Mateship, it is obvious, can come at a high price
Crikey, that's hurtful. Give a man a coalmine, make him rich, and what does he do? He goes and tells everybody he's not your mate. It's fair dinkum un-Australian!
Granted, the union boss did concede in testimony before ICAC this week, that he and the minister may have had a "close working friendship". Yes, struck the deal over a magnum of pinot noir at Catalina Restaurant. Yes, there had been no tender - come on, it was only a "training mine". Yes, the training mine somehow become a real mine and found its way into a stockmarket company NuCoal. And yes, John's $165,000 investment happened to turn into $14 million. After all that goodwill from Macca, one can only surmise that John attaches exceedingly rigorous performance hurdles to his mateships.
In the same year that Macca approved the Hunter Valley licence for John, he also opened up tracts of land in the Bylong Valley. That's the spot where, by sheer providence, Labor powerbroker Eddie Obeid had bought a property whose value was soon to rise fourfold.
Eddie Obeid had stewardship of the mines portfolio in NSW from April 1999 to April 2003. Macca came later. A pall has been cast over any mining deal struck by the NSW government in the past 14 years, including those with mining leviathan Newcrest, which operates Cadia, the country's largest gold mine, near Orange.
Gold and Copper Resources - an explorer led by Brian Locke and backed by former Rio Tinto boss Leigh Clifford, founder of Barlow Jonker Jeremy Barlow, former Glencore and Xstrata chairman Willy Strothotte, and venture capitalist Mark Carnegie - is contesting the validity of Newcrest's licences. They await judgment on the first of five court actions over the Cadia licences.
It's a mess, though there is the odd winner from ICAC: the Coalition, we in the media and, of course, Ian Macdonald's dentist to name three (love that smile). But the costs of corruption will weigh on NSW for years to come. A decade of deals can hardly be unwound now.
Historic hit for some
And so the cash rate has been cut to 2.75 per cent, a historic low. It's another hit for the dwindling species they call the self-funded retiree, especially those who eke out a living on term deposits and bonds.
The thing to watch now is the chase for yield. Stand by for a slew of dubious high-yield offerings, "bricks-and-mortar" spiels - the likes of supermarket REITs (real estate investment trusts) in Bunyip, Victoria.
They will appear attractive, and may perform well for a couple of years. Yet these are the next time bomb. The rule of thumb is that, as interest rates fall, asset prices rise. When rates rise again, REITs and their high-yield spruikers will have to refinance at higher rates. Most will have hedged for a couple of years but rising rates mean falling asset prices - and these assets, many of which will be derivatives, are required to be "marked-to-market" by the accounting rules.
Meanwhile, on Thursday night in the US, the punters were spooked by a rumour that the US Federal Reserve might "taper" off on its money-printing program. Ergo, the government would not be buying as many of its own bonds to prop up the stockmarket. Ergo, asset prices would fall.
And fall they did, both shares and bonds. Slowing the printing press? The market would not like that one bit, bemoaned the pundits on business TV. Even gold tanked. The suspicion is that "paper" gold - IOUs to deliver the yellow stuff - are now fetching less than gold itself. The gold bugs reckon there is more paper about than bullion.
Like the proverbial frog in boiling water, the world has become accustomed to the relentless money printing in the US and Europe and Japan. But the consequent asset bubbles can hardly be pricked as the US can't afford to strap on more debt or pay more on its present obligations. So the Fed is trying to whip up inflation to whittle away the debt while avoiding a sell-off in bonds.
For those who haven't seen it, take a look at USdebtclock.org, a real-time reminder of America's debt. It is ticking up towards $US17 trillion now, and unfunded liabilities now stand at a bloodcurdling $US124 trillion. The bulls cry, "New normal," the bears scream, "Armageddon." What seems sure is that the fundamentals are just as perilous but people simply tired of the bear market. It is not in the human spirit to endure more than three years of pessimism and despair.
Frequently Asked Questions about this Article…
The article describes ICAC testimony that flagged close personal relationships and questionable deals around NSW mining licences. It names former mining minister Ian Macdonald, union boss John Maitland and powerbroker Eddie Obeid, and notes a broader pall over mining deals in NSW going back about 14 years. The coverage suggests those deals — including licences that later formed parts of listed companies — are under scrutiny and have left lasting legal and reputational fallout.
According to the article, the investigations create legal uncertainty and reputational risk for mining projects and companies tied to contested licences. Some licence challenges (for example, actions against Newcrest’s Cadia licences) are already in court. That uncertainty can weigh on share prices, delay projects and make investment outcomes harder to predict for retail investors.
The article reports that a deal linked to a so-called 'training mine' eventually became part of a stockmarket company called NuCoal. It says union boss John Maitland invested A$165,000 and that investment later turned into about A$14 million, details that were part of ICAC testimony highlighting how personal dealings morphed into profitable holdings.
The article notes the cash rate was cut to a historic low of 2.75%, which reduces returns on safe, income-oriented investments like term deposits and bonds. That’s tough for self-funded retirees who rely on interest income, and it pushes many investors to look for higher-yielding (and often riskier) alternatives in search of income.
The 'chase for yield' refers to investors moving into higher-yielding assets as interest rates fall. The article warns that some high-yield offerings — including property-backed REITs touted as bricks-and-mortar opportunities — can look attractive short-term but become vulnerable when interest rates rise. Risks include refinancing at higher rates, falling asset prices and accounting rules that require certain assets to be marked-to-market.
The article recounts a US rumour about Fed tapering that spooked markets and led to falls in both shares and bonds. If the Fed reduces its bond-buying, government support for asset prices eases, which can lead to lower prices across risk assets — an important risk for globally diversified investors to monitor.
The piece highlights a suspicion that 'paper' gold (IOUs and derivatives) may trade differently to physical bullion and that paper claims can fall faster in stressed conditions. It suggests investors should be aware of the difference between owning physical gold and holding paper exposures, especially during volatility.
The article points to US debt approaching about US$17 trillion and very large unfunded liabilities, arguing that this backdrop may push the Fed toward policies that encourage some inflation to erode real debt burdens. For investors, that dynamic can mean persistent stimulus, asset-price inflation and the risk that any shift away from easy policy (for example, tapering) could trigger sharp market moves.
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