I’m not usually the most perceptive person when it comes to the subtle things in life, but unless I’m missing something here, what kind of deception is the ACCC referring too?

Moneyquote:

The ACCC is now claiming that all of Google’s paid advertising (which appears on the right hand side of its results page) is misleading and deceptive, as the search engine does not adequately distinguish between paid advertisements and non-commercial search results.

Using my top-tier research skills, developed through painstaking academic exposure at the great Newcastle University, I’ve comprised a snapshot of what the ACCC deems as ‘misleading and deceptive’.

Sometimes I have my doubts whether the ACCC wants to be taken seriously or not by business. Just like in the fuel collusion debacle, the ACCC needs to get some context before it uses dangerous, loaded words against a company who has, up to this point, been a model global citizen.

Once again, proving that currency markets are indeed a haven for trend following speculators, the Australian dollar has hit a new 23-year high of 90.20c.

Vegas, anyone?

In terms of ideology, Ross Gitten’s and I couldn’t be further apart. More than anything, he’s an economic moderate, always working through ideas that involve compromise and keeping those in power honest. While I have high respect for this, I disagree with his overall premise. Its not often someone challenges your beliefs, especially in economics. In our life time, we may have one or two ephimies regarding belief in resources allocation, but rarely would we change our underlying views from week to week. Mine came when I was 15, and I first started paying taxes. I decided I needed to inform myself of this complex mine field we call the tax system, so my solution was to buy a complicated, overly wordy and very intimidating hard cover book, “Social Issues: The Economics of Taxes and Public programs“. Without going into too much detail and causing you to click the little red X in the right hand corner, the book went over the basic premise of taxation, and how it attempts to solve current problems. It was conservative, talking about maximise allocation while minimising overheads. Even a 9th grader who’s discovered infomercials could understand how much savings there are to be made when the middle man becomes cut out!
Ever since, my path has stayed the same. I’ve noticed that this conservative bias appears everywhere, even in the simple economics courses I studied during my university days. My loathing for hippies and anyone who couldn’t prove something with numbers didn’t help in giving me a well rounded education, either. Fast forward to now, simplicity of numbers has begun to take a back seat. Although I’m still conservative, there’s more ideas I’m opening up too. I’m now starting to see, that somewhere, there’s a line. It might be fine. It might move from year to year. But to deny it exists is to deny the pursuit for perfection; a system which satisfies all who partake in it. Without getting too idealistic, to not pursue a goal like that is to not pursue anything worth while.

So, how does this tie into Ross Gittin’s? Every article I read, even if I disagree with his ideology, I find myself nodding my head, sipping my tea, and thinking, “you know, the man has a really good point.” Sometimes, like a chess game, someone makes a move that puts you into a check. You don’t lose the game - your strategy can go on - but sometimes the check causes you to have a rethink of your position. A change, of course, might be necessary. Perhaps you’re making the same large error, and it needs correction, because otherwise for the rest of the chess match you may be on the back foot. Intellectually, that’s kind of what Ross Gittin’s position does for me. It’s highly unlikely he’ll ever read this, but in that off-chance, I’d like to thank him, because I like to nod; it loosens my stiff neck early in the morning.

Oh, and before I forget, the article this week was about the WorkChoice reforms. Although he’s extreme in his views against it, one can’t argue with the facts he presents. I see both sides of the issue, but so does Ross, and unfortunately for Australia, I fear the Liberal party might be losing sight. That doesn’t mean they have an evil, pro-corporation heart, but it may mean their losing that touch that keeps their policies sane, and credible. Right before I left the Commonwealth bank, the banker’s union warned us that AWA contracts were on the way. I didn’t jump ship, for that reason, but part of the idea behind AWA’s is that you could if the contract wasn’t ‘fair’ enough. Then I think about the people I work with, and it’s then I realise that sometimes, the one economical safe guard in place; freedom of choice; isn’t really much of a safe guard after all.

One of my pet projects for this blog is to do an in depth review of one Australian publicly listed company every week. Choosing a company in vogue, I’d dig through news articles, press releases, finance reports, and opinions from those in the know. Although you could use it as a share trading idea, thats not really why I’m offering the information. Sometimes companies aren’t what they seem, and not necessarily in a bad way. Sometimes people don’t understand the company, and how it makes profits. The idea was kind of on the back burner till I heard Jim Cramer’s show and his trading advice was to sell Mac Bank.

Watching the video, it makes perfect sense to me as to why Macquarie Bank, often referred to as ‘the millionaires factory’, may be a great shorting (i.e, betting on a price drop) opportunity for investors. How mainstream would Cramer’s thoughts be throughout the Australian public or even the press? Its always interesting when one of our favourite son’s, whether it be One.Tel, Ansett, or HIH, run into operational difficulties, particularly to media response to such events. The reaction is almost as sad as the reality facing those who invested and worked for the company; that it was all a corporate cover up, and there was no way of knowing of the eminent collapse, except from a few obscure hindsight clues. Give me a break. Every company that fails shows a huge warning before hand. There’s only so much you can hide before common sense latches on to the puzzle pieces that are missing.

Mac Bank’s business model, although solid, is flawed in the current context of world finance. There is no denying this. I saw a flat road ahead for Mac Bank a year ago. Owning stable, high return assets, however, is never a business model thats going to take a u-turn, I thought. At the very least, it’ll keep profits stable and cash in off the hard work from the last 20 years of asset capitalisation. Cramer, although I’m not a huge fan, makes a great point about the business model.

Now, like all investment ideas, we play the waiting game. See you all in a year.

There’s one section of the free trade agreement that scared me the most out of the little 1023 page document. And wasn’t sweet refined bundaberg sugar (we do need this for some Australian made products, after all!) being excluded. No, it was the Intellectual Property law changes that were designed to polarise us closer to American laws, theoretically giving both countries greater freedom do go after intellectual property violators in each country. Intellectual property is very important in a capitalist society as a way of giving incentive for those to invest time and resources into intangible projects with the hopes of harvesting profits later on. Sueing single mothers who download two albums for $220 000, however, is without doubt, a total misuse of the theory behind intellectual property.

This type of thing normally wouldn’t bother me; another country, another law system, different context. But with our economic ties so strong, the next 5 years could see a big swing in how Australian courts view this kind of activity. And if you need more proof of how insane they are, read no further.

Money quote:
Gabriel asked if it was wrong for consumers to make copies of music which they have purchased, even just one copy. Pariser replied, “When an individual makes a copy of a song for himself, I suppose we can say he stole a song.” Making “a copy” of a purchased song is just “a nice way of saying ’steals just one copy’,” she said.

By the way, this includes downloading a CD you purchased on to your iPod. Makes total sense to me!

- Why doesn’t everyone run off with the banks money OR What do ya meean da banks outta money?!

- Finance players love to hunt in packs OR Why the hell am I paying so much rent?

- Excellent post on The Big Picture about why inflation measurement is so important.

Food and oil are usually the two commodities that the public find relevancy to their daily lives, and with good reason. Life becomes much more confounding when the two essential expenses; food and petrol, decide to double in price over the short term. Inflation, or to be more specific, stagflation now enters the foray, which starts factoring itself into all budget items, not just goods made from primary products, but also other items through increased wage and transportation costs. Without boring you with the usual economic dribble, out of control commodity prices are usually a big cooler on the economy, at least in the short term.

The SMH today debates several factors that seem to have been conspiring to lift raw food prices. They are:

- Weather patterns, namely the Australian Drought
- High oil prices, creating an opportunity for farmers to use food product as biofuel sources rather then human consumption
- Increasingly low inventories. “Research by the Commonwealth Bank says smaller wheat crops mean the “world is going to cut further into already dwindling inventories”. Inventories of wheat are likely to fall to about two months’ supply.”
- Increasing demand in Asia for more Western style foods.

Each is a fair point, but as most commodity traders would know, its only part of the picture. The fundamentals may create a bias, but its ultimatley the speculators who are driving the prices. This graph tells the story of the rise and rise of wheat:

Wheat is breaking out on the bull side, but fortunately, its doing so on less and less open interest (see the bottom bar). To read the chart properly, its important to understand what open interest is. Simplicity is easy in this case, as all open interest shows is how many futures contracts are trading the market. The lack of contracts is putting a temporary squeeze on prices, with momentum players (traders who ride big upward pushes) speculating further, driving the price high. Careful choices in langauge was used by fund manager, Dominic McCormick:

“McCormick says there will be huge corrections in prices along the way but the fundamentals are likely to remain to support higher prices over the long term. He says the main trend is the growth of Asian demand. Just as it is creating demand for resources, it is also the main driver of higher agricultural commodity prices.”

Translation: the fundamentals support the hypothesis of higher prices, but the short term value has gotten way out of hand. Food prices tend to fluxuate even more then oil/petrol prices. This is why the futures market was created in the first place; to leave consumers and producers out of the war zone. Higher prices may be a long term proposition, but a doubling of the long term mean would be highly unlikely.

Talk about Telstra has died down in the media somewhat, nearing almost a year since the company became completely private. Much less bad press has been written in this past year, apart from shareholders voicing concerns over growth in its share price and company value.

It seems odd to me that the government is only now interesting breaking up Telstra, post-privatisation. Talk has been pushed on to the Australian government by a New Zealand government decision to break up its big telecommunications player, Telecom NZ. The idea of breaking Telstra into three different units is not a new one, and has been discussed for as long as its public listing. Whether the government is actually serious or not is another question, but if they are, you would have to say that a serious lack of judgement in the 3rd installment float took place. Uprooting companies again after making some major changes not too long ago seems counterproductive to all stakeholders, at least in the short term. Just to be clear, I don’t mind the idea of a break up on the surface, but the reality is, this isn’t like carving a cake; there’s a huge administration and teething process that would go on, and its not like anyone could blame Telstra shareholders for losing patience with both the company and the government.

Money quote:
Macquarie Equities analyst Andrew Levy said a break-up would be a negative for Telstra, but not devastating, with the biggest impact likely to be on the firm’s five-year overhaul plan.

“With Telstra running flat chat to meet tough deadlines, imposing operational separation on the company may well lead to management putting back key deadlines,” he told clients.

Pushing back key deadlines doesn’t incense investors with optimism about growth prospects.