#boeing

Parker surprises positively

Parker Hannifin, the global industrial hardware store for all the major metal bashers like Boeing and Caterpillar reported results this morning. In a word – impressive.

All we care about is the orders trend. Parker supplies to global top tier firms around the world in pneumatics, hydraulics, pumps, solenoids, valves, actuators, linear motion, factory automation controls and so on. Think of it as a Bunnings Warehouse for multinational industrial corporations. Parker’s order book is a great read across on the state of global industrial production.

Orders for the quarter ending March 31, 2020, compared with the same quarter a year ago were as follows:

· Orders decreased 2% for total Parker

· Orders decreased 7% in the Diversified Industrial North America businesses

· Orders decreased 2% in the Diversified Industrial International businesses

· Orders increased 12% in the Aerospace Systems Segment on a rolling 12-month average basis.

Given COVID19, that is a pretty strong result on orders. Having said that, the next quarter maybe slightly more challenging and the company has pulled 2020 guidance.

At first glance, this is a pretty good outcome. The shares have retraced 50% from the recent lows.

The Fed firemen are also the arsonists

Jim Grant of Grant’s Interest Rate Observer has a great article pointing out the irresponsibility of the US Fed. It criticises the very conditions that made the outcomes of coronavirus way worse than had they administered sensible monetary policies decades ago. FNF Media has been saying this for years. Now we are facing long overdue nemesis. It is true of the overwhelming majority of unimaginative MMT ‘me too’ central banks.

Grant wrote,

It took a viral invasion to unmask the weakness of American finance. Distortion in the cost of credit is the not-so-remote cause of the raging fires at which the Federal Reserve continues to train its gushing liquidity hoses…But the firemen are also the arsonists. It was the Fed’s suppression of borrowing costs, and its predictable willingness to cut short Wall Street’s occasional selling squalls, that compromised the U.S. economy’s financial integrity.

FNF Media keeps on hearing tales about the failure of evil capitalism. When the actions of central banks stifle the free market from achieving price discovery, distorted capitalism will inevitably backfire.

From hereon, sharp pain will be the only effective – and quickest – way to resolve this mess. Governments need to ensure bad companies go bankrupt by rejecting bailout money to zombie companies that will just be a drag on the economy.

Instead of doling out tax dollars, the government should take equity in any business that receives money. Taxpayers deserve a return and by this methodology, it will enforce a mindset that always rejects propping up companies with failed business models. Instead of the government calling the shots, the expertise of commercial lenders should be tapped, a valid point made by Jonathan Rochford.

Unfortunately, this will cause huge short-term disruption and impact large swathes of the community but it will allow markets to clear and provide a platform for risk to be priced appropriately. It is like yanking off a Band-Aid. It stings at first but the recovery becomes far more sound, based on rational economics. Failure to do so will just lead to a protracted Frankenstein economy which will frustrate the majority.

The sad reality will be that Western governments will try to emulate Japan’s lost two decades by crawling on our belly making marginal inches forward. This is somehow seen as superior to hitting the giant “reset” button.

The only major difference being that the Japanese monoculture is experienced and better suited than any other nation to share grief. Western cultures are not remotely close to being able to tolerate such conformity. Japan is not capitalism with warts. It is socialism with beauty spots. It will pay to remember this. In the West, we will demand that others atone for our mistakes. Moral hazard will be the order of the day. This mentality must be stopped dead in its tracks.

Grant reinforced our long-held view on distorting capital markets with this,

The Fed commandeered investment values into the government’s service. It seeded bull markets in the public interest…But investment valuations don’t exist to serve a public-policy agenda. Their purpose is to allocate capital. Distort those values and you waste not only money but also timeLike a shark, credit must keep moving. Loans fall due and must be repaid or rolled over (or, in extremis, defaulted on). When the economy stops, as the world has effectively done, lenders are likely to demand the cash that not every borrower can produce.

We must not forget that post-GFC authorities have been asleep at the wheel even after the introduction of poorly thought out red tape designed to protect us.

Right before the regulators’ eyes, so many blue-chip corporations (e.g. Boeing, GE) binged on ultra-cheap debt to buy back their own shares just to chase short term performance incentives. In recent years, companies like Boeing and GE spent around $45 billion each aggressively buying back their own stock despite being in the midst of severe balance sheet deterioration. Both are trading in a state of negative equity today.

Ford Motor has a junk credit rating. GE & Boeing won’t be far behind them. Over 50% of US corporates are trading one-two notches above junk.

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The financial community has merely taken advantage of all of this short-termism. Where were the financial analysts doing forensic work on companies? All of this balance sheet deterioration was plain to see.  Why couldn’t they see the obvious long term deterioration in cash conversion cycles? How could they miss that aggregate corporate after-tax profitability has been trending sideways since 2012? Where were the biopsies? We will be witness to plenty of autopsies that were preventable.

Corp Profits After Tax

For Australia’s part, 28 years of unfettered economic growth has bred untold complacency. Only now will we realise the conceited arrogance of government and industry alike. One day we will realise that all of the onerous regulations dripping in ideology (e.g. climate/environment) to confound foreign investment will blow up in our faces. They will not have forgotten that Australia is an unfriendly place to conduct business.

Australia has behaved like a bloated drunk bishop looking down upon his destitute disciples climbing the stairs on hands and knees putting what is left of their pitiful savings into the collection tin. From now, the roles will be reversed at prices that will be highly unfavourable such will be our desperation. Not to mention our currency could well depreciate to a degree which makes us even more vulnerable to foreign predators. Setting our FIRB at $0 will be irrelevant if we fold to the whims of the first suitor that shows interest. The show will be on the other foot.

In press conference after press conference, we continue to be told that hibernating companies will spring back to life and it will all be a case of ‘keep calm and carry on!’We hate to sound negative here.

However, we believe that we are merely being realistic about what is to unfold. The coming depression will force us to become truly appreciative about just how well we have had it while governments have distorted our markets. Had we truly reflected on decades of prosperity instead of wailing about how life has never been worse, things might have turned out differently. We are about to get a true taste of the latter.

On reflection, some positives will come out of this tragedy because we will focus on things that matter rather than getting enmeshed in the theatre of the absurd – identity politics and the cancel culture.

Coronavirus might be a black swan event to the global economy but we have been complicit by allowing our lawmakers and regulators to play slalom with the icebergs. We all knew our overloaded ship was in danger of listing before we left the safe harbour but it was simpler to be suckered into the weather forecasts that predicted endless sunshine and eternal millponds. The engines have now stalled because the tanks are empty. We find ourselves in the middle of a pitch-black, stormy night with howling gale-force winds and a 40-foot swell. Some continue to cling on to the blind hope that the incumbent crew can bail fast enough to avoid the economy capsizing.

It will be all in vain because the ship’s crew left a tape recorder playing on a loop over the tannoy promising passengers to stay in their cabins while they secretly slipped away in the early hours on the only lifeboats available.

Central banks had one mission – create confidence. They have been complicit in the failure. They doubled down on all of the same policies that got them in trouble in the lead up to GFC. They had a simple task of telling governments to embark on structural and tax reform. Instead, they appeased their masters by endlessly cutting rates.

Never again must central banks be allowed to use QE to rescue the economy in a downturn. Central bank balance sheets should be forced to unwind all QE assets. Interest rates must be allowed to set at normalised rates which allow positive returns but avoid reckless borrowing.

While a lot of this piece might sound pessimistic we simply view it as being a realist with experience.

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.

Let shareholders burn

We buy shares because we expect to gain a return. We all know there are risks attached. As we wrote yesterday on Boeing, it has embarked on reckless buybacks which have compromised the balance sheet. The company has drawn down all of its $13.8bn in credit lines from banks overnight. It is panic stations. It was completely avoidable.

How ironic that companies which are among those that splurged $4.5 trillion on share buybacks just to chase short term management incentives will be the first lining up for taxpayer support to save them from negligent governance.

We say shareholders should suffer the downside of that investment choice. They had the power to remove officers from the companies they entrusted management to. If a company goes belly up, let other players in the market pick up the spoils for fire sale prices.

The Wolf Street correctly noted,

The Trump administration is putting together a rumored $850-billion stimulus package that will include taxpayer funded bailouts of Corporate America, according to leaks cited widely by the media. Trump in the press conference today singled out $50 billion in bailout funds for US airlines alone. A bailout of this type is designed to bail out shareholders and unsecured creditors. That’s all it is. The alternative would be a US chapter 11 bankruptcy procedure which would allow the company to operate, while it is being handed to the creditors, with shareholders getting wiped out.”

All this Trump package will do is encourage the same bad behaviour. We think this is nothing more than trebling down on the problems that hit us in 2008. But hey, it’s an election year!! Reckless.

As usual, the SEC has been asleep at the wheel. Same as in the lead up to 2008. This is what happens when regulators hire clueless lawyers who don’t have a clue about how markets operate. Therefore they miss crucial events.

As for shareholders – you earned it.

The only upside to this market volatility is that no one has talked about climate change for weeks! Probably because when people are about to lose their livelihoods, all of a sudden virtue signaling is worthless. That goes for diversity and inclusion too. Every cloud has a silver lining.

Should Main St bailout a Wall St that squandered cash on equity buybacks through excessive debt issuance?

Image result for boeing

Boeing was lopped two notches from A- to BBB (two notches above junk) by Standard & Poors overnight.  The diagnosis was:

“Cash flow and credit ratios will likely be much weaker than we had expected for the next two years. We now expect free cash flow to be an outflow of $11 billion-$12 billion in 2020 and an inflow of $13 billion-$14 billion in 2021. This compares to our previous expectation of positive $2 billion in 2020 and $22 billion in 2021.

The significant difference is due to an absence of MAX predelivery payments (PDP) into 2021, higher and more front-loaded cash compensation to airlines, additional cash costs related to the production halt (including supplier support), and lower MAX production rates and deliveries than previously expected.

We are also now expecting weaker cash flow from the rest of the business due to cuts to 787 production (including lower PDPs), delays to the first 777-9 delivery, and lower cash flows at the defense and aftermarket segments.

This results in higher debt levels in 2020 (with balance sheet debt peaking at more than $46 billion, including the debt from the Embraer joint venture) and a weaker improvement in 2021, with funds from operations (FFO) to debt in 2020 now likely to be only about 5% (previous expectation was 29%) and about 30% in 2021 (previous expectation was 75%). This forecast remains highly uncertain with the potential for increased downside from the coronavirus.”

As we pointed out earlier this week, Boeing is trading in a negative equity position. The question is should Main St be responsible for bailing out Wall St for blowing its dough on $10s of billions on buybacks. It appears Boeing is seeking a short term plug from the government after drawing down $9.5bn of committed credit lines from the banks. Of course, it is sold as saving jobs during coronavirus but this is just incompetence.

Oh, don’t get me started on Tesla. A frozen economy against a debt monster that just started to scrape some profits together.

Coronavirus will end up killing way more jobs than the people in them

GDANSK, POLAND - SEPTEMBER 3, 2018: Norwegian Air Shuttle airlines offers cheap flights. Airplane Boeing 737-800 takes off on from the International Lech Walesa Airport in Gdansk.; Shutterstock ID 1176630295; Purchase Order: -

None of this should be a surprise. 7,300 (out of 11,000) workers at Norwegian Air have been temporarily laid off as 85% of flights are cancelled.

This follows on from Scandinavian Airline Systems (SAS) which has temporarily suspended 10,000 workers and cut 90% of flights to combat coronavirus.

In short, Coronavirus will likely kill way more jobs than the people in them. Sadly, there isn’t a robust economic cycle to be able to weather this storm.

Note that Boeing shares fell 20% overnight as markets finally come to grips with what we mentioned yesterday. Boeing was also put on credit watch negative by Fitch. GE is back at $6.

And Trump’s S&P500 index reading was 2,264 when he took office. It is at 2,474 or 9.3% above that. We always said what he proudly attributed to his leadership on the way up could end up making him hoisted by his own petard on the way down.

Buy Gold, not toilet paper.

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.

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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.

Political expediency will trump Coronavirus market rout. Await market manipulation

MARKETS YTD

Share markets have been decimated in recent weeks across the globe. This year to date (YTD) chart above shows the extent. It shouldn’t really have taken Coronavirus or plunging oil prices to lead to this. We’ve been living high on the sauce for two decades and even though GFC in 2008 was a rude hangover, our authorities thought doubling down on all those free money excesses would work again.

Let’s not get too carried away. On a 5-yr basis, shares haven’t exactly blitzed with the exception of the S&P500. The ASX has put on just under 7% in 5 years. Germany, Japan and Italy have gone down. So if one is 45% higher than 5-yrs ago with an S&P fund, is that a mass hysteria moment?

INDEX 5YR

Automotive stocks have been dud investments over the last 5 years. It didn’t take Coronavirus to expose the underlying trends. BMW is don 52% on 5 yrs ago. Ford down 60%. Volkswagen -40%.

Car stocks

Industrial bellwethers like Caterpillar and GE have also not escaped stagnation. YTD, all of these stocks have bloody noses. Boeing has held up surprisingly well despite the MAX problems.

Industrials

Yet if we look at the FAANGs (Facebook, Apple, Amazon, Netflix & Google), we can see that over 5 years, investors have made a bundle.

FAANGAs these 5 stocks make up 15% of the S&P500 Index by weight, if they fall the impact is greater. With the exception of Netflix, these monsters are down 15~20%.

FAANG 1M

Worried?

Fear not, our heavily indebted incompetent political class and complicit central bankers will concoct a new potion of even lower rates, more QE and further fiscal spending on wind farms, solar panels and roads to nowhere to keep the ship afloat. It may be a hapless task in the long run but just watch the printing presses move to full speed. The ride is about to get interesting.

We’ve been bearish for years based on the underlying tenet that financial market manipulation by authorities has merely distorted the most efficient clearing mechanism -free markets. The invisible hand will eventually win. Just not quite yet.

Italian Senator and former Deputy PM Matteo Salvini has called for a ban on short selling. Why? All he’ll do is exacerbate the sell-off by diverting capital from Milan to London. The politicians just don’t get it. That is why Milan FTSE All-Share index fell by 10.75% overnight. That market is down 23% YTD.

When the pandemic hit the economy, we should have known from last month that it would spread and impact global travel, trade and oil prices. Why did it take so long?

We wrote last week that the explosion in market chasing (especially levered) ETFs would exacerbate distortions on the downside. The main reason being is that options markets that hedge levered products see heavy delta bleed (pricing blowing out) during routs. The reason is in bull markets human nature is more comfortable taking risk. In bear markets, people panic hence needing larger insurance premiums to protect against the madness of crowds.

Essentially what that means is that when ETFs were a far smaller chunk of the market, today’s 7.8% drubbing may only have been -4% in equivalent terms. That is because the ETFs chase, not lead markets because their product design is to replicate the immediate past. Yet our first instincts are to compare these apples with oranges and equate them to 2008. Wrong. Furthermore, a larger part of the market is dominated by a smaller

So the question is, do we liquidate all of our shares into the falling knife or take the view that some wonderful opportunities will present themselves to get exposure to what we hopefully viewed as sensible long term investments.

We take the latter view. We need to separate Coronavirus (the disease) and the hysteria (eg hand sanitizer and toilet paper panic buying).

While the disease is problematic and will hit the economy hard in the coming quarters, the question is market hope pinned to government response will come back. The measures should continue to grow and grow until they have cauterized the wound. After all, we live in a market where financial TV programs are summoning the opinions of NY Mets baseball pitchers for their ideas on stocks.

Of course, it will be all academic, but confidence is the only thing that matters from here. As soon as we get on top of Coronavirus, markets will swing back into action and many will simply fall for the same tricks like Pavlov’s dog and the short squeeze will send stocks powering back.

Governments now have a legitimate excuse to blow out deficits and borrow to save us. In that sense, this pandemic is a blessing in disguise. That isn’t to trivialize Coronavirus but to note that politicians will do almost anything to stay in power, even if the long term consequences will linger long after they’re out of office.

Where will they spend? The automotive sector has been in the doldrums for ages. Expect to see EV related subsidies which will be a boon for the EV battery plays – we’ve bought Jervois Mining (JRV.AX) which is about to start a cobalt mine in Idaho.

Think of support to the aviation industry when the crisis is under control. Boeing and Airbus. Don’t forget that American Airlines renewed 900 aircraft soon after it announced Chapter 11 bankruptcy back in 2011.

Think construction – cement companies and construction machinery companies tend to benefit from public works programs. We continue to hold gold (have done since 2001) as the ultimate insurance policy when the whole system can no longer heal with band-aids.

So get ready to buy some bargain-basement names with cash flow survivability, especially if you have a self-managed super fund.

Yes the underlying economic backdrop is dreadful but there will be one last hurrah!

Telstra’s CEO should close down operations to be on the right side of history

Telstra CEO Andy Penn has suggested that climate change will be the “defining challenge” of the decade but proclaims he doesn’t want to be drawn into the government policy debate. 

He has called for “more urgent action on climate as changing weather patterns deliver more frequent bushfires, floods, droughts and storms” at an American Chamber of Commerce lunch yesterday. 

What a pity that the UNIPCC’s March 2018 report on weather extremes (with respect to anthropogenic induced global warming) contradicted Mr Penn:

“…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 floods…low 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 monsoons…low confidence in wave height projections…overall low confidence because of inconsistent projections of drought changes…low confidence in projected future changes in dust storms…low confidence in projections of an anthropogenic effect on phenomena such as shallow landslides.”

Never mind what the scientists ‘actually’ think. Just run the narrative of the activists instead to prevent Extinction Rebellion nutcases from super glueing themselves to the lobby entrance. FNF Media could indulge you on what the scientists actually think of the IPCC. For those interested please see the link here. Spoiler alert – it is exceedingly critical.

Mr Penn said that businesses and individuals should become aware of their carbon footprints. He admitted Telstra is one of the biggest consumers of electricity in the country as data storage needs explode by up to 50% per annum.

If it is such a massive concern, Penn should put Telstra’s shareholder money where its mouth is and charge customers extortionate fees for data storage and data usage such that he can force them to lighten their evil digital-driven carbon footprint. That way he can slow his electricity consumption. Then, Telstra can await all of those woke customers fleeing Vodafone and Optus in droves to sign up for inferior service for more money. Not quite sure what shareholders would think of that…

Even better he could suggest to the board that they close the business for good for the sake of the planet. After all, by going the whole hog he can sleep safe in the knowledge that his kids and grandkids will know he was on the right side of history (the standard alarmist playbook) before we’re swept away by the rising sea levels. Think of all that energy saved.

Unfortunately, we’ve seen this vacuous corporate virtue signalling tokenism before. Who could forget the comments made by Josh Bayliss, the 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 didn’t he close down the airlines in the portfolio? Instead of waiting for his customers to grow a conscience via flight shaming and do the right thing why not force their choice? The obvious answer is that it’s hypocritical in the extreme.

The International Air Transport Association (IATA) has already positioned behind the flight shaming movement to do its bit for climate change. 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.

Still, the easiest way to gauge public fear on climate change is not via a biased think-tank poll but monitor individual consumption patterns. It isn’t just population growth, because it isn’t growing  at these rates. Three examples:

  1. Aircraft demand – In 2019, Boeing reported airlines will need around 44,000 new commercial aircraft worth $6.8 trillion by 2038, vs. 43,000 planes worth $6.49 trillion estimated in 2018. There are currently 25,830 commercial airliners in service.
  2. Smartphones – estimated that the number of global mobile subscriptions could be 13.8 billion in 2025 and 17.1 billion in 2030. The number of global mobile subscriptions has already reached 6.7 billion in 2013. Smartphones will grow from 6.3bn units in 2020 to 12.1 billion by 2030.
  3. Energy Consumption  – the U.S. Energy Information Administration (EIA) projects that world energy consumption will grow by nearly 50% between 2018 and 2050. Energy consumed in the buildings sector (including residential and commercial structures), increases by 65% between 2018 and 2050, from 91 quadrillion to 139 quadrillion Btu. Rising income, urbanization, and increased access to electricity lead to rising demand for energy.

So good luck trying to get people to feel awkward about their individual carbon footprints. They’ll be to busy charging their mobile devices while booking the next overseas holiday to the Maldives.

Aussie company has only approved technology for Qantas Boeing 737NG wing crack detection

Very simple story. Aussie based company Structural Monitoring Systems (SMN AX) has the only approved crack detection product in the market.

The 5 Qantas Boeing 737 NG planes (and dozens like it around the world) could have had far earlier detection with SMN’s CVM technology. To cut a long story short, CVM technology has vacuum channels, which if broken (via cracks emerging) notifies the ground crew of the structural issue.

The company already has a contract with Delta Airlines for its aircraft. This type of technology not only has the potential to ward off catastrophic failures but reduce the cost of inspections for airlines.

CM has owned SMN for over a decade. This trend was always coming.

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