International perspectives of home

Spending time with intelligent people who care is a blessing. Its also challenging.
Thankfully, I’d chosen to bring a bottle of Shiraz (Red Belly Black, surprisingly smooth) to the Sunday night dinner party, and it fitted right in. Not sure how it came up, but Australia’s immigration policy took a bit of a hammering, particularly from the European contingent, and this was pre London riots.
The basis of the indignation was a little simplified, and I disagreed with most of the statements and yet I still agreed with its conclusions – that Australia could afford to and economically would probably benefit from increasing the quota of refugees that we take in.
The argument consisted of a number of independent statements, which centred around Australia being a lucky country with plenty to go around, so we should share. Individually this was represented by teh following arguments:
  1. Australia has heaps of land and even if only a small percent of it is habitable and productive, it would still be more than what is available in Europe on a per capita level.
  2. The claim that Australia doesn’t have enough water is a localised issue, as the QLD floods demonstrate that in some places Australia has too much water.
  3. That Australia is a rich country because of its abundance of natural resources and this has contributed to the low level of national debt and low unemployment rate.
Now, I know lots of Australian’s would scoff at some of the statements above. But do we base this understanding on myths or on facts?
1. Population density. 
No one doubts Australia is big (5th largest country globally after Russia, Canada, USA and Brazil), and as a young nation our population (20,601,000 at last count – 2008 census data) is still small compared to other countries our about size (e.g., US, Brazil).
The typical defence to our low population density (2.68 ppl/Sq km compared to Germany’s 230.71 ppl/Sq km) is the amount of arid land we have, mostly due to a lack of water. 
Finding stats for inhabitable land is harder. What I did find was this infogram by which was pretty interesting. If you can’t read the stats below, adjusted for inhabitable land than you should download the original here. The stats unfortunately are not well referenced (other than they come from the University of Wollongong) and I have struggled to find anything better on the web. 
The message is pretty simple though and it is that based on inhabitable land quantity, Australia is still pretty empty. 
Judgement: We have plenty of room – which is not a surprise, but the extent of the difference is.
2. Availability of fresh water in Australia.
Australia has 398 Cubic km of annually renewable fresh water. (Pg 227, ‘The worlds water, 2006-2007: the biennial report on freshwater resources’ By Peter H. Gleick, Heather Cooley, David Katz). That equates to 0.05 Cubic METERS of water per Square km. Comapre that with Austria (Sorry Kristop, Germany wasn’t available) which has 84 Cubic Km of annually renewable fresh water and just 84,000 Sq Km of land. That is 1 Cubic Meter of fresh water per Square Km. Quite a difference but not really a surprise. Access to water is a big issue for us and I will do further research at another time to determine if it is taken into consideration in the ‘inhabitable land’ considerations, as it should be.
Another good source of water data for Australia is the BOM.
Judgement: Availability of water is a major concern for Australia. What is needed to address the issue (in my opinion) is investment in infrastructure for water security and good policy on water rights. Not easy, but achievable and no excuse.
3. Australia is a rich country because of our abundance of natural resources, particularly the mining industry. 
Australias latest national account are available here. They indicate on Pg 32, table 14 that Mining contributes about $120,000 M in Gross value add to the GDP per year. That is 9.26%. That is about the same as manufacturing (which everybody knows is dead, right?) or a little more than construction or a little less than either finance and insurance services or professional and technical services. I wont even go into employment figures which I know are even less! 

According to these latest stats, Mining is by no means going to be our saviour from the current global economic  situation either, as it was the largest shrinking industry in the last year to March 2011.

Judgement: Wake up Australia, the miners have got the government by the balls and are holding us all ransom. Even worse, we are propagating the myth for them at the international level to the detriment of all the other amazing industries we have. Rather than subsidising these companies we should be making sure we get a fair share of what will never be returned to us, and that this share is invested in the infrastructure we need to support a sustainable future, not infrastructure that hastens the existing consumption of natural resources.

Adventures in Singapore

Long weekend here in Singapore, so not much happening with the bike at the moment. I’ve been really enjoying singapore, and seek to denounce the myth that it is a boring place! Although, the locals are tough nuts to crack.

Highlights so far:

  • A couple of argentinians and I talked our way into one of the luxury residences at Marina Bay on a very hot Saturday. We thought we were heading to a garden but should have realised it was a roof top pool and spa complete with underwater exercise equipment, water massage beds blah blah. Not sure the almost totaly expat community appreciated the ‘swimming costumes’ we revealed but we sure enjoyed the swim! The over-weight, hairy, but very hospitable indian hedge fund manager in the spa was more than happy to accomodate the Argentinians. Putty in their hands.

  • Star Inn, Little india. Afternoon naan bread, curry and big bottle of Tiger. Snooze, cricket or a bollywood movie. All for $8.
  • Chinatown night markets – randomly spotted Claire MClintock as she walked by. Unbelievably. Not naming names, but someone should have bought that fossil…
  • A couple of frenchies singing Edith Pilaf songs at 3am in the morning after playing drinking games. Entertaining.
  • Beers with Jonathan from Niger talking about Africa and Australia and everything in between.

What I don’t get about Singapore:

  • Clarke Quay. On first impression, its amazing. Then, after a while, it was just wierd. A complete rift existed between the different cultures that were there. I couldn’t really work out what was going on, but suffice to say it was an experience.
  • The economy – how the hell does it work. Obviously the construction industry and the millions of Indians, Malays and bangladeshies and others that work in it are integral but Government stimulus on its own can’t run an economy. The number of shopping centres and junk and consumerism is staggering and ridiculous. A local was telling me that the effective income tax rate is only about 8%, but rent is essentially a tax as all housing and land is owned by the government. Rent is supposed to be expensive but is actually comparable to Sydney. And we haven’t even started on the giovernments foreign asset ownership.

     The imposing Marina Bay Sands from teh rooftop of the Esplanade
    In the shadow of Marina Bay Sands
  • The class structure. The divide between rich and poor is not obvious, I’m assuming the slums are hidden out the back somewhere. But the government at least appears to be concerned about the ppl working here – with lots of information available for workers regarding their work rights. But nevertheless, teh fact is some ppl are working long hours, for little money doing menial jobs whilst others are working in the professional services sector and earning big bucks. Somehow, the place works. I just don’t know how.
Raffles Hotel

Time and Marginal utility

I know it has been a very long time since I made an effort with regard to this blog, and it is a factor of two things, time and marginal utility…


Not many of us have a lot of time anymore. But time alone cannot be an excuse, because it is always possible to make time, it is always possible to stop doing one thing, and do another. So, rather then sleeping you could be visiting your girlfriend (like Heath!). Rather then working you could be at the TAB (Like dad!). Rather then calling your family you could be studying (like me :P). So, time is not an excuse, because a lack of time implies a lack of importance, which introduces our second concept…

Marginal utility:

The choices you make about time reflect, to a degree, your opinions of whats important, wahts enjoyable and whats urgent in the world. Geroge bush spends a lot of time talking rhetoric, rhetoric is important to Gerge Bush. John Howard spends a lot of time talking about whatever the hottest topic currently is (global warming) because wining elections is important to him. Unfortunately I have to admit that i have spent a lot of time recently glued to my computer working on my thesis because ithas been important, enjoyable and urgent! I’m sure my family understands!

So… is TV time more important, more urgent and more enjoyable then wahtever else you could be doing? Which ties in so well with opportunity costs… but maybe another time!


Just read and covered an interesting article by Kothari, Laguerre and Leone which analysed the relative degree of uncertainty of future earnings attributeable to current R&D investment, compared to current Capital expenditure.

The key finding was that R&D investments generate more uncertain future earnings then other capital expenditure. Not that surprising really. However, considering the majority of studies focus on the impact of investments on share price or return, its a little unusual.

Risk plays a large part in the buy/sell/hold decision of investors, and the uncertainty of earnings plays a large part in determining the riskyness of a project or prospective investment.

Does Risk play a part in evaluation? Do we consider risk when we consider the value of an item, or is it a completely seperate factor? I believe it is interrelated.
If a company is not providing a satisfactory return for its inherrent risk, a rational investor will sell his/her shares in that company.

How could I incorporate a similar analysis of a major accounting cost driver or cost centre intot eh evaluation of a company. Just as an aside, are investors really concerned with the inherent risk of the company they are invested in or the risk that they are missing a better alternative investment. (ie. cost of capital or opportunity cost)?

What’s in a theory?

Crazy smart people win prestigious prizes for coming up with amazing theories… so what’s in a theory? What is it about theories that gets so many people worked up, frenzied and excited?

“A Theory is a coherent set of propositions used as principles of explanation for a class of phenomena, assumed to hold throughout a broad range of specific instances”

What does that mean? I dunno, sounds more like the definition of a paradigm to me! Read Kuhns “The structure of scientific revolutions”. Its actually interesting. Explains how irrational scientists really are!

Anyway, my guess is the purpose of a theory is to provide a foundation from which it is possible to predict when phenomena will occur, understand why phenomena occur and what they are.

Apparently we all use theories everyday. If you look out the window, and its cloudy, what do you think? Hmm, maybe its going to be cold. I guess thats a theory of kinds, but iof you put it like this; its an argument right?

(Argument 1)
Its cloudy today.
Its cold when its cloudy.
Therefore today will be cold.

2 propositions and a conclusion. Looks like an argument, smells like an argument, it is an argument. So are arguments and theories the same? I doubt it. Maybe theories don’t have conclusions? Maybe when you actually make the prediction, it becomes an argument. That would make sense, because we know from my posts last year that their is a difference between arguments and explanations, and that difference is?

An argument makes a claim, an explanation does not make a claim. Ok, so a theory is just the propositions behind an explanation, with alternative conclusions depending on the phenomena that is observed?

(Explanation 1)
Its Sunny today
Its cold when its cloudy
that’s why it is warm today.

Notice the subtle difference. Good. Yes I’m schitzophrenic. Hi me! Your sexy! No – you are! oh shush, your making me blush! Your girlfriends hot. Why thankyou!

Same premises, different observation, but we used the same theory (albeit the first example was an argument) in the background to determine the conclusion. So despite my best efforts, the theory remains an implicit thing within these examples… The theory is essentially the background method, framework or thinking used to arrive at the conclusion given an observation(phenomena) and set of premises.

Thesis ideas Beta V3.07

Most of these come from the Eli Bartov research seminar:

1. Comparison of probability a firm is likely to inflate earnings if they have independent directors or not. Probability to inflate earnings would be determined by doing a Jones cross sectional analysis of Total Accruals. (USA based as not enough data in Australia)

2. Do comapnies show a preference to manipulate earnings by managing accruals, after the departure of independent directors from the board? (Thanks P. Wells)

3. Is the variance of earnings from cashflow for companies in a given industry a predictor of… shareprice?/Risk?/Poor governance?