Thursday, 23 August 2012

Moving right along . . . cancel my meetings!

Qantas posted it's first loss since being privatised 17 years ago. In the process they canceled orders for 35 Boeing 787 Dreamliners. It was was only last week that I was detailing the problems with the Dreamliner project and so now these problems have come home to roost in the form of an airline unable to see growth in it's operations that would justify the risk that this purchase would make to the balance sheet. Game over then. The high AUD, stubborn fixed costs and strong competition have done their bit. The CEO will now have little choice but to re-examine a breakup of the domestic and international operations and a scaling down of the core brand in favour of the less burdensome Jet Star. It's a sorry tale and without the cache of being a "hub" destination Qantas remains reliant on a north / South (Asia / Australia) axis that is starting to slow ever more obviously. There are some positives as Qantas gets 430mil or so in compensation from Boeing because of the delays. It kind of reminds me of when the Korean shipbuilders kept upgrading earnings due to retained deposits from cancelled ships in 2008 . . . it's all a bit like kissing your sister really.

One other thing I missed writing about yesterday as I was on the road was the BHP decision to suspend it's Olympic Damn project. For months now Jac Nasser (BHP Chairman) has been happy to tell all and sundry that the Australian Government's increasing intransigence to several key elements of the project may lead to this. The high AUD is very much part of the calculations, never mind the China slowdown. If the costs balloon, as they have, then the risk premium becomes too large. Sorry, game over 2.

Australia of course is not alone in having an unstable cost base. The recent strife in South Africa at one of Lonmin's Platinum mines brought into stark relief the pay gap between the miners and the owners. I don't know if 500 dollars a month is enough for poor uneducated black South Africans to risk their lives for, but I do know that the government there is in power because these are its people and therefore will act. Game over 3?

Readers of this blog have now that I've always said that Glencore’s chief, Ivan Glasenberg was trying to basically pinch Xstrata from the shareholders on the cheap. 

I don't begrudge him for being a hard man when it comes to deals, but I also know that he's smart enough to walk away without exposing himself or his company to a long fight with the Qataris who now own 12% of the company. I find the seeming acquiescence of Xstrata CEO Mick Davis somewhat puzzling and respectfully suggest that the board review the CEO's position. Game over 4.

Enough mining misery for the day. Instead lets look at the FOMC minutes where the Fed hammered on about how bad the economy is and how prepared they were to step in. 

"Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery," the minutes said.

Asia believed them and basically bought some risk. Maybe markets are relying on the greater fool theory coming into Jackson Hole in a weeks time? It's tough call and the data has turned slightly more positive in the weeks since these minutes were actually written. Remember, will Bernanke risk using up his remaining powder now?

What does this man know that we don't? I she the smiling assassin ready to creep out of the shadows?

Alberto Contador is only 5 seconds behind in the GC at Vuelta. Granted Froome has taken each of the attacks Contador has put to him in these opening stages with studied respect, but the cavalier Spaniard in my mind has some of his old bounce back and may yet do to Froome et al what Cobo did to Sky last year. Time will tell.

I can't wait to get back on my bike(s). This morning I was invited on yet another ride. It surprises me that while in Sydney you should see obvious evidence of the growth in cycling yet pure anger on behald of motorists. The local broadsheet today hosted an Op-Ed piece entitled: Bike haters parked in the Jurassic. In the piece the writer suggested that motorists needed to get over their constant carping about the evils of bike riding and embrace the alternative. The responses were pretty vitriolic to say the least. My personal favourite was from "Opposed":

"It’s about time cyclists stopped holding our city to randsom! Us drivers paid for and built this city, name one good thing a cyclist has ever done? All they do is break the law, clog up our roads making more conjestion, and push parking prices through the roof!
At least Barry and Mr Guy are standing up for OUR RIGHTS! I’m very happy they are opposing this policy, and all the other policies, as any good opposition leader should do!
Aug 23, 2012, 08:39AM"

Oh, my what can you do when you read something like this. "Us drivers" . . . aside from the poor grammar the suggestion that the arrival of the First Fleet in 1788 saw hundreds of convicts offloaded in SUV's really does push absurdity to new highs. To say the car culture dominates in Australia and Sydney in particular is a classic understatement. Is it the same in other low density sprawls such as L.A.? Honestly . . . Game Over Mr. Opposed of Campbelltown.


No comments:

Post a Comment