Colliwobbles ……. mark two September 29, 2010

Hi All,

Make no mistake Collingwood is due but here to hoping that we can extend this glorious record for another year ….. go Sainters

Colliwobbles!

A happy day to all

Client Lessons September 29, 2010

There is a lot to be said about what we learn in our daily interactions with clients. It is also fair to say that we often learn just as much from clients as they learn from us. I will share such wisdom that a client recently handed over so kindly, when we were talking about the subject of families, children and life in general .

Enjoy the time with your children, especially things like school plays, pantomimes, concerts, athletics carnivals, football matches, soccer games, swimming lessons, cricket matches, bike rides, guitar lessons, school assembly – Pretty soon this time in your child’s life and in fact in your life will be gone forever and these are the things you just never had the time for but the things you will miss the most.

Thanks for a wonderful insight Champ

Telstra ……. What an absolute mess September 27, 2010

Morning All,

It is hard not be incredibly frustrated by the happenings at Telstra.

Yes Telstra has its fair share of critics and rightfully so but unfortunately for investors much of Telstra’s fate is not being managed by its boardroom but rather by politicians who are using the company and its future direction as a political football.

In today’s piece we refer to an article written by Stephen Bartholomeusz who we believe has summarised the current happenings perfectly.

Has there ever been a company battling so much uncertainty on as many fronts as Telstra?

The latest implosion in the Telstra share price suggests the market has given up grappling with the implications of the myriad of internal and external issues Telstra has been confronted with, with not even the near-guarantee of a double-digit yield providing a floor under the price.

Some of the uncertainties were touched on by an apparently somewhat frustrated Telstra’s chief financial officer, John Stanhope yesterday.

Telstra doesn’t know whether its proposed $11 billion deal with NBN Co and the government to gradually shut down its fixed line networks and transfer its customers across to the NBN will eventuate, given the need for parliamentary approval and the unpredictable shape of the current parliament.

For NBN Co to become a wholesale open-access monopoly there will need to be an over-ride to the Trade Practices Act enacted that enables the deal, which would see Telstra shutting down competitive infrastructure in return for the $11 billion of net present value, and which would potentially create disincentives for any other operator to use or deploy their own broadband infrastructure.

Can the government get that kind of legislation through the Senate before the Greens gain the balance of power next July? Telstra doesn’t know.

Telstra doesn’t know what impact, if any, the Government’s deal with the independents to prioritise the roll-out of the NBN in regional areas might have on the deal with NBN Co because NBN Co has yet to work through the implications and Telstra has yet to have that conversation with NBN Co.

A reasonable assumption would be that building more of the network first in high-cost low-density less-affluent regional areas would reduce NBN Co’s early cash flows and adversely affect its own economics, with flow-on effects to the value it would attribute, and be able to afford, to the customers Telstra transfers.

Conversely, Telstra would lose its least contestable customer base first, albeit the highest cost-to-serve, and the big payments for the biggest and most dense slabs of its customers would be delayed, reducing the net present value of the income stream from NBN Co.

Telstra doesn’t know whether parliament will pass the legislation forcing a form of separation of its retail and wholesale businesses on it.

It may still not know the fate and final form of any of the key elements of the legislative framework that will govern its future until this time next year. Having already experienced more than a year of legislative uncertainty, that’s a dispiriting and destabilising prospect, albeit one not of Telstra’s making.

It also doesn’t know the existing regulatory regime might do to it – or the economics of the NBN and the value of its deal with NBN Co – while it waits for Canberra to put in place the legislative foundations for a new fixed line future.

Last week the Australian Competition and Consumer Commission issued a draft report and indicative prices for a completely new approach to fixed line services and the method under which access prices for Telstra’s competitors will be set over the next few years, abandoning the long-standing theoretical approach to pricing for a ‘’building block’’ approach based on actual historical costs that would significant lower wholesale line rental prices and further damage Telstra’s already weakening fixed line revenues.

If the draft approach is confirmed in the commission’s final report it might also impact the economics of the NBN and lower the value of Telstra’s customers to NBN Co further. That’s another issue to be analysed and discussed by Telstra and NBN Co.

The legislative and regulatory uncertainties and risks aren’t capable of being controlled by Telstra but add to the already difficult task of trying to manage the group through dramatic changes to the structure of its sector – the implosion in its fixed line revenue base and intense competition in the exploding wireless broadband segment – while also wrestling with an ambitious and costly attempt to change the group’s culture in anticipation of a post-NBN environment.

It is difficult to imagine a more destructive mix of external and internal challenges and such a broad and substantial range of uncertainties.

The market, still faced with a protracted period of further uncertainty – Stanhope says the group is still ‘’aiming’’ to put the NBN Co deal to its shareholders by June next year but isn’t certain it will be able to meet that timetable – appears to have almost given up trying to work its way through the complexities, despite the $4 billion to $5 billion of cash flow a year Telstra will continue to generate even with its $1 billion investment in enhanced competitiveness and the internal change program this year.

It is unclear how the spiral of disappointment and fear can be arrested, let alone reversed, given that so much of it is driven by what happens in Canberra rather than within Telstra’s head office.

In light of Telstra’s plight it does bring into question the merits of purchasing government assets once they come to market.

Happy Days to All

Grand Final ……. Of Course we have got an Opinion …… Go Saints September 24, 2010

With less than 24 hours to go, we thought it would be right if we put our own spin on Tomorrow’s AFL Grand Final between Collingwood & St Kilda.

a) It’s fairly safe to assume that Collingwood supporters will be going for the Pies.

b) And it’s also fairly safe to assume that St. Kilda supporters will be joined by the rest of mankind in going for the Saints.

c) And for all these Pies supporters who think they are dead certainties to win (ie that is most of you) remember this little gem from Wikipedia

Colliwobbles

The “Colliwobbles” refers to the Collingwood Football Club’s apparent penchant for losing grand finals over a 32 year period between 1958 and 1990.

During this premiership drought, fans endured nine fruitless grand finals (1960, 1964, 1966, 1970, 1977 (drawn, then lost in a replay the following week), 1979, 1980, 1981).

The term “Colliwobbles” was to enter the Victorian vocabulary to signify a choking phenomenon.

Much to the chagrin of the majority of Aussie rules fans, Essendon (bloody typical but Daniher’s hit on Brown was a doozy) allowed Collingwood an easy grand final victory in 1990 to break the premiership hoodoo, The good news however is that the dreaded hoodoo that has haunted Collingwood is back as they have since lost two consecutive Grand Finals to the Brisbane Lions in 2002 and 2003.

d) While it is fair to say that we are no statistician’s 1 in 12 since 1959 is a pretty average ratio.

e) The last time we had a drought and a hung parliament was in 1966 …….. and guess who won their first and only premiership (drum roll please) St Kilda and yes they beat Collingwood by 1 point.

So what’s our take ……. Go the Mighty Saints!

Tony Abbott ……. a dangerous game indeed September 24, 2010

Morning All,

Regardless what side of the political divide you sit on, one can’t help feel frustrated by the current political impasse. After much deliberation the cross benches, minus the mad hatter, have decided to throw their support behind Labor, thereby creating a minority government. In reaching this decision, the cross benches worked exceptionally hard on the concept of parliamentary reform …… something that I think we all would agree is required if we consider the stupidity of the past.

One aspect of this reform related to the role of speaker and it required both of the major parties agree that the speaker’s vote would be paired thereby removing this as a potential problem.

Prior to the cross benches making their nomination, both major parties supported this and for the first time in a long time it appeared that we were entering a new environment, call it consensual politics, one where party influences would be put to one side for the benefit of the nation.

Well one week on and it is fair to say that consensus is now out of the window and we are back to square one if Tony Abbott’s actions are anything to go by.

As detailed by Peter Van Onselen of the Australian Tony Abbott will either bring down the government or himself as he presses to destroy the workability of the new parliament. It is an interesting tactical decision.

According to Van Olselen Abbott is already hiding behind the thin veneer that he is compelled to oppose Speaker pairing for constitutional reasons, despite having previously struck an agreement to do so.

The real reason, however, is political.

Abbott would like the public to believe that constitutional questions about Speaker pairing is a concern that has emerged only now; no one should fall for that.

Abbott’s manager of opposition business, Christopher Pyne, brokered the reforms with Labor’s Anthony Albanese and the rural independents. Pyne’s closest friend in the parliament is George Brandis SC, the shadow attorney-general, who advised Abbott that pairing the Speaker would be unconstitutional.

The Solicitor-General disagreed but did acknowledge that it would be an informal agreement.

That was enough for the Coalition to walk away from what had previously been agreed.

It is hard to believe Brandis did not alert Pyne to his view before signing up to the reforms. At any rate, Pyne knows his way around parliamentary rules as well as anyone. He would surely have known of the question marks surrounding pairing the Speaker before agreeing to reforms.

The bottom line is the Coalition was prepared to pair the Speaker if it were in government but won’t agree to it now it is not. That’s what most people like to call double standards.

Would Labor have been as lacking in honour had it not won government? Perhaps, but we will never know.

What we do know is that Abbott, and his shadow cabinet, by agreeing with this decision, have failed the honour test.

But that doesn’t necessarily mean they will fail tactically. Abbott hopes that the spectre of confusion about the Speaker will play into perceptions that this is just another Labor stuff-up. It’s unfair, but it might just work.

Given the above one can’t help feel that this is a case of sour grapes. While one can’t blame the liberals for trying to exploit an opportunity, the risk here is that this could very quickly backfire as the electorate is becoming decidedly bored.

All in all it poses for some interesting times ahead.

A great day to all

Luke

GO SAINTS!

Interest Pressures a coming ……. September 23, 2010

Morning All,

It would appear that the RBA’s recent statement to hold fire has changed. According to their recent policy statement, it is fair to say that their views have now changed. For your reading pleasure attached is an article as provided by our resident in house economist Dr Ron Woods. Enjoy Interest Rate Pressures are a coming…….

RBA holds fire September 7, 2010

The Reserve Bank has left interest rates on hold, giving borrowers another month to breathe easy over mortgage repayments.

Reserve Bank – Will they or won’t they? September 6, 2010

With the reserve bank set to meet tomorrow, speculation has yet again surfaced about the next move for interest rates. Today we have attached a timely article written by our resident economist Dr Ron Woods:

Dr Ron Woods – Interest Rate Discussion

Happy Reading!

Shane

Stronger markets. September 6, 2010

The world economy is hanging in there. The chinese economy has continued to grow at double -dight levels seemingly independent of the weakening US economy. Our Australian economy has seen a solid reporting season and strong local economic data. We should se the Aussie market open stronger this week. Who needs a governemt?

Political Standstill September 3, 2010

Is it just me or is the country functioning better without an elected Government? That said if it comes to down to the Mad Katter … all one can say is God Bless Us All but jeez it will be fun.

Great day to all

Luke