In yesterday’s Markets and Money we explored the possibility that stock market crashes are a deliberate and effective way of transferring wealth and power from one group to another. Today we’ll take a slightly less cranky look at the markets. We’ll start with a look at World War IV and end with the Hamburglar.
But first, if you’re the proud owner of the brand new iPhone 5, spare a thought for the 2,000 workers at one of the Chinese factories where iPhones are made. At least 40 workers were taken to hospital for medical attention following what the Financial Times describes as a riot at Foxconn Technology Group’s factory in Taiyuan.
The factory employs around 78,000 workers. The FT reports the fight broke out after a supervisor bullied a worker. Co-workers from the same home province then rallied to his side. The altercation ensued. The FT also reported that there were will be no interruptions to the iPhone’s supply, which is a good thing, considering Apple has already sold over 5 million of them this week.
The connection between Apple and Chinese labour is worthy of more analysis. But here at Markets and Money we must confine ourselves to superficial observations about the world. We’ll leave it at this: Apple stock will probably hit $1,000 per share in 2013…about time labour relations in China break down and the country faces a serious economic crisis. Stay tuned.
What about financial markets? Well, we’re nearing the end of the third quarter. This is when you’d normally expect to see ‘window dressing’ by fund managers. They want to buy and own the best- performing stock of the quarter…so they can say they bought the best-performing stocks of the quarter. That kind of behaviour doesn’t tell you much about where stocks are headed, so we’re going to ignore it and talk about the war being waged right this second on your desktop, lap top and mobile phone.
World War IV is what we talk about over cigarette and coffee breaks in Scoops Lane, the alley behind our office here in St Kilda. World War IV – or the ‘Code War’ as one faction likes to call it – is the idea that the next World War has already started and may never end. The Warfare State is real, here, and now.
This War isn’t the armed conflict you see on the History Channel. It’s the on-line war of all against all. Governments, corporations, hackers, terrorists, teenagers, housewives, and criminals are all combatants. In an information-rich, networked world, the battlefield is everywhere and all the time.
For example, today’s Age reports that hackers broke into a server at the University of Technology Sydney and published the usernames and passwords of students and staff. They also defaced a webpage on the site, replacing the normal content with a picture of Dr Zoidberg, a fictional alien crustacean from the televisions series Futurama.
That seems like harmless fun, although it’s not so fun if your data gets stolen. But there are more serious engagements being fought in the ‘Code War’ every day. A Canadian energy company, a Philippine oil company, and a military organisation in Taiwan have all been targets of cyber espionage from a Remote Access Trojan (RAT) named Mirage, according to Computerworld magazine.
How these things actually work is a mystery to us. But their purpose is pretty clear: to steal commercially sensitive information. Theft is theft in any medium. But it’s probably a lot easier to steal information by breaking into someone’s computer than it is breaking into the office to use the same computer. Industrial espionage in the ‘Code War’ is already common.
The ‘Code War’ is being fought between governments too. US government officials allege that attacks on the websites of JP Morgan and Bank of America this week were being carried out at the direction of Iran. If that allegation is correct, it proves the Iranians know that blowing holes in the information architecture of the US financial system is just as valuable as sinking an air craft carrier in the Strait of Hormuz, if not as spectacular.
And even if large corporations and countries find ways to defend their computer networks against attacks from each other, there’s the random human element out there that just wants to destroy things because it’s fun. How long will it be before specific computer programs are designed to crash a stock price, a currency, or a bond market?
We know algorithms can be used to manipulate stock prices upward. But just wait until someone designs one to manipulate a stock price to zero…or cause completely random price action in the market. Maybe it will lead to fewer, more secure digital stock exchanges. Or maybe it will further erode the public’s confidence in markets. We’ll see.
Speaking of waning public confidence in 20th century institutions, did you see that $43.7 billion budget deficit Treasurer Wayne Swan swooned over yesterday? The Treasurer pointed out the deficit was smaller than the $44.4 billion projected earlier this year. He said the $661 million difference between the projected number and the actual number was the smallest variation in ten years.
The Treasurer focused on a small number because the big numbers are so ugly. In four years, the government has racked up $173 billion in debts that you and your kids will have to repay. The falling terms of trade will probably lower income tax receipts next year, blowing another $10 billion hole in the budget.
Australia’s net federal government debt is now $147.2 billion. The champions of spending your money will tell you that’s only 10% of GDP, and 10% is a lot better than, say, 100%. That math is hard to argue with. But the whole point of comparing things to GDP is to make them look small by comparison.
In case you missed what just happened this year, let’s recap: Australian exporters witnessed a 170-year high in commodity prices and a 140-year high in the terms of trade. And during the time that money was pouring into the country, the government of Australia ran a $43.7 billion deficit. Only a world-class Treasurer could pull off that kind of performance!
In the spirit of yesterday’s DR, where we introduced you to the Cheeseburger Police who want to wring all the fun out of life, we’re renaming Wayne Swan the Hamburglar. The Hamburglar loves burgers so much he can’t help but steal them. And can you blame him? Burgers are delicious!
In the modern feudal state, the proper name for hamburger theft is calorie distribution. You take from the fat and give to the hungry. The trouble with this method of administering social justice by theft is that sooner or later you run out hamburgers. Tomorrow, more on what’s cooking for Australia in 2013.
for Markets and Money
From the Archives…
The Sharks Amongst the School
21-09-2012 – Greg Canavan
20-09-2012 – Greg Canavan
There’s Going To Be a Fight
19-09-2012 – Dan Denning
The World’s #1 Money Printer
18-09-2012 – Bill Bonner
The Video That Started All the Controversy
17-09-2012 – Dan Denning