All bets are off as rumour mill sends bookies into a panic

Bookmakers reacted swiftly to the crisis engulfing Cronulla, suspending betting on the club’s round-one clash with Gold Coast as well as other markets.

While the bookies maintained they did so as a precaution, they were quick to halt betting on Sunday’s game, as well as the markets on most losses and to miss the top eight. TAB Sportsbet spokesman Glenn Munsie stressed the measure was precautionary only after the rumour mill went into overdrive on Wednesday.

“All we’re hearing is there are investigations and they (ASADA) are interviewing people at Cronulla,” Munsie said. “We’re not saying there’s anything wrong there, but we need to protect people who don’t know what’s going on. It’s suspended until we find out some further information.”

Tattsbet’s Gerard Daffy told AAP his agency had suspended betting on the Sharks game and a number of its futures markets at 4.30pm on Wednesday. “There’s a lot of rumour and innuendo, particularly about one side, the Sharks,” he said. “There’s rumours a lot of players are going to be stood down, and not all from the one club.”

Sportingbet Australia spokesman Bill Richmond said his agency had also stopped betting on the Sharks-Titans game. “We stopped all markets associated with the Sharks game,” Richmond said. “We have calls from people already wanting to back the Gold Coast.”

The Sharks, still without a stadium sponsor and the only club without a major backer, had just secured a sleeve sponsor. However, plans for an announcement are likely to now be on hold. The timing couldn’t be any worse for the club or the game. The Sharks were expected to be major contenders for the 2013 title, and heading into the season were $11 to win the grand final

after adding Luke Lewis, Michael Gordon, Chris Heighington, Beau Ryan and Jonathan Wright to an already impressive roster.

The original release of this article first appeared on the website of Hangzhou Night Net.

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League shock as Sharks hunted

Rugby league has been thrown into chaos on the eve of the season after speculation Cronulla were to become the first big victim of the Australian Crime Commission’s investigation into drugs in sport. Up to 14 players are believed to have been told they are facing a minimum six-month ban.

Fairfax Media understands the players have received legal advice suggesting they admit to taking performance-enhancing drugs in the hope of avoiding longer suspensions. It is understood the players refused.

Devastated Sharks officials are resigned to being without a host of star players for the season, some of whom could be suspended before their season-opening match against the Gold Coast on Sunday.

Bookmakers suspended betting on the game amid speculation Cronulla were negotiating with Australian Sports Anti-Doping Authority officials to cut a deal which would result in bans of just six months. Eight players from other clubs have also been implicated. The NRL refused to comment.

Sharks insiders believe a former staffer has turned whistleblower on the Shire club, one of six rugby league teams named in the ACC’s report into the integrity of Australian sport, alongside Newcastle, Manly, Penrith, Canberra and the North Queensland Cowboys.

ASADA officials interviewed staff from the club during the week and are expected to continue their inquiries in the coming days. Sharks players, some accompanied by their agents, were summoned to a meeting on Tuesday night to discuss the situation. Coach Shane Flanagan cancelled media engagements and a planned store appearance as the club locked down. Wednesday’s training session was held behind locked doors.

There were reports an emergency Sharks board meeting was called on Wednesday night to decide the club’s fate but club spokesman Rob Willis denied this.

The Cronulla club operates without a chief executive, and its chairman, Damian Irvine, is overseas.

It is understood the focus of ASADA’s investigations revolve around the time sports scientist Stephen Dank spent at the club in 2011. He was at Cronulla only a short while, falling out with team doctor Dave Givney. Sources said some players were concerned they were being investigated for their dealings with Dank after he left the club. Dank has repeatedly denied any wrongdoing.

”Sharks fans and all rugby league supporters can be assured the club has been very proactive in fully co-operating with ASADA and taking other measures that prioritise the integrity of our club and the welfare of our playing group,” the club said in a statement.

”While there are strict boundaries around what we can say while the ASADA investigation is ongoing, fans should be assured that as soon as there is an opportunity to provide further information we will do so.”

An ASADA representative refused to comment on the latest developments and wouldn’t confirm the meetings with the Sharks.

The original release of this article first appeared on the website of Hangzhou Night Net.

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Big dreams, but little tribes rule the roost

It’s the last Friday of a soggy pre-season, and again the northern beaches are flooded. Instead of jumping castles and kicking games at Brookie, the Sea Eagles’ launch has been moved to the leagues club. Undaunted, hundreds of supporters press in to have their photos taken and jerseys signed. Here are the Stewart brothers, Jamie Lyon, some unfamiliar young guys, Igor the Eagle, as the players come in from afternoon visits to hospitals and schools.

There are the trademarks of the ad hoc event: a dodgy microphone, a late-running schedule and, Manly being Manly, some officials giving others a wide berth. But no amount of rain or mayhem can douse the defiant excitement you get in a community club at its season launch. It might be damp, but here and in 15 other clubs, this is the smell of hope.

Though its central administration is corporate, rugby league is a fundamentally local game. In cricket, Michael Clarke and Shane Watson appear for their clubs once. The endless cricket summer has no linear narrative. With league, the heroes of the sport are locally embedded, and the season has a clear ending, which 15 clubs prefer to forget, and a beginning, which is now.

Manly chief executive David Perry sums it up: “When you finish the season in October it feels like a long period for fans and players to wait. Everyone’s a bit restless now.”

The coach, Geoff Toovey, describes his mood as one of “nervous excitement”. “The players are chomping at the bit. They’re well and truly over running around the oval. Bring on Brisbane.”

Halfback Daly Cherry-Evans, who became a father last month, is ready. “To be honest, my partner’s doing most of the work getting up through the night. I’m looking forward to getting out there and doing my bit to support her.”

This is the tingling of early autumn. Manly, twice premiers in the past four seasons, have a dozen new players to inject hunger. In Brad Arthur and Andrew Johns, it has two high-profile new assistant coaches. Every start is a fresh one, for every player and every club. But in the bigger picture, 2013 is truly fresh, with a new broadcast deal and new chief executive, and the first fully prepared season of the Australian Rugby League Commission.

The commission was designed to shift power to the clubs. This is significant, because so many of the clubs face uncertainty that can only be alleviated by unity. “The clubs are the key stakeholders, and we’re hoping the new money and resources will be used wisely,” Perry says.

Toovey says: “We’re hoping to see positive changes. It’s such a great game, we believe it can be even greater. We’re excited at the possibilities of the commission doing it for us.” And yes, there is a new referees’ administration. Rugby league has always been the game that will change itself for the sake of the spectacle, and of the fans.

League is a fans’ game, which creates a tension between the aims of the centre and the needs of the local.

Adam Muyt, a Manly supporter, says the league is “chugging along beautifully as a game to watch. Its simplicity is its advantage. In the last few years the standard has got better and better.” But as a Manly fan, there is the constant spectre of nationalisation and rationalisation. Broadcasters have not paid millions to please northern beaches locals; the aims of the game’s chiefs are distinctly anti-local.

Keeping the big picture and the small linked is the challenge facing not only Manly, Muyt says, but all clubs. “The demographic shifts concern me,” he says. “Manly is not the same place as in the 1960s and ’70s. No place is, but that’s Manly’s biggest problem long term. Add in the push to rationalise the grounds. Brookie feels like it’s still 1978. The problem with rationalising is that Sydney is much more geographically decentralised than Melbourne, with the clubs a long way out and people strongly identified with them.”

Muyt says he would not follow league if Manly were rationalised – as they were, into the ill-fated Northern Eagles, 13 years ago. But the perennial tide keeps moving against Sydney community clubs. “The heart and soul of rugby league has shifted 1500 kilometres north,” Muyt says. “The strength of the game is its Queensland base. It might not sit well with Sydney, but Queensland could support two more teams at least. Papua New Guinea and New Zealand could probably have more teams. Does going national and international mean going back to the push to rationalise the Sydney teams?”

Up in Queensland, Matt O’Hanlon has been involved as a player, coach, even ground announcer, for decades. When Manly travel north this week, he will be with a thousand others at the Beenleigh Annual Prawn Luncheon, the appetiser for a trip to Lang Park. O’Hanlon is a “bigoted rugby league follower – there’s no other game”, though he does not follow any club. “I was a Newtown supporter, then Wests, then the South Queensland Crushers. Clubs are happy for me not to support them,” he says. He is a season ticket-holder at Lang Park, and goes to Gold Coast matches. A high school teacher, O’Hanlon agrees on the game’s northern strength. “Junior numbers are up in south-east Queensland. The kids at school are a barometer, and every Monday they’re talking about league.”

Anti-Sydney feeling has made the game national. O’Hanlon says: “Hardly a Queenslander wouldn’t say Melbourne is their second team.” The Storm, with its Queensland Origin stars and Super League foundations, is the league’s southern shopfront. Yet the local-national tension also complicates the Storm’s position. Paul Dalligan, a South Sydney supporter who moved to Melbourne seven years ago, says: “Melbourne people are never going to get better rugby league than this Storm team produces. That’s what worries me.” The game is still battling in the AFL stronghold, where, Dalligan says, “they wouldn’t know Gorden Tallis from Gordon Ramsay”.

AFL’s crowds dwarf rugby league’s. Dalligan says he is often asked ” ‘If your sport’s so good, why are your crowds so low?’ My response is, first, NRL’s a much better television sport than AFL, which is shown in the NRL’s television rights being worth $50 a minute more. And second, Sydney is not as centralised as Melbourne. People want to watch their team locally, whereas in Melbourne they’re happy to come to the MCG.”

Dalligan, like O’Hanlon and Muyt, belong to a community of league tragics who contributed to the inaugural Rugby League Almanac, a publishing idea imported from the AFL this year, in which fans write reports on every match. Dalligan supports South Sydney, and on Thursday will travel north to see his team play the Roosters. “I’m more confident than I have been, which is dangerous,” he says. But a Rabbitoh fan bears too many scars to be complacent. Dalligan says league wrecked his first marriage. “Souths were leading against the Broncos, and Gorden Tallis scored in the last minute. I was in the foetal position in the shower. My then wife walked in and saw me, and the look on her face said, ‘No . . .’ “

Hoping to prolong Dalligan’s agony will be Roosters diehard Brett Oaten, also an Almanac writer. “Ever since I was a kid I’ve hated Souths, as is required. The Roosters and Souths have never had good years at the same time. That makes this year particularly interesting,” he says.

Being a glamour team sits more easily with the Roosters, but Oaten has had his share of heartbreak. “I think I’ve loved them more than they’ve loved me back . . . I’ve had the same season tickets for 15 years. I like going to the footie even when we lose. I get angry, but keep coming back.” For this week, he says: “I’m nervous. All my mates are nervous. And we’re not even playing.”

That nervousness is all about to come to a head, from all corners of the rugby league nation. Matt Tedeschi, who lives in Orange and supports the Canberra Raiders, will travel to Penrith for their first game. “I’ve been counting down the weeks and days. It’s been a boring summer waiting,” he says.

It’s been even longer for Peta Bryant, who epitomises the transcendence of league fandom. Last year, Bryant lived in Cambodia and was only able to follow league online. “I was coming last in the family tipping comp,” she says. “I’m just looking forward to seeing any game live, it doesn’t matter who.”

Bryant is club-agnostic; she just loves her league. “Some families go to church on Sundays. For us it was going to the grandparents’ for lunch, then settling down to watch the Sunday afternoon league game.” Who she follows “depends on which family member I’m watching with. There are Bulldogs, Knights and Dragons fans among us. They get into me for my lack of loyalty, but it’s the game I love, not a team. I know that’s unusual.” It is her own way of conquering the local-national tension: support the game itself. Back in league civilisation, she will spend the 2013 winter in Canberra. “I’ll be going to watch Raiders games, for sure. That’ll give me a fourth team.”

The original release of this article first appeared on the website of Hangzhou Night Net.

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Napthine takes the reins after Baillieu’s leadership crumbles

Ted Baillieu has resigned as the Victorian premier and been replaced by former Liberal leader Denis Napthine, after the surprise resignation of Frankston MP Geoff Shaw from the Liberal party destabilised the government.
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An ashen-faced Mr Baillieu emerged from a special party-room meeting at the Victorian Parliament on Wednesday night after telling Liberal MPs he had decided to quit ”in the best interests of the government”. Mr Baillieu said he would remain in Parliament as the member for Hawthorn.

”I love this state, I love the Liberal Party, I love this role that I have had the honour to enjoy over the last two-and-a-bit years,” he said at a press conference just before 8pm.

Mr Baillieu said he offered Dr Napthine his full support.

An emotional Mr Baillieu thanked his family and said ”the most important thing is the people of Victoria”.

Within minutes, Dr Napthine returned the compliment, saying Mr Baillieu had put ”his heart and soul” into his role as premier.

”Ted is a great friend and colleague. I’m proud to call him a friend. Ted Baillieu has certainly served the state very well.” Dr Napthine said his appointment was ”an honour and a privilege”.

Mr Shaw had earlier released a statement saying he had quit the Liberal Party because he no longer had faith in Mr Baillieu’s leadership.

”I believe my actions reflect the general loss of confidence Victorians are feeling in the leadership of the government,” he said.

Mr Shaw’s resignation eliminated the Coalition’s one-seat majority and it will now be forced to rely on the controversial MP’s vote to govern.

Mr Shaw is being investigated by police after an Ombudsman’s report found he abused his entitlement to a parliamentary vehicle.

Victorian Opposition Leader Daniel Andrews said Mr Shaw had sacked the premier and the government was beholden to him.

”It would seem that every piece of legislation, everything this government wants to do, will now have to be the product of a negotiation with Geoff Shaw,” he said.

The original release of this article first appeared on the website of Shanghai Night Net.

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No high fives in Myer label spat

Myer boss Bernie Brookes has admitted there will be ”a degree of awkwardness” in dealing with designer Kym Ellery if the department store succeeds in a legal bid to force her back into its stable.
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But he seems in no mood to back down from the courtroom stoush, sparked when the 29-year-old designer allegedly broke her exclusivity deal with Myer by signing a deal with rival David Jones.

Ellery’s glamorous frocks were a notable absence as Myer launched its autumn racewear range in front of a roomful of lunching ladies at Melbourne’s Flemington Racecourse on Wednesday.

Last month, DJ’s opened their autumn-winter launch show with one of her designs, draped over the frame of ubermodel Miranda Kerr.

”You’ve got the same person signing an exclusive deal with two department stores,” Brookes said.

”I think people will make their own decision as to the merit of that, but we’re going to pursue this,” he said.

”We’re increasingly confident that we’ve got the very logical case to say that she has to continue to supply us.”

He said the department store had a $1.5 million order with Ellery and wanted the clothes.

”It will be a degree of awkwardness but we funded Kym to go to [US trade event] G’Day LA, we funded her on catwalks, we funded her on a number of events, and we’ve invested to build the brand – and she’s invested in Myer.

”It’s a shame that she came to the extent that she decided to do this, but the relationship … it’s no good saying we’ll all be high-fiving at the end of it.”

The case is set down for trial in the Victorian Supreme Court next month in front of Justice Michael Sifris.Gloves are on

Brookes was speaking after a fashion parade that featured models in racing get-ups that featured extravagant hatinators, including one that looked like a radar dish and another that resembled a leather do-rag.

Racing is both one of Brookes’ passions and a big part of Myer’s promotional strategy.

But the chain has yet to sign a new deal with the Victoria Racing Club to extend its sponsorship of the spring racing carnival, which expired after last year’s Melbourne Cup.

”Over the next week, hopefully, we’ll be in a situation where we’re getting closer and closer to hopefully doing a deal with them [the VRC],” Brookes said. ”The VRC have been tremendous in the early discussions. We’re working in good faith and fingers crossed that we can do a deal over the next few days or the next week.”

It’s an important time of year for Myer – Brookes reckons that last year Myer sold 12,000 pairs of cufflinks and 22,000 hats and fascinators in the nine weeks leading up to the carnival.

”Gloves will be in this year – that’s my only fashion tip,” he said.Time to re-Joyce

Perhaps Gina Rinehart was stewing after being demoted from the position of the world’s richest woman by Forbes magazine. Perhaps she was distracted by the legal stoush with her kids. Whatever the reason, CBD can’t help but notice Her Roy Hill Highness didn’t put as much of her usual heart and soul into her latest column in Australian Resources & Investment Magazine.

Instead, she devoted it to reprinting most of her ”Christmas reading”, a piece from The Spectator Australia by Senator Barnaby ”Barnyard” Joyce.

The line taken by the National Party senator will seem awfully familiar to anyone who has enjoyed Rinehart’s previous efforts.

Come to think of it, has anyone ever seen them in the same room?

Got a tip?

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The original release of this article first appeared on the website of Shanghai Night Net.

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Fortescue fights mine tax

Fortescue Metals and the Queensland and WA governments are in court over the mining tax. Photo: Louie DouvisThe federal government’s mining tax is ”a crude form of control of the states”, Andrew Forrest’s lawyer told the High Court on Wednesday.
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David Jackson, QC, appearing for Andrew Forrest’s Fortescue Metals Group, told the court the tax’s uniform application across the states was unconstitutional because it imposed different tax rates on miners in different states and territories.

This is because the tax is calculated based on how much mining companies pay in mining royalties, which differs across the country.

”One can’t avoid the fact that it is state-based,” he said.

States were being unfairly targeted by the government’s tax, Mr Jackson said, because it eroded their ability to give assistance to, or reduce the royalties paid by, particular mining companies.

”It interferes with their ability to choose what they want to do with their assets,” Mr Jackson said.

The attorneys-general and solicitors-general of Queensland and Western Australia have joined the action. They argue that because mining royalty regimes differed among states before the mining tax took effect on July 1, 2012, the effect of the tax was discriminatory.

Under the constitution, Parliament must not impose taxes in a way that discriminates between states and territories.

The minerals resource rent tax applies a 22½ per cent tax on miners after they have reached $75 million in profit (profit meaning revenue minus expenditure). Mining companies are also eligible for partial profit offsets when they raise between $75 million and $125 million.

The government argues that the tax is applied uniformly across Australia, and therefore there is no discrimination between states.

It also argues that the tax is imposed only on mining companies, not on people at the higher level of government, and thus cannot interfere with the ability of the states to make their own choices, including how they encourage economic development.

Commonwealth Solicitor-General Justin Gleeson, SC, is expected on Thursday to outline the federal government’s position, including the argument that any inequalities in the amount of tax paid by mining companies in different states are caused by the royalty regimes of the states, rather than by the Commonwealth’s mining tax.

The original release of this article first appeared on the website of Shanghai Night Net.

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Canberra warned over spectrum sale

Dr Robert Pepper. Photo: Pat ScalaGovernments should not use spectrum auctions to extract revenue from telecommunication companies, a top executive from US-based global technology giant Cisco has warned.
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The comment comes as Canberra prepares for the so-called digital dividend auction, which includes spectrum used for the 4G super-fast mobile network.

The spectrum is in the 700Mhz band and 2.5Ghz band, at present devoted to analog television signals. Next month’s auction is expected to fetch billions for the federal government as it takes bids from carriers such as Telstra and Optus.

Robert Pepper, who was also the head of policy development at the US Federal Communications Commission, said: ”The benefit is getting the spectrum into the hands of people who are going to build out and use it, provide services and compete. It is not about maximising auction revenue.

”My philosophy, when I was at the FCC, was not about the money. In fact, in the US, we are prohibited by law to take into account how much money is raised from spectrum.”

In marked contrast to the US policy, the Australian government has a stated policy objective to raise revenue from the spectrum auction. Communications Minister Stephen Conroy described the spectrum last year as a premium public asset. ”This spectrum is seen as the ‘waterfront property’ of spectrum and the government has made a significant investment to free it up. It is important that we get a reasonable return on this valuable public asset.”

In January he announced the formula for the minimum floor price for spectrum. Industry analysts and telcos at the time said it was too expensive by international standards. Vodafone, the third largest telco in the country, said it would not bid at the price.

Dr Pepper said spectrum should be cheaper.

On the topic of the national broadband network, the Cisco executive said any plan needed to be future-proofed.

”Globally what we will see is fibre either to premise or fibre very close to premise,” he said. ”The best global practice is to have a network that is future-proofed that can support very high bandwidth and low latency [delay].”

There has been an ongoing dispute between the government and the Coalition over the NBN. The government wants to connect premises with fibre-optic cable, while the Coalition believes the NBN should use part of Telstra’s existing copper network for the ”last mile” connection to the premises. Dr Pepper doubted whether copper could handle the exponentially growing data demand.

”If you are going to bring fibre all the way up to the neighbourhood, you want to be able to bring that capability to the premises.”

The original release of this article first appeared on the website of Shanghai Night Net.

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Better way to tackle big banker’s bonuses

Anger in Europe over executive pay is finding its way into legislation. The European Parliament, backed by almost all the European Union’s finance ministers, plans to cap bankers’ bonuses, and 68 per cent of Swiss voters endorsed a referendum initiative to ban ”golden parachutes” and put other curbs on bosses’ pay.
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Agitated voters, grandstanding politicians and intelligent policy rarely go together, and this is a case in point. Let’s agree that people are right to be disgusted. In the past decade top bankers led the world into the deepest economic slump since the 1930s, and their banks had to be rescued by taxpayers, yet the culprits aren’t exactly suffering. In most cases they still have their jobs and by ordinary standards they’re still outrageously well-paid. Bonuses – whose purpose, one is always told, is to reward excellent performance – have fallen but are still being handed out.

Meanwhile, lower down the capitalist food chain, workers are being laid off or told to take pay cuts. It’s tough out there, say chief executives, and we all have to make sacrifices. Absolutely, say Europe’s ministers of finance; that’s why we have to cut essential public services and raise taxes.

Considering the complacency, lack of contrition and in many cases sheer nerve of those responsible for the calamity of the past five years, the miracle is that the popular backlash against capitalism has been so mild. But being morally in the right isn’t enough. If policy is to serve voters’ interests, rather than gratify their anger, it has to be carefully designed. These initiatives aren’t.

The first question is whether it’s wise for the government to have any kind of say on how companies pay their executives. Straight away there’s a crucial distinction – between banks and financial enterprises that enjoy an implicit public subsidy (through the prospect of a bailout if they get into trouble) and ordinary public companies that don’t.

If taxpayers are exposed to losses, regulators are not just entitled to monitor and curb the risks that banks are taking, they’re obliged to. This obligation includes regulating pay structures, since those can influence the amount of risk a bank takes on.

So doesn’t capping bonuses serve that purpose? Not really. It’s bewildering, first of all, that Europe’s parliament is insisting on bonus caps in return for consenting to new international rules on bank capital. Requiring more capital is the best and simplest way to reduce the banking subsidy and hence the incentive to take undue risks. The new rules don’t go nearly far enough in this respect. Rather than calling for them to be strengthened, the parliament wants a concession on bankers’ pay. Go figure.

The parliament wants to limit banking bonuses to 100 per cent of salary, or 200 per cent if shareholders approve. There’ll be loopholes, of course, but for the sake of argument let’s assume they aren’t exploited and the policy works as intended. Banks will simply fold average variable pay into basic salary. Most likely, such limits won’t do anything to cut bankers’ pay overall, the very issue that upsets the public.

One remedy is not a cap on bonuses, but rules that lock them up and grab them back if things go wrong. Bankers should be made to retain a stake in their company’s losses. Big bonuses relative to basic salary – so long as they can be clawed back – would serve that purpose well.


The original release of this article first appeared on the website of Shanghai Night Net.

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We can’t match America’s muscle

Why has the US sharemarket reclaimed its pre-financial crisis high when the Australian sharemarket is still 25 per cent short of it? Because in important ways, the Americans are better than us.
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The US economy was the epicentre of the global crisis and half a decade later it is still struggling. Its debt-to-GDP ratio is too high at about 75 per cent and is expected to grow by less than 2 per cent this year, as automatic government spending cuts totalling $US85 billion feed in.

Australia’s new national accounts reveal this economy expanded by 3.6 per cent last year.

The annual run rate was 2.6 per cent in the second half of the year and the Reserve Bank is watching the slowdown closely, but Australia will log its 22nd year of growth in 2013 and probably outpace America.

Sharemarket investors buy the near future, rather than the present or a more distant future where, in America, structural problems become impossible to ignore. When they look at the US market they see potential. They also see better value: even after racing ahead of Australia to reclaim its pre-crisis high, the American market is cheaper.

The surge in America’s jobless rate that accompanied the global crisis came as companies laid off workers. The productivity gains that flowed will be largely retained as new jobs are created. After falling from 10 per cent cent in October 2009 to 7.9 per cent, America’s jobless rate is still 2.5 percentage points higher than Australia’s, but it is falling.

Australia is posting productivity gains after losing its way for most of the past decade. The gain in 2012 was 3.3 per cent, better than the 2.5 per cent growth rate in the mid-’90s, when Australia famously collected a deregulation dividend. National productivity will get another boost as resources projects that have sucked up capital begin producing and generating returns. Companies are also on efficiency drives as they look to offset soft demand.

If you are betting that this economy will be more productive than America’s over the long term, you are assuming a sea change. However, America’s long-term productivity growth rate of about 2.2 per cent a year is twice as good as Australia’s.

The US economy is also on the verge of harvesting an economic dividend as its massive reserves of shale gas underpin a heavy industry renaissance. Cheap domestic gas will deliver a cost advantage for decades.

American intellectual property sits behind market hot spots including information technology, and US companies are being protected in their deep home market and supercharged in export markets by a US dollar that is being kept low by the US Federal Reserve’s zero-interest-rate regime and quantitative easing. They hold record cash reserves of about $US5 trillion, have healthy balance sheets after the crisis purge and are borrowing money at historically low rates.

Australia has higher borrowing costs and higher domestic energy costs, and its currency is at levels that hurt export competitiveness and open up companies to low-priced import competition. External factors including zero interest rates and quantitative easing in America are behind the Australian dollar’s strength, but it is what it is.

This economy is also attempting a delicate shift in activity to the industrial sector as the resources boom cools. Private capital expenditure led by the miners contributed almost two-thirds of Australia’s 3.6 per cent GDP growth in 2012, but it fell by 6 per cent in the December quarter and will fall more this year. The question, not answered in the latest national accounts, is whether the non-mining economy will accelerate and close the gap.

Despite all that, and despite the fact the S&P/ASX 200 share index is 25 per cent below its November 2007 high of 6828.7 points, the Australian market is more expensive than Wall Street.

The Dow Jones Industrial Average, which hit new highs on Tuesday night US time, is valued at about 12.5 times expected earnings in the next year. The S&P index of 500 top US shares is 1.6 per cent below its high and valued at 13.6 times expected earnings. Our S&P/ASX 200 is trading at 14.5 times expected earnings.

While the resources boom was raging, cracks in the industrial economy were being papered over. Now the boom has cooled. Commodity prices have eased, mining profits and mining company share prices have fallen and as interest rates and the Australian dollar remain relatively high, pressure on the industrial sector continues. Earnings growth has been outpaced by share price rises and our market has moved to a price-earnings premium.

Australian companies still offer dividend yields that look good compared with fixed interest and the productivity gains are great news. A fall in the value of the dollar will be a game changer, and it will eventually happen. For now, though, this market has some pressure points. It is short of its pre-crisis high for good reason.

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The original release of this article first appeared on the website of Shanghai Night Net.

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A weaker dollar would benefit those with northern exposure

As the Australian dollar drifts lower it is worth revisiting stocks whose earnings get a boost from a weaker currency.
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There are a host of stocks with substantial northern hemisphere operations that can benefit from a softer local currency. These include James Hardie, News Corp, Treasury Wine Estates, Sims Metal, Cochlear and Computershare. Others cheering the Aussie lower are domestic companies competing against cheap imports. Among this group are BlueScope, Capral and Select Harvest.SDI Ltd

A smaller company that should thrive in a lower-dollar environment is dental manufacturer SDI (ASX code SDI). We wrote about the company last year, emphasising the cost reduction program under way, a move that inspired a doubling of the share price. The company recently upgraded its earnings guidance for the year to June 30, 2013, to between $4 million and $5 million net profit. This places the company on a price-earnings (P/E) ratio of about 13 times.

SDI generates about 90 per cent of its income offshore, in Brazil, the US and Europe. The Aussie has been weaker against all three currencies in recent months, providing a tailwind for SDI’s earnings.

A further benefit is the softness in the silver price. SDI’s amalgam products require a significant amount of silver to manufacture.Mayne Pharma

Another company that could look smart if the currency descends below US96¢ is pharmaceutical upstart Mayne Pharma (MYX), revamped with the arrival of Scott Richards as chief executive.

When the Australian dollar was trading around $US1.04 in October, the company announced the acquisition of US-based generic drug developer and manufacturer Metrics Inc for $US120 million. The deal was struck on a historical earnings before interest, tax and depreciation (EBITDA) multiple of about six times. Metrics swamped the existing Mayne business and effectively made the company a pharmaceutical play in the US.

Mayne said in its half-yearly results that Metrics was operating to budget. This has proved sufficient to push the stock up 10 per cent to 42¢, more than double where the company struck its rights issue to buy Metrics.

It is difficult to justify Mayne’s valuation on 2013 earnings but with a full-year contribution from Metric in 2014 it should be able to generate EBITDA of about $30 million, for an EBITDA multiple of 8.3 times. While this is not cheap, Richards will use the Metrics acquisition as a launching pad to build a larger US operation.K&S Corp

The Melbourne-based transport group (KSC) has been on a tear over the past year, jumping 70 per cent compared with a 15 per cent rise in the All Ords.

We wrote about the stock last year when the share price was $1.60, believing it offered the dual attraction of a cheap entry into a cyclical upswing in the economy and the injection of fresh management. Today it’s $2.30.

The company lived up to its word by announcing earnings of 11.3¢ a share for the first half, up 37 per cent on the previous corresponding period, achieved on a modest 8 per cent increase in revenue, showing how leveraged a transport business can be. It also benefited from a robust performance of K&S’s West Australian Regal Transport.

It must be remembered that besides the strong results in WA, few areas are firing for K&S. It has a major exposure to the much-maligned domestic steel industry and the depressed housing market.

If we double the first-half result, the company is trading on a 2013 price-earnings (P/E) multiple of 10 times. This compares favourably with the larger Toll Holdings that has jumped out to a P/E of 13.

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The original release of this article first appeared on the website of Shanghai Night Net.

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Lenders find it tougher going in Asian markets

Two of the biggest foreign banks in Asia have underlined the tests facing lenders in the region, as profits are constrained by slower growth and stiff competition.
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In a sign of the challenges facing ANZ, which is targeting Asian banking as a key source of growth, UK-listed Standard Chartered reported slowing income growth in several key Asian markets, as its 2012 profits edged up by less than 1 per cent to $US4.79 billion, compared with 12 per cent growth a year earlier. Standard Chartered, heavily focused on emerging economies, said its income growth in Hong Kong had slowed to 6 per cent, from 19 per cent in 2011, and income in Singapore rose 5 per cent, compared with 27 per cent a year earlier.

While it had experienced a surge in income from China, the bank described the previous year as ”challenging” and predicted this would continue into 2013.

London-based HSBC, one of the biggest banks in the world with a major presence in Asia, also this week reported that its net interest margin had narrowed in the year to December to 2.32 per cent, from 2.51 per cent a year earlier.

Group finance director Iain Mackay said its margins in Asia outside Hong Kong had been squeezed by the slump in global interest rates, but were holding up ”remarkably well”. He made the comments after HSBC handed down a 6 per cent slump in pre-tax profit to $US20.6 billion, after it was hit with hefty fines in relation to money-laundering charges in the US and Mexico.

The results come after ANZ Bank last month said its margins had been squeezed by more competition in Asian markets, which are also a focus for Commonwealth Bank, NAB and Westpac.

Although HSBC and Standard Chartered were optimistic about China’s growth prospects, their results highlighted the challenge created by economic uncertainty and more competition in the region. HSBC chief executive Stuart Gulliver said the bank was expecting economic growth of 8.6 per cent in China this year, compared with growth rates in developed economies of just 1 per cent.

”Whilst the operating environment for financial institutions remains difficult, our core business will continue to reap the benefit of recovering economic growth in mainland China and its positive impact on other faster-growing regions,” he said.

The original release of this article first appeared on the website of Shanghai Night Net.

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House brands squeeze out Tahbilk

Over a barrel: The high dollar and private-label brands are taking their toll.Establishment winemaker Tahbilk has fingered private-label wines and low-cost imported wine for swamping liquor store shelves and reducing the space once given to proprietary brands.
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Tahbilk chief executive Alister Purbrick said the growth in house-brand wines was not limited to the major liquor chains owned by Woolworths and Coles, but was also becoming a feature of the large independent banner and supermarket groups.

The other hidden impact, according to Mr Purbrick, was the strength of the Australian dollar, which made imports more competitive.

”So you have got the double whammy of own-brand and imports taking space away from us, up go our promotional slot costs and there is less opportunity for us in any case,” he said.

Mr Purbrick said Tahbilk would walk away from uneconomic promotional and discount deals with retailers.

Last year Ross Brown, the former boss of 121-year-old winery Brown Brothers, used an industry function to launch a spray against leading retailers for flooding stores with private-label wines that he said were ”hollow”, ”copycats” and ”masquerading as real brands”.

The retail squeeze affected Tahbilk’s sales for the 2012 financial year, with domestic sales weaker for the 153-year-old winemaker. But the resilience of its popular Tahbilk Wine Club bolstered the bottom line and allowed the family-owned company to post an improved full-year profit.

Revenue for 2011-12 was $13.187 million, down slightly from $13.675 million in the previous year, while pre-tax profit increased to $776,768 from $736,430. However, after accounting for a dividend payment of $113,805, Tahbilk’s full-year profit was $51,168 against $235,137 recorded in 2011-12.

”Our wine club generates about 65 per cent of the total Tahbilk branded sales,” Mr Purbrick said.

He said the wine club allowed the company to perform well in the face of the strong Australian dollar and collapsing margins.

”There is not a lot of margin in exports, so the best way to describe our exports at the moment is that we have them in a holding pattern. We are not going out aggressively to grow because we can’t make margin out of it, but we want to maintain our presence in those markets.”

China is still a growth market, as the exchange rate with the yuan is more favourable to exporters such as Tahbilk.

The original release of this article first appeared on the website of Shanghai Night Net.

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Fels calls for tougher laws

Twenty years after the toughening of the competition test for mergers, the architect of the changes, Professor Allan Fels, has called for more action to deter anti-competitive behaviour by large companies.
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Speaking at an event in Sydney to mark 20 years of the merger test, Professor Fels said Parliament should consider tougher laws to deal with creeping acquisitions. He also wants more effective laws on abuse of market power by large companies and powers to seek court orders for divestiture when they abuse their power.

His suggestions come as the Australian Competition and Consumer Commission investigates whether the big two supermarkets, Woolworths and Coles, are misusing their market power to exploit suppliers. Banks have also come under scrutiny over their failure to pass on interest rate cuts.

As chairman of the Trade Practices Commission and later the ACCC, Professor Fels was instrumental in convincing the government in 1993 to change the law so mergers could be blocked if they were likely to lead to a substantial lessening of competition.

Before that, mergers were blocked only if a company would dominate the market.

The change, fiercely opposed by business, gave the ACCC teeth to block several mergers, though it has still allowed powerful duopolies to develop in supermarkets, hardware, airlines and packaging.

Professor Fels said it was time for more change. For instance, when a large retailer acquired a small shop in a country town, the effect might be profound in the town, but would not fall foul of the current test, which requires a substantial lessening of competition.

”It would be useful if the law more explicitly addressed creeping acquisitions,” he said.

In the case of section 46 abuse of market power cases, Australia had opted for a requirement to prove that the actions were for the purpose of abusing that power.

”The US and the European Union have an effects test and it is much better to focus on the economic outcome of the act,” Professor Fels said. ”Our system induces a cops-and-robbers mentality, where regulators are focused on finding emails and the like to prove the purpose.”

A change in the test would be significant for the supermarket suppliers who allege the big two use their power to drive down prices of commodities such as milk.

He also wants divestiture added to the armoury of penalties, though the penalty should be available only where a court has established abuse of market power.

”It would add much more clout to the act if companies knew there was a prospect of divestiture,” Professor Fels said.

The original release of this article first appeared on the website of Shanghai Night Net.

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