Traffic Accident

Credit is normalising, but… excellent commentary from Narrow Road Capital

If you haven’t done so already, we strongly encourage people to sign up to Narrow Road Capital’s insights on high yield and distressed credit markets. Even better it is free. Jonathan really puts together his thoughts in a very digestible format.

Jonathan has penned this excellent summary of the state of debt markets and cautions us not to get too excited. We have highlighted the things that stood out for us.

Credit is Normalising, But…

Credit securities, both in Australia and globally are getting back on their feet. The bookbuilds this week of $1 billion of corporate debt by Woolworths, $1.25 billion of RMBS by La Trobe and the $500 million of hybrids by Macquarie are all positive signs. However, secondary trading in many debt sectors is light and a few sectors remain moribund. Whilst the signs are generally encouraging, three dark clouds on the horizon point to the possibility of worsening conditions.

The leverage fuelled, panic driven sell-off started on February 24 and ran until March 23 . The circuit breaker was the Federal Reserve’s announcement of “unlimited quantitative easing”. At that time, there were widespread reports of global investors struggling to sell even the highest quality government bonds. Given how dire it was, it has been a relatively quick journey back from the abyss.

In Australia, major bank senior bonds recovered first and are now trading at similar spreads to three months ago. Corporate and securitisation debt has had a far slower recovery with trading remaining patchy. The large issuance this week by Woolworths and La Trobe, as well as a smaller issue by Liberty showed that buyers were willing to return. But unlike major bank bonds, spreads on corporate and securitisation debt have been reset at much higher levels.

At the same time as credit markets are improving, the economic outlook is also brightening in some ways with the gradual easing of restrictions on business. There is a growing view that the worst of Covid-19 has past and that a vaccine or drug treatment might not be far away. The optimism of the human spirit seems boundless with some investors seeing the pandemic as just another opportunity to buy the dip.

Where many investors are seeing mostly positives, I’m seeing mostly negatives. Australia has gone nearly 30 years without a recession leaving our economy fat and lazy. Asset prices (notably housing) have been propped up by population growth, credit growth and interest rates cuts, all factors unlikely to repeat. We’ve had over a decade of Federal Government deficits, destroying the legacy of Peter Costello’s decade of fiscal discipline. The economic buffers we had before the last crisis have been frittered away, leaving Australia poorly placed to withstand and rebound from the current economic and financial crisis. Given this backdrop, there are three standout risks for investors to factor in.

Remember 2007 – Fundamentals Matter

The bounce back in the last two months reminds me a great deal of 2007. In July 2007 credit markets slammed into a brick wall with credit default swaps and CDOs taking substantial damage. Bank bonds sold off as the riskier European banks started to have their solvency questioned. Yet after an initial shock, some of the markdowns turned around offering a window to get out with limited losses.

At first, equities and property continued on their merry way oblivious to the damage in credit markets. Australian equities peaked in October 2007 but held near record levels until January 2008. In December 2007, the property sector was slammed as Centro disclosed it couldn’t roll over its debt. Both at the time and in hindsight, the second half of 2007 was a bizarre period where fundamentals and market prices were so divergent. Given the medium term outlook for Australia includes significant unemployment and business failures, it is hard not to conclude that most investors are ignoring the fundamentals, just like they did in 2007.

Quantitative Easing

If the global debt markets are likened to plumbing, then quantitative easing is the duct tape used to cover the cracks. Central bank buying of government debt has delivered liquidity to debt markets at a time when governments and corporates are going on record borrowing sprees. If investors weren’t able to sell assets to governments via quantitative easing programs, they wouldn’t have capacity to buy the new issuance and bond yields would soar. Quantitative easing is beating back the bond vigilantes temporarily.

Australia has been a late entrant to this charade but is making up for lost time with the RBA hoovering up 7% of Australian government bonds in two months. At this rate, they will own the entire government bond market by the end of 2022. Whilst the RBA buying government bonds is the main game, there’s also been cheap funding for banks and the securitisation market. It’s no longer a case of merely providing liquidity against super safe assets, the recent purchases of sub-investment grade securitisation tranches come with the meaningful possibility of capital losses.

Whilst quantitative easing has yet to hit its unknown limits in developed economies, emerging markets have shown what happens when citizens and investors lose confidence in a fiat currency. The widespread use of US dollars in Argentina, Ecuador, Lebanon, Venezuela and Zimbabwe is the practical outworking of a country adopting funny money practices. At some point, the duct tape stops working and the value of the currency goes down the drain.

Global High Yield and Emerging Market Debt

Whilst most credit sectors are recovering well, corporate high yield debt and emerging market debt are on life support. The US high debt market has recovered around half of the losses that occurred since mid-February. However, this has been a quality driven rally with BB rated companies able to issue whilst B- and CCC rated companies are stuck in the doghouse. Several failed transactions have been a clear warning that lenders have little appetite for companies that can’t demonstrate their solvency in the medium term. The weaker airlines, energy companies and tourism associated businesses are looking at their cash positions and making calls about when to enter bankruptcy.

It’s a similar outlook for the weaker sovereign borrowers, particularly in emerging markets. The years leading up to this crisis saw an explosion in lending to the lowest rated sovereigns. Many of these countries are now turning to the IMF for bailouts; at last count roughly half of the world’s countries had put their hands up for help. There’s a global wave of jobs that will be lost as the weakest companies and countries are forced to reign in their spending. Whilst investors are pricing in a solid probability of defaults, they are ignoring the wider economic impacts of defaulting borrowers on the global economy.

Written by Jonathan Rochford for Narrow Road Capital on 16 May 2020. Comments and criticisms are welcomed and can be sent to info@narrowroadcapital.com

Disclosure

This article has been prepared for educational purposes and is in no way meant to be a substitute for professional and tailored financial advice. It contains information derived and sourced from a broad list of third parties and has been prepared on the basis that this third party information is accurate. This article expresses the views of the author at a point in time, and such views may change in the future with no obligation on Narrow Road Capital or the author to publicly update these views. Narrow Road Capital advises on and invests in a wide range of securities, including securities linked to the performance of various companies and financial institutions.

APRA priorities are frightening

We wrote a while back that the Australian Prudential Regulatory Authority (APRA) had taken its finger OFF the pulse when assessing the risks facing our financial institutions. That was before COVID19. We think our banks are heavily leveraged and have little equity to offset a collapse in the property bubble.

Despite being faced with the prospect of a property meltdown thanks to an employment destroying pandemic, APRA thinks hiring a “Head of Climate Risk” is the way forward.

Why does APRA bother pursuing a field it has no expertise in much less look to create new green tape to extend its oversight?

It is not alone. The Australian Securities & Investments Commission (ASIC) is now seeking more oversight on corporates reporting on climate change.

ASIC’s own study found that fewer and fewer companies were reporting on climate change over the past decade. Shouldn’t we take that as corporates having a better pulse on the impact that climate change will have on their industries than a bunch of bureaucrats wanting to legislate an ideology?

With the COVID19 driven seismic economic shifts to come, it is frightening to see our government departments pursuing irrelevant regulation that companies are even less concerned about.

APRA should be focused on ensuring the coming property market implosion doesn’t cripple our banks. Instead of using the time to fine tune a wide variety of scenarios and stress tests to combat the troubling future, it is only proving it should have power taken away not granted.

The one fatal flaw experts forget when seeking to mimic #Abenomics style endurance

Pain

Over three decades ago, the Japanese introduced a TV programme titled, ‘Za Gaman‘ which stood for ‘endurance‘. It gathered a whole bunch of male university students who were challenged with barbaric events which tested their ability to endure pain because the producer thought these kids were too soft and self-entitled. Games included being chained to a truck and dragged along a gravel road with only one’s bare buttocks. Another was to be suspended upside down in an Egyptian desert where men with magnifying glasses trained the sun’s beam on their nipples while burning hot sand was tossed on them. The winner was the one who could last the longest.

Since the Japanese bubble collapsed in the early 1990s, a plethora of think tanks and central banks have run scenario analyses on how to avoid the pitfalls of a protracted period of deflation and low growth that plagued Japan’s lost decades. They think they could do far better. We disagree.

There is one absolutely fatal flaw with all arguments made by the West. The Japanese are conditioned in shared suffering. Of course, it comes with a large slice of reluctance but when presented with the alternatives the government knew ‘gaman’ would be accepted by the nation. It was right.

We like to think of Japan, not as capitalism with warts but socialism with beauty spots. Having lived there for twenty years we have to commend such commitment to social adhesion. It is a large part of the fabric of Japanese culture which is steeped in mutual respect. If the West had one lesson to learn from Japan it would be this. Unfortunately, greed, individualism and self-entitlement will be our Achilles’ heels.

It is worth noting that even Japan has its limits. At a grassroots level, we are witnessing the accelerated fraying of that social kimono. Here are 10 facts taken from our ‘Crime in Japan‘ series – ‘Geriatric Jailbirds‘, ‘Breakup of the Nuclear Family‘ and the ‘Fraud, Drugs, Murders, Yakuza and the Police‘ which point to that old adage that ‘all is not what it seems!

  1. Those aged over 65yo comprise 40% of all shoplifting in Japan and represent the highest cohort in Japanese prisons.
  2. 40% of the elderly in prison have committed the same crime 6x or more. They are breaking into prison to get adequate shelter, food and healthcare.
  3. Such has been the influx in elderly felons that the Ministry of Justice has expanded prison capacity 50% and directed more healthcare resources to cope with the surge in ageing inmates.
  4. To make way for more elderly inmates more yakuza gangsters have been released early.
  5. 25% of all weddings in Japan are shotgun.
  6. Child abuse cases in Japan have skyrocketed 25x in the last 20 years.
  7. Single-parent households comprise 25% of the total up from 15% in 1990.
  8. Domestic violence claims have quadrupled since 2005. The police have had to introduce a new category of DV that is for divorced couples living under the same roof (due to economic circumstances).
  9. The tenet of lifetime employment is breaking down leading to a trebling of labour disputes being recorded as bullying or harassment.
  10. In 2007, the government changed the law entitling wives to up to half of their husband’s pension leading to a surge in divorces.

These pressures were occurring well before the introduction of Abenomics – the three arrow strategy of PM Shinzo Abe – 1) aggressive monetary policy, 2) fiscal consolidation and 3) structural reform.

Since 2013, Abenomics seemed to be working. Economic growth picked up nicely and even inflation seemed like it might hit a sustainable trajectory. Luckily, Japan had the benefit of a debt-fueled global economy to tow it along. This is something the West and Japan will not have the luxury of when the coronavirus economic shutdown ends.

However, Japan’s ageing society is having an impact on the social contract, especially in the regional areas. We wrote a piece in February 2017, titled ‘Make Japan Great Again‘ where we analysed the mass exodus from the regions to the big cities in order to escape the rapidly deteriorating economic prospects in the countryside.

Almost 25 years ago, the Japanese government embarked on a program known as
‘shichosongappei’ (市町村合併)which loosely translates as mergers of cities and towns. The total number of towns halved in that period so local governments could consolidate services, schools and local hospitals. Not dissimilar to a business downsizing during a recession.

While the population growth of some Western economies might look promising versus Japan, we are kidding ourselves to think we can copy and paste what Nippon accomplished when we have relatively little social cohesion. What worked for them won’t necessarily apply with our more mercenary approach to economic systems, financial risk and social values.

Sure, we can embark on a path that racks up huge debts. We can buy up distressed debt and repackage it as investment grade but there is a terminal velocity with this approach.

The Bank of Japan is a canary in the coalmine. It has bought 58% of all ETFs outstanding which makes up 25% of the market. This is unsustainable. The BoJ is now a top 10 shareholder of over half of all listed stocks on the index. At what point will investors be able to adequately price risk when the BoJ sits like a lead balloon on the shareholder registry of Mitsui Bussan or Panasonic?

Will Boeing investors start to question their investment when the US Fed (we think it eventually gets approval to buy stocks) becomes the largest shareholder via the back door? Is the cradle of capitalism prepared to accept quasi state-owned enterprises? Are we to blindly sit back and just accept this fate despite this reduction in liquidity?

This is what 7 years of Abenomics has brought us. The BoJ already has in excess of 100% of GDP in assets on its balance sheet, up from c.20% when the first arrow was fired. We shouldn’t forget that there have been discussions to buy all ¥1,000 trillion of outstanding Japanese Government Bonds (JGBs) and convert them into zero-coupon perpetual bonds with a mild administration fee to legitimise the asset. Will global markets take nicely to erasing 2 years worth of GDP with a printing press?

Who will determine the value of those assets when the BoJ or any other central bank for that matter is both the buyer and seller. If the private sector was caught in this scale of market manipulation they’d be fined billions and the perpetrators would end up serving long jail sentences.

Can we honestly accept continual debt financing of our own budget deficit? Japan has a ¥100 trillion national budget. ¥60 trillion is funded by taxes. The remainder of ¥40 trillion (US$400 billion) is debt-financed every single year. Can we accept the RBA printing off whatever we need every year to close the deficit for decade upon decade?

In a nutshell, we can be assured that central banks and treasuries around the world will be dusting off the old reports of how to escape the malaise we are in. Our view is that they will fail.

What will start off as a promising execution of Modern Monetary Theory (MMT), rational economics will dictate that the gap between the haves and the have nots will grow even wider. Someone will miss out. Governments will act like novice plate spinners with all of the expected consequences.

In our opinion, the world will change in ways most are not prepared for. We think the power of populism has only started. National interests will be all that matters. Political correctness will cease. Identity politics will die. All the average punter will care about is whether they can feed their family. Nothing else will matter. Climate change will be a footnote in history as evidenced by the apparition that was Greta Thunberg who had to tell the world she caught COVID19 even though she was never tested.

Moving forward, our political class will no longer be able to duck and weave. Only those that are prepared to tell it like it is will survive going forward. The constituents won’t settle for anything else. Treat them as mugs and face the consequences, just like we saw with Boris Johnson’s landslide to push through Brexit.

The upcoming 2020 presidential election will shake America to its foundations. Do voters want to go back to the safety of a known quantity that didn’t deliver for decades under previous administrations and elect Biden or still chance Project Molotov Cocktail with Trump?

What we know for sure is that Trump would never have seen the light of day had decades of previous administrations competently managed the economy. COVID19 may ultimately work in Trump’s favour because his record, as we fact-checked at the time of SOTU, was making a considerable difference.

Whatever the result, prepare to gaman!

 

Who the hell is Leeroy Jenkins?

One of the more uniques ways of describing the behaviour of the US Fed. Zerohedge noted that the Fed has gone full Leeroy Jenkins. Who the hell is Leeroy Jenkins?

As you will see in the video clip, the team gamers are discussing a coordinated strategy to defeat the monsters waiting in the next stage of the game. Unfortunately one of the gamers, Leeroy Johnson takes matters into his own hands.

Since 2001, we have continuously said that easy credit would become so addictive. The resulting complacency would turn destructive.

We said that the then-Fed Chairman Alan Greenspan would go down as the most hated central banker in history. Despite being heckled, laughed at and mocked, we never waivered from the key tenet that his actions and those of the subsequent Fed chairs would ultimately end up in tears.

We should have had that cathartic moment to reset back in 2008/09 (and 2000 for that matter). Instead, we merely doubled down on the very same mistakes that got us into trouble in the first place.

If the Fed moves to support the junk bond market, undeserving companies run by irresponsible boards will be kept on life support instead of the free market being able to set clearing prices and potentially terminate them. Why not let market forces determine whether anything of value remains inside their entrails?

The Fed doesn’t have the power to buy equities yet but surely that is a coming attraction. We have seen how dismally it has worked in Japan.

The Head of Japan’s stock exchange admitted that  Japan’s central bank now owns around 60% of all Japanese Exchange Traded Funds (ETF) which is almost a quarter of the broader market. By stealth, the Bank of Japan has become a top 10 shareholder in almost 50% of listed stocks. In a sense, we have a trend which threatens to turn Japan’s largest businesses into quasi-state-owned enterprises (SoE) by the back door. At what point does it stop? When is enough?

We must accept a new reality where bankruptcy is openly accepted as a cure to weeding out excesses in the economy. Should there be demand, more efficient players can pick up the spoils.

We need this to make people realise that moral hazard isn’t going to be tolerated and personal responsibility is the order of the day. Anyone who is more than happy to have a winner-take-all mentality on the upside must be prepared to accept that the loser has to take all as well. Why should Main St bailout people who poorly assessed personal risk because our authorities provided a platform that encouraged the behaviour?

Let us not kid ourselves. There are no excuses in the game of greed. Lessons need to be taught to avoid such calamities in the future.

Sadly, our authorities will reject that advice and continue to fool around using the same reckless tools tried making us pay an ultimately higher price.

Buy Gold.

Nothing to see here

We will get the US Auto sales figures out tonight for March. They will be dreadful. The US has run a 17m seasonally adjusted annualized rate (SAAR) for some time now. March will probably be in the 11-12m SAAR category. Post GFC car sales were in the 9-10m SAAR area.

The market will expect a smacking. It is just a case of whether it beats/misses expectations.

Note China’s car sales fell 79%YoY in February. The highest number on record. China’s car sales have been sliding for the last 2 years so the relative fall is meaningful.

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?

Boeing’s negative equity & prospect of zombie lending

We should have seen this earlier. One sign of trouble in industrial businesses can be seen through the lens of the cash conversion cycle (CCC). A CCC that is positive essentially means that payables are being executed way before receivables are being banked. Rising CCC is never a good thing. Amazon is at the other end of the spectrum with negative CCC which means they receive payment before delivery.

Note Boeing has seen its CCC blow out from around 124 days in Dec-2010 quarter to 344 days in Dec-2019. Effectively Boeing is sucking up a year of net receivables before collecting them. What escaped us is that the company is trading in negative equity at present and it will be a hard balancing act to let such CCC get much larger to a group that is so under the fiscal pump.

We recall the difficulties the supply chain had under the delayed 787 program in the early 2000s. Parts suppliers were bleeding because they’d invested and prepared for an expected ramp-up that ended up arriving 3.5yrs later than anticipated. All that high fixed capital formation and inventory that needed to be paid for by a client that couldn’t take delivery. Boeing tried to muddle through but was ultimately forced to rescue suppliers to keep them alive after some faced the brink. Boeing bought some suppliers in house.

One imagines the 737MAX delays will exacerbate the CCC again although Boeing contends it is in cash conservation mode. Coronavirus can only add to the misery of airlines reluctant to add to fleets where capacity is being slashed aggressively. Just look at the self-isolation bans being put in place in recent days. Who wants to holiday abroad if told they’ll spend two weeks in their hotel room feasting on room service? Airlines get the efficiency of new aircraft helping operating performance but at the same time running any planes at 20% capacity won’t help.

This is only going to get worse. For all of the pain of a much higher unit volume plane yet to be approved for flight, Boeing cash flows are being tortured. It is incredible that the shares had held on so well during the MAX crisis.

It is interesting to note that Boeing is trading in a state of negative equity. Liabilities are greater than assets. Where is the press on reporting this? It is hardly trivial for a business that hasn’t even faced the worst of its struggles.

Just like we wrote two years ago about GE, Boeing went straight down the line of monster share buybacks. $43bn to be exact since 2013. Over half of the buyback has been conducted at share prices above the current level. The goodwill and intangibles on Boeing’s balance sheet total $11.398bn. Equity at minus $8.3bn. So negative $20bn.

bA

We did the following infographic some 3 years ago but the trend has deteriorated further. As we can see AAA-rated (top) stocks in the US have dwindled while BBB+ and below has surged. It is estimated that over 50% of US corporates have a rating below BBB. That is the result of artificially low-interest rates which have lured companies to borrow big and splurge on buybacks. Our biggest worry is if the market starts to reprice corporate debt accordingly, such as what happened to Ford when it was dropped to junk.

IMG_0523.PNG

So the question remains how does Boeing manage to get out of this pickle? Even if MAX gets certified, airline cash flow is being crippled. How big will discounts need to be in order for airlines to take on new planes? At the moment one imagines many airlines are deferring deliveries (787, 777 etc) until they get a clearer picture.

Boeing has delivered 30 aircraft in the first two months of 2020. At the same time last year, Boeing had delivered 95 planes. A lot of MAX impact but we imagine March will be even worse.

Airbus delivered 86 aircraft so far in 2020. At the same time last year, Airbus delivered 88 planes.

Think of the major gateway that is Hong Kong International Airport. It’s passenger flow for February 2020 – minus 68%! 6 months of this type of crippling volume would be catastrophic for airlines. 9-11 was a watershed moment for the aviation industry where the confidence to get back on a plane turned quickly after the terror attacks. Now we have a situation where passengers would be more than willing to fly again but governments simply aren’t letting them. The problem is whether they will be in the same financial position to fly if the virus isn’t contained rapidly

One sweet spot for Boeing is that it is a major defence contractor which means that government bailouts are a given. Sadly, shareholders shouldn’t think this current share price collapse has finished. Boeing feels a lot like mimicking GE when it sunk to $6 from over $30.

It is probably worth referencing AerCap Holdings which owns International Lease Finance Corporation (ILFC) one of the big two commercial aircraft leasing companies. Its share price has cratered from a high of $64.79 to $24.50. Moody’s affirmed the “Baa3” ILFC this month.


AerCap

The company has 3.1x leverage. $36bn of property (mostly planes) on its books. The shares are trading at 0.35x tangible book value presumably because the market is forecasting the value of the tin is going to fall through the floor if leased planes return from airlines that have been forced to cut costs or go bankrupt.

The only crux is the future appetite of investors to support AerCap in the debt markets. It has $17.5bn in unsecured notes and $9.8bn in secured debt with a further $2.3bn in subordinated, mostly via a 2079 maturity bond issue. The maturity profile is still comfortably beyond 2028. No problems just yet but times are only just starting to get challenging.

Of note, AerCap is paying $1.295bn in interest charges on $29.5bn of debt. Leasing rents from its airline customers total $4.281bn. It all comes down to the assumption that its multiple airline customers can keep honouring those payments or whether the leasing companies are forced to renegotiate their deals in order to keep the customer alive. The last thing a leasing company needs is a flood of aircraft to return because customers go belly up. Fingers crossed there is no zombie lending to avoid having to mark-to-market the value of the fleet (assets) which would flip the ratings and refinancing prospects considerably. The balance sheet would be slammed.

With so many financial excesses built into the global economy, a prolonged spell of coronavirus containment will come at the expense of a crippling economic armageddon which will undo so much of the disastrous can-kicking we’ve become accustomed to. You can’t quarantine the world for 6 months and expect a tiny ripple.

CLies IT

It is not the disease we need to worry about per se. It is government and central bank incompetence over the last 20 years which has created a situation where we are out of ammunition to rescue the situation because expediency is so much easier for voters – comforting lies are easier to take than inconvenient truths.

Be sure to reference our thoughts on

Aussie banks,

Aussie government debt,

central banks and the

pension crisis ahead.

Heathrow jettisons reality for religion

Forget economic planning for the next 20-30 years. Drag up the non-binding Paris Climate Accord (of 2015) and use it as an excuse to hobble economic growth by claiming the third runway at Heathrow Airport is illegal. Forget the fact that passenger growth is a true underlying reflection of travellers’ true feelings about climate change. When it comes to offsetting one’s own carbon footprint by electing to pay a penalty, the truth is that 98% of people couldn’t care less.

Stopping Heathrow’s 3rd runway follows a dangerous path. Surely councils can see airport expansion benefits the community more than impedes it. Why do councils fall for tales of doom spewed by activists who often haven’t the first clue about what they are protesting about other than what they have read in The Guardian or heard from Hollywood star Emma Thomson who flew in from NY to tell them to panic?

Officers at Uttlesford District Council in Essex had recommended the approval of proposals to increase London Stansted Airport’s passenger cap to 43mpa in 2018 from 35m. However, the council’s special planning committee members rejected the scheme in January 2020.

Bristol Airport applied to the North Somerset Council to expand capacity by 30% in 2017, to keep up with the faster than expected demand. It was recommended for the jobs that would be created but the council rejected it, despite assurances the airport itself would be net-zero emissions in its operations.

While the activists may well rejoice at stopping the expansion, some fast facts about Heathrow Airport should send chills down the spines of Westminster:

  1. Currently operating at 98% capacity with 473,000 flights a year (capped at 480,000). It was 350,000 in 1991.
  2. Civil Aviation Authority notes Heathrow handled 80.9m passengers in 2019 up from 63m in 2002 and 40m in 1991. 
  3. Heathrow handles 50% of all London’s flights and 27% of all UK flights.
  4. Heathrow estimates 30% for business, 35% for holidays and 35% for visiting friends and relatives.
  5. 65% of passengers are going to the UK. 35% use Heathrow as a hub to connect.
  6. 76,000 are employed at Heathrow Airport.
  7. Heathrow is the 7th busiest airport in the world.

Demand is growing. Moreover, Britain’s population is expected to swell from 66m today to over 73m by 2045, the largest country in Europe.

The simple thing is facts don’t matter. Despite today’s modern fleet of aircraft burning 15-20% less fuel and spewing far lower emissions of planes even 10 years old, hysteria wins the day.

By the International Air Transport Association’s (IATA) own admission, global air travel in totality is only 2% of man-made CO2 emissions. That is to say that all air travel is responsible for 0.00003% of CO2 in the atmosphere. Heathrow makes up 0.1% of all commercial flights globally.

Not to worry, IATA has got behind the movement to do its bit for climate change too. In a two page flyer, it covered the idea that we reckless passengers must consider our carbon footprint but at the same time help the U.N. raise $40bn in taxes, sorry ‘climate finance,’ between 2021 and 2035.

The Carbon Offsetting & Reduction Scheme for International Aviation (CORSIA) is the vehicle which the UN’s International Civil Aviation Organization (ICAO) intends to liberate us from our sins and help fund the waste so endemic in the NY based cabal. Wherever the UN is involved expect a sinister agenda behind the virtue.

All airlines have been required to monitor, report and verify their emissions on international flights since Jan 1, 2019. Operators will be required to buy “emissions units” from the UN. If one asked the UN would it prefer emissions to be cut or taxes to be raised, it would select the latter every time.

What of the UN IPCC summits going forward? How will activists, government officials and observers manage to get to upcoming climate conferences if their ability to fly is curtailed? Best allow for expansion to ensure their vacuous jollies remain uninterrupted, especially after Greta Thunberg’s efforts caused a 50% rebound in attendees at Madrid.

Forget fears of Brexit hurting the economy. Just let green councils run amock based on religion. The ultimate irony will be when airlines, bursting at the seams, request to put on larger aircraft to cope with the growth that has been restrained by the infrastructure.

XPT – Facts and Figures

Image result for xpt trains

While the media has been quick to point fingers, are there any data buried inside the annual reports and releases from NSW Trains/Transport NSW in the lead up to the tragic derailment at Wallan yesterday that point to problems?

On Feb 18, 2020, several days before the accident, Transport for NSW made the following statement:

The NSW Government is replacing the ageing NSW regional rail fleet of XPT, XPLORER and Endeavour trains, which includes trains that are up to 37 years old.”

A contract with Momentum Trains for the $2.8 billion project to design, build, finance and maintain the new regional rail fleet, along with a new purpose-built maintenance facility in Dubbo. This is an artist’s impression of the new rolling stock.

In the 2013/14 Annual Report,

Around 65 new state-of-the-art trains, including some 520 new carriages, will carry passengers to the Central Coast, Newcastle, Blue Mountains and Illawarra. The first train is expected to be in service by 2019 and the new fleet will be progressively rolled out through to 2024.” was announced. Unfortunately, 2023 is the realistic time frame for the first trains to arrive.

The 2017/18 AR also discussed the announced fleet upgrades. 
According to the 2016/17 Annual Report, “Sydney Trains is responsible for the maintenance of the rail assets. Sydney Trains charges NSW Trains for the maintenance of rolling stock, infrastructure and stations utilised by NSW Trains, and recovers associated costs.

Problems with the existing fleet were revealed relatively frequently in press releases and annual reports.

On page 25 of the NSW Trains 2018/19 Annual Report, it clearly states,

Temporary speed restrictions impacted services to Moree, Brisbane and Melbourne during the year. Trains were required to travel at reduced speeds due to extreme weather conditions and infrastructure issues. In addition, trespass and copper wire theft in the Victorian ARTC network also affected our ability to meet the punctuality target.

The reliability of the ageing XPT fleet has affected punctuality and we are working closely with the fleet, maintainer to minimise the impact on customers.

XPT Reliability

As we can see XPT punctuality vs the other regional services it compares to shows a marked drop off to 55.7%.

In the 2017/18 Annual Report, NSW Trains noted,

Signals passed at danger (SPADs) continued to trend upwards during the reporting period. There were 39 SPADs in 2017–18, which is 15 per cent higher than the previous year.

Note in 2018/19 that had climbed again to 42.

SPAD

Lost Time Injury Frequency Rates (LTIFR), which is a combination of physical and psychological stress revealed the following. A more than doubling of the previously recorded peak. Were staff feeling the pressure of the ailing fleet and infrastructure?

LTIFR

In the 2016/17 AR further problems were flagged with infrastructure problems.

Temporary speed restrictions put in place by the Australian Rail Track Corporation (ARTC) were imposed periodically throughout the financial year and the number of these increased from January to June 2017. The speed restrictions significantly affected Intercity services on the Southern Highlands line and Regional services on the Melbourne and Canberra lines between Campbelltown and Goulburn

Copper wire theft from the ARTC network affecting signal operation on the main South line during February 2017 and June 2017 caused delays to Southern Highlands Intercity and South Regional services. To improve reliability and reduce customer delays, NSW TrainLink worked closely with ARTC and John Holland to better track work possession planning, prioritise rollingstock projects with Sydney Trains, the maintainer of the NSW TrainLink fleet, and develop plans for extreme weather conditions.

In August 2013, a big push had been rolled out to improve reliability of the rolling stock.  Rob Mason, CEO of NSW Trains said in the statement:

In addition to daily maintenance and our already high standards, there have been a number of measures implemented aimed at reducing the likelihood of faults on our XPT fleet.”

These measures include:

  • frequent replacement of components such as wheel bearings
  • an anti-corrosion program, including examinations for corrosion and minor repairs communication systems upgrades
  • establishment of a Reliability Improvement Program Team tasked with investigating incidents and creating solutions for future issues.”

In the 2017/18 AR, on p. 19 NSW Trains note,

Automatic Train Protection (ATP) is being installed on trains and tracks to boost safety across the electrified network. The ATP system monitors train speed and will alert the driver if the train has exceeded the permitted speed. It will also automatically apply the emergency brake if necessary…The first stage of the ATP System implementation (Newcastle Interchange to Cockle Creek) is planned for March 2019.

In defence of NSW Trains, the annual reports all point to the acknowledgement of the problems with rolling stock and infrastructure.  Sabotage and theft of crucial safety systems seem to have played a role. Was that responsible for the increase in SPAD incidents? Is this a factor for the crash at Wallan?

It seems that V-Line train drivers had been warned (on advice from the Australian Rail Track Corporation) on Wednesday in a memo which stated that some of its trains would be diverted through the 15km/h Wallan Loop on Thursday. Apparently, the signal hut at Wallan had been damaged by the bushfires. In December 2019, Infrastructure Australia knocked back a proposal to upgrade the line from Melbourne to Albury as a national priority.

Plenty more tales will be told as the result of the investigation but it appears that these problems have been well flagged by NSW Trains since 2013/14.

Cancel culture puts holes in Swiss chocolatier

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Cancel culture. Weak corporate. Gutless response. Repeat.

It seems that Swiss Airlines will remove Swiss chocolatier, Läderach from its supplier list in April over the owner’s affiliation with a pro-life/pro-family Christian organization.

Who is this supposed to help? Passengers have a hard enough time consuming airline meals at the best of times to have the only edible certainty banned. To be honest, how often do passengers actively look through the list of suppliers of crackers, chocolates or packaged cheese and demand a boycott? Why don’t corporates truly work to understand their customers?

For over 10 years, Läderach had supplied Swiss Airlines with small boxes of chocolates that were given to some passengers as a token of appreciation. The company was aware of the CEO’s stance. Why didn’t it conduct proper due diligence 10 years ago?

According to an article published by Swiss magazine “Beobachter,” the airline has a significant number of homosexuals among its employees.

CEO Johannes Läderach denied being against homosexuals.

We have homosexuals working for us, too. We don’t ask them. I attended a gay network event because I wanted to hear what the LGBTQ movement has against Läderach. There I explained that I may have a different opinion on same-sex marriage or on the question when life begins. But this does not mean that I have anything against homosexuals. Läderach has zero-tolerance for discrimination.

Jürg Läderach, the owner of the chocolatier, is president of ‘christianity for today‘ (cft), a Swiss-based group. Johannes Läderach is a board member. cft advocates pro-life and calls for Christian values to be instilled in children.

In October 2019, left-wing activists attacked the Basel Läderach store using butyric acid which causes respiratory irritation, nausea and vomiting. 7 stores were attacked and forced to close for two days to clean the mess. A lot of lost business. Protestors surely broke the law. Repercussions? Probably not. It only emboldens more radical activism.

One has to wonder why Swiss Airlines doesn’t stand up against this form of terrorism instead of giving in to it. The majority of Swiss Airlines passengers probably pay little mind about the views of a chocolate owner. Is everything up for debate? Will something said 20 years ago surface?

As it turns out. Swiss Airlines buckled to a German homosexual lobby group which suggested,  “One way of protesting would be, for example, if hotels or restaurants decided to eliminate Läderach’s products from their range of goods and clearly mark the reason.

Are you noticing a pattern? The list is longer than FNF Media thought.

Greyhound Australia chickened out to a bunch of truants over Adani.

Gillette told its customers to mind their toxic masculinity but was forced to wipe off $8bn in market value as a result of alienating its core clientele. 

Extinction Rebellion inspired protestors are actively trying to bankrupt Shell through willful property destruction.

NFL ratings plunged on the back of the kneeling saga.

Cricket Australia and Tennis Australia were targeted by the ACF over risking violating the Corporations Act if they didn’t address climate change. This was despite the average temperatures during both events being below the long term average.

John McEnroe & Martina Navratilova protested Margaret Court holding different views and pushed Tennis Australia to rename a stadium named after the 77yo sports star after someone they hadn’t consulted who actually loves and admires Court.

Greta Thunberg slammed Roger Federer for having a sponsor which financed the fossil fuel industry. He folded with an utterly spineless response.

Nike cancelled a sneaker on the back of advice from a woke social justice warrior Colin Kaepernick who still can’t make the cut.  

Recall Starbucks forcing its staff to undergo compulsory training to understand their ‘white privilege’ over the legitimate arrest of two people freeloading in the restaurant.

Reebok told us about compelled speech. 

The plastic bag boycott movement which in reality only proved substitution rather than reduction.

NY Times hired an editor who openly said she hates “dumbass f*cking white people“. She has since been fired.

San Francisco Mayor London Breed told her staff that she will no longer conduct business with 22 states that have laws limiting the ability of women to obtain abortions, specifically late-term. Sadly for Breed, Coca-Cola, WalMart, AT&T, Aetna, Pfizer & Eli Lilly have donated to politicians who have advocated for abortion bans in some of those 22 states. Will SF City Council vending machines be stripped of Diet Coke?

Multiple corporates folded to Mad F*cking Witches over radio presenter Alan Jones’ remarks over Jacinda Ardern. One has to question the corporate PR departments to flake out over a group who has that as a name. Companies like Koala Mattresses proudly dumped Jones despite promoting its brand via profanity-laced man-hater, Clementine Ford.

The Code of Conduct from the Nursing and Midwifery Board of Australia has some interesting clauses regarding nurses acknowledging our colonialist past and check our white privilege.

The University of Texas  started the  “MasculinUT” programme. It was organized by the school’s counselling staff and most recently made a poster series encouraging students to develop a “healthy model of masculinity.” The program is built around “restrictive masculinity” and tries to encourage men to drop traditional gender roles to “act like a man”, be “successful” or “the breadwinner.”

11,000 signatories attached to the non-peer reviewed paper which the media made absolutely zero attempts to question the validity of included Mickey Mouse, Aminta Aardvark and Albus Dumbledore. Typical drip-feed brainless and contemptable reporting.

An open letter supporting the Extinction Rebellion threw up some very enlightening facts. Read it and weep. Not the letter – the stats. Perhaps the most hilarious signatory to the letter is Matthew Flinders of Flinders University. Unless the university website has another Matthew Flinders listed as an active member, our esteemed explorer seems to have navigated his way back to life…simply adding to the total lack of credibility of the cabal of 268 academics who believe they have some sort of intellectual superiority over us. If one ever wanted proof of our judiciary leaning hard left, 12% of the people that signed this document were in law-related fields. Eerily, over 90% of the signatories do not appear to be renowned experts in teaching science, much less climate science.

The Inclusive Communications Task Force at the Colorado State University has introduced an appropriate language guide and it has deemed the words “America” and “Americans” might prove offensive to some and have discouraged their use on campus.

Dr. Aaron Brough of Utah State University conducted the study to see if there is a correlation between toxic masculinity and climate change. His assumptions ran the line that men see environmentalism as more feminine and get triggered if forced to make ecological choices if they feel threatened.

The government-funded University of Melbourne allows an artistic performance that requires “paying” white customers access on the basis of signing an acknowledgement of white privilege.

Don’t miss the posters put up by the University of San Francisco which pointed out how to spot privilege.

A Michigan State University religious studies professor Shreena Gandhi has claimed that white people who do yoga contribute to a “system of power, privilege, and oppression… White Americans should learn yoga’s history, acknowledge the cultural appropriation they engage in and possibly reduce the cost of yoga classes for poor people, a group that often includes people of colour and recent immigrants, such as Indian women to whom this practice rightfully belong.”

According to the BBC, it was. The UK taxpayer-funded broadcaster is buying into this hypothesis that the CIA may have been too “white” and not diverse enough to spot the terrorist activity around September 11, 2001. Weren’t the whites that founded the agency in 1947 the same thinkers who had the nous to use “diversity” (Navaho Native Americans) to devastating effect to transmit sensitive information during WWII?

We could go on and on – but you get the drift.

There have been some good wins from those that have stood up for their beliefs.

Chik-fil-A, refused to back down on its Christian beliefs that the store was founded on.  It is now the fastest-growing fast-food chain in America.

Adani has said things are progressing just fine.

FedEx told customers that it didn’t like guns but wasn’t getting involved in boycotting NRA loyal customers after the Parkland shooting.

NRA membership searches surged 4900% the week after the Parkland shooting as people valued their 2A rights.

What a surprise in today’s academia. Three scholars—James Lindsay, Helen Pluckrose, and Peter Boghossian—wrote 20 fake papers using fashionable politically correct jargon (wrt gender equality, white supremacy, LGBTQI) and developed ridiculous conclusions with the aim of placing these ‘peer-reviewed’ pieces in high-profile journals. At the time of exposing the hoax 7 journals succeeded in being published, 7 were in the approvals process

This growing intolerance and failure to respect alternative opinions. Instead of openly debating Läderach on how normal the overwhelming majority of LGBT people are, do lobby groups honestly believe shouting them down, using acid, shaming and boycotting will somehow win them over? Not in a million years.

Worryingly, a CIS study in Australia showed that 58% of millennials had a favourable view of socialism. Unfortunately, 51% did not know who Chairman Mao was. Another 32% did not know Stalin and 42% hadn’t heard of Lenin. If we combine with “know but not familiar” with “don’t know” we see almost 80%, 66% and 74% respectively. Oh, how wonderful to learn in school about three men whose social policies led to the deaths of 10s of millions.

Silence is consent. As Orwell said, “In times of universal deceit, telling the truth is a revolutionary act!

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