Geopolitics

A gem on how to work our way out of the coming economic crisis

Image result for truck nitroglycerin movie

Jonathan Rochford of Narrow Road Capital has written a gem on the role of central banks in spawning this current crisis. An excerpt here:

The rapid and widespread sell-off over the last four weeks is a textbook systemic deleveraging. Whilst the culprits are many; hedge funds, risk parity strategies and investors using margin loans have all been caught out, the underlying cause is excessive leverage across the economy and particularly the financial system. The timing of the unwind and the economic damage from the Coronavirus wasn’t predictable, but such a highly leveraged system was like a truck loaded with nitroglycerin driving down a road dotted with landmines.

Frustratingly, this inevitable deleveraging was clearly predicted. Rather than act to reduce systemic risks central banks encouraged governments, businesses and investors to increase their risk tolerances and debt levels.

Naturally, it fits our own long-held view on central banks.

Jonathan adds some sensible actions which are contained in this link. The question remains whether governments will put principle ahead of expediency in the cleanup?

MSM relishes trade of economic depression via pandemic over Trump as POTUS w/ no virus

Trump Derangement Syndrome (TDS) knows no bounds. Yes, the mainstream media (MSM) is celebrating the milestone that the Dow is below the level when Donald Trump was inaugurated.

We have always said that if Trump continued to boast about market gains he would have to wear it on the downside too. Alas, he is being hoisted by his own petard.

Sadly, as much as CNN and others relish the though of Trump out of office, we sincerely doubt the vast majority of Americans would trade a pandemic with catastrophic unemployment over business as usual before the WuFlu with a Trump at the helm.

Markets are forward looking. They anticipate where corporate earnings are likely to be. This market rout has little to do with Trump’s policies in isolation.

We’ve said repeatedly that global central banks have created a debt bomb through reckless monetary policies over the last two decades. They have proved just how little impact cutting rates to zero or throwing $850bn in handouts has on markets. They’re out of ammunition. Confidence is shot. We’re in uncharted territory.

Boeing is the perfect canary in the coal mine. The 737MAX debacle which is imminently due to be on sale again to a market that has effectively vanished. Airlines are cutting routes and it will be up to the zombie lending cycles of aircraft leasing companies to renegotiate rates so they can keep the patient alive. Airlines will push out deliveries.

However before Boeing’s core business troubles, the management embarked on short term incentive chasing buybacks to the tune of $43bn since 2013. The company is trading negative equity and has drawn down ALL of its credit lines ($13.8bn) and now wants a handout.

All of this is the product of two decades of mindless expediency. Governments are just as culpable for allowing greed to override common sense. No lessons have been learnt since 2000 and especially 2008. Blue chips like Boeing and GE are now heading to record lows because of it. Ford Motor is rated junk. How long before Boeing and GE fall foul of the same problem?

We are particularly interested in the next set of results from Parker Hannifin. It is like the global industrial hardware store. All of the major manufacturers use Parker for parts – pumps, hydraulics, pneumatics, valves, hoses etc. When we see Parker’s upcoming report on order flows we can gauge how bad it is at the manufacturing coal face.

This time we are staring at a “global depression” and it would be nice to think the MSM would try to put some context around the ramifications of this virus and the raft of economy killing policies governments around the world are introducing instead of just blaming Trump. Yes, he’s been his normal self during this but is he responsible for the actions of other countries going into shutdowns? Seriously? Do the US Coronavirus stats stack up poorly vs countries like Italy on a relative or absolute basis? No. Moreover COVID-19 cases in the US are a mere fraction of H1N1 swine flu cases which the media made nowhere near the level of hysteria as now. It’s a disgrace how far the media will go for clickbait.

Had the world’s central banks behaved sensibly to stop excessive debt and allowed markets to function freely, this pandemic would have had far less effect than it is now because we would have had the ammunition to fight this war of attrition. Now all our governments and regulators are doing is moving phantom armies across maps trying to stop economic Armageddon.

Global Coal-fired power statistics – Diary of a Wimpy Kid

What is it with the self-flagellation over coal-fired power? The announcement that the Morrison government intends underwriting “ONE” coal-fired power plant brings with it the hysteria of publicly force-feeding kindergarten kids with highly radioactive sludge at recess time. Naturally, none of this outrage is based on facts. It is all tokenism.

Here are the stats for coal-fired power stations globally:

Coal Capacity

Australia has only 2.5% of the coal-fired capacity of China. Versus our total of 58, China has almost 3,000 in service.

Coal Operation

Coal-fired plants that have been announced, are under construction, permitted and pre-permit stage around the globe total 1,046. Where are the climate activists in China, India, Vietnam, Pakistan, Indonesia, Bangladesh, Philippines, Japan, Russia, Mongolia, Botswana, Nigeria, Zimbabwe, South Korea, Thailand, Malawi, Serbia, Bosnia & Herzegovina, Turkey, Egypt, Poland and South Africa?

New Coal

The mt CO2-e output of each country is as follows. Note China produces 36x more CO2.

Coal CO2

So China and India are responsible for 58% of coal-fired power generated emissions and will be 50% of all new capacity additions going forward.

Coal CO2 Contrib

China has 100x more coal-fired power on the drawing board than Australia yet we behave as though we are the biggest climate sinners on the planet! China and India have consistently been 70%+ of all new coal-fired plant capacity additions since 2006.

Coal Capa

So do Australian activists honestly think that canning one domestic new coal-fired power plant will have the slightest effect on global temperatures when our Asian and African neighbours are full speed ahead?

There have also been arguments made by activists that our coal exports should be counted against our totals in terms of emissions. Fine. Then by that logic, FNF Media expects the total emissions of every car sold in Australia (including fuel consumed) to be charged back to Japan, China, Korea, America and Europe. Every aircraft, every electronic device, every imported building material, crane, bulldozer, wind turbine, solar panel and truck that transports it. It would equal itself out pretty quickly.

Our global neighbours seem to be prioritizing national growth over climate alarmism. For it would appear they do not have the same level of brain-washed fanatics telling our kids that they have inherited a planet that will make them the last people on earth to survive.

The quickest route for Australia to end its prosperity is to cower to this insanity. To fall in line to the idea that renewables are cheaper (they aren’t) and more green is preposterous. Wind turbine blades are being put into landfill and solar panels are toxic to recycle and likely to end in the same place. Germany is giving us a great beta test case of how renewables are failing them. Indulge yourself here.

Coal-fired plants in Australia are forced to run sub-optimally to cater to the demands of the fluctuations in renewables which must be given priority to the grid. Ask anyone in large scale manufacturing how being forced to run at fluctuating levels destroys efficiency. It really is that simple.

Coal Price

Thermal coal prices are far from going out of control. So our power plant electricity generation isn’t becoming pricier due to input costs.

We have to stop becoming emotional about numbers and data and look at what they are telling us rather than build a narrative and reverse engineer the results. It always catches up to us in the end.

Our government needs to show some backbone and provide easy to understand data about reality. Rather than fold at the confected outrage which appears backed by crony capitalists.

Now that former PM Turnbull is weighing in on the debate (contradicting comments made while PM) saying that it is lunacy to pursue coal. Given his record of poor judgment, it stands to reason building cleaner coal-fired power plants is a sensible way to lower energy prices and remain a competitive global economy.

As FNF Media likes to say, the numbers will always be right in the end. Fiddle them at your peril.

Outrage at the most predictable event in American history

Whatever outrage one wants to express over the rights and wrongs during the impeachment saga, it has been the most predictable event in American history.

There was no surprise that the Senate didn’t indulge the Democrats with more witnesses. For two reasons:

1) Partisan lines (don’t think for a second the Dems wouldn’t have done the same had they held a majority in the upper house). The GOP did play by the constitution in its rejection of witnesses. The Dems are the pot calling the kettle black given their actions in the House of Representatives;

2) the Democrats had all the time in the world to lengthen their own impeachment trial in the lower house to include any witnesses they chose – including Bolton. They didn’t, such was their wish to rush the trial (at least until Nancy’s pens arrived). Now it is convenient to point fingers at the GOP for not doing what it could have done itself was it to be thorough in the initial process. Is it the GOP’s fault for the sloppiness of its opponent?

It was no secret that Bolton intended to spill his version of the beans in his role as NSA director. He openly admitted as much on Twitter well before the House passed the articles of Impeachment to the Senate. The Democrats knew it. His tweets went viral. Why didn’t Schiff wait? They would have had their man in the witness box.

Politics is a dirty game. For all those that are complaining at the conduct of the GOP senators, they clearly weighed their re-election chances via their actions. At the moment, Trump’s re-election still looks assured, with the added insult Trump would technically be able to run in the 2024 election too, given a failed impeachment resets the clock.

The GOP have argued there was no victim, therefore no crime. We can play semantics til the cows come home but this trial was open and shut before it began. No surprises at all. Not lost on the American public either.

When the Washington Post ran an article on the 20th January 2017 which read,

The campaign to impeach President Trump has begun

the sinister campaign by the Democrats – who couldn’t believe Hillary wasn’t coronated – to find a way to remove Trump by any means started. Representatives like Maxine Waters were wailing “Impeach 45” well before the phone call with Ukraine. Rep Tlaib happily shouted “we’re gonna impeach the mother f@cker” when she won her seat. Well before the impeachment trial.

One has to wonder whether the Deep State goes to DEFCON 1 and tries more extreme measures to remove him. Let’s hope for all our sakes, no such event transpires.

CNN complains about lack of diversity on Coronavirus team

Only CNN could find outrage in the team looking to combat the Coronavirus. Apparently diversity is more important than ability in a crisis.

CNN political writer Brandon Tensley quipped,

Who are these experts?…They’re largely the same sorts of white men (and a couple women on the sidelines) who’ve dominated the Trump administration from the very beginning...[comparing it to Obama’s handling of the Ebola virus in 2014] Neither was it so abysmal in terms of gender diversity. (Of course, to contextualize, Obama’s administration, on the whole, was far more diverse than Trump’s.).”

Commentator Dave Rubin retorted,

Sir, I’ve discovered the cure to the Coronovirius! We can create an intitiode and spread it worldwide within 12 hours.”

“Bob, we’ve told you repeatedly if you aren’t a non-binary latinx disabled lesbian you’re not allowed to talk.

Welcome to 2020. Where finding a cure ASAP takes a backseat to diversity. Liberal logic.

One imagines that the Chinese authorities have a similar lack of diversity on their team to combat the Coronavirus.

EU Parliament sticks to its totalitarian roots

Nigel Farage gave his last speech to the EU Parliament last night. It was telling to see his microphone cut off mid speech when he started to wave the Union Jack.

So totalitarian is the EU that it doesn’t allow nations to display national flags in parliament. One would think Farage was waving the Swastika such was the outrage directed at him. Perhaps he would have been expelled if he’d waved a Trump 2020 flag.

Farage hit the nail on the head when he said, “we love Europe, we just hate the European Union.” That is likely true for many Brits.

Parliament vice-president Mairead McGuinness took quite an exception to those remarks, furiously retorting that “we shouldn’t hate anyone, any nation or any people.” Rich coming from a body that hates its members and treats nation state democracy with utter disdain, as was evidenced through the protracted Brexit process.

As we have said all along, the EU requires drastic reform and respect for nation state democracy if it is to survive. If it fails to wake up from Brexit it is doomed. The sooner the better.

50 years of Davoz. The Global Shapers will be the rope the Multistakeholders use to hang the rest of us with

Davos is upon us. That event where the world’s elite congregate via private jet and helicopter transport to tell the rest of us to reconsider our use of a second hand SUV to take the kids to soccer practice for the sake of the planet.

This event marks 50 years. What started as a good idea is now nothing more than a networking event for crony capitalists looking to exploit gutless governments into backing their schemes and ridiculing those that don’t sign up for multi-million dollar memberships.

We should applaud the World Economic Forum (WEF) for helping perpetuate the culture of systemically brainwashing our youth.

In the 2020 Global Risks report, we get the following table which highlights adults (‘Multistakeholders’) and the youth (‘Global Shapers’). Who knew that environmental issues took the Top 5 positions among the kids? Privacy be damned. Adults were more concerned with politics and trade wars. Hint hint President Trump.

The long term outlook produced even more drama. The adults seem to have appeased the kids on climate but their private jet powered life styles at the very least mention global governance failure and the risk of asset bubbles popping.

The youth on the other hand ramped up the global warming rhetoric to 11. The Top 6 concerns are climate and #8 turns out to be about climate refugees. That’s the result of a Marxist education, one that NZ is only too proud to boast about. Forget rational debate to engage kids on how to see two sides of an argument. They will be admonished for speaking out against the orthodoxy. Or doxxed on social media. Or both. Is it any wonder we have a mental health crisis?

Although it is worth mentioning that the deteriorating global economic fundamentals highlighted in the same report risk handing the kids their ideal utopia by way of a deep recession thanks to excessive global debt levels and low interest rates. It is unlikely these self-entitled ‘Global Shapers’ have ever contemplated, much less lived through such an outcome with all of their earth ending hysteria. Best tell them that if they pursue their dream of 100% renewables and zero carbon emissions they can bask in the shared misery of having let their teachers blindly mislead them by never challenging them on anything. Experience is a hard teacher. They’ll get the test first and the lesson afterwards. But such reality will be too late and take decades to fix.

Perhaps these ‘Global Shapers’ would do well to study the reasons why inequality and social upheaval will continue to grow if the world pursues the barking mad drive to decarbonise the world. The report even makes a point to talk of the disruption in France by the yellow vests. It noted,

In France, for example, the persistence of the “gilets jaunes” movement had caused businesses more than US$11.4 billion in losses by December 2019 and complicated the government’s plans for economic revival.

The yellow vests are protesting over regulation and climate related taxes.

Under the chapter of ’10 years left’, we got the following passage which is full of untruths as to beggar belief.

Governments, markets and, in an increasing number of societies, voters are awakening to the urgent realities of climate change—it is striking harder and more rapidly than many expected. The last five years are on track to be the warmest on record. Climate-related natural disasters such as hurricanes, droughts and wildfires are becoming more intense and more frequent, reportedly now averaging a disaster a week. Polar ice is melting more quickly than anticipated, with drastic implications for sea levels and coastal populations. Severe weather is worsening: the last year witnessed unprecedented wildfires and devasting storms across the globe, sea ice loss in the Arctic and record-breaking heatwaves in Europe.”

Yet how was it that Queenslanders voted to keep the incumbent government in power because of its support for a coal mine? Why is China committing to 300-500 new coal-fired power plants?

How is it that the UN has reported categorically that it has ‘low confidence’ on any shift in the behaviour of natural disasters? In the UNIPCC’s March 2018 report on weather extremes with respect to anthropogenic induced global warming) it says,

“…There is low confidence in observed trends in small-scale phenomena such as tornadoes and hail because of data inhomogeneities and inadequacies in monitoring systemsin some regions droughts have become less frequent, less intense, or shorter, for example, in central North America and northwestern Australia. There is limited to medium evidence available to assess climate-driven observed changes in the magnitude and frequency of floodslow confidence for the attribution of any detectable changes in tropical cyclone activity to anthropogenic influences..low confidence in projections of changes in extreme winds.. low confidence in projections of changes in monsoonslow confidence in wave height projections…overall low confidence because of inconsistent projections of drought changes…low confidencein projected future changes in dust storms…low confidence in projections of an anthropogenic effect on phenomena such as shallow landslides.”

Where is the evidence of 10s of millions of climate refugees fleeing rising sea levels an coastal populations?

Virginie K. E. Duvat of the Institut du Littoral et de l’Environnement, University of la Rochelle-CNRS, La Rochelle sponsored by the French National Research Agency; French Ministry of Environment, Energy and Oceans (MEEM) wrote.

Analysis “using tide gauges and satellites showed 30 Pacific and Indian Ocean atolls including 709 islands, revealed that no atoll lost land area and that 88.6% of islands were either stable or increased in area, while only 11.4% contracted.

This confirms a 2010 study by Webb & Kench which revealed,

that 86% of islands remained stable (43%) or increased in area (43%) over the timeframe of analysis. Largest decadal rates of increase in island area range between 0.1 to 5.6 ha. Only 14% of study islands exhibited a net reduction in island area. Despite small net changes in area, islands exhibited larger gross changes.

There is even reference to properties sold in Florida and the risk they become uninsurable. Then why is the Florida house price index at record highs?

What about record breaking cold waves in Europe and Canada? Unprecedented wildfires and storms? Not according to the data.

Unprecedented media sensationalism more like it.

One comment made in the report was the fact that 14x more women die than men during natural disasters. Is this proof there are only two biological genders or are the studies on non-binary deaths during disasters incomplete? This may have to be a separate break out session.

The report also issues this stark warning.

Aside from a number of vanguard first-mover champions, most companies, too, appear ill-equipped to address climate risk.

Ill-equipped or paying lip service?

Take Josh Bayliss, CEO of Virgin Group. He said,

“It’s definitely true that right now every one of us should think hard about whether or not we need to take a flight.”

Why doesn’t he close down the airlines in the portfolio? Instead of waiting for his customers to grow a conscience and do the right thing why not force their choice? The obvious answer is that it’s hypocritical.

Yet even our own ASIC feels the need to force the minds of corporates to deal with climate change. Forget the data that shows reporting on the subject has collapsed since 2011 from an already low level because the free market mechanism reveals that pricing to offset such fears simply don’t exist in any meaningful way. The regulator’s wish to enforce reporting only proves it needs to construct a narrative to ward off a problem that doesn’t rate much of mention other than virtue signaling.

Perhaps this urgency to get regulators to pressure corporate leaders showed up with this snippet in the WEF report,

In the World Economic Forum’s survey of business leaders, none of the top 10 risks globally are environmental, suggesting a critical blind spot…industry partners of the World Economic Forum ranked environmental risks higher than business leaders surveyed more broadly…Overall, lack of consistent awareness-raising among business leaders may create first-mover advantages for some, but it also potentially demonstrates the much more concerning overarching risk: that many businesses may not be planning for the physical and financial risks that climate change may have on their activities and across their value chains.

So in plain English that says that the majority of corporates that don’t pay into the WEF’s Davos slush fund are evil and if we can get the governments of the world to force change, its members will be the first beneficiaries of any new climate legislation.

Yes, Global Shapers are merely the rope that the Multistakeholders will use to lynch the rest of us with.