Super Fund

The future fund I mentioned in my letter to The Age newspaper yesterday, was set up from the proceeds of the sale of our home grown Telstra. It represents most of the second half of the sale. The idea is that it will be invested by the future fund managers for the next decade and then be worth $140 billion. The current government thinks this should be used to pay the unfunded liabilities for the super-annuation for the Public Servants.

The Public servants have a very generous super and currently are paid out of pay as you go government payments. This could continue into the future.

When the government sold the second half of Telstra they had to bribe the investors with generous dividends. The money they raised should of been used for the benefit of all of us. It was part of our common wealth and should of been seen as that. Historically we have used our common wealth to pay for large infrastructure projects and through taxes and charges the costs are repaid over the decades by all of us.

The profits from the sale of Telstra should never of gone into a future fund that couldn't be used to help all of society. From memory the Super fund wasn't ever debated properly and the government used their numbers in the house to get it though.

Shame on them. And for Mr. Costello to talk about opposition members getting their hands in the honey pot, he was seen to be playing the international money markets with our money and loosing millions. He's no genius when it comes to money management, though he likes us to think he is.
Woof.

Any additional comments can be sent to mark_brickel@hotmail.com

Broadband for Australia. Kevin Rudd Style

I wrote a letter to The Age newspaper this morning.

Mr Rudd wants to use $2.7 billion of the Future Fund to help build a
national broadband network. Peter Costello immediately calls it "A
shabby little deal" and "economic vandalism'
My first thoughts were what a wonderful use for the future fund.
You couldn't get something more focused on the future than a high
speed Internet broadband network. Set up properly it should give very good returns to the
investors which I imagine the Rudd government will be one of. Instead
of seeing it as a "shabby little deal" or "economic vandalism" It
should be seen as a sensible use of our assets i.e. the sale of
Telstra.
The future fund was always a bit of lame duck. This sort of innovative
relatively safe investment, is an ideal way of using it. In ten to
fifteen years time it may be viewed like the purchase of 'Blue Poles'
by Gough Whitlam. Criticised at the time, but heh what investment that
turned out to be.

The Howard Government has had 10 years of unprecedented growth and
prosperity with the added bonus of GST revenue, and we are way behind
in Internet speed and technology.

Woof.

Any additional comments can be sent to mark_brickel@hotmail.com

Harold Wilson and other thoughts

Recently I have been writing to an old school friend in the U.K. We haven't talked in twenty years and so there is a lot of catching up. He has moved to an area of Cornwall I used to live in, virtually the same village. There are people around the area that I remember well, and some that have moved on or died. One of those is a guy I will call Bobby.

Bobby was as Cornish as they come, he could fish and build houses. His other talent was to tell long stories to anyone who would listen. I used to see him as I walked down to the fishing cove just below our village. One day he told me a story about Harold Wilson, who at the time was the Prime minister of England. Wilson had had a difficult time in office. Things like Rhodesia and Miners etc. He used to like coming down to Cornwall for his holidays and stayed on the Isles of Scilly which you can get to from Penzance not far from where I lived.

One day Bobby was talking to one of Harold Wilsons aides a top civil servant with the ear of the Prime minister. So Bobby asked the aid how things were going. "

Was the Prime minister on top of everything, coping, so to speak. "

The aid answered by saying,

"No".

"And why is that". asked Bobby.

"We are never on top of things in Government". said the aid

"What do you mean." said Bobby.

"Lets put it like this," said the aid.

"In government you react you don't act."

There was a pause, and then he went on to describe how it was like putting fires out all the time.

"You never have time to make things happen they happen around you and then you react and try and put the fires out and settle the troops."

He gave the impression that being in government was a game of chance and if you were lucky you got out ok and if not you left office covered in shite.

Not a lot has changed. Here in Victoria we have a premier called Steve Bracks and he is waiting for rain. He is praying for the stuff to drop from the sky [big time] cause if it doesn't, he will have trouble facing his electorate. He will appear to have done nothing to solve the problem [to react to the situation] Maybe there already too many things he is having to react to.

And here in Australia we have a Prime minister who goes by the name of John Howard. He used to be a failed treasurer many years ago. He is a politician they call 'Lazarus with a treble by pass.' He too wishes that he had taken retirement when he turned 65 years old. He could be enjoying retirement but instead by the time he goes [next election] this year, he will have gone from longest serving Prime minister to possibly one of only two Prime Ministers who lost their seat in parliament while serving as Prime minister.

So some of it is luck some of their own making, but don't ever think those in high office have time to get on top of the job. They just don't.

Woof.


Any additional comments can be sent to mark_brickel@hotmail.com

Zimbabwe

PRESIDENT Robert Mugabe Must Go. Any which way he has to go and go very soon. He has taken Zimbabwe to point of self destruction, inflation and unemployment out of control. The brutal treatment to anyone who disagrees with him. The removal of white farmers who had stayed on after Independence and produced good produce.

Mugabe is an evil man who has been allowed by other nations in Africa to remain in power. Shame on them all.

And the international cricketing nations are still prepared to play cricket with them. That is outrageous.

Time send in United Nations troops to close down the Mugabe regime and restore democracy.
Woof.


Any additional comments can be sent to mark_brickel@hotmail.com

Dirty Politics

I have long thought of our prime minister as a weak man who has managed through lots of luck to look ok as a leader.
He has presided over 10 years of economic growth and taken the credit for it. But now his luck is running out. The problems are coming home to roost and he doesn't have much idea what to do about it, except to work harder and walk faster.

He passed his use by date about 2 to 3 years ago, he almost went then. But because people that have tasted power can't be trusted to give it up, they hang on and on and on. Can you imagine an American president going for his 4th term in office.

I would think there are many liberals who want him gone. But they too can't let go of what they had thought of as their best chance at re-election. In the end it is all down to their own survival as politicians. We might like to think they are all working for the common good, cause that is what they say as elections come around. But you only have to look at the way they behave in betwixt and between times to see that power and money gives you a high that is worth defending in any which way you can.

I'm not saying the Labor side is any better, they too have had their hangers on. But when they win the next election [and they will] the Liberals will go into long and arduous analysis of their loss and why they allowed John Howard to stay on, beyond his use by date.

Woof.


Any additional comments can be sent to mark_brickel@hotmail.com

Qantas Sold

Well that didn't take the treasurer very long. He has approved the sale of Qantas to the consortium of business men, known as 'Airline Partners Australia' snappy little name really. They may be partners to each other but I doubt they will be seen as partners with Australia a year or so down the track.

The treasurer announced certain conditions of sale and said they would be contained in an 'enforceable deed of agreement'. I like the word enforceable, as if that is going to carry much weight when the company is no longer a publicly listed company and has moved much of it's operation off shore. As some bright spark has said,

"I bet the consortium lawyers are looking at ways around the enforceable parts of the deed of agreement." And of course they will.

What the Treasurer has done, used to be called a snow job. Make it look like you have considered the problem, and in this case give it a few weeks, then announce some cosmetic changes and allow the deal to go through.

There is not much any of us can do to stop the sale now and in reality it won't make that much of a difference, to most of us. It will mean the employees may loose their jobs and we may end up with an airline known as Jet Star instead of Qantas in the future.
Woof.

Any additional comments can be sent to mark_brickel@hotmail.com

To Fall on ones Sword

A row has blown up down here in Australia, over politicians meeting lobbyists who are disgraced ex-politicians. The federal opposition leader Kevin Rudd has been accused of lying about the content and the intent of his 3 meetings with the ex premier of Western Australia. Not too big an issue if you think he met him 2 years ago when Kevin was an opposition foreign affairs spokesman and not the leader. But in the course of the governments attack on Kev for seeing this guy, it has been alleged by the Federal treasurer that any one who has met with this disgraced ex premier is tainted. The slanging match in parliament was designed to humiliate Kevin, who is new to the job and needs to be knocked around a bit by the government front bench. Especially as he has a very high approval rating.

It back fired for the government cause one of their own ministers had also supped with the disgraced ex prem. So he too was tainted. In normal circumstances the minister would take a lot more flack before he resigned. But that is exactly what he did within a day of revealing his misdemeanor. Normally he would of had the support of the prime minister, for such a meager deed of wrong doing. But no the prime minister immediately accepted his resignation.

Why you may ask?

The short answer is so the prime minister can continue to attack Kevin over values and honesty and all the mumbo jumbo that blustering politicians can come out with to gain some moral high ground.

I can't and wont say too much about our prime minister but suffice to say it is a beat up and I just hope the media treat it as such and don't go along with the prime ministers farce of making the leader of the opposition be accountable for something that isn't worth defending or talking about. This is typical of John Howard, small time politician acting as a high ground moralist of statesman like character.

He was described today as a coconut with a shoulder that shakes when he is flustered.
Woof.


Any additional comments can be sent to mark_brickel@hotmail.com

A Few Grumbles

Firstly there is the news that our Prime Minister has been chatting with Liberal party heavy weight, Ron Walker about Nuclear Power. Nothing wrong with that you say, free country, etc. etc.
We were led to believe at the time the prime minister announced an enquiry into nuclear power that it was part of an open discussion about alternative energy. Now we find out that Mr Walker had registered a company specifically for the purpose of building?, operating? a nuclear power station. This was done around the time the prime minister was talking up the prospect of nuclear power as a future power supply. Come clean the pair of you and tell us about the chicken and the egg.

Water: Heard from someone today that they take 7 minute showers every day of the week, they need the 7 minutes cause they have to wash their hair every day. I grew up in a family of four kids we had a bath once a week and we shared the water. Here in Victoria we are experiencing a severe drought that has been going for 7 years. We are encouraged to save water, people tell you how they save their shower water, to water precious plants in the garden. We even know how many mega litres it takes to produce our breakfast in the morning. We have been encouraged to dob in a Water Wally. But what we do in the confines of our home is kept a secret. I threaten my family with the water police, which isn't a river boat but a police officer with a big wrench to turn your water off, if you are wasteful. So beware. And to give said friend a break the length of shower has come down from 7 mins to 5 since stage three water restriction have come into force.

Lastly; some politicians just don't know when to stop. Well most don't, but some just keep going far too long. There is one in Western Australia he used to be their premier. Lost his job, got into trouble with the law, served his time, out again and now many years later he has resurfaced as a powerful maverick behind the scenes of the Labor party. I think to date 3 or 4 high ranking members of the West Australian parliament have been sacked, for associating with him. And what are they doing? Silly stuff like fund raising, helping each other, doing favours. The sort of thing that can lead to corruption if it is not kept transparent. You know the sort of stuff school boys do, but sometimes they continue to do when they are old enough to know better.

Woof.

Any additional comments can be sent to mark_brickel@hotmail.com

Merchant Banks

As readers of this blog will know I have been banging on about the sale of Qantas airlines over the last few weeks. One of the major sponsors of this sale are the Merchant banks and one in particular.
The other day I heard a senior executive of this bank being interviewed and of course the topic of his pay came up. He is paid millions of dollars in bonuses and fees. All based on his performances. His base pay is a cool $400,000.00 [that is four hundred thousand dollars] which he described as well below world average for his job. But in reality his take home pay is millions of dollars.

He kept using the word 'Create' to describe what he does, as in.

"When I create I should be paid large sums of money, because I create." What I think he meant is, he is creative with making money make more money.

From what I can see from a deal like the tunnel that goes under Sydney, [which has been a disaster of a project]. The likes of his bank took enormous amounts of money in the form of fees. Sometimes, in fact many times, banks like his tout their creative ideas to governments with the hope of picking up very large projects.

My feelings on this sort of behaviour is not that it is creative, more predatory than creative. This takes me to the Qantas deal and the behaviour of this bank. It thinks it is being creative to buy up a company of this size and then play with the figures and make it look profitable so the new owners can sell it in a few years for a profit.

This may sound simplistic but when you see the figures that these banks and directors are going to pay themselves, the only motivation must be to make very large amounts of money. A figure of $80 million in fees.

If the share holders weren't the only interested group that need to be consulted on this sort of predatory behaviour then these deals would have a much harder time getting approved. And this still may be the case with regard to the Qantas deal. Due to regulatory controls.

If the main way of measuring success in this world is by how much money you can extract from any given deal, then Merchant banks are a business success. But as with the Sydney Tunnel and the Qantas deal, there will be numerous other factors in play.

What is the purpose of building roads that need the protection of other roads being closed and hefty tolls being imposed to make them profitable for elite investors. When our environment is being harmed by too many cars.

Equally what is the purpose of buying an airline and burdening it with debt [which includes large amounts of unperformed debt to pay Bank Fees] to buy fleets of planes to carry more passengers and compete with low cost competitors. At a time when fuel consumption and the environment has rightly become a real concern.

I believe this type of predatory banking/financing is cleaning up the later part of the capitalist system as we know it. There will be a melt down of money markets and this way of doing business will be seen for what it is, a rich mans play ground in the guise of responsible wealth creation. And then see where our Super Annuation funded wealth disappears too.

Woof.


Any additional comments can be sent to mark_brickel@hotmail.com

More on QANTAS

Here is a follow up piece from Kenneth Davidson in The Age Newspaper re. the sale of Qantas. It is worth a read cause it will most definitely relate to a company in your neck of the woods too.
Woof.
PS I have been told by one of my readers that she prefers my more personal tales. I will endeavour to find one around here soon.

THERE are five reasons why Treasurer Peter Costello should block the sale of Qantas to private equity consortium Airline Partners Australia (APA).

The sale is at the expense of Australians both as taxpayers and superannuants. It increases the risk that Qantas will go bankrupt.

And even if APA achieves its objectives, the takeover will not generate wealth and will add to Australia's already onerous

net foreign debt of about $550 billion.

But more importantly, if this deal goes ahead, it will be the forerunner to a flood of similarly financially structured takeovers that will load Australian corporations with debt levels not seen since the '80s, which led to the "recession (Australia had) to have".

If this deal goes ahead, any company, no matter how large and well managed with a prudent debt-to-equity ratio, will be vulnerable to takeover by privateers who will finance their takeover by loading the target company with debt.

In the '80s the main actors were the paper entrepreneurs — the Bonds, the Holmes a Courts, the Spalvins and the Abe Goldbergs.

The immediate victims were the banks, which lived in a world of unlimited financial liquidity thanks to financial deregulation, were desperate to lend to anybody, and ended up with $28 billion of what were laughingly called non-performing loans.

Compared with today — with trillions of dollars sloshing around desperately looking for profit — the '80s was a period of financial drought.

Today the paper entrepreneurs have been replaced by a new breed of financial engineers who specialise in private equity.

The banks still play a major role in putting the deals together, but instead of risking their depositors' funds, the deals (and the risks) are passed on to superannuation funds.

It helps to understand what is going on by knowing why APA can pay a 25 per cent premium on the value of the pre-bid shares, which adds

$2 billion to the Qantas market valuation.

APA would like you to believe that by going private, the entity will have more freedom to restructure and take a longer-term view than that available to management of a publicly listed company subject to the discipline of investors and regulations designed to protect investors. Maybe.

The name of the game is leverage — the same game that was played out in the '80s. APA will finance its highly leveraged bid by accessing the $330 million-a-year corporate taxes paid by the company now to finance the extra interest on borrowings and use the assets (mainly planes) as surety for the loans.

The takeover proposal reduces equity in Qantas from $6 billion to $3.6 billion. Debt is increased from $5 billion to $8-9 billion.

For a given revenue, the smaller the equity, the higher the return to equity holders; but the higher the debt, the higher the fixed costs and the greater the risks.

The transaction and success fees that will be extracted from Qantas if the takeover goes ahead are staggering — in the order of $400-500 million — for what amounts to low-grade activity that adds nothing to Qantas' value.

The participants expect another similar round of transaction fees when Qantas is sold back to the public in five years, provided the company's value rises sufficiently.

Whether the value rises during this period depends far more on the economic environment continuing to be favourable to civil aviation in general (low interest rates and global growth) and Qantas in particular (the regulatory regime that continues to exclude Singapore Airlines from profitable routes) rather than the superior management skills of the new, temporary owners, who have said they intend to keep the present management and corporate strategy in place.

According to a report in The Age last December of a speech by Reserve Bank governor Glenn Stevens, private equity companies claim they have more room to restructure, "but mainly their strategy is one of leverage", adding that, if the process continued, corporate debt could be a bigger risk to the economic and financial system than it has been for 20 years.

According to the Reserve Bank statement on monetary policy, issued this week, leveraged buy-outs (LBOs) rose from an average of $1.5 billion a year over the previous five years to $7 billion last year. In the last December quarter alone, the value of completed or pending LBOs was $19 billion.

The RBA commented: "If the current surge in LBO activity continues for some time, the increase in corporate leverage could become a long-term risk to economic management."

In the absence of a reversal in the scandalous decision to abolish capital gains tax on capital gains realised by foreigners, and the absence of changes to the corporations regulations to make private companies subject to the same rules of disclosure as public company, the only way to prevent the surge of LBOs becoming a flood is for the Treasurer to stop the Qantas takeover and any others of the same ilk in the pipeline.

Any additional comments can be sent to mark_brickel@hotmail.com