Here's my edition of Top 10 links from around the Internet at 10:00 am today. Sorry about the missing one last week. We now have a Monday-Wednesday-Friday schedule for Top 10.
Bernard will be back with his version this Wednesday. We will have another guest posting on Friday.
As always, we welcome your additions in the comments below or via email to david.chaston@interest.co.nz.
See all previous Top 10s here.
1. The war between Swiss banks and the US tax system
As time goes on and the investigations about banker activity drill down, the details are truly mind-boggling.
HSBC's Mexican operations in laundering drug money has become the stuff of legend - not to mention gaming trade sanctions.
And now Credit Suisse's operations to subvert the US tax system are equal to them, it seems.
The US Senate has been holding hearings. The investigations of a Permanent Subcommittee of senators who oversee Homeland Security have become an angry group after what they found.
On Tuesday the committee had released a 178-page report documenting how Credit Suisse helped US citizens escape taxes using systems which the Republican senator John McCain said were like something out of "a spy novel".
According to the report, bankers filed false visa applications pretending they were tourists and drummed up business at sponsored golf events. One customer's bank statements were passed to him hidden inside a copy of Sports Illustrated.
Clients who visited the bank in Switzerland were whisked to meetings in a button-less, remote-controlled lift where they were advised on the best way to circumvent US tax laws.
About 1,800 Credit Suisse staff worked on the accounts, but only 10 people have been disciplined and none had been sacked, the committee heard.
2. Mike Smith sells
ANZ supremo Mike Smith has sold 36.8% of his shares in ANZ Bank realising some AU$17 million which will partly be used to buy to buy property. (Part will also be used to pay some tax.)
This is interesting in a couple of ways; a bank CEO quitting more than a third of his holding in 'his' bank, and a banker selling high-yielding bank shares to buy property.
I wonder if his property investments will be leveraged with debt? Can't imagine they wouldn't be. Leverage works better with property than shares.
In addition, after the sale Smith also has another 856,000 'performance rights' shares on top of his remaining 932,000 regular shares. He is the highest paid Aussie bank CEO, earning more than AU$10 million in 2013 in 'total remuneration'.
Smith's sell down is a tiny footnote on the issue of banker salaries last week. The main news was from HSBC in Britain: rather than comply with the EU bonus limits, HSBC simply chose to pay its top 600 managers the bonus equivalents as part of their regular salary. Presumably they now don't have to 'achieve' the sort of pre-agreed targets that a bonus system implies.
The Guardian has their spin on the HSBC move, which is a fun read although as it is the Guardian, a spin alert is warranted:
"Dear shareholder, this new EU law capping bonuses is silly so we've decided to exploit the enormous and very obvious loophole. Stuff Brussels: we're not paying ourselves less. Your co-operation in this matter is greatly appreciated."
That was not, of course, how HSBC presented its new remuneration policy and system of "fixed-pay allowances", which will ensure no senior executive is disadvantaged by meddlesome politicians in Brussels. Instead, there was the usual line about the need to remain "competitive" with banks not domiciled in the EU.
3. Serious structural problems
Australia is facing up to some tough choices. Their newly elected Treasurer Joe Hockey has used the world stage to warn that Australia will run out of money for health and education, and must consider unpopular options such as lifting the retirement age to 70, introducing big new taxes, and redesigning the economic system.
''The starting point is, if our health, welfare and education systems stay exactly the same, Australia is going to run out of money to pay for them,'' Mr Hockey said ahead of the G20 forum in Sydney.
''We will either have to have a massive increase in taxes - and that means fewer jobs at the end of the day - or we are going to have to look at ways that we can restructure the system to make it sustainable.''
4. Death to machines?
Even today's Luddite sympathisers have given up trying to figure out how to cope with the next wave sweeping labour these days, the Second Machine Age. Left-wing Lord, professor and provocateur Robert Skidelsky sums up his views like this:
Because computer programs and humans are close substitutes for such jobs, and given the predictable improvement in computing power, there seems to be no technical obstacle to the redundancy of workers across much of the service economy.
Yes, there will still be activities that require human skills, and these skills can be improved. But it is broadly true that the more computers can do, the less humans need to do. The prospect of the “abridgment of labor” should fill us with hope rather than foreboding. But, in our kind of society, there are no mechanisms for converting redundancy into leisure.
But we really need someone to figure out an appropriate public policy response to the changes that are coming. Skidelsky has no idea but I am hoping readers here may spark some options. The issue isn't that we won't adapt. The issue is the speed with which change is coming. We are passing a tipping point that really valuable machine processes (Apps etc) are replacing traditional middle class jobs really fast. Are you ready?
New Zealand may be ok in this process because we don't have the type of manufacturing and service jobs in great numbers that other countries have. But our trading partners (China especially, and the US and Europe) are especially vulnerable.
5. A rethink is needed
The anti-GMO debate has been framed by activists - especially in New Zealand where it has become conventional wisdom - as an ethical issue, and a nature-vs-corporates (Monsanto) debate.
But it is becoming clearer it is an ethical issue, but not the way we have been sold.
Bioethics professor Peter Singer has been grappling with the elements and pointing out Greenpeace has been guilty of playing bumper-sticker politics. (We bought those bumper-stickers years ago.)
Genetically modified crops are now grown on about one-tenth of the world’s cropland, and none of the disastrous consequences that we Greens feared have come to pass. There is no reliable scientific evidence that GM foods cause illness, despite the fact that they receive much more intense scrutiny than more “natural” foods. (Natural foods can also pose health risks, as was shown recently by studies establishing that a popular type of cinnamon can cause liver damage.)
Although cross-pollination between GM crops and wild plants can occur, so far no new superweeds have emerged. We should be pleased about that – and perhaps the regulations that were introduced in response to the concerns expressed by environmental organizations played a role in that outcome.
Regulations to protect the environment and the health of consumers should be maintained. Caution is reasonable. What needs to be rethought, however, is blanket opposition to the very idea of GMOs.
6. A mega payoff
Forget the usual finance metrics: The price Facebook paid for the app Whatsapp last week is being justified in all sorts of new ways. Lets be (un?)real here: they paid US$19 billion for an app, one created by a group of just 35 people in total. Sure, its got millions of users but as yet, no revenue. The Xero folks will have stars in their eyes now.
7. The Aussies love us
Here's a curiosity, especially for those who think a lower exchange rate is a better exchange rate.
Not only are we selling more goods to China (although that can be seen as some sort of special case, given that the goods we sell to other countries are not growing anywhere near as fast), but we are an increasingly attractive place to visit.
Tourist numbers are up strongly, and they are up from Australia, where our currency has appreciated probably the most. Go figure. The percentage growth may be from China as Stats NZ reported, but the annual number growth is from over the ditch (which they didn't highlight). (H/T Infometrics)
(Perhaps our trade balance and visitor numbers will be even higher at one of the parities that are possible these days ? !!)
8. Digital dairy
Despite the pressures, dairy farming is essentially pasture-based in New Zealand - and long may it continue like that. It will be hard; urban consumers demand impact-free produce, free from annoying pictures that can be shown in primary schools and TV (similar places). Buckling from the pasture-base may deliver something those urban school teachers and media novices like even less.
Actually, that is happening in Europe - in fact has been happening for a long time. They get away with it because it is behind closed doors rather than 'outside' near cameras. I vividly recall a visit to Palma in the dairying heartland in Italy. No cows visible, no fences, just beautiful fields of grain crops. But European dairy farmers are in a squeeze with some price supports due to wind down.
Their answer is to either pack it in, or mechanise dramatically. Factory farms include robots; in fact the cows themselves become machines. Spiegel Online has the story:
The radical increase in production per cow in recent decades was primarily the result of improvements in breeding, feeding, milking techniques and care. Those factors hold true for Nielsen on Sylt just as they do for Westrup in Bissendorf, just on a different scale. Both of them, however, are far removed from the extreme limits of dairy farming being tested in North America. The cow of the future in Europe will live in a digital world, milked by robots and fed by machines. In the Canadian province of Québec, some 5,000 kilometers (3,100 miles) away from Nielsen and Westrup, this future is already reality.
There, David Landry stands in his stall and watches as robots do his work for him. A round one, roughly as broad as a hula-hoop, moves between the paddocks shoving the hay closer to the cows. Another machine, the so-called Creeper, crawls through the stalls pushing manure out. In the middle of the stall is the milking robot.
Landry, a small man with thick hands and not much hair, grew up on the farm with his two brothers and remembers back when his father only had about a dozen cows and had to shovel out the manure himself. As a child, Landry milked cows by hand into a bucket. Today, he has 2,300 cows in six huge barns. In the morning, all he has to do is drive the feed to each barn -- the robots take care of the rest. He also has to shove a couple of cows into the milking machine, though most go there on their own.
9. The Far Side at the Fed
The recently published transcripts of the meetings at the Fed have been mined for all sorts of insights - after all it was when the GFC hit.
But the NY Times has also extracted out the humour in those transcripts. A bit corny, as they observe, but fun to read all the same.
10. Today's quote
"Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it." - Will Rogers
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