A glance in the rear view mirror...
Every so often Hedge Clippings likes to track through our prior meanderings. There are a number of reasons for this - not wanting to repeat oneself too often and thus become tedious is one, or regurgitate last week's views and be considered forgetful, or worse, being another. However now and again we like to check that our weekly gibber is not overly gibberish, and that what we might have written in the past remains relevant.
Of course, if one of our past editions was shown to be completely incorrect we might not highlight the fact. However, in this case we looked at a "Hedge Clippings" from early June when we mentioned, amongst other things, the possibility that North Korea might overstep the mark.
Far be it from us to try to predict who will win the chest beating exercise between North Korea's presidential nutter, Kim Jong-un and his US counterpart, Donald Trump, but it would seem that neither is renowned for stepping back from a fight, even if in Kim's case it is one that numerically only one side can win, while everyone else also loses. However it has finally jolted markets and the VIX out of their low interest rate stupor. Kim cares not a jot for world opinion, and based on his previous rhetoric, Trump not a lot more. However, we would agree with Trump that a line has to be drawn in the sand somewhere, and as previous US administrations have failed to do so, we are reminded of the old saying that "people behave the way they're allowed to".
In the same edition we also commented on the seeming malaise in Australian politics, and this week's decision (or abdication of one) to resolve the same sex marriage question by holding a non binding, non-compulsory, postal opinion poll seems to personify the issue. Without wanting to enter the debate on either side, the process seems to be symptomatic of the current disconnect between business confidence and household sentiment.
Business confidence is high as a result of low interest rates, low inflation, low wages growth,little in the way of labour shortages, and the use of technology to reduce costs. The other side of the coin is that consumer sentiment is low due to high housing costs, low wages growth, uncertain employment prospects, and looming high utility bills. However we suspect that's not all that is troubling the average household. There would seem to be a lack of clear national direction, which is also affecting the widespread optimism that was apparent when Tony Abbott was removed as PM, and could it be a reflection of the fact - or perception - that in reality he's still there pulling strings?
Finally, while on the subject of malaise, a word on corporate governance at the big end of town in a week where it was announced that in the US since the start of the GFC 10 years ago, financial institutions have paid fines totaling US$150 billion for the various misdeeds of management. More correctly the shareholders of those financial institutions have presumably paid the $150 billion in fines. Full marks therefore to the board of the CBA for at least slapping the wrist of a few senior executives. However, in reality, and as one who has spent some considerable time and effort to keep up to date with the AUSTRAC Anti Money Laundering (AML) provisions, those responsible at CBA must have either been asleep on the job, or incompetent, (or both) to have permitted such extensive and long running cash deposits to have occurred right under their noses.
