THE DISTILLERY: Currency clarity

A rather full plate this morning; the boys are still tinkering with their QR National train sets, women in business and interest rates scored the sainted Gail Kelly a few headlines for Westpac, Woolies' buyback has finished and it would not be too much to say the company got knocked down in the rush, the looming US foreclosure paperwork scandal is at last recognised by one jotter, but we start with another sharp edged commentary from Fairfax's Ian Verrender.

He says the federal opposition has shown its ignorance of things economic in climbing on the rising dollar: "Here we go again. As the Australian dollar prepares to punch through parity, the usual howls of protest about the damaging effects on our rural exports already have begun. The worry, however, is that the misinformed howls are emanating from the alternative government and, given the tenuous political position of the Gillard government, from those who could soon be running the nation. Yesterday Andrew Robb, the opposition finance spokesman, made the extraordinary claim that the rising dollar was a result of economic mismanagement and let fly that the government should take action to keep the dollar down. It is a comment that defies logic." There should be more of that from jotters on The Australian Financial Review and The Australian if they believe in the freedom of markets and good economic policy.

Gail Kelly is the eighth most powerful woman in the world according to Forbes magazine, topping the PM, now says she'll promote more women into management jobs at Westpac, and charge us more for our mortgages. The Australian Financial Review allows her to get away with that one this morning: "Westpac Banking Corp chief executive Gail Kelly has warned that home loan rates will have to rise to offset "materially” higher funding costs, admitting a split with the government over whether banks need to raise mortgage rates by more than official rates set by the Reserve Bank." And The Australian thinks she means to lift rates, although she tapped danced around just what she meant: "Westpac chief executive Gail Kelly has stood up to government calls for banks to avoid out-of-cycle rate rises... "We have a particular view on what's occurred with funding costs. I think it's been clear ... that the rise in funding costs have been a direct result of the global financial crisis and the government will have a different view of the extent of it and just how the banks should deal with that situation," Mrs Kelly said as she sat next to Prime Minister Julia Gillard at a business lunch in Sydney yesterday. While Mrs Kelly declared funding costs had risen "materially", she denied her comments should be interpreted as a signal to government that the nation's second-largest bank was planning to lift interest rates ahead of an expected rate rise by the Reserve Bank of Australia next month." Why doesn't she have the courage to stick rates up and not just talk about it; earn your Number 8 ranking Mrs Kelly.

The Australian's Andrew Main says the old rumours of a divorce at Tabcorp, are back on the mat:" It's back ... talk of a Tabcorp demerger, that is, with speculation of a capital raising to help split its casino and wagering/gaming units. It's logical, and major shareholders keep pushing the option, but question marks remain over whether the time is yet ripe. A trigger for a demerger would be a successful application to the Victorian government to renew its wagering and betting licence (it is shortlisted with Tatts and Ladbrokes for the 12-year licence)." Who'll be the celebrant?

Woolworths had a successful share buyback and The Australian's John Durie says big banks and brokers were not the grinners: "The retailer received tenders for $5.2 billion worth of stock and, as stated, accepted only $704 million worth, which meant 88 per cent of those tendered at the discounted $25.62 a share were handed back. The good news for those who successfully sold their stock into the buy-back was they received a $22.54 fully franked dividend plus were deemed to have sold the stock at $6 a share, being the capital component of $3.08 a share plus a calculation based on the final price. Self managed super funds with low tax rates and fund managers were the big winners. The losers on paper were the banks, which bought stock to ensure clients who sold into the buy-back would not lose their index weighting, and will be lift (sic)carrying an overhang."

Fairfax's Adele Ferguson tries to extend the emerging US home foreclosure crisis to Australia, desperate for a local angle. Why? The US problem is bad enough: "As investors await the release of some crucial US economic statistics this week to help them predict the chances of a double dip recession, a more frightening bomb is sitting in the US residential market, with the potential to set off the next chapter in the subprime debacle. There are profound implications for Australia and the rest of the world with the direction of the US dollar, the health of the US economy and the havoc it can wreak on the many financial services institutions that got caught up in residential property investments – directly and through exotic derivatives such as collateralised debt obligations – in the US. From an Australian perspective it is being monitored closely by a few consumer advocacy operators, one of which represents 200 families who are allegedly the victims of fraudulent mortgage documents. If the cases get up, it could expose the local banks, mortgage brokers and financial institutions hundreds of millions of dollars." And President Barack Obama last week vetoed a sneaky attempt by Congress to get the banks off the hook by validating all the dud documentation without anyone knowing, other than the bankers, lawyers and others implicated in the disaster.

News Ltd's Terry McCrann catches up with the QR National sales campaign: "Is QR National the new Telstra? That is arguably the most important question potential investors need to ask and answer. The comparison is valid even though on one of the most important things for especially retail investors – the dividend – they are like chalk and cheese. Rather ironically, you can buy a Telstra and QRN share for around the same price. Telstra closed at $2.68 yesterday. QRN shares will go to retail investors at between $2.50 and $2.80." This point was made over and over on Monday by fellow scribblers.

And another News jotter, Tim Boreham of The Australian: "We can only concur with Queensland top banana Anna Bligh's view that few folk view an initial public offering offer document as a "bodice-ripper or a page-turner". But the spruiker-in-chief for QR National makes an exception for the rail operation, now the subject of a 148-page potboiling prospectus. In the next couple of days the steamy tome will land in the laps of 1 million Australians who requested the document (or were automatically pre-registered by their broker). So it's fair to describe the interest as feverish. The trouble is, based on two-year EBITDA forecasts, QR's pricing is not compelling." And the AFR says: "As QR National seeks to convince investors of the merits of its float, it is highlighting the expansion of its rail networks in central Queensland as an example of how it will boost revenue growth."

And that view's hard to support when you read the commentary from The Australian's Matthew Stevens this morning: "At the back of the QR National prospectus, amid a long and necessarily imaginative list of its key risks and uncertainties, is a warning. It says that the malcontents that fomented into the coalminers' $5.2 billion bid for Queensland's freight rail network might now result in its key customers becoming competitors. The coalminers believe they are on the cusp of a new era of demand, most particularly in thermal coal. But they have no confidence that QR National can deliver either the infrastructure or quality of freight service necessary to extract the full benefit of the expected explosion in Asian electricity consumption." So QR National will expand, while its customers want to play trains as well? Time for Fat Controller to step in, I think.