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Fundies game ‘seismic shift’ into ETFs

Sharp-eyed investors are buying up stocks ahead of their anticipated inclusion in key stock indexes, on expectations of the onslaught of passive funds flowing into them and boosting prices once the inclusion is finalised, according to new research from Citi.
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The paper, by a team of global equity strategists led by Robert Buckland, examines the “seismic shift” in global equity markets, as hundreds of billions globally flows out of managed investment vehicles and into passive investments, which are carefully calibrated to mirror the composition and performance of key indexes.

Passive funds offer exposure to equities for far lower management fees than is the case with active funds. In the past 12 months, Citi states, passive equity funds, usually in the form of exchange traded funds, have seen inflows of $442 billion globally, while active, managed funds have seen outflows of $534 billion.

Citi expects the proportion of money invested in passive vehicles to only grow, possibly rising to 50 per cent of market share in coming years.

The impact of large parts of equity markets being held by “passive investors” has been much debated in recent months.

Passive funds are equally weighted in all the companies in an index, and because they are intended to mirror an index rather than to outperform it, they can’t sell out of index constituent companies for poor performance. What critics say

Critics of passive investment argue that this risks investors being heavily exposed to stocks that have already risen strongly, and that it lessens the difference between the sharemarket performance of the best and worst performing companies.

Citi looked at this possibility, but concluded that across a range of global markets, correlations have not significantly increased in recent years.

“The biggest driver of correlation still seems to be market direction,” the analysis notes. “If markets are rising then correlations tend to fall. They rise when markets are falling. There is little indication that the rise of passive funds has [yet] changed this traditional relationship.” Different trends

But the impact of passive funds is discernable in several other trends. One is the tendency for stocks about to be included in the S&P 500 to see high levels of buying in the five days immediately before, when such stocks gain, on average, 50 basis points.

“We can find evidence that stocks outperform ahead of an announcement that they are going into the S&P 500 index, perhaps because speculators are guessing that they may be included,” the analysts wrote.

“They continue to outperform immediately after the announcement is made [around a week before inclusion], but fade away prior to the actual inclusion day. Then there is evidence of another burst of performance around the inclusion, as passive funds buy, but the effect soon fades away.”

“Passive fund managers are wise to these effects and adopt various strategies to minimise the distortions created by index changes.

“However, this will become harder to do as their funds get bigger. Overall, there does seem to be evidence that active traders can use an ‘index reconstitution’ strategy to exploit the actions of passive funds.”

This effect has been observed more widely than the US – the CSI300 index of Chinese stocks, for example, rose 3.4 per cent in a day last year on expectations its top stocks could be included in the MSCI Emerging Market index. ‘Liquidity smile’

Another phenomena, dubbed “the liquidity smile”, refers to the twin peaks of daily trading now seen in US equity markets. Historically, the largest volume of trades tended to be conducted early in the day, as companies tend to release news at this time.

But Citi’s researchers note there are now two peaks of trading – one at the start, and the other at the end of the day, as exchange traded funds adjust their passive portfolios. The trend “may present an opportunity for active investors/traders to exploit”.

Citi acknowledges the vital role played by fund managers in being “market makers”. But, in a comment likely to raise eyebrows among Citi’s fund management clientele, the researchers argue that the toll exacted for this service by fund managers is too high.

“Active managers and their research providers play an important part in the price discovery mechanism that is at the core of capitalism. However, maybe we were charging society too high a price to do this.

“At its core, the shift to passive investing is really about reducing that cost. And do we really need 51 ???CFAs [chartered financial analysts] for every stock in the MSCI World index? Does that really represent the optimum allocation of highly educated people?

“What if the shift to passive is partly about an industry that has traditionally charged high fees and earned super-normal profits being brought down to earth? Forty per cent profit margins are hard to defend in an industry where barriers to entry are low, alpha generation inconsistent and low cost disrupters on the prowl.”

‘The water moves at great speed’: The big threat from Cyclone Debbie

The biggest threat to residents from tropical cyclone Debbie – and similar tempests – typically comes from the huge storm surge that can inundate low-lying coastal regions rather than the winds, researchers say.
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Cyclone Debbie remains on track to cross the coast near Bowen – midway between Townsville and Mackay – on Tuesday morning, with a “very destructive core” bringing winds gusts potentially reaching 260 km/h, the Bureau of Meteorology said. That would make it category 4 or severe cyclone.

“Residents between Cape Upstart and St Lawrence are specifically warned of the dangerous storm tide as the cyclone crosses the coast on Tuesday morning,” the bureau said.

Cyclone Yasi, which struck north Queensland in 2011, powered a storm surge that reached 7.5 metres between Cardwell and Tully Heads, akin to a tsunami, said David King, the director of the Centre for Disaster Studies at James Cook University in Townsville.

Storm surges “bring in flooding”, Professor King said. “The water moves in at a great speed.”

Waters under the eye of the cyclone swell because of the deep low pressure. Strong winds also whip up waves, with the impact intensified if the storm’s arrival coincides with a high tide.

On current forecasts, the storm is predicted to make landfall at 10 am local time, or close to the 9.45 am high tide timing at Bowen, according to the bureau.

“More people have historically died from storm surges than the wind damage,” Jonathan Nott, a specialist in extreme weather also at James Cook University (JCU), said, noting the Great Bhola Cyclone killed half a million people in Bangladesh in 1970.

“[Yasi] literally swept houses…off their foundations and they were totally gone,” Professor Nott said. “Others were destroyed.”

“We could be looking at 3-4 metres with Debbie as it intensifies,” he said.

(See bureau chart below of the current forecast track of what is expected to be a category four cyclone.)

Jeff Kepert, head of severe weather research at the bureau, said it’s long been understood that flooding poses a greater risk for people living in a cyclone’s path.

“You hide from the wind but you flee from the water,” Dr Kepert said.

Shifts in the forecast track of just 30 kilometres can add a metre in storm-surge height if the storm hits a bay rather than a headland.

While the science of cyclones has advanced rapidly in recent decades, more improvements will be introduced by the end of 2017, Dr Kepert said. These include advanced modelling, which will allow forecasters to give better “worst-case” predictions for coastal inundation, and more precise cyclone strength estimates.

“Intensity forecasts have scarcely improved at all,” compared with other recent advances, he said. Rain, reef

Heavy rainfall, perhaps as much as 400 millimetres, could also lead to inundation particularly if it combines with swollen rivers and high tides.

“Localised flash flooding is likely, and the public is urged to stay tuned for warnings,” the bureau said..

“Townsville had a very poor wet season,” so the catchment is really dry ahead of Cyclone Debbie, Professor King said.

Both professors said cyclones such as Debbie were important for bringing rainfall to inland parts of Queensland. They also help ease the threat of bleaching of coral reefs by lowering water temperatures through increased cloud cover and ocean mixing.

Much of the corals of the central Great Barrier Reef appear to be bleaching this year, adding to the damage from last year’s massive event. DEVELOPING: Thousands evacuated as braces for #Cyclone#Debbiepic.twitter苏州夜总会招聘/sxz08CrJHF??? Weather Center HQ (@WeatherCenterHQ) March 26, 2017 Photo: Rick Rycroft

Interestingly, rain and water vapour from cyclones has a distinct isotopic signature, with most of the oxygen-18 isotopes rained out because of the intense convection of the event and how high the molecules rise within the storm.

Using the chemical record within limestone and other sources, Professor Nott and other scientists have been able to show that cyclones are now the fewest in at least 800 years for the Cairns region and 1500 years for Western . (See Nature paper here.)

“We’ve already been able to show that climate change is already affecting the behaviour of tropical cyclones in ,” Professor Nott said.

“One of major impacts is a very marked increase in the intensity and a marked decrease in the frequency [of cyclones],” he said. “This really started occurring quite dramatically in 1970.”

Some other regions, such as the north-west Pacific, are experiencing more and stronger cyclones. GFS NWP model’s current forecast for rainfall resulting from #CycloneDebbie. Areas as far south as SE NSW may benefit. pic.twitter苏州夜总会招聘/pvii7CiBLa??? Andrew Miskelly (@andrewmiskelly) March 26, 2017

New ABC chair says ‘high-minded’ Turnbull won’t interfere

Incoming ABC chairman Justin Milne says he has deep respect for Malcolm Turnbull but his longstanding friendship with the Prime Minister will have “zero impact” on his role at the public broadcaster.
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In an interview with Fairfax Media the telecommunications veteran said he would reduce his board appointments but would continue to serve on the board overseeing the rollout of the National Broadband Network. He also flagged that supercomputers capable of analysing huge amounts of data could be used in the future to assess the ABC’s coverage for bias.

Mr Milne, who replaces former NSW chief justice James Spigelman, got to know Mr Turnbull when he ran OzEmail, the internet service provider Mr Turnbull co-founded.

The pair became friends and Mr Turnbull appointed Mr Milne, who also ran Bigpond and MSN, to the NBN board in 2013.

“Malcolm is a high-minded public servant,” Mr Milne said.

“I’ve seen the way he operated at the NBN.

“He wants robust, well-managed institutions; he doesn’t want to be the king of .

“I don’t think he will be ringing me up and saying, ‘Get that person off Q&A or anything like that.’

“I have got to know him over a number of years and have a great deal of respect for him.”

Mr Milne, who was approached to apply for the role by Communications Minister Mitch Fifield, said the ABC was accountable to the audience rather than to either side of politics.

“The ABC is owned by the people of , it’s almost entirely a taxpayer-funded service,” he said.

“The audience are the people we must not be independent from – they are our shareholders and that’s to whom we owe our alleigance.”

Although Mr Milne has a vast amount of experience in media and telecommunications, he said would not be tempted to micro-manage the organisation or interfere with the work of managing director Michelle Guthrie.

“I don’t see myself as an interventionist chairman – it’s not my job to decide on programming or to second-guess journalists or other staff,” he said.

“At the successful organisations I have been a part of the boards don’t do that.

“There is an expectation that a new chair will try to stamp his mark on the organisation or come in with a new broom – I won’t be doing any of that.”

Mr Milne said he would “definitely” remain on the board of the NBN and that there was “no conflict at all” with his role at the ABC.

But he said he was reviewing his other board appointments to see which he could offload to make time for the ABC.

Mr Milne is also chair of accounting software group MYOB and NetComm Wireless, and sits on the board of Tabcorp Holdings.

Despite the regular complaints of conservative commentators, Mr Milne said he did not believe the ABC has a problem with political bias.

“Bias is in the eye of the beholder,” he said.

“The ABC goes to a great deal of trouble to be unbiased.

“I’m sure the ABC wants to drive a line straight down the middle of and provide all ns with a news service they can trust.

“In the era of blogs and ‘fake news’ the ABC is more important than ever.”

Mr Milne said he expected to continue the external audits of ABC coverage launched by his predecessor James Spigelman and these could be deepened in future years through the use of “big supercomputers”.

Machines could potentially analyse a huge amount of data in a more objective way than human reviewers, he said.

“Supercomputers like IBM’s Watson can read and understand and are able to look for keywords in the same way a human being does,” he said.

“They can understand what the intent of a piece of information is and what the biases are, the perceptions behind it.”

Mr Milne said the biggest challenge facing the ABC was the shift among younger consumers from traditional broadcasting to digital media.

The ABC must prepare for the day more ns consume television through digital devices, such as their mobile phones, than a TV set, he said.

Mr Milne’s five-year term officially begins on April 1.

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Blow to Berejiklian’s council mergers as court rules against KPMG report secrecy

The Berejiklian government’s remaining council merger plans have been thrown into upheaval after the NSW Supreme Court ruled the process used ahead of a proposed merger between Ku-ring-gai and Hornsby Councils did not accord with procedural fairness.
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The decision could have ramifications for other Sydney councils challenging their proposed mergers in the courts, and mean that uncertainty around council mergers will continue for months or years to come.

Ku-ring-gai won in the Court of Appeal on five of its six arguments mounted against the process used to justify its proposed amalgamation with Hornsby.

At the heart of its challenge was a report by consultancy KPMG, which recommended council mergers and which the government refused to release in its entirety, claiming it was subject to “public interest immunity.”

Based on KPMG’s analysis and modelling, the Government’s merger proposal stated that “around $70 million in net financial savings over 20 years” would be achieved through the amalgamation of Ku-ring-gai with part of Hornsby Shire.

Judges Robert Macfarlan and John Basten ruled that the delegate appointed to assess the proposed merger could not have properly carried out his assessment without access to the KPMG report.

They also found that the public interest in keeping the report secret was outweighed by the public interest in making the information available.

Judge Ronald Sackville dissented on these points.

Judge Macfarlan found the delegate, Garry West, “did not form his own judgment about the financial advantages or disadvantages of the proposed merger but instead adopted, uncritically, the results of the undisclosed KPMG analysis.”

Judge Basten found that the financial advantages identified by KPMG for the government were a critical element in favour of the merger, but this analysis was not provided to the delegate or public.

As a result, Mr West had “constructively failed” is his statutory duty of examining the government’s merger proposal.

“The Council was right to assert that the delegate could not properly carry out his function of examination without having access to that material,” Judge Basten ruled.

“Release of the material was also necessary for public participation in the public inquiry to be meaningful.”

The ruling could affect other councils fighting their proposed mergers, because similar processes were used ahead across the state.

When she became Premier, Gladys Berejiklian said she would listen to community views about council mergers.

She subsequently decided to cancel planned mergers in the bush that had been delayed because of legal challenges, but push ahead with Sydney mergers.

The councils that have not yet been merged, but which the government says it wants to merge, are: Burwood, Canada Bay and Strathfield; Hornsby and Ku-ring-Gai; Hunters Hill, Lane Cove and Ryde; Mosman, North Sydney and Willoughby; and Randwick, Waverley and Woollahra.

Ku-ring-gai mayor Jennifer Anderson said: “We believe the court’s decision signals a turning point for Premier Berejiklian’s government.

“If they continue with the merger process they will be flying in the face of our community and the court,” Cr Anderson said.

The Opposition Leader, Luke Foley, said the government should drop further forced amalgamations and release the KPMG report.

“Thank God we’ve got an independent judiciary in NSW,” Mr Foley said.

“After today’s shellacking the government should just admit defeat,” he said.

Greens local government spokesman David Shoebridge said: “Today the Court of Appeal has said the obvious, that it is blatantly unfair to forcibly amalgamate a local council on the basis of a secret report.

“This decision doesn’t just affect Ku-ring-gai Council, it could dismantle every single outstanding amalgamation proposal.”

Monday’s judgment ordered that Mr West’s report recommending the council merger be set aside. It also ordered that a subsequent review by the Boundaries Commission be set aside.

In an earlier Land and Environment Court judgment in September, Judge Tim Moore had ruled against Ku-Ring-Gai on all grounds but one. That ground was that the delegates’ report had failed to consider the impact of the merger on an area south of the M2 Motorway.

A spokesman for Local Government Minister said: “The NSW Government is currently considering the Court decision for Ku-ring-gai Council handed down by the Court of Appeal today.”

EDITORIAL: Lake Macquarie councillor John Gilbert cracks down on parties

DO police have sufficient powers to deal with (mainly) teenage party goers?
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And even if they don’t, is this a matter that Lake Macquarie City Council should be concerning itself with?

They are the two main issues that arise from a move by a Lake Macquarie Independent, John Gilbert, who wants NSW to have the same sort of “out of control” party laws adopted in 2012 by Western in 2014 byQueensland.

In a notice-of-motion for Monday night’s council meeting, Cr Gilbert links his call for tougher lawsto a party that spun out of control in Charlestown last month.Cr Gilbert says police have told himthat “such powers would assist them to manage future incidents” and that as a result, he wants the NSW government to“heed the lesson of this troubling incident” by adopting WA or Queensland-style legislation.

The main aim of the out-of-control event laws is to sheet home responsibility to the organisers of problematic events, who must prove they took reasonable measures to prevent such gatherings from becoming out of control. In both states, the party laws include maximum penalties of a year in jail anda $12,000 fine.

In an interview with the Newcastle Herald, Cr Gilbert, a real estate agent, said the Charlestown fracaswas followed by a 100-person problem party at Coal Point. He justified involving the council in a state matter by saying most people wouldn’t care at which level of government any tougher legislation originated.

But as various critics have pointed out in relation to the Queensland and WA laws, there are already a large number of offences on the books with which to address any criminal behaviour by party-goers. Indeed, it was reported at the time that 11 people were arrested after the Charlestown party, so police powers in that regard do not appear to be wanting.

Would arresting the owner –or lessee –of the house add anything to the police armory? The answer is almost certainly yes, but it needs to be asked whether such a power would be an overkill. Cr Gilbert clearly believes the stronger laws are justified, but it remains to be seen whether he can convince enough of his council colleagues to support him. Especially after saying a few months ago that “local government policy should relate to things that come under the umbrella of local government”.

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Faster cars, but what a drag GP racing has become

If the n Grand Prix was representative of the much-vaunted new era of Formula One, long-suffering followers are in for yet another season lacking exciting racing.
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While the revamped rules returned Ferrari to victory for the first time since 2015, on the basis of Sunday’s largely processional 57 laps around the Albert Park lakeside circuit, the faster cars have not improved the on-track action.

At least Sebastian Vettel’s despatch of Lewis Hamilton was a promising early sign that Ferrari has used the technical upheaval to become a serious threat to Mercedes-Benz’s crushing domination of the past three years.

But while the competitive order at the very top of F1 may have altered, the move to wider tyres and more aerodynamic downforce did nothing for the spectacle of the racing.

In fact, as widely predicted, the changes made overtaking moves even more difficult than before – so much so that there was only one position change involving a pass in racing on the track (excluding the dash from the start to the first corner) during the whole event.

Vettel overtook Hamilton in the pits thanks to Ferrari’s superior strategy, stretching his first stint six laps further to give him the decisive advantage.

It was a great and popular effort by Ferrari and Vettel, erasing the memory of the strategic blunder that cost them last year’s Melbourne GP, but it wasn’t an exciting battle.

The only actual overtaking not involving a pit stop was on the 52nd lap – and even that was between backmarkers as Esteban Ocon muscled past Nico Hulkenberg and Fernando Alonso, who was then also immediately relegated by Hulkenberg.

The lack of overtaking and close wheel-to-wheel racing was the predictable result of making the cars much quicker by significantly increasing grip in the braking zones and through the corners.

The new, more muscular breed of F1 racers were certainly much quicker – although not to the record-breaking extent expected – and a lot more physical for the drivers.

They could push harder for longer on the grippier, more durable Pirelli tyres and for those who understand such nuances, it was clear that the likes of Vettel, Hamilton, Valterri Bottas, Kimi Raikkonen and Max Verstappen at the front of the field were racing on the limit all the way.

However, as a spectacle, the race was an indictment of F1’s reliance on over-complicated technology that is a known barrier to close competition.

It is likely that things will improve as the 20-race season wears on, with the teams learning more and extracting more speed from the new cars.

There is already hope that Ferrari is going to fight Mercedes for the world championship, with fans praying Vettel’s strong start is not a false dawn and that he will wage a season-long battle with Hamilton for the crown.

Fans around the world – and especially in – that Red Bull Racing also catches up, putting Daniel Ricciardo and Max Verstappen into the fight.

The big crowd at Albert Park – by all accounts, a major increase on recent years – was bitterly disappointed by Ricciardo’s early exit on top of a pre-race problem that saw him make a delayed start from the pit lane.

Whether spectators – and, indeed, the worldwide TV audience – appreciated the extra lap speed of this year’s machines is questionable, particularly in the absence of the local hero trying to fight his way through to the tail of the front-runners following his qualifying miscue.

One wonders, too, what the big bosses of F1’s new owner Liberty Media thought of their new acquisition, which needs to be a major sporting spectacle to justify their multi-billion dollar investment.

Long-time F1 czar Bernie Ecclestone has been replaced by a triumvirate tasked with making the sport more fan- and viewer-friendly.

While F1 chief executive Chase Carey and his commercial lieutenant Shane Bratches would’ve been impressed by the scale and action-packed program of the n GP, they should be concerned about the lack of exciting racing in the main attraction.

The other member of the trio, F1’s new sporting boss Ross Brawn, has a lot to think about as he plots how to make the racing closer and more visceral, and spread the competition more evenly through the field.

There is much to be done.

Holden, Kia pull YouTube ads over video insulting Ita

The Guide.Ita Buttrose at the Channel 10 studios in Sydney.The longevity of Ita in a business that is notable for people crashing and burning.19th April 2016.Photo: Steven Siewert Photo: Steven Siewert
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Holden and Kia have suspended all advertising from YouTube after they unwittingly paid to promote their cars alongside an offensive video that directed misogynistic insults at journalist and businesswoman Ita Buttrose.

The car makers are joining a slew of major global companies who in recent weeks have boycotted the Google-owned video hosting giant because their ads were appearing before or alongside objectionable content.

Holden and Kia pulled the pin on YouTube after it came to light their ads were appearing on a video featuring an interview with “men’s rights activist” and author Peter Lloyd on Channel 10’s Studio Ten talk show.

The video calls Buttrose, a former n of the Year, an “old hag”, an “old bag” and other explicit misogynistic insults.

Holden told Fairfax Media it had decided to pull all advertising from YouTube until it could be confident it would not appear next to objectionable content.

“We value our good relationship with Google but in line with General Motor’s global response and Holden’s diversity stance, we have instructed our media agency to temporarily suspend all advertising on YouTube until we are confident Google can protect our brand from inappropriate or offensive content,” a Holden spokesman said.

“We’ll work closely with our partners at Google to achieve this.”

A spokesman for Kia Motors said its “programmatic advertising” had been suspended as soon as the company was made aware of the video.

“It will remain suspended until such time as we can meet with Google to further clarify the application of this type of advertising,” he said.

The moves came after major media agencies had said last week they were keeping a close eye on the scandal.

Google has been embroiled in a global controversy over ads being placed on objectionable YouTube videos and has scrambled to reassure its customers it can stop them from being associated with anti-semitic, racist and other extremist content.

Johnson & Johnson, AT&T, Sainsbury’s, Toyota, Volkswagen, BBC and the British government have all pulled ads from YouTube in recent weeks.

Google’s parent company Alphabet’s market value fell by $31 billion last week.

After the Trumpcare setback, an eerie silence from the White House

Washington: Measured against past meltdowns, Friday’s humiliating healthcare defeat should have sparked savage finger-pointing and name calling.
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Instead it’s as though shock has numbed political instincts in the White House and the GOP leadership.

The presidential Twitter accounts are idling, rather than in overdrive. And instead of score-settling leaks, White House aides busied themselves on Sunday insisting a Saturday tweet by President Donald Trump, which was read in many quarters as a jab at House Speaker Paul Ryan, was anything but.

The usual parade of GOP talking heads emerged for the Sunday morning TV talk shows. But dire prognostications by some after just 65 days of this presidency were left to hang in the ether. There was no real fightback, no serious counter punches – just a whole lot of handwringing acknowledging a crisis that, for now at least, seems to have stumped the party.

“I don’t know that we could pass a Mother’s Day resolution right now,” Florida Republican lawmaker Matt Gaetz said before offering a doomsday scenario in which Democrats might win enough seats in the 2018 midterm elections to seek Trump’s impeachment.

It is not surprising that administration insiders described Trump as “tired in every way, including in spirit ??? a weariness about him that had not been present a day earlier” as he retired to the White House residence on Friday evening.

The healthcare debacle had come on top of him being stymied twice by the courts on his attempted migration and refugee crackdowns, and on the sacking of national security adviser Mike Flynn.

This is not how it was meant to be.

In his book The Art of the Deal, Trump boasts: “Deals are my art form. Other people paint beautifully on canvas or write wonderful poetry. I like making deals, preferably big deals. That’s how I get my kicks.”

At various stages of the 2016 election campaign and more recently, he promised a healthcare deal that would be “unbelievable”, “beautiful”, “terrific”, “less expensive and much better”.

In a speech to last year’s GOP convention, he famously declared: “I alone can fix it.”

And he claimed on Friday to a gaggle of reporters in the Oval Office that he had “never said repeal and replace [Obamacare] within 64 days” was at odds with a February 2016 tweet, “We will immediately repeal and replace Obamacare – and nobody can do that like me. We will save $’s and have much better healthcare!”

The nub of the problem that has seemingly left the administration speechless is this – if Trump could not close the deal with a fractious GOP congressional conference on a historically difficult issue such as healthcare, how can he convince it to back his huge plans for tax reform and infrastructure investment?

Few were happy with a GOP healthcare bill that seemed to become politics for politics sake, rather than a genuine effort to rewrite a major piece of legislation. Trump’s first reaction to its demise was to blame Democrats who refused to support it.

Yet when Congress voted on Obamacare seven years earlier, no Republicans voted for that bill.

In his weekly address to the nation on Saturday, Trump didn’t even mention healthcare.

By Sunday, Trump had turned on the GOP’s Freedom Caucus, which had refused to back the Republican bill, despite the President’s relentless lobbying, cajoling and bullying to have the 30-odd members of the caucus fall into line. In his only tweet for the day, he said: “Democrats are smiling in DC that the Freedom Caucus, with the help of Club for Growth and Heritage, have saved Planned Parenthood & O[bama]care.”

But if the Freedom Caucus was discomforted, it did not strike back.

Arkansas Senator and Trump supporter Tom Cotton argued on CBS’s Face the Nation that defeat was about more than the Freedom Caucus, saying: “The problem is not with a specific faction in the House, it’s with the bill.”

Trump supporters acknowledged too that taming the Washington political beast remains a challenge for Trump.

His budget director Mick Mulvaney told NBC’s Meet the Press: “We haven’t been able to change Washington in the first 65 days.”

His chief of staff Reince Priebus told Fox News Sunday: “At the end of the day, I believe it’s time for the party to start governing ??? I think the President’s disappointed in a number of people that he thought were loyal to him that weren’t.”

And, in the minutes after Friday’s defeat, House Speaker and author of the doomed healthcare bill Paul Ryan told reporters: “Moving from an opposition party to a governing party comes with growing pains ??? and, well, we’re feeling those growing pains today.”

Michael Steele, a former Republican National Committee chairman injected a sense of urgency into the debate: “Your base walked away from [the bill], the White House wouldn’t own it, and the leadership was caught flat-footed,” he told Politico magazine.

“What I hope is that folks sober up to what this episode says about our readiness to govern. Because come Monday morning, the country’s going to want you to have some answers to some things, and you better be prepared.”

Former House speaker and Trump loyalist Newt Gingrich was not so gloomy.

Refusing to accept that Trump would be hobbled by the healthcare setback, he predicted that the impending appointment of Neil Gorsuch to the Supreme Court and Friday’s reversal of the previous administration’s order to halt the controversial Keystone XL pipeline would be cheered by Trump’s supporters.

“He was the President this morning. He will be the President tomorrow. He has all the advantages that that implies,” Gingrich said. “He’s having a better presidency than anybody in the Washington media thinks.”

Left out of that equation is that, as Trump moves ahead with the rest of his agenda – winding back Obama era environmental regulations, building a border wall and more – his opponents in Congress, the community and in an army of activist lobbies will have learnt from the healthcare crisis that the game can be played against this President.

Resistance may have taken on new meaning.

Murdoch cashes in $US125m of Theranos stock for $US1

The Wall Street Journal reported that its proprietor, Rupert Murdoch, has sold his $US125 million ($164 million) investment in scandal-ridden blood testing group Theranos for just $US1.
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According to the report, Murdoch did not join other prominent investors who collectively put $US600 million into the company in 2015 and have been given additional shares in return for a promise not to sue the company or its founder and chief executive, Elizabeth Holmes.

While Murdoch will apparently receive some upside if the company recovers from its various setbacks – which include investigations by regulators and lawsuits by investors – the report does not say whether he is retaining the right to sue the company.

The only thing Murdoch has gained from his Theranos investment, besides a harsh lesson on why he should stick to media investments, is a tax loss that will help cushion the tax bill that will be coming this year.

Holmes can take some solace that loss from Murdoch’s investment in her company pales in comparison to the billions that News Corp investors have lost on his $US 5 billion acquisition of the WSJ nearly a decade ago.

The downfall of Theranos was triggered by an article the WSJ published that first raised doubts about the claims of the company’s celebrity CEO, who was a billionaire at 30 and being dubbed the Steve Jobs of biotechnology.

The great promise of Theranos is that it could conduct the full range of laboratory tests – ranging from cholesterol to herpes – using just a few drops from a fingertip pin-prick instead of a needle and syringe.

It was expected to revolutionise healthcare affordability, and led Murdoch and other wealthy investors to inject $US632 million in Theranos between 2014 and 2015, which valued the company at $US9 billion.

Holmes owned half the company but that will be significantly reduced after she agreed to hand over her personal stock to Murdoch’s fellow investors in return for their pledge not to take legal action.

“This is an affirmative development for the company, providing a path forward in partnership with employees, investors and other stakeholders,” said Theranos director, Daniel Warmenhoven – the only person to speak on the record to the WSJ.

“Elizabeth elected to contribute her own equity to protect any dilution of shares held by other parties.”

The WSJ report came out just months after the major investment by Murdoch.

The US Food and Drug Administration (FDA) raised concerns within weeks of the report. By January last year, federal regulators were claiming the company violated clinical standards.

By June, Forbes estimated that Holmes’ stake was worthless.

The company has survived, and still had $US200 million in cash at the end of last year. But there are investigations and law suits pending as outsiders try to answer the basic question: Is the company a fraud?

And leading the charge will be Murdoch’s WSJ.

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Starchitect highlights Sydney’s affordability flaws

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Profit, not passion, is putting home ownership – and good design – further out of reach for the average Sydneysider, Pritzker Prize laureate Shigeru Ban says.

“Commercial developers, [who are] profit-oriented ??? that’s the problem,” he said.

“Cities are not designed by planners or government, cities are made by developers [now].”

And Ban understands affordable housing. The Tokyo-born architect has spent more than a decade working on humanitarian projects, designing temporary shelters for those displaced by natural disaster for as little as US$2000 ($2620).

But the design principles for designing relief homes and designing more permanent residences is the same, he explained.

“It’s not about space, it’s about construction method,” he said. “Even with the same space, we can make a comfortable house inexpensively.

“There are so many ideas in the construction method to make affordable housing, as long as the developer doesn’t mind to make less benefit, there are so many ways to make comfortable, affordable housing.”

Ban is perhaps best known in the Asia-Pacific region for his ingenious use of cardboard tubes, like those used in his Cardboard Cathedral in Christchurch, which opened in 2013, two years on from the earthquake that devastated the region and left 185 dead.

In Sydney at the weekend to promote the opening of his first n exhibition, The inventive work of Shigeru Ban, at the Sherman Contemporary Art Foundation, the architect also lamented the waning vision of his contemporaries.

“Generally speaking, architects stopped inventing. One of the reasons is, people are afraid to be sued – if you do something extremely innovative, we can be sued very easily,” he said.

“Especially these days, nothing comes out anymore, nothing new – it’s only decorative, funny shapes. Nobody wants to be innovative and experimental, nor to be sued.”

Ban said the effect has left a lasting impression on city skylines around the world.

“In Tokyo, most of the buildings are designed by not good architects, they are designed by big firms ??? normally they are not good architects so that the building is boring – in Tokyo, in Sydney – it’s the same.

“In big cities, most buildings are designed by big firms, they are not interesting.”

The inventive work of Shigeru Ban is open until July 1 at the Sherman Contemporary Art Foundation.