THE DISTILLERY: In the cross hairs

There have been some interesting straws in the economic and business breezes overnight. The rain continues in parts of rural Australia, especially Queensland and NSW, the US bond market is a bloodbath for very obvious reasons; Australian banks, with a regional operator downgrading earnings last night; a major speech from the Reserve Bank's chief economist, the media buys by Gina Rinehart, copper and a major bit of buying back the farm. All in all a lot for our covey of jotters to wrap their words around this morning.

No wonder there's blood in the bond market in the US where there has been another big sell off overnight after the latest, this time defacto stimulus package from President Barack Obama and the American Congress. Fairfax's Malcolm Maiden said: "The US bond market tanked yesterday after President Barack Obama backed down and extended George Bush's tax cuts for the rich for another two years, and shares failed to hold on to a rally. But Obama's deal is nevertheless an important and potentially positive moment for the global market recovery. It's an ideologically loaded decision, because liberal Democrats hate the idea of extending tax rates to fat cats, and it's prima facie expensive: the government's revenue loss on the entire extension runs to $US3.6 trillion in a decade, and the high income earner component costs $US700 billion. And it's inflationary, because it shores up household incomes, and spending. But it's also necessary, to keep the economy going, and head off a market nosedive." So much for deficit reduction.

And The Australian's Michael Stutchbury analyses a major speech in Sydney last night by the chief economist of the Reserve Bank, Phil Lowe in which he discussed the rise in household saving: "Importantly, Lowe suggested this household restraint was turning out to be 'quite long-lasting'. The Reserve Bank was assuming the household saving rate would stay high 'for quite a while yet'. 'If this were to occur, not only would it lead to a lowering of risk in household balance sheets, but it would reduce inflation pressures during the period of high (mining) investment,' he told the Australian Business Economists' annual forecasting conference dinner." And that could mean fewer rate rises. Later today the jobs figures for November will be released.

Fairfax's Elizabeth Knight says it's hard to know what Perth rich lass Gina Rinehart wants with her media buys: "Rinehart would get far greater bang for her buck investing in Fairfax if she wants to get a voice in Canberra. The fact she has taken an investment in both suggests there is a wider corporate agenda – one that has not yet been revealed. In order to get any traction in either situation, she will have to find support. Ten per cent of Ten buys her little other than a poor dividend stream. If she, Packer and Murdoch are like-minded in their strategic plans for the network, she might get some traction. Her current investment in Fairfax achieves even less. She needs to buy more, and the talk around town is that this is her intention."

And Ms Rinehart had something to say yesterday, posting a statement on her company's website: "Australia's richest woman chided the media for labelling her a 'mining heiress', describing journalists who use the term as 'stupid'. Gina Rinehart refused to discuss her $200 million splurge on the media sector but she found time for the strongest defence yet of her own role in building Hancock Prospecting into a major mining house. Mrs Rinehart said she was left with 'substantial debts and liabilities' and no 'inherited money' upon the death of her legendary father Lang Hancock in 1992. The statement was issued in response to a Perth journalist's comment on a radio program that Mrs Rinehart was 'born with a silver spoon in her mouth'. It came after she was revealed this week as the buyer of a $50 million stake in Fairfax Media a fortnight after she emerged with a $150 million stake in the Ten Network."

Still in mining, The Australian's Matthew Stevens wrote this morning: "For a second time in but six weeks, JPMorgan operatives in the Big Apple are cranking open the US capital market sluice gates in the name of Fortescue Metals. In late October, investors pumped $US2.04 billion into Fortescue through an unsecured note issue and overnight JPMorgan was busy again, this time lining up support for an $US800 million issue on slightly modified terms."

Ian Verrender mounted his favourite banking hobbyhorse again in The Sydney Morning Herald this morning: "Don't expect the earth to move when the Treasurer, Wayne Swan, finally unveils his grand plan to boost competition within Australia's banking industry. And nor should it. History has shown that radical overhauls of the finance industry – either to boost lending or restrict the power of banks – almost always results in unforeseen and unexpected consequences that usually end in disaster. What is needed is ongoing and vigilant oversight by the federal government and its regulators – the Australian Competition and Consumer Commission and the Australian Prudential Regulatory Authority – to ensure the needs of bank customers are balanced with the demands of shareholders."

But Stephen Bartholomeusz made a very good point about banks and lending in Business Spectator yesterday: "Efforts to re-create, with government/taxpayer assistance, the same intensity of competition that existed in the lead-up to the crisis are therefore misconceived and potentially threatening to the stability of the system. Small banks and non-banks shouldn't be able to borrow as cheaply as their larger and more diverse and, in the case of non-banks, generally far more heavily capitalised big bank competitors. That they could do so pre-crisis was an aberration rather than a norm." This column should be read by other jotters and banking wannabee critics.

AAP reported yesterday that: "ANZ's [Senate inquiry] submission admits there has been consolidation in Australia's banking industry since the GFC, through acquisitions and smaller players exiting the market. But it said there are still a large number of players in the market, particularly in home lending, with over 100 providers or mortgages offering standard variable rates between 6.72 per cent and 8.3 per cent."

Still in the real world of banking, Fairfax Insider, David Symons says: "A profit warning from Bank of Queensland last night shows times remain tough in the sunshine state's commercial property market. Negative fallout from the downgrade could hit cross-town rival Suncorp Metway. It seems that two impairments across two of the bank's retail shopping centre exposures prompted Bank of Queensland to review its commercial property lending book, with a focus on the top 250 exposures." The update came on the eve of the bank's AGM today.

And Symons also revealed a major buy might be about to happen from Pattie's Foods: "The owner of the Four 'N Twenty, Nanna's and Herbert Adams brands – which makes 60 per cent of its revenue selling to Coles and Woolworths – is understood to be closing in on a deal to acquire Sara Lee's Australian food brands, which include Moccona, Sara Lee, Piazza d'Oro and Pickwick Tea. The deal will require a substantial capital raising, and with Patties' founding shareholders – the Rijs family – unlikely to take part, their current 38 per cent interest will be substantially diluted."

According to the AFR this morning, the Tax Department has ruined some investor's breakfasts: "Shareholders in major listed companies including Wesfarmers, Rio Tinto and Woodside Petroleum face higher tax bills, following a contentious draft ruling by the Australian Taxation Office yesterday."

And the AFR's Chanticleer says: "The imminent launch in London and New York of several exchange-traded funds that will hold physical copper are definitely signs of a bubble in the base metals market."

Still in copper, the paper also reports that: "Rio Tinto last night was placing the finishing touches on a $US1 billion-plus financing deal with Ivanhoe Mines which could end a tussle between the partners in the Oyu Tolgoi copper-gold project in Mongolia."

Should Tassal have disclosed the private equity approach? The Australian's Bryan Frith says its a vexed question: "The "outing" of Tassal Group by Pacific Equity Partners once again raises a thorny issue. Should listed companies engage when approached about a potential takeover." And should they also disclose that approach, he says, and when.