig In The Sky".

Wright sang lead vocals on a few Pink Floyd tracks, "Astronomy Domine" being one, "Time" being another. He had, if not the best voice in Pink Floyd, the nicest one. But in later years, Wright's contributions became less and less as bassplayer Waters and guitarist Dave Gilmour fought it out for creative control of the band.

It's often been argued that Wright was the first casualty of this battle, when he became the second member of Pink Floyd to be sacked, after the recording of The Wall. In reality, Wright and Waters were not the best of friends at this point, and Wright's escalating cocaine problem just gave Waters the excuse to get rid of him.
Maybe because of this, Gilmour chose to re-hire him again during the recording of A Momentary Lapse Of Reason - Waters was by now suing Gilmour and Mason for ownership of the name Pink Floyd, and the message that Wright was back in the band could only be interpreted as perfect spiteful timing.

Now clean, Wright returned to songwriting on The Division Bell, Pink Floyd's last studio album.

He also played with Waters again at their one-off reunion gig last year.

He will be missed. RIP.

16 September 2008

Rock epic of the month: "Lost Keys (Blame Hofmann)/Rosetta Stoned" (Tool) 2006

Rock epics of the month is a series of posts where I'll look back on classic examples of what I think is the greatest excess of rock and roll - the rock epic.

Get a few blokes drunk at a party, and inevitably the conversation will veer over to who is the greatest rock drummer going at the moment. I know this bloke who will maintain until his dying day that John Stanier (Helmet, The Mark Of Cain, Tomahawk, Battles) is "the hardest working drummer in rock and roll".

For me though, there really is only one choice: Danny Carey.

There is something truly amazing about this guy's precision. And unlike Stanier, the guy can swing a bit, too. Not swing, as in the genre, although I don't doubt for a moment that given half a go, he'd probably be able to have a crack at Gene Krupa's wildest work, but swing, as in fall off the beat and back on again in the blink of an eye.

Kinda like what a good jazz drummer is said to be able to do.

10,000 Days was Tool's fourth album, and in one of my rare album reviews, I wrote about being awestruck by not only Carey's stickswork, but by how well him and bassplayer Justin Chancellor work as a team. Tool's sound is very much built from the ground up, and you could probably release an album with just Carey and Chancellor on it - guitarist Adam Jones and vocalist Maynard James Keenan effectively become the flesh around Carey and Chancellor's bones.

I also wrote about being seriously blown away by this tune: I rightly described it as the "piece de resistance" of the whole CD.

Well, a year and several months later, and I'm no less over it. At 14:55, it's still an almighty bitch-slap of a tune, and anyone who says otherwise either hasn't got it, or hasn't listened the whole way through.

It's listed as two separate tunes on the CD, but they're really rammed together as one. "Lost Keys" starts with some eerie air raid guitar and a plaintive lament on Jones' guitar. Meanwhile, after about two and a half minutes, there's some trouble in ER:

Nurse: Excuse me Doctor? If you have a moment?

Doctor: A moment? What's the question?

Nurse: More of a situation. A gentleman in exam 3.

Doctor: What's the problem?

Nurse: That is the problem. We're not sure.

Doctor: Do you have the chart?

Nurse: Right here.

Doctor: Not much here, is there?

Nurse: No doctor. No obvious physical trauma. Vitals are stable.

Doctor: Name?

Nurse: No sir.

Doctor: Did someone drop him off? Maybe we can speak to them. Let's get some background on this fellow.

Nurse: No ID. Nothing. And he won't speak to anyone.

Doctor: Well then. Let's say hello.

Doctor, to patient: Good morning, I'm Doctor Watson. How are you today?

No response

Doctor, to patient: How are you today?

No response

Doctor, to patient: Look son. You're in a safe place. We wanna help you in whatever way we can. But you need to talk to us, we can't help you otherwise. Now, what's happened? Tell me everything.

Which is where it segues into "Rosetta Stoned". And this is where the fun begins to truly heat up.

We now return you to the action in Act 2. The video is just fantastic, just like all Tool's videos. (My apologies about the last minute of the tune or so being cut off)

Edit 16/09/2008: As regular commenter Taj points out, this is not an official Tool video. Not surprising really - who would normally film a video to a fifteen minute rock epic? It's still good:

07 September 2008

Our Newly Appointed Governor-General

It really depends on how you interpret our constitution.

Either our first female head of state was sworn in on Thursday, or our second. Or someone else, who just happens to be the first female to hold that role.

In any event, Ms Quentin Bryce succeeds Major-General Michael Jeffery as our new Governor-General, becoming the 25th Governor-General of the Commonwealth of Australia in the process, and the first female to hold the post.

The former Governor of Queensland is possibly also the first Governor-General to only be entitled to one style or title at the start of her name, not including the "Her Excellency" that she gets by virtue of being the GG. Which she also would have got for being Governor of Queensland as well. This blogger notes that the previous 5 GGs had the following styles and titles (not including gongs, military honours and suffixes):

And since they've retired, Hollingworth and Jeffery will have had "The Honourable" added on to the start of theirs. Which makes it almost refreshing that we can get someone like Bryce who is merely a "Ms".

NB: For the benefit of my international readers, our head of state appears to be defined roughly as the Governor-General on behalf of the British monarch. Hence the confusion about who the head of state actually is. A lot of non-Aussies usually ask me at this point, if they're not the head of state, then what is the role of the Prime Minister? In short, the PM is the head of government: In Westminster parliamentary systems, the two roles (heads of government and state) are separate.

I was prompted after reading about Bryce to go back and look at the Constitutional Convention of 1998 where the question was put about what model republic we would have if we were ever to become a republic. After some serious fighting, it was proposed that a model with minimalist changes should be proposed at a referendum as an alternative.

This model would merely erase mention of the British monarch and change the name of the GG to "President". I would have gone one step less myself and kept the title of "Governor-General".

Some say that the referendum that followed was sabotaged by then Prime Minister, John Howard. Unfortunately, this was misdirected anger, as Howard was a scapegoat for those who really destroyed the whole process. Sure, he did assist in stacking the delegates, writing the referendum motion and the red herring that was the proposed preamble was genius.

The process of Australia becoming a republic was, in actual fact, destroyed by a bunch of "republicans" making a noise about how any future president should be directly elected by the people, not appointed as proposed. Prominent Australians who were opposed to an appointed figurehead and who supported an elected one included Eddie McGuire, Phil Cleary, Ted Mack and Clem Jones. These "republicans" supported a "No" vote in the referendum on these grounds.

I use quotes deliberately to make a point: There have been, since the failed referendum, three GGs appointed. Two of which were controversial: the very controversial Hollingworth, former Anglican Archbishop of Brisbane, and the mildly controversial Jeffery, former Major-General in the Australian Army.

Each of these appointments in turn, called into question the links between church and state, and military and state. And in the case of Hollingworth, was almost completely disastrous.

It's interesting to note, however, that even though three GGs have been appointed since the referendum, not once have any of the "republicans" who supported the "No" vote in the referendum come forward to campaign for a directly elected Governor-General.

(Nor for that matter, have any of these buffoons proposed direct elections for the post of Queen/King of Australia. Which is the post that the British monarch holds.)

I don't think that I'm the first to issue this challenge, but this goes out to all you hypocrites who campaigned for a republic with a directly elected head of state: Either you immediately campaign for (at the very least) a directly elected GG, or you all fess up that you're all closet monarchists.

It's that simple.