Financial Markets

How do you like dem Apples?

How is it that Twitter has survived for so long allowing violence, vitriol and hatred on its platform yet Apple and Google chose to do zip about it? We know the answer.

However, when a conservative alternative is deemed to have ‘broken’ the rules, Apple comes down like a tonne of bricks. The rank hypocrisy.

Apple has never suspended Twitter from the App Store when hateful and violent bile has been and continues to be spread.

Kathy Griffin retweeted the image of a bloody decapitated head of President Trump (the one that she was desperately sorry for in 2017) the day after the election result was called by the media. Almost 10,000 retweets, 64,000 likes and a laundry list of hateful replies. Is this not violence?

Or a more recent tweet from Griffin,

Look, you stupid bitch, go throw your dad that BJ he wants and then walk him out of the White House and the Presidency forever. Force him to resign immediately. twitter.com/ivankatrump/st…

Of course some will argue she is a comedian (a terrible one at that) and therefore deserves a pass on distasteful content as it is an art form.

Still, doesn’t suggesting that Ivanka perform fellatio on her father violate community standards? If anyone (including a comedian) suggested one of Obama’s daughters perform oral sex on her father, Twitter would censor it (appropriately) and the mainstream media would run with it for days lambasting this despicable behaviour and go out of their way to cancel the offender.

John Henson, host of Food Nation, tweeted, then deleted,

“I hope Barron gets to spend today with whoever his dad is.”

Is slut-shaming FLOTUS fair game? Is making fun of a minor appropriate? Even if people delete tasteless tweets, why isn’t Apple demanding that Twitter take stronger action and threaten to suspend it from the App Store until it has dealt with people who violate community standards?

What we find particularly sinister is the way Big Tech is flexing its muscles and bullying companies they have ideological differences with conform to their moral code. Maybe Apple should demand a seat on the board of Parler to approve its decision? It would be one thing if Apple put Twitter in the penalty box as well but alas, corporate double standards are a thing. It is not the principle that matters, but the side.

Why doesn’t Apple suspend Tinder from its App Store until it deals with the countless cases of sexual assault? In a survey conducted in Australia, 48 out of 400 Tinder users claimed they were a victim of sexual assault. Of that, 11 claimed they had a formal response from the company.

Isn’t Apple big on supporting #MeToo? It has an entire series, The Morning Show which deals with sexual misconduct in the entertainment industry. So it is happy to make a buck off content that relates to inappropriate sexual behavior but not be prepared to stand up for real victims who get hurt by apps like Tinder where Apple’s very own words to “adequately address these proliferation of these threats to people’s safety” isn’t extended.

Spare us the double standards!

Stop Press: Now Amazon has piled in to dump Parler from its web services.

Welcome to the dystopian nightmare. Black is white. Freedom is slavery. War is peace. Got it?

Media worth consuming – a recap of December 2020

My good mate Jonathan Rochford of Narrow Road Capital has compiled a brilliant summary of the recent madness in markets, politics and economics. One could be forgiven for thinking it is a lot like satire. Link here.

Too much cash can create a crisis

A very important piece from our learned friend at Narrow Road Capital, Jonathan Rochford.

“The current conditions in credit markets are bizarre. We’re still in the midst of a global pandemic and economic downturn but credit markets are partying like there’s no tomorrow. Almost every day credit spreads go lower as anecdotes emerge of banks refusing to take term deposits from new clients. The banking system is flooded with liquidity and there’s simply not enough demand to borrow to match the freshly printed central bank cash.

The last time I remember such excessive liquidity was in early 2007. Back then I was managing a cash fund and I remember being rebuffed by several major banks when we called and asked for their rate for our short term cash. When we couldn’t find a home with them we turned to the commercial paper market and found some boring vehicles that would take our cash for a handful of basis points over the bank bill rate. We didn’t get involved with the racier structured investment vehicles (SIVs) that offered a little more yield, with several of those blowing up as the financial crisis kicked off in 2007.

In a credit spread sense it’s not as bad today as it was then with 5 year major bank senior bonds paying around 35 basis points over BBSW today compared to 10-12 basis points then. However, on an all-in (credit spread plus risk free yield) basis it is far worse today as the cash rate in 2007 was over 6%, which was miles above the inflation rate. Today, there’s very little global debt with an investment grade credit rating that offers a positive real (after inflation) return. Whilst it is easy to look back and be critical of those chasing additional yield then, it is harder to criticise the same behaviour today when central banks are deliberately punishing conservative investors with negative real returns.

The inevitable outcome of this excessive liquidity is stupid lending is happening on an ever increasing basis. Despite a large swathe of companies on the brink of default, the US high yield market has never had worse covenants and never had lower all-in yields. Several African countries have defaulted or are on the brink of default but others are easily selling new bonds. Italy and Greece have virtually no prospect of ever paying off their debts but their 10 year bond yields are barely 1% more than Germany. Today’s growing pile of dead wood debt risks becoming tomorrow’s bonfire.

All of this is happening because central banks and politicians are too afraid to tell the truth. An economy built on ever increasing levels of debt isn’t sustainable. Trying to prevent investors from taking losses only causes them to take greater risks which leads to larger losses in the long run. We’ve made a long series of bad decisions to get here and there isn’t a painless way out. The glut of cash isn’t a sign of good health, rather it indicates financial markets are delirious with stimulus and won’t stop partying until there’s a crash so big that central banks can’t affect a bail out.

Leaked CNN tapes, Janet Yellen will stop climate change & SF mayor avoids own COVID rules by dining in another city!

Dave Rubin of The Rubin Report discusses Project Veritas’ leaked CNN tapes of months of internal meetings, Treasury Secretary nominee Janet Yellen’s plans to fight racial inequality, and more liberal hypocrisy as yet another Democrat lockdown hypocrite gets caught at The French Laundry.

First, Dave gives his thoughts on the leaked audio of CNN CEO Jeff Zucker’s meetings. James O’Keefe of Project Veritas revealed that he has been recording Jeff Zucker’s internal morning meetings for two months. The tapes offer proof of CNN’s extreme anti-Trump agenda.

Next, former head of the Federal Reserve Janet Yellen gave a speech outlining how as Joe Biden’s Treasury Secretary she will somehow use economic policy to reduce inequality, climate change, and gender inequality.

Finally, it has been discovered that lockdown proponent and San Francisco Mayor London Breed avoided breaking the COVID dining rules by simply leaving her own city and going to The French Laundry, the same luxury restaurant that California Governor Gavin Newsom was caught breaking his COVID rules at (and dropping $15,000 on booze).

It is worth the 30 minutes.

NASDAQ wants to enforce diversity on boards as a listing requirement

NASDAQ is pushing for SEC approval of a rule that would require public companies on its exchange to have at least one female director and one “diverse” director – one that self-identifies as an underrepresented minority or LGBTQ.

Companies would be required to disclose that diversity in its filings. Forgive us for being obtuse, but wouldn’t the ability to read a balance sheet or understanding corporate governance be the more relevant skillsets for shareholders? If the best candidates happen to be all women, LGBTQ or whatever other identity, wouldn’t shareholders applaud their appointment based on just being superior candidates as opposed to genitalia or who they choose to sleep with?

We’ve already seen how badly forced diversity programs have worked at companies like PG&E. Remember that the company had full data sets on the diversity of its workforce and suppliers but not the state of the infrastructure of its core business. Alas, not understanding the health of its main product led to the devastating forest fires in California last year sending the company into Chapter 11 bankruptcy.

The irony of the plan by NASDAQ is the partnership with Equilar. The picture above is the Equilar board which doesn’t seem to be playing by the very rules that NASDAQ wants to enforce on others. It reminds us of ACSI, which is a huge advocate for diversity on listed boards, but doesn’t even meet the very requirements it seeks to impose on others.

What if a prospective board member happens to be LGBT but doesn’t wish to disclose that fact as an individual member of privacy? What will happen if a company has to choose between a female, a member of the LGBT community, a person of colour or a female LGBT person of colour? Will more ticks in the identity box grant companies be seen as more advantageous in disclosure reporting even though the LGBT person is the most qualified? What will happen if prospective directors falsely claim they identify as something they are not, merely to be in the selection process? Will the companies check the validity by peering through the window of staff homes to ensure they are sleeping with the right person?

NASDAQ also wants to push the SEC to force private companies to adopt the same framework.

In a lecture we gave to a group of executive MBA students, we put up a chart where someone’s superannuation would have grown to $430,000, $180,000 and $130,000 given three different investment products over a decade. We asked for a show of hands as to which sum people wanted to retire on. Everyone wanted the $430,000. Surprise, surprise. When it was revealed that the first sum came from a direct investment in Harvey Norman, which doesn’t believe in all this woke diversity nonsense (despite having an exceptionally talented CEO who happens to be female, the group was surprised. The middle sum was the broader market index and the worst performer was the ESG fund. When asked would that change their mind, they all said no. Who knew? Being woke didn’t matter as much as being able to retire on a larger nest egg.

The students were more shocked to find out that the management fees for ‘woke’ products was higher than standard investment structures. Who knew that heavily promoting social justice would be more financially rewarding to the investment advisors pushing it? It is for the planet, diversity and their brand new speedboat you know!

When will regulators let shareholders determine who they see best fit to run the companies they choose to invest in? We have no issues seeing more diversity on boards, provided it is based on merit rather than forced quotas.

We can’t help but feel that ambitious people (of whatever incidental identity) don’t need such condescending structures. They have enough confidence in their own ability to succeed than to be patronised in a way that suggests that without intervention they can’t get ahead.

Unfortunately these programs are by their very definition are all about discrimination.

Ethics lectures from hypocrites

When will banks like ANZ realize that pushing climate change evangelism in order for prospective customers to qualify for loans might be far better served if these groups operated from a position of squeaky clean ethics to begin with?

What is the true global warming impact of a farmer with 100 farting cows who needs to upgrade his tractor to more efficiently operate? Will he be penalized for not erecting a solar park first?

There is little more infuriating than being lectured to by organizations that have a long history of sketchy behaviour.

While banks should be free to run their business as they see fit within the realms of the law, what purpose does this nonsense serve? Since when did ANZ become the axe on climate change? Just like the clowns at ASIC whose own research proved that corporations found less need to make statements about the climate impact on their businesses. So upset is the regulator that it wants to impose a reporting structure anyway! Will 3 extra pot plants in the foyer qualify as climate abatement in an annual filing?

What next? Will small businesses fail to qualify for ANZ loans if they don’t have the right mix of identities or apportion a certain amount of philanthropic donations to approved activist organizations like BLM?

Will ANZ demand that businesses declare how many suppliers in the minority community are mandated? We all know how well that went with PG&E in California.

There has to be a massive opportunity for a financial institution to grow a pair and fill a need. With fewer players, they might find it much more margin accretive and satisfying for shareholder returns.

Biden campaign in a nutshell?

We think Ronald Reagan’s comments work well with the Biden campaign. Higher taxes for most. More anti-competition regulation for many industries and subsidies for green energy.

Which begs the question. Do you honestly think politicians can spend your money better than you can?

As Nobel laureate Milton Friedman once said,

You can spend your own cash on yourself – you have a great incentive to economise and get the best bang for your buck. You can spend your own money on somebody else, perhaps by buying your neighbour a present. Again, you will seek to economise; but you won’t care as much about getting good value for money. “You will, of course, want to get something the recipient will like – provided that it also makes the right impression and does not take too much time and effort…Then you can spend somebody else’s money on yourself. Imagine a lunch on an expense account: you will try and spend as much as you can get away with, with limited incentive to economise, but seeking to get the best possible meal for the price. Last but not least, you could spend someone else’s money on yet another person. You will have little interest in economising – and won’t care too much about getting the greatest value for money.

Sinister Big tech’s intentional election meddling

Big tech is determined to tell users what they deem is suitable for consumption. The top screen grab is from Facebook. Head of Comms, Andy Stone, made it clear the social media giant would curtail the Biden conflict of interest news story under the guise of ‘fact checking.’

The NY Post article that surfaced overnight revealed emails from Hunter Biden’s PC which showed he was leveraging his then VP father’s relationship with Ukrainians execs.

Twitter went to an even more interesting approach to suggest the NY Post link was “unsafe” to prevent views.

What we do know from history is that the more efforts made to cover one’s tracks, the more one guarantees to raise awareness to those problems on a stratospheric level.

Ultimately, big tech firms were granted immunity from prosecution as they promised to be mere hosts of content without fear or favour. Now that they are using discretionary editing, they should lose their sanctuary status and be liable to prosecution for suppressing free speech.

These are deep-seated liberal activist platforms. As businesses they are free to exercise commercial decisions. However they don’t have a right to flaunt laws without real world consequences.

Today big tech crossed a line and outed themselves as interfering in the election.

NBA Game 5 2020 viewers -70% vs 2019

Rut Roh! It seems that all the political activism on the basketball court has seen NBA Game 5 drawing only 5.7 million viewers, according to TVLine, representing a nearly 70% decline from the 18.22 million viewers who tuned-in for Game 5 of the 2019 NBA Finals when the Golden State Warriors took on the Toronto Raptors.

No wonder the NBA is promising to keep its woke activities behind closed doors in 2021.

The NBA finally figured out that fans watch sports to distract themselves from politics and financial/marital/work stresses, not have it shoved down their throats.

#GetWokeGoBroke

Disney’s Double Standards

Never let social justice get in the way of the almighty dollar or RMB.

Disney is having a hard time explaining why it was happy to threaten to pull the company’s production apparatus from Georgia if the state passed a controversial ban on abortions performed after a fetal heartbeat is detected but was happy to shoot part of the film, Mulan, in the Xinjiang region in China where the government has been accused of oppressing the country’s Muslim-minority Uighurs.

Disney responded as follows:

The film is a celebration of female empowerment, based on a 1,500-year-old Chinese poem…The scenes in Xinjiang amount to just 78 seconds and were done to capture the region’s dramatic desert scenery and the historic Silk Road. Most of the movie was shot in New Zealand.

We don’t have an issue with corporations acting in the best interests of shareholders. We only wish they would be consistent in their application of social standards. Ideally, they should shut up.

Sadly, in an ESG consumed finance world, listed corporations are focused on making ever more woke gestures and statements to appease institutional funds who run guilt tripping rackets which coax gullible investors into thinking they are being socially responsible when in reality they’re forking over higher fees to line their pockets in a market structure ruined by low margins ETFs. It is a total con.