The Time Has Come (the Walrus said) Archives

And now for something completely different

My friend and colleague M, from the cold northern side of the planet (and who wishes to remain anonymous) sent me this picture:

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The small black spot you can see is a fisherman. He and the car are on a frozen lake in Finland a couple of days ago.

Oh yes, and they are 2 kilometres from the lake shore.

Bit of a change to dry and warm in Australia. :)

The lake is fresh water. A similar lake not far away supplies all of the drinking water for Helsinki – population about 1 million.

Speeling, wot spealing?

One of those things that really gets up the ole hooter is poor spelling, especially from people who should know better.

Todays pet peeves:

DRAW – When used in the context of a fing ya put ya stuff in.

It’s not a DRAW, it’s a DRAWER, even if it is pronounced the same.

DRAW is something ya do wif a pencil on a bit o paper.

DRAWER is the aforementioned fing-fer-puttin-stuff-inta. Or, ever more archaic, it’s ya Grandmas underwear (or perhaps they are Bloomers).

And…

LOOSE - when used in the context of You Win I Loose.

It’s not LOOSE, it’s LOSE.

LOOSE implies you are somewhat promiscuous, or (at the stretch of a having a couple of screws loose) have a couple of kangaroos runnin’ around in yer top paddock.

LOSE on the other hand is what happens when you misplace something, or when you don’t win some game, contest or competition.

In this case, the excuse of phonetic spelling loses points because LOOSE is pronounced like NOOSE, and LOSE is pronounced like OOZE.

More effort required chaps! Savvy?

Oh what the hell…

I’ve been tagged by the delightful Kath for one a them Meme thingies. Grr.

This blog is for me to rant and rave about things that drive me mad, not about me… me… me…. But what the hell.

Seeing as I’m orf in Melbourne for a couple of days at a conference, I’ve pre-posted this to appear while I’m away. (Evil laugh).

Todays exciting topic is: Seven random and weird facts.

1. Milk. I’m not a big milk drinker, it seems I’ve become lactose intolerant, though I’ve never had a formal test to confirm or deny. Not long after I started work, about 3.5 million years ago, I did the same as many others and had a big flavoured milk at lunch. Talk about feeling sick! Nothing twigged though, until years later when I used to have the obligatory bowl of cereal for brekky, and then feel sick, bloated and gassy until about 10am. After subjecting myself to this torture for another 5 or so years, somebody else described their problems and the effect of cutting out milk – or switching to low lactose milk. I did the same and the trouble cleared up in a few days. These days I’ve given up the low lactose milk as well, and just have a bit of plain milk in tea, and that’s about it. The thought of drinking 600 ml of flavoured milk makes me feel ill.

2. First serious job was a spot of nepotism by my father, working over summers for the electricity authority pushing lawnmowers, pulling up weeds and so on. I did this 2 summers in a row. Shovelling 20 tons of mulch off the back of a truck with a pitchfork on a 35 degree day was not especially intellectually stimulating. But in that job I learned how to plant things, how to run out drip irrigation pipe, changed my share of lawn mower blades, and when things got really boring I would mentally calculated how much I was being paid, in dollars per hour, and then cents per minute. Then count off the minutes and figure out how many dollars (or cents) had gone by. My brother did the same thing a year or two later, for one summer only, and hated every moment of it.

3. First really serious professional job was working with a friend from uni, for a guy he knew. We built some electronic thingies and made some software to automate the operation of his chicken hatchery. The amount you can do, and learn, in 10 weeks of summer holidays is astounding. It was installed and ran happily for several years. Later we worked for the same guy writing software – to manage a piggery. I must have been about 19 or 20, something like that. There is nothing quite like driving to the other side of Murray Bridge to see the piggies and then going home to roast pork for lunch. Strangely enough, piggies in a pen smell much like roast pork. It took years for the smells to become disassociated again. Those holiday jobs paid for my first car. Looking back now I realise how fortunate I was to get that kind of work experience, it comes very rarely.

4. First car. Was a brand spanking new Ford Laser, KB, in post-box red. I paid cash for it, and had almost nothing left to use for putting petrol in it. But I didn’t want a second hand car. More fool me, probably one of the worst decisions ever. The first and only new car I’ll ever own. The value of a new car falls by about 20% the moment you drive it out of the showroom, and that money can be put to use for better things. I did keep and drive that car for over 16 years, and sold it when the constant need for maintenance drove me mad. When it reached the point of spending a whole weekend doing repairs, enough was enough.

5. Study and all that. I spent FIVE years at university, travelling in on the bus each day. That five years was about 2 years too much, I was thoroughly sick of it by the end. But that did get me two degrees, one with honours, and an offer to come back for year 6 to do honours in the other. Which I gracefully declined. There was some special arrangement, since gone I think because they didn’t like it, where I did the first 3 years of a 4 year engineering degree. Then took a year off to do final year of a maths / science degree (there being so much overlap), then back for final year engineering. Seeing as my year 12 score saw me barely scrape in, I was kinda chuffed for pulling this off. Mind you, it required massive study and hard work and a completely zero social life for the first 4 years. I finally got the hang of the studying thing and breezed through the final year. The best part was getting out. These days, if in town and we park in the right place, we can walk through the grounds of the university. It feels completely foreign, which seems odd after it being such a bit part of my life for a long, long time.

6. Worst ever bout of laughing. All sorts of things make me laugh. Sometimes I’m the only one to see the humour, which probably says more about me than anybody else. The worst time ever ever ever was at the aforementioned university, where I was sitting in a very boring Physics lecture about quantum friction dynamics, or something equally exciting. The lecturer was small, balding, and spoke quietly. We utterly relied on what he wrote because otherwise you got completely lost. Somebody leaned over and said “what’s that blob” – pointing at the board. To which another quick-witted friend replied “that’s the lecturer”. That was it, I was off. Uncontrollable giggling which I could not quite get out of. I was painfully, helplessly giggling for the next 1/2 hour. Poor guy must have wondered what on earth was going on. Hmmm. I suppose you had to be there.

7. Thin. When younger I was very thin. OK, skinny. OK, skin & bone. First job after university was for a large Commonwealth Government department, where you had to get prodded and examined in an obligatory medical. They are not supposed to tell you the results, but this doctor did. His advice: gain weight. I was underweight, that means more than 20% below the mean. Nothing I did for the next 10 years or so made any difference. The last 10 years have been wildly different. Now I’m technically a normal weight for my age, the downside to the girth expanding has been the need to go and buy new trousers. Seeing as I detest shopping for clothes, I normally buy 2 pairs of trousers at a time. It’s very frustrating though to end up with two pairs that are fine in all respects apart from not fitting. It’s not just the girth, though. Things from when I got married over 20 years ago don’t fit either (yes, I still have a few clothes from those days), which means I’ve expanded across the shoulders as well. I put a lot of that down to the years of physical work on weekends after we built a house. Years and years of digging holes, building retaining walls and laying bricks. Or perhaps that’s just wishful thinking as well.

——-

NOW… the way these thingies are supposed to work is that I have to tag some other folk. Seeing as half the blog-folk won’t bother, and the half that would might be grumpy about it, I’m not going to push that side.

Banks ‘n Loans – Revisited

Duncan has a bit of a spray at banks raising their loan rates at greater than the increases being applied by the Reserve Bank.

But actually, if you look at both history and the current environment, its hardly surprising.

The History Lesson

Once upon a time, a long time ago, when knights were bold and maidens were fair… you get the idea. Anyhow, if you wanted a home loan you went to a bank. The banks raised funds from depositors and in wholesale markets (the money market and so on). The banks had to make their profit from the Spread - the difference between what they loaned money for, and what they paid depositors or on the wholesale market.

Then, a few years ago, along came deregulation and the emergence of the non-bank lenders. These guys ONLY raised wholesale money, either in the wholesale markets or by borrowing huge sums from a big bank and then slicing and dicing it into little chunks. The non-bank lenders also packaged mortgages into loan books and sold them off (called Securitising), leading to the stories of the mythical Belgian Dentists who earned a tidy income from owning a portfolio of Australian home loans.

The emergence of the non-bank lenders gave the banks serious competition. Over the last 15 years, the spread (that’s the difference between the loan and the deposit rates) has roughly halved.

And now folks… the Current Environment

Back in about August 2007, a bunch of clever dicks in the USA suddenly realised the Emporer had no clothes.

Until then, they had been making large numbers of home loans to people who could not pay. These were of an even lower standard than the Australian “low-doc” loans. These were to people who never had a hope in hell of paying. In the parlance, they were “sub-prime” loans. But the game was about making loans and collecting fees and to hell with tomorrow.

houseofcards.jpgTo help keep the merry-go-round spinning merrily, these loans were packaged (securitised, as above) and sold off all over the place. A bunch of even cleverer folks made managed funds out of packages of these crappy loans, and sold the funds. And on and on the game went. Some of these low quality loans were tucked and folded so many times they even became classed as high quality, such was the obscurity! Lots of yummy fees collected, but eventually the house of cards came a-falling down. Along the way, a few methaphors were mixed as well.

All it took was a bit of an economic slowdown in the USA, and those people who struggled to may their mortgages simply stopped paying. A lot just walked out of their homes. In that kind of environment, there are no buyers so house prices have tumbled, and an economic decline spiral has started. When the borrowers don’t pay, suddenly all those people with sub-prime loans, and funds, and what-not stop receiving an income and want to know why.

Poof! Like Merlin waving the magic wand, the light of realisation suddenly appears as people realise their “investment” was merely an illusion.

Like they have been in everything else, the politicians and leaders in the USA are completely incompetent – even if they knew what to do, they can’t fix this mess overnight. They allowed it to happen over a period of many years, and many years is what it will take to fix. At the moment they are in denial – just listen to President Bush.

In this environment, there is no confidence in any markets for anybody who wants to borrow money. There is still money available to borrowers, just a lot less of it, at much higher interest rates.

Because the lenders have generally departed, leaving only a cloud of dust and the sound of receding running shoes, the unravelling is spreading. Now, any company with large amounts of short term debt is considered suspect, irrespective of the assurances they give about having sources of funding lined up. (Witness the declines of Allco, ABC Learning, Asciano, RAMS and many many more). Funding is harder to get, and bankers are about the only sources left – and they are nervous.

So we’ve seen massive declines in the share market, as companies with large loans (called “highly geared”) have had to reassure investors that they can survive. They try, but it’s not working very well. The loss of confidence is contagious.

For the poor old home owner, the tables have turned. The non-bank lenders have no easy sources of funds – apart from our friends the big banks. They can’t borrow on the wholesale market – because there isn’t one for the likes of them. The only wholesale money market left is for the banks – big, solid, and dependable. And the rates being charged are higher.

The banks don’t source all the funds they loan out from depositors, much has to come from those wholesale markets. When the rates there go up, the banks only have two choices: absorb it, reducing returns to shareholders; or pass them on to customers, increasing their pain.

And that is why the banks are raising rates at greater than the rate set by the Reserve Bank.

Cos the money they are loaning out is costing them more.

Hot as hell

I don’t like the heat.

Our current Adelaide heat-wave began a week ago, so we’ve now had 7 days in a row of over 35 degrees.

Yesterday was 39, today 40.

Current forecast is for more of the same until at least Friday.

:(

Banks ‘n Loans

This has to be my quote of the week:

Warren Buffet in the Berkshire Hathaway annual report and letter to shareholders:

Some major financial institutions have, however, experienced staggering problems because they engaged in the “weakened lending practices” I described in last year’s letter. John Stumpf, CEO of Wells Fargo, aptly dissected the recent behavior of many lenders: “It is interesting that the industry has invented new ways to lose money when the old ways seemed to work just fine.

(My emphasis)

And this isn’t far behind:

Now let’s move to the gruesome. The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down.

The airline industry’s demand for capital ever since that first flight has been insatiable. Investors have poured money into a bottomless pit, attracted by growth when they should have been repelled by it.

:)

After a hard nite…

Wadda you do after a hard night out?

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