Tell-tales blowing in the wind

Does history repeat itself? A question that has kept Briefcase awake recently after a series of events which are eerily like 1987, the time of the last great boom (and bust).

Until recently this theory of, “oh dear, here we go again”, was not being widely discussed. Commodity prices were too high to contemplate a crash, and perhaps they still are.

But, as you tick-off the rest of the tell-tales blowing in the breeze it really is rather alarming, and while a crash is unlikely there is every chance of a sudden deflation of a grossly inflated speculative balloon.

The event that did more than most to send a shiver down the spine of Briefcase was the withdrawal of the Coogee Resources float. This was a remarkable decision because, as far as most brokers flogging Coogee shares to their retail clients were concerned, the float of this interesting oil and gas company was a done deal.

In that description the key word is retail, because what seems to have happened is that applications from mums and dads flooded in, even forcing a scale back (rationing of shares), such was the demand.

Institutions, however, run by professionals who look a bit deeper into a request for their cash, went cold.

Why?

The answer seems to be that seasoned market specialists could see something the little people couldn’t. They could see an over-priced float, with too much blue-sky.

The really disturbing possibility is that many retail brokers could also see the pricing problems in the Coogee float, but they could also see the fees they would earn by recommending, or at least not warning, that Coogee was “priced to perfection”, which is the finance world’s euphemism for over-priced.

Whatever the reason, the sudden withdrawal of institutional support (or did it simply not arrive at all?) was precisely the event that tipped companies into trouble in 1987. The late Robert Holmes a Court being a major victim after he first secured, then lost, a $1 billion funding package that might have saved his Bell Group from Alan Bond, and the knacker’s yard.

The rest is history, which destroyed a lot reputations, including that of one-time WA premier, Brian Burke – whose lobbying activities are surely another of the tell-tales pointing to how gross this current period of excess really is.

Nervous financiers are one sign of a waning belief in the boom – or at least a belief that we are overdue for a breather. These are some of the others warning signs:

•           the flood of totally hopeless uranium floats;

•           troubled, if not failed, mining ventures;

•           troubled, and failed, energy ventures – including Alinta Infrastructure;

•           the increased use of multiple leveraged debt via so-called ‘private equity’;

•           rising interest rates;

•           rampant cost inflation which is destroying project economics;

•           an acute shortage of talent, of any sort;

•           greedy young men (and women) playing the stock market like a casino;

•           the same young people lacking any economic or historic reference points;

•           a property bubble caused partly by a land shortage – in Western Australia;

•           gross (and widespread) conspicuous consumer consumption; and

•           the corruption of government.

Of these other factors, it is the talent shortage that most worries Briefcase because there seems to be little doubt that dopey people are being parachuted into jobs way above their capacity.

Over time, this will be seen as a curious variation of the Peter Principle, which says that employees rise to their level of incompetence.

In WA today there’s no rising to that level; people are starting beyond their level of competence – and continuing to rise to astonishing levels of incompetence.

One example says it all. Last week, Briefcase was told about a bright young engineer who opted to not practice after graduation, preferring to work for five years in a pizza shop. When he finally decided it was time to use his qualifications (which, by now, were five years out of date) he was snapped up, walking into a $100,000 a year job – and not having a clue about what he was supposed to do.

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Corruption of government is the second most concerning of the “back to the ’80s” tell-tales blowing in the wind, and while the current inquiry into events surrounding a poorly executed property development in the South West is yet to report, there is an awful stench in the air.

Without doubt the most alarming point is that one of the men at the centre of the inquiry, Brian Burke, appears to have been exerting power in government 18 years after he was actually in government, and after he was jailed twice for corruption.

What you see with Mr Burke is what you get, and it staggers Briefcase that more people can’t see precisely what he is. It’s also interesting that no-one has dredged up the famous words of former deputy premier Ian Taylor in 1994, who declared his love for Mr Burke as they disappeared down the garden path together for the last time.

In fact, going back in time provides us with a few of those useful historic reference points, which show that the more things change the more they remain the same.

One is the use of a special purpose financial structure to fund a campaign in support of the South West property development.

Back in the 1980s, Mr Burke was doing precisely the same thing through his control of a special ‘leaders fund’ into which donations were made for the leader of the Australian Labor Party (Burke) to spend as he saw fit.

Or, in Mr Burke’s words in his 1997 corruption trial, he was entitled to spend the $7 million or $8 million that flowed into the leaders fund “in the interests of the Labor Party, as I perceived them to be”.

Control and power is what Mr Burke is all about; control of money and power over people.

Now, what was it Lord Acton said about power? Oh that’s right: “power tends to corrupt, and absolute power corrupts absolutely”.

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As a final thought on Mr Burke there is, even now, a gap in the public hearings into how he lobbied civil servants and members of parliament. It’s called the money trail.

If history is a guide (and Briefcase has just spent a column arguing that it is – therefore it must be true) the best way into Burke’s World is by following the money trail.

It is the flow of funds which might yet provide the best insight into how the lobby game has been played in Perth over the past few years – on both sides of the ledger, showing who deposited what, who was paid what, for what services.

It’s only when the circle of funds is complete that we will know precisely how it all worked.

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“One of the most common of all diseases is diagnosis.” Karl Kraus