The Treasury Select Committee on Private Equity meets again

…tomorrow. Sadly, in the am, meaning I’ll be (one would hope) sound asleep. But it ought to be entertaining. I posted about the last meeting of theirs, and Graeme Wearden of the Guardian did a splendid job of playing Osric.

Since then, much has happened – not least a bundle of moves by Private Equity in the UK, not to mention unions. And then the new PM made friends with them, to boot. Congress’ sabre-rattling will give the committee more courage still – as though they needed it.

Anyway. I look forward to reading all about it upon waking. The Blackstone performance should be good. They’ve been out in front criticising the plans by Congress to un-sweetheart their deals a little (it’s popularly called the Blackstone Tax bill, now).

Upon the morrow.

Japan grows coral to keep China out

I don’t even know how to categorise such a story as this. Originally spotted at the wonderful BLDGBLOG (that’s Building Blog), here. The story? A Japanese expedition has started to create two coral islands in a storm-racked corner of the Pacific Ocean that seems destined to become a testing ground for renewed rivalry between Japan and China.

Known in Japanese as Okinotorishima, or “remote bird islands”, they are critical to Japan’s interests today. Tokyo says they mark an exclusive economic zone extending 200 miles from these rocky outcrops.

Japan lays claim to resources that include fishing, minerals, oil and gas within the area. It has already spent more than £300m to build huge cement barriers encircling the islets. No less than £25m was lavished on a titanium net to protect one reef.

China disputes the Japanese claim, though even Beijing’s mapmakers, who like to enclose swathes of the South China Sea within their borders, do not assert that China has a right to the territory. Instead, the Chinese simply say that they are not islands, just rocks.

They argue that under the Law of the Sea, the Japanese therefore have no right to mark an economic zone there or to stop Chinese exploration.

The islets have been ’sinking’, as it were, with increasing water levels and higher tides, etc. So the coral is there to keep those islets Japanese territory. What a novel idea! If Japan can turn these into something recognisably island, they get the water around it and all the natural resources they can find nearby. Seems a bit desperate, but as Geoff Manaugh pointed to in his BLDGBLOG post, the magazine New Scientist found that land as yet undeclared by any nation…doesn’t exist, anymore.

Every single piece of claimable land on Earth has been bagged by someone. There’s a strong incentive for doing so, as owning even a remote rock can significantly extend a nation’s access to marine resources such as oil and fish.

That’s except a piece of Antarctica, for whom land claims were frozen by treaty in 1961 – so you can’t have it, either. There’s always the moon? The fish don’t bite, but it sure is peaceful.

BLDGBLOG mentions are few uses for this (Japan’s sleight-of-hand, not the moon).

…perhaps it could mean that the U.S. will turn away from Treasury-depleting global military adventurism to spend money on more interesting projects within its own borders – funding a whole new series of Hawaiian islands, designed by Thom Mayne, that would extend Hawaii archipelagically toward Asia…

Greece, inspired, would then expand the Cyclades with a cluster of designer islands, slowly growing to dominate the Mediterranean once again – a kind of inverse-Odyssey in which the islands themselves do all the traveling…

Or maybe there’ll be a whole new terrestrial future in store for Scotland’s Outer Hebrides, or for the Isle of Man, or for Friesland – or perhaps even a whole new Nova Scotia, extending hundreds of nautical miles into the waters of the north Atlantic, a distant, fog-shrouded world of melancholic introspection, visited by poets…

My government could have use this back when trying to get their grubby hands on as much of the Greater Sunrise Gas Fields as they could. Just look at that:

A little work off the Christmas Islands and those gas and oil reservoirs would have been ours! Its reef surrounds are a hazard, as they are, too – what better than to turn them into island? And our government already nastied through their racist anti-asylum legislation kicking the Islands out of our migration zone, so it isn’t as though more boat people would be a problem. Hell – they could have been offered interminable detention before deportation, or crappy jobs on the rigs!

I guess it just takes a country whose scientists can actually pretend they’re killing whales for scientific bloody research to think up something like coral reef hair plugs.

There is – naturally – more than minerals and ore in play, though. From the BBC:

According to Yukie Yoshikawa, a scholar of international relations, the Chinese want to evict Japan so that they can have a free hand in the area in wartime.

“China wants freely to investigate its seabed for submarine operations in case of military conflict involving Taiwan,” she said in a paper for the Harvard Asia Quarterly.

The Americans support Japan in the dispute. If war broke out over Taiwan and the US intervened, its warships from Guam would probably have to sail across the area.

I have to say I’m down on the idea that this is at all relevant. Sure, the US will do anything that looks like holding in China (they do like their walls, the Americans). But given a China-Taiwan-US-Australia-New Zealand (those are the only treaties I know about. I’m sure Japan would be involved) war broke, who actually owns a stretch of water isn’t going to count for much, now is it? The US’ Pacific Fleet would gunboat its diplomacy, as usual, while dealing with a (probably unexectedly) decidely adversarial fleet of Chinese Song-class submarines (by which, by the by, the US Navy has already been embarassed).

I still bet Alexander Downer and John Howard wish that they’d thought of those reefs while East Timor was still trying to shrug off Suharto.

That Australian commodities boom

Speaking of this commodities boom, and while I was at the website of the Reserve Bank of Australia. News from the Reserve Bank is that the commodities index (all commodities) is down, slightly, for June:

Looking only at the annual data, one can see the boom of which I spoke, earlier:

The non-rural sector is driving it, and base metals in particular. A recent report by ABARE suggested the same is likely to continue.

So commodities are earning more while rural/farming earnings are down (although they’re expected to move up this year. Wool production is declining due to the drought, etc., but prices are high thanks to emerging market demand, and grain and seed prices and production are up). Apparently we’re even managing to deal with the bottle-necked ports. All of which goes into the optimism not only of Australian wage-earners and Australian government tax-earners (especially if this is all going on in an increasing ForEx market for the AUD), but the currency market-players who will hope to take their share from our increasing interest rates.

The highs of the Australian dollar

The Australian dollar is doing rather well, these days. It isn’t hard with regard to the US dollar (the GBP looks reaonably comfortable over USD2, these days), but we’re performing well overall. For the US and Europe (data from the Reserve Bank. The vertical lines are days upon which trading was closed), looking at monthly averages since the Euro floated:

Which, for the AUD to EUR exchange rate, more or less matches our Trade-Weighted Index:

Our performance against the USD is similar to that against the JPY, in that it isn’t related to the value of our trade, etc. but to currency speculation of various types.

As the coverage discusses, investment in the AUD is coming from so-called carry trades, funded with sales of JPY. Carry trades consist of selling Japanese debt (in this instance) and buying Australian debt. So borrowing money in Japan, with lower Japanese rates, and lending that money in Australia, which has higher interest rates (and an expectation of still higher rates, with our own economy almost at full employment, and a resources boom coming in from the expanding economies of China and India).

This relates to that warning from the Bank for International Settlements. Here are 3 currencies, relative to the Australian dollar – and only the Euro is mostly trading according to, well, trade. The US dollar is trading in part according to its own economy, and what we expect to become of it shortly (and that is a going to be in large part a function of financial ups and – more likely – downs), while our performance relative to the Japanese Yen is a function of currency speculation.

Which, one can argue, is fine – exchange rates are supposed to prevent arbitrage and, if they don’t correct themselves in response to these movements, people deserve to make money off of it. Meanwhile our more valuable dollar may help slow our economy, and vice-versa for the Japanese economy. Our Current Account Deficit (AUD15bn or so – about the price of a medium-sized leveraged buy-out, these days) won’t appreciate the efforts, though, nor will domestic Australian producers. I guess I just don’t like speculation. Macroeconomic management is hard enough without wankers seeking to be the next Soros making it more difficult.

Wesfarmers purchase of Coles “reassuringly old-fashioned”

I mentioned this below, but in passing. The Coles Group – supermarkets, liquor, general retail (2nd largest in Australia), was purchased for AUD22bn by another Australian group Wesfarmers (nothing much of interest in those links – trading has halted on both companies’ shares)

This is from the Financial Times:

There is something reassuringly old-fashioned about Australia’s biggest buy-out ever. The proposed purchase by Wesfarmers, the financial services and industrial conglomerate, of Coles Group, the country’s second-largest retailer, marks the marriage of two wholesome Australian names. There is no private equity involvement and most of the purchase price is being offered in scrip.

I love that expressiong because that was exactly my reaction. Wesfarmers is offering cash, that it has on-hand and that it will raise through a share issue. No private equity take-over (as I said, two groups, Blackstone and the Carlyle Group, hadn’t been able to raise the debt for their bids), no leveraging. Just an honest takeover between folks.

Bear Stearns laying out their coffee spoons

Sadly, a reference to a poem that also contains the lines “In a minute there is time/For decisions and revisions which a minute will reverse.”

Bear Stearns will, by mid-July, have added up the consequences of their cruise through the hamburger stand.

I enjoyed this part:

The process of calculating the funds’ net asset value is taking longer than usual because the securities in which the funds invested are thinly traded and the market for them has been volatile, according to the Journal, which cited a letter to investors from Bear Stearns’ asset-management arm.

No kidding. This time, the rest of us are nearly as interested as the funds’ poor investors (no, not that definition of ‘poor’). Amongst other things the sound of two Bear Stearns funds falling is the first proper sound we’ve yet heard in these woods, and people are interested in getting an idea about what to think of other similarly-exposed funds. But ‘thinly-traded’ and ‘volatile’ is a kindness, I should think. I reckon interested parties include potential investors of the Carlyle Group’s delayed-in-offering-publicly fund Carlyle Capital:

The fund, called Carlyle Capital, will mainly invest in AAA-rated residential mortgage-backed securities, but also in loans, junk bonds and collateralized debt obligations.

One has trouble deciding whether the Carlyle Group got lucky or unlucky with their timing. They’re certainly very active these days. They signed that deal for Allison Transmission (5.6bn, shared with Onex), taking over Manor Care (USD6.3bn), another float of partly-owned Time Share Advertising & Communications (suggesting that their plans to take Allison Transmission public may be good ones indeed – they took a piece of Time Share only last year). They had been interested in the BCE deal, and now seem to be going for Virgin Media (for around USD11bn). I’m not sure I follow the logic that these foreign telco companies are under-valued, relative to their US equivalents. Could the US telcos not in fact be over-valued?

One can at least see where comparisons to sharks come in. The Carlyle Group is clearly afraid to stop swimming. Not every is going for them though – they weren’t able to raise the debt to buy the Coles Group, now going to another Australian company for AUD22bn. The funny thing is, by comparison the Group’s purchases aren’t all that big (they manage USD59bn at the moment).

Hey, WordPress has advertising…kind of

Upon checking my blogstats this morning (it has become a weird obsession. I think I should be become a trader for a year to get finance and watching numbers out of my system), I noticed an outgoing link was an advertisement – but I don’t have advertisements. Nobody does, because WordPress won’t let you (this is how you know I still have hardly any readers. I’d cash in if I did).

Eventually I found this:

Since the ad test about 6 weeks ago there have been ads. Where? We very occassionally show Adsense (contextual text ads) on post and tag pages.

Why? To allow us to focus on free features in addition to paid and to offset costs of rapidly rising traffic.

There are two questions to think about if this comes as a surprise to you: Have I ever seen these ads? Have my readers? (Ask them!)

The ad code tries hard not to intrude or show ads to regular readers, which means a small percentage of page views. Apparently it works, since we haven’t gotten many feedbacks on them. Perhaps a better favorite would be “really, really unobtrusive ads.”

Even though you will probably never see an ad, if you did happen to come across one I don’t want it to be a surprise. The comments last time we discussed ads were fairly heated but I wanted to make sure everyone had accurate information.

What a neat system. Apparently advertising is still being discussed, but I get the impression the WordPress folk aren’t decided upon how they’d like them – who has control over advertising, etc. Which is fair enough. Personally I think whoever saw and followed that one advertisement should get a prize.