The consumer watchdog is barking that the likes of Meta, owner of Facebook, is dodging tax but it can’t prove it. People ask me: How do these big US companies get away with this? Well, it starts with an old US law of life that says “anything is legal if 100 businessman say it is!”

The big tech companies such as Meta, Apple, Google, Microsoft, Intel and others have set up operations in Ireland, where the company tax rate is very low. This year, the Australian Computer Society informed us that “Microsoft, which took $6.3 billion from Australian customers during fiscal 2021-22, told the ATO that 93.6 per cent of that was not taxable – ultimately paying just $120.28 million, for an effective tax rate of 1.9 per cent of gross profits.”

The AFR’s Sam Buckingham-Jones has looked at Meta’s argument for its low tax bill and a spokeswoman from the company came up with the following: “Tax is just one part of the equation, and we are proud of the economic activity that Meta generates directly through our own investments and through the thousands of Australian businesses that have grown on our platforms.” That’s like a parent saying how proud they are that their child can drive faster than most drivers, after they’ve smashed the car!

Interestingly, the Australian Competition and Consumer Commission (ACCC) says it’s hard to work out how well Meta’s Facebook and Instagram works out for advertisers, “because it was difficult to verify how accurate their claims were”.

The consumer regulator (ACCC) wants the Government to change laws to make what these big companies do and what they generate in revenue and profit to be more transparent, and the Australian Tax Office (ATO) would support that.

What about the businesses and consumers that lose money to the likes of Meta because they permit scams to exist and flourish on their social media platforms? This week, one of my financial planning clients informed me that he saw I was ‘advertising’ stock tip deals on Facebook, which had nothing to do with me or my business.

This is about the fourth time it has happened since early May, and despite the ACCC and ASIC representing me to stop this happening, it’s still going on! Given I personally don’t spend money with Facebook, how hard would it be for Meta in a high-tech world to stop any ad that uses the words — “Peter Switzer”?

I’m sure if Mark Zuckerberg was continuously and consistently maligned on Facebook, it would get stopped. I have to wonder if the Meta spokeswoman is proud of the scamming that happens in that “equation” she talked about?

And I wonder if she’s proud of the fact that Meta is pulling out of the News Media Bargaining Code a law that compelled Facebook and Google to negotiate commercial deals with news publishers in 2021 for using their content to attract customers’ eyes, ears and business!

In contrast, at least Google is playing fair, with Buckingham-Jones reporting that it “has been quietly renewing its agreements.”

In 2023, Facebook Australia reported revenue of $209 million with a net profit of $47.1 million. Undoubtedly, the ACCC sees this like the scary fairytale Hansel and Gretel. But for Australia, there’s no happy ending.

On those revenue numbers, Guzman y Gomez and their 30 stores generate three and a half times more revenue!
How do they get away with it? Try these bananas:
1. Expensive lawyers and big accounting firms protect them.
2. In 2019, Reuters reported that then President Donald Trump came up with this when Italy was trying to impose a digital tax on big tech companies: Trump “…believes this is an unfair discrimination on U.S. companies since they are the primary companies that would be affected by such a tax,” the official said. “If such targeting of U.S. companies is done, he would have no choice but to retaliate to protect U.S. businesses.”
3. Scared politicians.
4. It’s called transfer pricing, where the head office in Ireland does work for the Australian branch but they over-charge, over-service and effectively smuggle profit out of Australia as costs, which becomes profit in the Irish headquarters.
There’s another big pay off because the Irish company tax rate is 12.5%, while ours is 30%.
A guy I know who’s building his business in the US said there are gangster companies out there making it hard for him. Now I’m starting to see what he means.

The bad news is that there are stock market manipulators who conspire to drive up share prices and then sell them to make a quick profit. It’s called pumping and dumping. But the good news is that the corporate cop — the Australian Securities and Investments Commission (ASIC) — has these shysters in court.
Historically, ASIC has been accused of not being effective in pursuing market-connected crimes but the regulator’s chairman, Joe Longo, wants to make it clear that this cop on the beat means business.

For a long time, it has been argued by some quarters that ASIC hasn’t got enough scalps when it comes to crimes orchestrated in financial markets and services. However, Mr Longo wants to change that impression.
“Market manipulation is illegal. Pump-and-dump schemes are a form of financial fraud, eroding investor wealth, threatening the integrity of our markets and potentially the Australian economy more broadly,” the AFR reported that he said in a statement.
As a consequence, Syed Yusuf, Larissa Quinlan, Emma Summer and Kurt Stuart were before the court this week following pump and dump conspiracies, they allegedly were connected to during the pandemic lockdown era.

Over a three-week period, nine small-cap companies (mainly resource stocks) saw their share prices pumped up and then, after a significant rise, the stock was dumped. All up, the group is accused of making $85,000 over three weeks of pumping and dumping.
How did the organisers get a couple of thousand market players to join in the scam? The answer is by using Telegram channels that Wikipedia tells us are “…one-way feeds where the channel owner or admins can post content while followers can only read, react and comment, if comments have been enabled. Channels can be created for broadcasting messages to an unlimited number of subscribers.”

Ah yes, just another criminal opportunity brought to us by the Internet and the failure of politicians to care that there are pirates out there on the ‘open seas’ raiding people’s wealth that no one seems to care about. So, Joe Longo and ASIC are at least doing something, however it needs help and that’s where politicians and the Government need to step up.
The AFR’s team of writers made it clear that the regulator needs help from Canberra with the following: “ASIC will also use the case to illustrate the delay caused by the chronic under-resourcing of the Commonwealth Director of Public Prosecutions, which was handed ASIC’s brief of evidence in December 2022.”

As an example of what the group in court were accused of, take the case of Australasian Gold Limited, whose shares opened up 9.8% at 28 cents, before rising to 30 cents before the pumping was rammed up via mentions on a Telegram channel, which saw the stock quickly hit 47 cents.

Comments on the Telegram site indicate that some of the many participants who helped the pumping thought it was legal to do it! However, they were clearly uninformed patsies who might have made money by getting out ahead of the dumping, but it shows ASIC needs more money/resources to perform its job and clearly better education for market participants looks overdue!
In an age where young people can’t buy property, many are using the stock market to try and build wealth. But it means they could easily be victims of ‘wise guys’ and ‘fast buck’ merchants. Personally, I worry about some of the cryptocurrency ads that are obviously targeted at the young, who want to make money in something “cool” like crypto.

This is an area where the regulator should be looking at the marketing of these products. In the world of gambling, the media now has to remind punters that “you are about to lose…”, which is the kind of warning that should be imposed on some of the investment products now being marketed.

What happens to these pumpers and dumpers should be interesting. Rene Rivkin, the famous entrepreneur, investor, investment adviser and stockbroker was convicted of insider trading in 2003 and sentenced to nine months of periodic detention.

He was caught trading shares in Qantas after the chairman of Impulse, Gerry McGowan, told him of a pending merger with the flying kangaroo! He profited $2,664.94 and did nine months in jail!
Those before the court on these pumping and dumping charges could be fined a million dollars and could cop 15 years jail!

The entry price into a Sydney home is too high for anyone on the median income and it could be a decade before that changes for the better. This implies the supply of housing has to increase faster than demand but the latest news on that front says the Albanese goal of 1.2 million homes by 2030 will fall short by, wait for it, a quarter of a million!
The SMH’s Josefine Ganko looked at the research of Mustapha Bangura from the University of Technology Sydney and Chyi Lin Lee of the University of New South Wales and “found that there is nowhere in Greater Sydney where someone on the median part-time or full-time income can afford to buy a property.”

According to the 2021 Census, the median income for someone in Sydney was $117,716, while the latest average income found by PayScale was $82,000. This news comes as we learn that Sydney’s median house value has climbed to almost $1.5 million, while Canberra ($986,000), Brisbane ($953,000) and Melbourne ($949,000) are all above $900,000.
The only way to beat the house price/income challenge right now is for a homebuyer either to be on an above median pay or they have supplemental income, and that’s where the bank of mum and dad has become crucial.

“While we expected the issue of housing affordability to be severe for part-time employment, we found that full-time employees are also significantly affected,” Lee told the SMH. “This highlights the widespread housing affordability crisis and the need for comprehensive policy solutions.”

The researchers think the problem will persist until the 2030s, however, that has to rest on a big improvement in the supply of housing compared to the increase in demand. And that’s where the Albanese Government’s goal of 1.2 million homes built by 2030 is a high priority. But the SMH’s Shane Wright says the latest predictions say this goal will come up 260,000 short.
That’s a big miss in on anyone’s count and it shows how we need politicians, who are housing champions at both national and state levels to make sure heaven, hell and earth is moved to get more homes built.

Wright today has revealed that “…forecasts from Oxford Economics, released on Monday, show that despite the housing construction market enjoying a pick-up from next year as the Reserve Bank starts to cut official interest rates, the government will miss its ambitious home target by more than 20 per cent.”

This revelation underlines how the Government’s commitment to getting inflation down is not only important to help the RBA to cut rates but to get young people into homes of their own.
What is a huge worry is that Oxford Economics says the Government’s $30 billion plus spend on its housing policy, along with an extra billion dollars for the states to fast-track infrastructure such as sewers and roads, $9.3 billion for more social housing and its $10 billion Housing Australia Future Fund, won’t be enough to effectively get rid of the housing crisis!
So, the next question is this: who nationally and at a state level is going to do something about it?

If Peter Dutton doesn’t come up with a credible policy to fix our housing mess, then he mustn’t want to be PM bad enough. This along with the cost of living, could be a critically important issue at the next election.

President Joe Biden has made the right choice to pull out of the race for the White House, which since that disastrous debate and the attempted assassination of Donald Trump, has become more an expected walkover than a race! Mr Biden has endorsed his Vice President Kamala Harris, but she is unlikely to be supported by Democrats at their convention in Chicago from August 19 to 22.

So, how will the financial markets respond to this big and sensible decision by Joe Biden?

Following the assassination attempt, stocks were down for the week. While some of that was linked to the expectation of the first interest rate cut in September, which has encouraged investors to take profits by selling stocks that did well recently, to buy stocks that will benefit from lower interest rates. It’s called rotation out of certain companies or sectors into others.

The S&P 500 dropped 2.56%, while the Nasdaq lost 4.11%. But the Dow Jones index actually was up 0.37%, which indicates that non-tech companies will be more popular as interest rates fall because they have customers who might spend more as rates fall.

However, there would have to be some “Donald Trump is certain to win”, following that shot and that could’ve helped the overall indexes drop as well.

For example, Tesla’s share price fell, and we know Mr Trump favours scrapping EV subsidies, which would likely hurt Tesla. He will also slam tariffs on Chinese products, which will include those made by US producers who make ‘stuff’ in China.

On the flipside, Elon Musk has supported Trump and that’s not just with words. In the US it also means money!

On Trump tariffs, Citi believes the most important potential impact on commodity markets stems from Trump’s stance of tariffs. Last week, Trump announced a plan proposing a 60% tariff on US imports from China, and a universal baseline 10% tariff on imports from all other countries.

Clearly, companies negatively affected would’ve seen their share price negatively affected as well, while others would’ve been beneficiaries of these intended policy hits. A Biden replacement would not impose such tariffs. It will be interesting to see how the market responds to his resignation from the race.

We might have to wait to see who takes his place before there’s a significant market reaction.

Citi believes this wouldn’t be good for commodities and we sell commodities — iron ore, coppers, wheat, wool, etc. Meanwhile, gold and silver should do well because by the time these tariffs come into law, it could be a year’s time and interest rates will be on the way down. Lower interest rates are good for the likes of gold.

A trade war could lead to a rush for the US dollar, seen as a safe haven and that would send our dollar down. That’s good for us selling exports but it would be inflationary, as our imports become dearer with a weaker dollar.

A Democrat is looking like a better option for Australia, as it would reduce the need for the Albanese Government to take sides in the expected trade war with China. Last time that happened, PM Morrison quickly supported Trump. Not long after, China hit us with tariffs on wine, coal, barley, lobsters and other products.

Overall, Wall Street wouldn’t have a big negative reaction to a new President Trump, as he sees the stock market going up as an endorsement of his popularity. On the other hand, a Democrat would be seen as a more reliable President to read, understand and invest with, which market players prefer.

The trick for the Democrats is to come up with a genuine rival for Donald Trump or else he’ll be a shoo-in and 2025 could be a trickier year for investing. It will be helped by falling US interest rates, but the Trump tariffs could be a big negative for an export-oriented country like Australia, whose best customer is China!

By the way, BHP fell 4.79% last week, which could be a little bit of Trump fear and a larger bit being China’s slow economic recovery, which data showed recently. A strong China with no trade wars would be better for Australia.

Yesterday brought two bad pieces of news. First, the June jobs report brought too many jobs and unemployment increased because more people went looking for work. The second and more important sad news was an Australian legend of economics, CommSec’s Craig James, went public with his admission that he’s now battling Parkinson’s disease.

Mayoclinic.org explains the medical challenge Craig faces this way: “Parkinson's disease is a progressive disorder that affects the nervous system and the parts of the body controlled by the nerves. Symptoms start slowly. The first symptom may be a barely noticeable tremor in just one hand. Tremors are common, but the disorder also may cause stiffness or slowing of movement.

“In the early stages of Parkinson's disease, your face may show little or no expression. Your arms may not swing when you walk. Your speech may become soft or slurred. Parkinson's disease symptoms worsen as your condition progresses over time.”

I’m very familiar with Parkinson’s because my wife’s father, Frank Jordan, another champion bloke, later in life had to cope with the disease with the help of his family.

Anyone who has seen that great movie about Michael J. Fox called Still that explains how Parkinson’s disease progressively attacked his normal acting and social life, understands what my old mate faces.

My historical action after a big economic number such as yesterday’s 50,200 new jobs being created, when 20,000 was tipped and unemployment increased by a measly by 0.05% from 4% to 4.05%, would be to read Craig’s take on the number.

And if I needed to test out my ‘outside the square’ view on the number and the implications for interest rates, I’d give him a call. Over the years, both he and AMP’s Shane Oliver were my ‘go-to’ economists and if my calls have been good, I can publicly thank them for sharing their views and knowledge. (Off the record, my calls have been pretty good!)

Yesterday I didn’t know about Craig’s condition, which was revealed in The Daily Mail Australia this morning, after he went public on Linkedin.

Aside from updating Australia on the latest on economics, which he pioneered for CommSec in the early 2000s, Craig kicked off as an economist at the State Bank of New South Wales, and then became chief economist at The Colonial Group before writing for The Australian Financial Review.

He was then headhunted by CommSec which was run by our business partner Paul Rickard, who claims he gave Craig his start on TV. It was great for Craig, great for the fledgling online stockbroking business that got the right exposure on heavily watched news services, and it was great for the audiences who gained important information from him.

And Craig became great at explaining ‘stuff’ for normal people (which is an education service that he and I both enjoyed doing).

A few years back he and I travelled the country for a CBA roadshow for their small business customers. He did the economics presentations, and I threw my two pence worth in, as well as looked at the lessons from great small business legends. Then I’d interview Craig.

I remember two amusing takes from Craig. The first was on Gen Y staff, about which he said: “Training your staff is really important. If you have some Gen Y employees, who’ve been with you for a long time, you know, three or four weeks….” Yep, that always drew a laugh from businessowners.

At the time, the CBA had just launched their “CAN” commercials. With that he shared this aside, as he talked about the outlook for wages and inflation: “I know the bank is now saying “yes we CAN” to customers but when I asked for a pay increase, I got “no we CAN’T!” That too brought a big laugh! These are impressive efforts for a profession not known for funny gags!

Craig isn’t only a champion economist and a competitive sprinter on the track, he’s a good family man and the best of human beings, who I know will take on the challenges of Parkinson’s Disease.

If anyone can slow down the negatives with this disease it will be Craig, and I’ll be pestering for his views on the economy for as long as he’ll take calls and respond to my emails. And we’ll all be better off because of it.

By the way, his CommSec colleague, Ryan Felsman, sent me an email on the job numbers and the best message I took from the analysis was the following: “Today’s labour market data slightly shifted investors' expectations towards another cash rate hike from the RBA in August, with futures implying a 20% probability from 12% before.” Note: 20% is still a small probability.

My view is that the ‘make or break’ statistic for the RBA and those worrying about another rate rise will be the CPI out later this month. If it’s too high, the RBA could easily give us another hike. I hope not for economic and social reasons, but the data isn’t making it easy for the RBA.

I also hope I’ll be able to share my views on the economy with Craig James for as long as possible. Knowing Craig, I bet I’ll get plenty of time.

PS: In 2011, Craig made the final cut for Men’s Health magazine’s Men’s Health Man award, which looked for the best of Aussie males for fitness, work, relationships, etc. So, it’s not just me who says he’s a champion bloke, the publication that Switzer Media & Publishing now owns in Australia agreed with me!

Back on Tuesday 23 January there was posted on Switzer Daily an article by me titled “Trump will not get a second term” https://switzer.com.au/the-experts/malcolm-mackerras/trump-will-not-get-a-second-term/. I find myself now somewhat regretting writing that article - although it did contain some interesting historical information. The question raised, however, remains, and it is this: to what extent can we compare the 1884, 1888 and 1892 presidential elections with those of 2016, 2020 and 2024?

One similarity quickly springs to mind. The Democrat Grover Cleveland (!885-89 and 1893-97) is presently the only former President to have served two non-consecutive terms. In my article “Nixon and Trump: two failed Presidents” https://switzer.com.au/the-experts/malcolm-mackerras/donald-trump-the-worst-most-failed-us-president/  I showed a table of presidential greatness as measured by historians. It rated Cleveland as “high average”, coming in at number 13 out of 44 past presidents. He was the 24^th and 26^th President, the Americans counting him as two men. By contrast with Cleveland, Donald Trump sits at number 44 out of 44 past Presidents. In other words, American historians rate Trump as the worst former US President, a view with which I agree.

It is now clear that Trump will get a second term after all. He will be described as number 45 and number 47, with Joe Biden as the 46^th President. How will historians then rate Trump? I think I would find myself compelled to place him at number 14, just one rank below Cleveland. That would make Democrat James Buchanan (1857-61) and Republican Warren Harding (1921-23) the two worst Presidents.

Readers who go to my January article will note the title I gave to it. That title was “Trump will not get a second term.” I have never previously predicted in public print who would be elected on Tuesday 5 November 2024 - only who would not be. Here I must confess to wishful thinking. While in private conversation I would typically say that Biden would be re-elected in 2024 I was hoping all along that Biden would give way to Kamala Harris. That was quite a strange hope to have.

It certainly shows how superior our Australian democratic system is to the American. Yet many Americans would claim their system is more democratic. The highest office in the US is the President and every American voter participates in that choice, both in the primaries (which determine who would be each party’s candidate) and at the general election in November. The highest office in Australia, by contrast, is the prime minister and he or she is chosen by an electorate to be their local member and by the party to lead it. Who are we to say that our system is more democratic? My answer to the question is to assert that our system is not more democratic than the American, but it works much better. That is why at Australian referendums the result we so often get is: “If it ain’t broke, don’t fix it”, that being a suitable Americanism to describe our situation. Australia is the lucky country.

So, what about this fond hope I have had that Biden would give way to Harris?  Clearly, I have not been the only election analyst to entertain such a hope. As recently as last Saturday morning, the Democratic election guru and strategist James Carville was quoted by two journalists in The Weekend Australian on pages 17 and 22. The full quote is: “Joe Biden is going to be out of the 2024 presidential race. Whether he is ready to admit it or not. His pleas on Monday to congressional Democrats for support will not unite the party behind him. Mr Biden says he’s staying in the race, but it’s only a matter of time before Democrat pressure and public and private polling lead him to exit the race. The jig is up, and the sooner Mr Biden and the Democratic leaders accept this, the better. We need to move forward.” To see that quote in the paper see Paul Kelly on page 22.

The problem is the very democracy of the Americans. Biden won a whole heap of primaries giving him all those delegates to the Democratic National Convention at Chicago in August. Are they to be ignored in the pretence that really the American system can be converted into the Australian? Idiotic though the American system is that is the reality.

This article is titled “Thursday 27 June and Saturday !3 July were days that gave Trump the 2024 election.” The former date is when the debate took place between Biden and Trump at Atlanta, Georgia. It was shown on Australian television on the morning of Friday 28 June and universally thought to have been a disaster for Biden. Last Saturday 13 July was when the assassination attempt was made on Trump’s life at Butler, Pennsylvania. The debate effectively killed Biden, the hope of the Democratic Party being alive only by virtue of the fond one mentioned above. Then the shooting last Saturday meant that Harris will not want to hold the poisoned chalice of being the Democratic candidate. Nor would Gretchen Whitmer. Nor would Gavin Newsom.

So, how will the presidency of Biden be seen by historians? I would say that he has been an excellent president but that he has bungled the politics of the 2024 election as comprehensively as could be imagined. That is why he has been left holding the poisoned chalice. So, no one else now wants to be the Democratic candidate in 2024. Historians will see it that way. He has made his bed, and he must lie upon it. He must also contend with the opinion of historians that he behaved selfishly by continuing his campaign. He should never have sought a second term. Once it became clear that he was not fit for a second term he should have released his delegates at the August convention.

And what about Trump? I see him as someone of questionable character and with radical policies who wants the presidency so that he can pardon himself. Like his friend Vladimir Putin he does not care about ordinary people. They are losers to him. For Putin they are cannon fodder. For Trump they are voters fit to be manipulated. His achievement has been to place himself above the law with help from his mates on the Supreme Court which he has stacked in the past and will stack in the future.

For the Democratic Party there is one reason for hope about the future. Trump will not be able to be a candidate in 2028 so both big parties will go through the democratic processes of primaries and the rest. The person who wins the nomination of the Republican Party (presumably Vice-President Vance) will carry the baggage of Trump who will surely suffer a disaster at the mid-term 2026 elections as big as the disaster of the 2018 midterms. The Democratic Party candidate, by contrast, will be in a pretty good position. Mark my words: the second Trump aberration will be just as bad for America as the first. Therefore, the Republican candidate in 2028 will be rejected just as comprehensively by the voters as Trump was in 2020.

Some day in October I’ll contribute another article for Switzer Daily giving details of my predictions. For the moment, however, I am predicting that the electoral college will divide 327 votes for Trump and 211 for Biden. In 2020 the division was 306 for Biden and 232 for Trump.

Excuse me for having a memory for history but when I hear the Greens encouraging the nation’s Treasurer Jim Chalmers to cancel the Reserve Bank if it raises interest rates next month, it made me think about how the legendary radio personality John Laws described the Greens when they became a federal political party in the 1990s.

Laws described them as “watermelons: green on the outside, red on the in!” And looking at the party’s recent list of demands, the Greens have been making this left-leaning mob looks a tad more like the communists of the Russian Revolution!

Led by Adam Bandt, who has progressively lurched more to the left in recent years, he has Treasury spokesman Senator Nick McKim, who made his name recently threatening to send Woolworth’s CEO Brad Banducci to jail for not answering a question on the company’s return on equity!

But wait, there’s more and The Australian’s Joe Kelly has today reported on the list of leftist demands the Greens’ economics hitman has put on the Government. And remember, the PM and Jim Chalmers rely on these guys to get legislation passed. Here’s Nick’s list:

1. He wants the Treasurer to overturn a rate rise decision from the RBA, if it happens in August.
2. He wants the Government to give up on its Budget Surplus.
3. He wants the Productivity Commission to evaluate the privatisation policies of the past 50 years, started by Labor legends Bob Hawke and Paul Keating.
4. He wants a “corporate super profits tax” to reduce demand and inflation.
5. He would bump up JobSeeker and other income support payments from government.
6. He wouldn’t support cuts to the National Disability Insurance Scheme.

Interestingly, McKim apparently has section 11 of the Reserve Bank Act on his side. This says that the Treasurer can “override decisions made by the board of the RBA, including decisions on interest rates”!

This is what McKim said to Joe Kelly: “The mechanics of section 11 are that the treasurer can advise … the governor-general that is, to issue an order to the RBA board. And the RBA board has to comply with that order. Dr Chalmers … should be making it very clear to the RBA that he is prepared to use section 11 to overrule them if necessary”.

While that might be legally true, if Dr Chalmers took Nick’s advice, then this is what would happen:

1. The dollar would be dumped by overseas players, making imports dearer and pushing up inflation.
2. Overseas lenders would be afraid to lend to us and would see us as a potential “banana republic”, as Paul Keating once inferred could happen here in a radio interview with John Laws, when unions were opposing his proposed economic reforms. After that reference, the dollar fell under 50 US cents!
3. Labor would be smashed at the next election!

Nick McKim is driven by a leftist goal to ‘take from the richer to give to the poorer’, which many Robin Hood fans would support. But this isn’t England in the year 1160! But in a globally interdependent economy, where we’re small in population and big borrowers of the savings of other countries, we are expected to play ball like other sensible capitalist economies.

If we start overriding central banks and imposing excessive taxes on successful businesses and people, the economic consequences of ‘nice’ ideas could come back to bite the very people Nick McKim wants to help.

As the dad in the movie The Castle would say of Nick’s goals: “Tell him, his dreamin’!

It was late April this year when the local airline Bonza went through another Groundhog Day, with the low-cost airline grounded and heading for voluntary administration, crashlanding 300 workers out of a job. Now the CEO of Qantas has affirmed what we’ve already worked out — a fourth airline for Australia is ‘pie in the sky’ stuff.

History has shown three airlines i.e., Qantas, Virgin and Rex can be profitable, especially if they charge high prices to customers, but as soon as a new kid on the block lands, it’s only a matter of time before something gives.

Ansett died when Virgin Blue and Impulse Airlines started eating its lunch. Impulse has gone. So has Compass. The sad story screams: fourth airline? Go fly a kite!

New boss of the flying kangaroo, Vicky Hudson, effectively said the same thing when in Perth to launch the airlines new Perth to Paris non-stop service in 17 hours. This runs ahead of Project Sunrise, which will deliver customers a 22-hour non-stop journey from our east coast airports to New York and Europe.

Summing up our airline predicament, Hudson told those attending the launch of this Perth-Paris innovation the following: “If you think about why three airlines really struggle, it’s a number of things – our population; the US has 250 million people, we have 26 million and spread between the economics of being a viable airline, it’s incredibly challenging because it’s capital intensive.”

The SMH’s Amelia McGuire reports that Federal Transport Minister Catherine King will soon release a white paper that outlines the airline policy for the country to 2050. You have to hope the history of failed airlines and the failure of pricing policies that favour consumers means that we need a new approach to aviation in this special country, that Vanessa Hudson defined.

There needs to be better regulation such that entrants to the airline space are restricted, so airlines can be profitable but not exploitative when it comes to what they charge customers.

If the current airlines want protection from the fallout of failed airlines, then they must play fair when it comes to pricing.

Fallout from failed airlines? “Qantas and its rival Virgin Australia have poured millions into accommodating stranded Bonza passengers whose travel plans were dashed when it entered voluntary administration in April,” McGuire reminded us.

Against this, as the AFR reported late last year, you must also remember that the “…Melbourne to Sydney flight corridor has retained its status as the fifth-busiest route in the world, with more than 9.3 million travellers making the journey in 2023.” Out of that has to be scope for good profits for airlines and fair prices for customers. All we need is someone in a position of authority to make it happen!

I suspect most ‘normal people who don’t get up at 5am each morning and surf US business TV channels don’t know that the stock market sectors that are expected to do well for the year or so ahead include energy, materials, small caps, emerging economies and commodities.

When it comes to commodities, apart from our usual food exports, we’re now learning that Australia is the biggest exporter of goat meat in the world!

According to a surprising story on theguardian.com, we now sell goats to the value of $235 million, and 2,364,307 goats went to our abattoir last year! While that’s only 0.4% of global production, because we’re not great fans of goat meat (consuming only 9% of the country’s herd), it makes us number one in goat exports. Most countries who raise goats keep them in the country, but we export ours.

Let’s put this into perspective when it comes to our top exports. We export about $214 million worth of goats but compare that to this from Meat & Livestock Australia: “In 2023, Australia exported a total volume of 1.84 million shipped weight tonnes of red meat to over 100 countries worth a record A$17.08 bn for the 12 months ending November 2023.”

If you’re thinking: “What the f…!”, then like me, you aren’t a property owner selling beef, but I do know a lot of ‘famous’ business-builders who went to cattle after making a squillion in the big end of town.

My old mate and advertising king, Harold Mitchell, who passed away earlier this year did exactly that after selling out of his former businesses. And then as the AFR’s Matt Cranston reported in 2017, he “…sold his Yougawalla Pastoral Company, with its three main cattle stations spanning more than 850,000 hectares and about 45,000 head of cattle” for $70 million!

Beef is big business when commodities are in favour but this surprising news about our goat exports is still a significant revelation. Our exports of seafood come in around $1.4 billion, which means goats are about 15% of that industry.

OK, so it’s small beer in the world of Aussie exports but we are a big exporter because we have a small population, have enormous resources and our export income explains why we’re rated 10^th in the world for income per head. We’re 12^th in the world when it comes to GDP (or total production), which is significant when you remember that we’re 55^th in the world when it comes to population.

Back to goats and here are some surprising revelations:

1. They’re feral goats.
2. They’re found all over Australia, but the biggest population is in north-west NSW.
3. Australia produces 35% of all goat meat exports, and accounts for 44% of the global export value of goat meat.
4. The US is our biggest customer.
5. The Muslim and Hispanic communities are big consumers of goat meat.
6. The NSW Government has put $1.2 million into a Go Ahead with Goats program. “Our goat producers in western NSW are at the forefront of the goat industry and the NSW government is supporting them with a number of resources so goat producers and stakeholders can take their goat business and the industry to the next level,” the NSW agriculture minister, Tara Moriarty, told The Guardian’s Mandy McKeesick.

However, what gets the goat of environmental groups is that these animals are bush munchers on a grand scale. “Goats are one of the worst invasive species because they stop regeneration of bushland, they overgraze [vegetation], they outcompete with native animals and they erode soils and stream banks,” the Invasive Species Council’s advocacy director, Jack Gough, says.

The way ahead is likely to be a greater development of goats on managed properties and the reduction of the feral goat herds. But that might be easier said than done.

There is an old goat quote that goes like this: “Happiness isn't happiness without a violin-playing goat.” I don’t know the origins of this but given the financial results, the goat herders in northwest NSW are pretty happy about their goats, even without violins!

 

One of my financial planning clients saw an ABC commentator saying and showing enough to ‘frighten’ him to ask whether he should remain exposed to the stock market. This client had just made close to 15% for the year for his super fund and I guess he had to ask the question.

His return was good considering the Australian stock market’s capital gain (as measured by the S&P/ASX 200) was up only 9.05% for the year. The market is by definition 100% exposed to stocks but my client is now only 70% exposed to stocks. At the start of the year, he was less exposed but because his portfolio has done so well, he now has more assets in stocks (or growth assets).

Over the past two years, the overall local market is up about 15%, which isn’t enough to spook me. Compared to the US stock market, our shares have lagged behind. In contrast, Wall Street’s S&P 500 index is up 24.64% for the past year.  Over the past two years, it’s up over 45%!

Now the ABC report focussed on some expert who was predicting that negative times were heading for Wall Street and undoubtedly the big tech stocks called the Magnificent Seven (M7) i.e., Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA, and Tesla.

These have not only seen their own stock prices boom ever since there was talk of rate cuts in the US in 2023, they’ve also driven the S&P 500 index up as well because of their size and influence on that index.

Over the same time, the Nasdaq (that captures most of the hi-tech companies in its index) was up around, wait for it, 60%!

Take these seven stocks out and the overall US stock market hasn’t done as well. In February, forbes.com reported the following: “Dating back to the end of 2022, the median return of the 493 S&P components not included in the magnificent seven is 13%, far below the S&P's 35% return owing to the magnificent seven’s average return of 154%”.

So, while the US market rise numbers look worryingly high, the other companies have only had moderate rises and, like many of our companies, are overdue for a rise. Therefore, the next question has to be: what will help the other 493 stocks gain over the next year or two, to render the ABC’s scary report less worrying?

Many of these other non-M7 companies were smacked (share price-wise) when the Yanks copped 11 interest rate rises and they’ve been waiting for a time when lower inflation in the US would drive rates down.

Part of the reason why US stocks generally have done well in recent weeks is the belief that the Federal Reserve is very likely to cut rates in September. The central bank boss, Jerome Powell, has reacted to good inflation data and he left market messages such as:

1. The data will drive the rates decision.
2. The US election won’t delay a cut if the data says one is warranted.
3. Leaving rates too high for too long could be bad for the US economy, implying an expected soft landing without a recession could end up being a hard landing instead.

Powell isn’t a softie, and we’ll hear from him this week when he speaks at the Economic Club of Washington. Big market players will hang off every word. There’s also a swag of economic data out this week in the US, including retail sales, industrial production and the leading index of the US economy.

Right now, the money markets expect there is a 93% chance of a rate cut in the US in September, which could be the start of another leg up for US stocks as lower interest rates will be good for many of the 493 companies that have struggled since rates were pushed up.

At the same time, there could be selling of the M7 stocks to buy those companies in the 493 group, so there could be ‘ups and downs’ for the index, but I can’t see the M7 stocks being dumped so hard that the US market crashes. And it’s crashes that my client should worry about.

Right now, the M7group and some other tech companies have a tailwind for their stock prices called Artificial Intelligence or AI. This is in its early stages. AI companies will benefit from lower interest rates as well and so will their customers.

Historically, stock markets rise when interest rates are cut, especially so if there’s little fear about a looming recession.

And I’m not alone in my optimism for stocks for the next year or so.

Chief investment strategist, John Stoltzfus, at US investment bank Oppenheimer Holdings, raised his year-end S&P 500 target to 5900 from 5500. That index is now 5615.35. “Stoltzfus noted that artificial intelligence has sparked a mindset shift in the market that’s driven ‘not so much by fear and greed but a need to invest for intermediate to longer term goals. This change could benefit the 11 S&P 500 sectors as this ‘innovation cycle’ shows signs of being both ‘cyclical and secular coupled with cross generational demographic needs’,” he told CNBC.

Meanwhile, history has shown when stock markets hit all-time highs (like now), they keep hitting those highs until scary things happen, such as rising rates, a recession or a ‘surprise’ from financial markets.

Right now, I expect some ‘ups and downs’ for stocks but on a rising trend, as lower interest rates help lots of companies and consumers in the US. Eventually, we’ll see lower inflation and falling interest rates and that will lift our stock market, but we’ll benefit from Wall Street lifting on those lower rates.

This time next year, with a new US President, I could say “enough is enough” for being long stocks. Then I could easily go defensive and income-chasing. But right now, I wouldn’t be afraid of reports of negatives ahead from an ABC commenatator.