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The Election Circus & Australia's Worst Batting Collapse in 26 Years

by The Wrinkle | July 23, 2010

If he were still alive it would be interesting to know what Jung would make of Joe Hockey’s “shadow” following his comments about Paris Hilton and celibacy. While politics is often little better than a circus, with clowns trying to out do each other in the ring, regardless of your political beliefs the current level of spin being generated is frankly insulting to those of us who believe we at least have the semblance of an IQ.

I don’t want to pick on Joe Hockey particularly as he’s an easy target, however I will. Regardless of whether you thought Peter Costello was spineless for not walking over Jeanette and making John Howard stand aside, most people still respect him for his economic stewardship. When you look at Joe Hockey merging capital and revenue savings plus a bit of opportunity cost avoidance into the same pot to get as big a number as possible for a headline you wonder a) how skillful is he really, and b) how low will he go to generate a headline that insults any of us with a degree of common sense.

The other thing that really gets up the Wrinkle’s nose is the view that all politicians seem to have been thinking it’s far better to avoid the question than agree to what is obvious. Kerry O’Brien on the ABC’s 7.30 report has become a bit of a master at exposing this, he made Kevin Rudd lose his cool, Tony Abbott confess to being a liar, and then during the last week Joe Hockey was also matted. Mainly for refusing to acknowledge that changing a separate bill that would totally negate a clause in the Fair Work Bill was effectively exactly the same as changing the Fair Work Bill.

Obviously the pollsters have told the politicians that it’s far better to treat people as stupid as this leaves an element of doubt, rather than ever admit to anything negative that can be blown up in the press. Rather sad, don’t you think, that even the idea of truth has been relegated to a percentage tick on someone’s popularity chart.

While I’ve carved up Mr. Hockey, don’t get me wrong the other crowd are just as bad, and when it comes to “carve ups” they are obviously masters of that game.

Still at the street level and within business, the reality is that there is little material difference between the policies of the two main parties, so you may as well sit back and enjoy the more bizarre elements of the side show. The big ticket item that has been kicked for touch by both parties is the introduction of a price on carbon or carbon tax. Which in turn brings me to an interesting point I came across at the weekend buried in an SMH article on Advent Energy.

“One third of Australia’s carbon dioxide comes from 12 or 13 power stations between Wollongong, Sydney and Newcastle”

“if you converted all of the coal-fired power stations to gas from a discovery that we made, then you’d actually meet Australia’s Kyoto that one single step”

- David Breeze – Executive Director - Advent Energy

For those unaware, Advent is the company involved in prospecting for gas off the NSW coast, and while obviously they have a vested interest in pitching their prospects, they are actively involved in the industry and there is no reason to materially doubt the validity of their numbers.

So while the more environmentally orientated among us may be focusing on the small incremental gains from hybrid cars, etc. a huge beneficial “king hit” may be staring us in the face just off the NSW coast. The Wrinkle was “blown away” by just how large the carbon footprint is of the NSW coal fired power plants.

For those interested in the investment side, the only public entry point is via MEC Resources who owns 50% of Advent (MMR). This stock is a pure “one test well” gamble at this stage, so the Wrinkle isn’t picking it unless you want to treat it as a 50/50 sports bet. It’s also had a huge run up in recent weeks and could easily spike and retreat, plus there isn’t any real support level in the open bids. Buyer beware.

The Wrinkle has mentioned in the past how Betfair can be a good, cheap way to improve your trading ability and in particular help to train you to take the “emotion” out of your trading decisions. Accordingly I’d like to share with you one of my recent mistakes to help highlight what I’m talking about.

In the first cricket test between Australia and Pakistan the Wrinkle indicated that he thought Pakistan was a better team than the $6 odds on offer and that at some stage the odds would shorten and you could lay off for a profit, even allowing for a predicted Australian win. The strategy here being to look to trade on an improving outlook during the 5 day window. I followed this strategy myself in this test and cleared $100 on a $200 bet.

Coming into the second test this week emotion took over as I decided Pakistan were in total disarray following the change of captain, and couldn’t improve from their $8 opening odds position. When in reality all they did was replace a non-performing player with a better one, objectively making the team better. Ergo the strategy used previously should be even better the second time around given the higher odds. However the Wrinkle “in clown mode” effectively made what was a sports bet not a trading bet by placing $300 on Australia.

So what happens, Australia have their worst opening innings in 26 years, and the odds on Pakistan shorten to around $1.50. Australia has since recovered to be favourites again and may yet win, however let’s consider the trading bet that was on offer and missed.

If Pakistan had been backed for $100 at $8 at the start, and then laid off at $1.50, you could have laid off $533 of potential gain to get a guaranteed $433 profit (net $411 after 5% brokerage) regardless of who won the test or if it was a draw. All I can say is that I hope there was someone out there less stupid than “moi” who followed the strategy and made a great return.

You could argue that a once in 26 year collapse is hard to foresee, however the point here is that if you take the time to develop a trading strategy, and it’s proven to work. Harden your heart, and keep using it.

Have a good week.

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