Wong must woo the big polluters

Tag : airline sock

CLIMATE Change Minister Penny Wong is clearly a very capablepolitician but the level of business support for her carbon greenpaper would seem to dim hopes of dramatic reductions in carbonemissions under her regime.
It is too early to make judgments before the crucial decisions onreduction targets and permit prices, not to mention myriad detailson how the scheme will work. The final Garnaut report will give thefirst clue on the emissions target but is clear Wong is using theeminent economist as a bad cop to her good cop.
The best hope is that by bringing the community with her on theproject, she can make it as inclusive as possible with big businesspolluters ready to sign up with the right incentives.
The big fear is she will go soft and, while not upsetting anyone,will also achieve zero in cutting Australia's carbon output withall the dangers to the economy and country that Ross Garnaut soeloquently outlined in his draft report.
The mere concept of backing down on petrol prices the day beforethe green paper was released was disastrous for those seekingmeaningful changes because it was simply an open invitation forthose seeking exemptions to come knocking on her door.
The whole principle of the scheme is meant to provide incentives tochange behaviour through either gifts or penalties and yesterday'sgreen paper was loaded with the former and short on the latter.
One clever bit of politics is to bring in an emotive word such aspollution and place it next to carbon, which at least describes thepoison accurately, even if her proposals on paper won't go close toreducing it.
Talk to an owner of a brown coal-fired power station and he or shewill tell you carbon emissions can be cut by 30 per cent just bydrying coal but this costs and they will want compensation beforedoing that.
Visiting Professor Jeffrey Sachs is also right in arguing the bestthing Australia can do is encourage carbon capture, what better wayto produce a sustainable coal industry than making it cleaner.
Business won't change on this without being led by their wallets.
The concept of free permits is fine so long as the cap is tightenough to actually encourage them to look for alternatives.
By providing an arbitrary line around the biggest polluters as towho gets the most perks, Wong is establishing a strange precedent.
Surely it would be better to focus debate around the value anindustry can provide rather than how much pollution it can create.
Then there is the decision to fix permit prices for the first fewyears, which would seem to negate the mere concept of a marketpricing system not to mention the danger of a low ball price thatdoes nothing.
The Government's paper is a small step in the right direction but,out of 10, it scores four and that's being generous.
Qantas cockpit in full flight
QANTAS chairman Leigh Clifford has moved with amazing speed inrevamping the board to his own liking with three new people sincetaking the top job last October.
Gone of their own volition are Margaret Jackson, James Packer andPaul Anderson and, maybe soon, long-timer Mike Codd.
Former Rothmans executive Paul Rayner joins Barbara Ward andRichard Goodmanson as the newcomers.
The old Qantas board appointed Clifford to the job, by all reports,deciding he would be better suited to the task than former chiefand IAG chairman James Strong. Having cleaned up the board to hisliking, one could suggest it is more than time enough for Cliffordto nominate who will be the new boss when Geoff Dixon steps downnext February.
As Dixon noted in his staff letter this week, the airline industryis facing its biggest challenge, with oil prices up 45 per centthis year alone so the last thing the company needs is uncertaintyin top management. As foreshadowed last week, Dixon next week willannounce the biggest cut to the 36,000-member workforce since the2002 SARS epidemic.
Naked or in shorts
EFFECTIVE regulation is a mixture of bluff and action, which isexactly what US SEC boss Chris Cox is trying to achieve with hisclaimed crackdown on naked short selling of financial stocks inAmerica.
Firstly, one should understand that naked short selling, where thetrader either doesn't own or hasn't borrowed the stock, doesn'thappen in Australia and if it does it is extremely rare.
Cox is trying to do two things: restore confidence in the marketand protect his own backside.
The aim is clean up a loophole in the US, a position where youdon't have to have ownership of either the lent stock or the actualstock before you short it.
For example, if you want to short Fannie Mae you go to JPMorgan oranother custodian and say 'can I borrow some millions of FannieMae?' and, if he or she says yes, then you say 'hold on to it', asin don't transfer ownership, and you just keep borrowing it all dayseveral times over.
Cox will require actual ownership -- whether borrowed or not --before the stock is sold short and, while at first restricting itto a bunch of financial stocks, will consider applying the ruleacross the board.
He is doing nothing more that try to play catch-up with Australianrules without probably knowing what the rules here happen to be.
This restriction met some amusement, given that protecting thelikes of Morgan Stanley et al was like protecting the robbers frombeing robbed.
The Wall Street Journal, by way of example, is reporting that theheads of two firms, the defunct Bear Stearns and Lehman Brothers,have contacted Goldman chief Lloyd Blankfein to inquire whether hewas aware his traders were spreading rumours and shoring theirshares.
Of course, the Goldman boss had never heard of anything morepreposterous and the firm officially denied the matter.
Superannuation Minister Nick Sherry will introduce an amendment tothe Corporations Act in the next session of parliament starting inlate August to require mandatory reporting of borrowed short sales.
This will mean a broker must be a client when selling, whether theyare shorting the stock or have borrowed to cover their positionsand visa versa.
This happens to be what is required now in the US and will increasethe visibility of short positions.
The best guide now is provided by Data Explorer, a British-basedfirm that provides the data to sock lenders and the like.
The accompanying table shows some highlights of the present stockloan positions, which roughly equates to sort positions.
In total there is now some $45 billion worth of stock sold short orborrowed in Australia, which equates to roughly 5 per cent of theS&P 200's market value of $979 billion.
The first column is the dollar value of borrowed stock against aparticular stock and the second is the percentage of availablestock that is borrowed.
The big dollars are obviously in easy arbitrage situations like BHPand Rio, along with Wesfarmers (with its special stock to appeasethe Coles board) and Westpac.
These are aside from the notables, the like of Fairfax, Aristocrat,Toll, B&B, MIG et al, which are perceived easy targets.
Above all, short selling is an ancient art, which is rarelysuccessful for any prolonged period and only attracts concern inmoments of market panic.