The Australian:

Hedley Thomas, National Chief Correspondent, The Australian & The Weekend Australian, writes: Re. “Mitchell and The Oz (part II): ‘it’s now war’ with the government” (Wednesday, item 2). Crikey has tried hard to paint another false picture of journalism at The Australian by inferring that reporters at The Oz lack independence from Chris Mitchell.

Crikey doesn’t get it. Journalists want to work for The Australian because the newspaper is gutsy, fearless, and willing to turn a story on its head, notwithstanding the prevailing political correctness or accepted wisdom. I have never felt pressured to align my reporting with what you describe as Mitchell’s obsessions.

The Crikey piece revisited Overland-OPI stories in The Oz in June last year.

For the record, I lobbied strongly for those stories to be published because of what I saw then (and more so now) as clear evidence of gross abuses of OPI power, perversions of the course of justice, cover-ups, show trials and political bastardry.

The fact these abuses occurred via one of the most intrusive, media-leaked and expensive telephone tapping operations in Victoria’s history, which succeeded in removing the head of the police union and an assistant commissioner (enemies of the OPI and Overland) without resulting in a single successful charge, should have led to searing media examination before The Oz started looking at it.

But here’s the thing. If I had, instead, told Mitchell last year: “The story does not stack up”, there would have been no disagreement, no publication. To suggest otherwise is offensive.

Of course we knew that The Australian’s unrelated legal stoush with the OPI and Overland would be used to question our motives. It’s always easier to shoot the messenger.

What is unfortunate is that the preoccupation of Crikey and the analysis of our motives diverted the attention of good independent journalists from the more serious issues. Melissa Fyfe of The Age is a notable exception.

Crikey, however, has been well and truly used.

Caltex:

Simon Hepworth, Chief Financial Officer, Caltex Australia Limited, writes: Re. “Paper prophets get it wrong on Caltex profits” (Tuesday, item 17). Glenn Dyer’s article raises an important point about the need to ensure the market is comparing “apples with apples”.

This is why, for many years, Caltex Australia has been providing information on the basis of a replacement cost of sales operating profit (RCOP) — to ensure “apples” in one reporting period are compared with “apples” in another.

Oil refining can be buffeted by many factors outside of the control of the industry participants. One such factor is the biggest single cost to a refiner — crude oil. It can take up to two months from the time a refiner such as Caltex takes possession of a cargo at a foreign port and records the cost of the cargo in its books, to the time the product refined from the crude oil is sold.

Much can happen to crude oil prices in this period. Sometimes the value of crude oil can increase, while on other occasions the value decreases.

If the historical cost of crude oil is used as the cost associated with a sale of products, this can result in significant volatility in the Company’s reported results. Using the replacement cost of crude oil is more reflective of the true state of the business as both products and the crude oil used to make them are valued at the same time. A similar method is used to value finished products that are imported and resold.

Reporting just on a historical cost basis can heavily distort the figures reported to investors. Over time, the impact of these fluctuations on the accounts tends to average out but they can create considerable uncertainty in the interim and be a cause for confusion about the strength of any given refining company.

In addition Replacement Cost has a closer correlation to cash flow than historical cost.

Replacement cost accounting is widely accepted within the global refining industry. (In the USA the “last in, first out” accounting principle is used. This produces similar results to replacement cost.)  As a result, our many international and domestic shareholders have a standard form of measurement to assess the performance of the business against other refiners around the world.

Contrary to Mr Dyer’s article, Caltex calculates any dividend on the basis of the RCOP result, not on an historical cost of sales profit (HCOP) basis as claimed. Our market announcement also provided the result on an HCOP basis, for statutory purposes and in the interests of providing transparency about all the relevant forecasted numbers. It is also worth clarifying the inaccurate RCOP figures that appeared in Mr Dyer’s original article. The RCOP figures provided in the ASX release were $100 million to $115 million, while the HCOP figures were $255 million to $275 million.

Mr Dyer’s contends that Caltex’s 2011 first half outlook, when viewed on the basis of HCOP, shows the company “is looking at a substantial increase in profits” this year. He later adds that Caltex’s outlook is better than suggested and that the company is somehow “hiding the good news”.

As the commentary implies, we already live in an age of overly-spun public announcements that can confuse perceptions of a company’s actual performance. Mr Dyer’s criticism here seems to be that Caltex chose to emphasise the lower of the two possible profit outlook numbers, though it is unclear what the motivation for such a move would be. It is our experience that the “good news” that the writer refers to could alternatively be “bad news”, depending on the variability of the crude market — a factor outside of Caltex’s control and the very reason Caltex has long provided profit outlooks and results on an RCOP basis in addition to its statutory requirements, a practice consistent with other international refining and marketing companies.

RCOP is the most appropriate measure for assessing the underlying performance of the business and is a consistent approach we have taken for many years. The variability in the value of the crude between purchase and product sale can inflate or deflate Caltex’s profit numbers when calculated on an historic cost basis. By stripping this external volatility out of the result, and emphasising the value of a clearer gauge using RCOP, Caltex is providing a more transparent indication of the performance of the business and ensuring our investors can more accurately measure our business against global competitors — apples compared with apples.

ChilOut:

Sandi Logan, DIAC’s national communications manager, writes: Re. “Christmas Island ‘prison-like’ for children: advocate report” (yesterday, item 14). When your normally approachable Tom Cowie contacted my media team today by email and asked for our reaction within the hour to a 40-page report we’d just received, he said nothing of a deadline — simply could we get him something in the next hour. Given it seems Tom had his story already written, I’m not sure our considered response would have mattered to him.

In any event, we’ve now read ChilOut’s report following the group’s visit to the Christmas Island in April 2011 (not to be confused with their circus-like escapade, complete with an unmanned aerial drone camera, a month later). The philosophy under which we operate is that we take our duty of care for all clients in immigration detention seriously. We aim to have all clients detained for the shortest time possible.

Unaccompanied minors and families with children are detained in the most appropriate available low-security facilities, such as Inverbrackie alternative place of detention (APOD) in South Australia and Leonora APOD in Western Australia. Importantly, no child is held in an immigration detention centre. As at COB on 22, there were 989 minors in detention (of whom only 67 are on Christmas Island; the remainder are on the mainland).

We’d also remind Crikey‘s readers that on 18 October 2010, Chris Bowen, the Minister for Immigration and Citizenship announced his intention to progressively place significant numbers of unaccompanied minors and vulnerable families in community detention arrangements. This move is in recognition of the increasing numbers of families with children and unaccompanied minors in immigration detention and the lengthening period of time which some may have been detained during processing of their claims or finalisation of their cases.

Community detention is part of an holistic and humane response; people in community detention are not under constant guard by the department and families are not supervised or escorted by the detention service provider or DIAC officers. Carers from NGOs such as the Australian Red Cross provide unaccompanied minors with appropriate supervision and support. As at June 17, and since the minister’s announcement last year, 1343 clients have been approved for community detention.

Of the 1343, 1069 are either living in community detention or are being transferred in the coming days.

Bitcoins:

Ian Wienand writes: Dan Bourke (yesterday, comments) wrote:

“A server admin using idle cycles on his machine for personal projects is also not inherently problematic — idle cycles are just that, idle, and useless. Putting them towards some beneficial end seems like the right thing to do, though one might rather the admin had chosen SETI or [email protected] for his pet machines…”

This is most certainly not the case. While there’s no physical wear-and-tear from using the “idle cycles” the cost here is in power.

A computer doesn’t just give you the answer to 1+1 for free — it takes energy to get the answer. The more calculations you do, the more energy it costs; a server running at 100% capacity can consume up to 3 times as much power as one at an idle load (say, 150W v 417W). Not only are you paying for that, but with power usage comes heat to dissipate, meaning you have to turn up the air-conditioning, costing you even more.

Thus there’s no free lunch. Gold coins are acquired by digging holes and pulling it out of the ground, and scarcity is due to the physical distribution of gold. Bitcoins are acquired by using a computer to convert electricity into solutions to difficult maths problems; scarcity is due to us not knowing any quicker ways to solve these problems. Both cases are fundamentally the same; energy (mining/computer calculations) is converted to a scarce token of wealth. If I want some gold, I have to either use my energy to dig it up myself or use that same energy to do something for someone who has gold, so they will give me some of theirs in return.

The end-game is the same too; there is a finite amount of gold and a finite number of Bitcoins.  The only difference is we know exactly how many bitcoins are available to be “mined” (20,999,999.9769) while it is impractical to make anything more than a vague prediction about how much gold remains in the earth.  However, if I discover my house sits on top of a huge nugget that contains all the world’s remaining gold then suddenly the market is way out of alignment.

I’ve got all the wealth without expending energy getting it; it’s this expending of energy in the hunt for resources that keeps the economy going for the good of everyone.  The guy with his pick-axe and pan digging the gold needs a haircut, the hairdresser likes apples, the apple farmer needs a truck, and so on.  It’s the same if you figure out a way to solve the Bitcoin maths problem very quickly without expanding much energy; suddenly you would own all the remaining Bitcoins (note that we suspect that this is not actually possible, but nobody has so far rigorously proved it, Google P=NP for more details).

We can all debate about the various Federal Reserves and their policies, but we can probably agree that their goal is to create a stable market.  I’d rather live in an economy where the money supply is in the hands of a well-meaning (if, on occasion, mis-guided) Federal Reserves rather than at the whim of self-interested gold/Bitcoin barons.

Greece:

Niall Clugston writes: In response to Mick Peel http://www.crikey.com.au/2011/06/23/the-press-gallery/ (yesterday, comments) , for Greece a debt default is a benefit in itself:  they don’t have to pay back all that money!

Currency devaluation is a separate issue.  It has pros and cons, and will only deflate debt if that debt is denominated in the local currency (which is unlikely).

But just because Greece has euros, it doesn’t mean it can’t devalue.  All it has to do is go back to drachmas.  And that’s probably a good idea too.

Well done Crikey:

Paul Bryant writes: Just when I was about to lose all faith in Crikey, you come out with a brilliant edition led by the Paul Barry and Stephen Mayne pieces. These pieces were the independent, behind the scenes, quality factual journalism that I originally subscribed to Crikey for.

If you care about maintaining my subscription, keep printing articles such as these. Otherwise keep printing the bitter, uninformative opinion pieces about how much you hate The Australian.

Everyone knows The Australian has a crazy right wing agenda. I don’t pay $150 a year for you to tell me about it.

Peter Fray

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