Stocks set to follow Wall Street lower

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Australian shares are set to open on a down note after the Aussie dollar fell and Wall Street was down on concerns the Fed may begin trimming stimulus measures later this year.

On the ASX24, the SPI futures contract is 14 points lower to 4884. The Aussie dollar was buying 96.57 US cents, down from 96.8 late yesterday, and down sharply from 97.9 in offshore trade early on Tuesday. It was also buying 96.54 yen, 73.73 euro cents and 63 pence.

Economic growth in the first three months of the year is expected to have been boosted by resources exports and strong consumer spending. The figures, due for release at 11.30am, are expected to show the economy grew at 0.7 per cent in the March quarter for an annual rate of 2.7 per cent, a Bloomberg survey of 25 economists found. This would be considered a strong result given the impact of the high Australian dollar and fall in investment in the mining sector during the first few months of the year.

What you need to knowSPI futures are 14 points lower at 4884The $A is lower at 96.57 US centsIn New York, the S&P500 was 0.55% lower at 1631.38 In Europe, the FTSE100 rose 0.51% to 6558.58China iron ore added $US4.70 to $US116.60 a metric tonne Gold fell 1% to $US1397.34 an ounceWTI crude oil lost 14 cents to $US93.31 a barrelReuters/Jefferies CRB index lost 0.34% to 285.94

Making news today

In economics news:ABS national accounts, including gross domestic product for March quarterAiG-CBA Performance of Services Index (PSI) for May

There is no major company news scheduled for today

Analyst rating changes:Oceanagold cut to hold at InvestecBillabong cut to sell at Deutsche BankSeven West Media raised to strong buy at BBYCochlear raised to neutral at Macquarie

How we fared yesterday

Australian shares finished 0.3 per cent higher on Tuesday, ending a three-session run of losses as Wall Street gains overnight bolstered sentiment and firmer metals prices underpinned miners.

The S&P/ASX 200 index tacked on 12.5 points, after a volatile morning session, to finish at 4,900.8. The benchmark fell 0.8 per cent to its lowest close in four months on Monday.

BusinessDay with agencies

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Smith promises Blues a taste of their own medicine

Queensland’s critics may suggest the Maroons are getting a bit long in the tooth but they aren’t too old to learn some new tricks, even from New South Wales.
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The early verdict on the Maroons team for game was that it was light on muscle from the bench, with no specialist frontrowers being held in reserve.

But Queensland captain Cameron Smith said the inspiration for the mix of Ben Te’o, Matt Gillett, Corey Parker and Chris McQueen partly arose from the Blues, whose smaller bench forward have proven troublesome to the Maroons in recent clashes.

And while Queensland has moved towards a more mobile approach for 2013, the Blues have taken a step back towards a more traditional interchange platoon, featuring a utility in Josh Reynolds, backrower Anthony Watmough and powerhouses Trent Merrin and Andrew Fifita.

Laurie Daley’s vision of how he wants the Blues to play clearly differs from Ricky Stuart, who went into game three last year with Tony Williams, Ben Creagh and Luke Lewis alongside Watmough, whose speed and impact have been difficult to handle for the Maroons.

Smith said he had complete faith in the bench to compete physically and hoped the more mobile additions would turn the table on the Blues late in the halves.

“I know in previous years we’ve gone with three really big blokes who can get us going forward. But these guys, they can push up if we need them to and they’re all backrowers,” Smith said.

“It’s what NSW has done over the past couple of years and we’ve probably found that they’ve troubled us a bit with those smaller guys and more leg speed and lateral movement.

“I’m really happy with the bench that we’ve got. They’re pretty dynamic there. Hopefully they can have an impact on the game.”

A faster ruck speed would help the Queenslanders deploy players like Te’o and Gillett more potently. NRL referees have watched the ruck like a hawk this season but Smith was unsure how much latitude there would be in Origin, where the whistle is typically used more sparingly.

“I guess we’re going to have to see the referees in the first 10 minutes or so to see what they are allowing. State of Origin, traditionally, is a little bit slower. They allow a little bit more work on the ground,” Smith said.

“As long as it’s the same for both teams, I’ve got no dramas. But I think both players and fans would like to see a free-flowing game rather than referees pull their whistle out every two minutes.”

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The man behind the Maroons’ magic

Mal Meninga Mal Meninga
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The puppet master … Queensland’s players say coach Mal Meninga has perfected the art of motivating his charges. Photo: Andy Zakeli

Billy Slater with his 1959 Queensland counterpart, Frank Drake. Photo: Peter Psaltis

It has been suggested that Mal Meninga is to rugby league coaching what John Buchanan was to Australian cricket, although with much more substantial thighs.

In Meninga’s possession is that rarest commodity in sport; not only a group of outright champions but a champion side. Honestly, how hard can it be?

Buchanan was famous for delving into the philosophical and encouraging his players to read extracts from The Art of War. But on the field, the get-out play didn’t require a PhD in psychology: “Warnie, you bowl at that end, McGrath you bowl from the other.”

Similarly for Meninga, the virtuosity of his squad has seen his contribution steadily diminished, or even criticised by some NSW observers as token. Surely coaching football isn’t that difficult when you can just throw it to Greg Inglis, or Billy Slater, or Darren Lockyer, or Johnathan Thurston.

Ask Queensland’s players and they’ll tell you the truth couldn’t be further from the perception. Far from a rent-a-legend that bellows a rousing pre-game call to arms, Meninga has become a master motivator and manipulator capable of extracting the last molecule of competitive edge from his playing staff.

With Origin now played by increasingly elite athletes and almost nothing between the sides, it matters. His players say it has been a huge part of their domination of the interstate series, which could stretch to eight-in-a-row should they triumph on Wednesday night and beyond.

“He was a player. He knows what made him tick and what makes us tick. He’s very good at doing those things and he thinks it’s very important for us to know the history of this jersey,” said Queensland lock Ash Harrison.

“He never ceases to amaze me with what he comes up with. He seems to push the right buttons every time. It’s one of the things he’s very, very good at.”

At the Queensland team reveal, now a full-scale gala dinner instead of a media-only event in a dingy hotel space, Meninga was at his best. He had assembled members from the 1959 side, the last team of northerners to win prior to the Origin concept proper in 1980.

Players like Noel Kelly and Frank Drake stood alongside their current-day counterparts as the 2013 side was announced on stage. It was a gesture Meninga had been cooking up since last November.

“Besides his coaching philosophies, Mal provides a really good environment for people to express themselves and play their best football,” said Maroons halfback Cooper Cronk. “The one thing he always does well is he makes us respect the past.

“I’ll be honest – I know about Origin from the ’80s but didn’t know much about it before then. When I was told that stat about the first successful Queensland team between that period of ’59 and ’82, I was blown away.”

Meninga has been a picture of relaxation and calm this time around. Zen master Buchanan would be impressed. But as in previous years, behind the scenes, Meninga will have rabbits in his hat.

In series past, when he’s said publicly that NSW taunts mean nothing, he has then showed his players footage of the offending quotes to fuel the fires. He’s had articles pasted on walls and footage of some of the best Origin biffo on rotation.

The now annual trip to regional towns like Emerald, Bundaberg and Roma has also given players an in-your-face reminder of what the game means to people in the regions. With many of his players growing up in bush towns, it’s not just the fans that benefit.

All of that adds to the unique mix, says Sam Thaiday, but the main ingredient is the man himself. Imposing, deeply respected and an unabashed personification of every Queensland cliché NSW detests, Meninga’s influence over his players is profound.

“If you want to know how good he is as a motivator, you just have to listen to him speak,” Thaiday said.

“We’ve got quite a mix in the coaching staff. We’ve got Steve Walters, who’s a bit of a character, Alfie [Langer] who likes to sling a bit on everyone. But as soon as Mal talks, everyone goes quiet in the room.

“It doesn’t matter if he’s talking about footy or whatever, everyone shuts up and listens. All of the boys have a great respect for him. Everything he says is gold to us.”

And Cronk, whose own philosophical ramblings reached cult status this week, put to bed once and for all the notion that Meninga is just along for the ride while assistants like Michael Hagan do all of the technical work.

“He’s very much the coach of this football team. But he is also the figurehead. He sets the example and creates a great environment that allows us to go out and hopefully play well,” Cronk said.

Harrison, a perennially underrated player who grows an extra leg in Origin football, said Meninga’s mystical touch extended well beyond game plans.

“We all just want to play for him. And that’s half the battle won.”

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There’s no super secret – it’s all in the mix

Illustration: Michael MucciQ I’ve never really understood super – my fund has 40 per cent invested in growth and 60 per cent in balanced. Is this a good idea or should I have it all in growth?
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A The essence of superannuation is that it is not an asset class like property or shares, but merely a vehicle that lets you hold assets in a low-tax area. Therefore, whenever you make the decision to invest, a major question to ask yourself is whether that asset is best held inside super or outside super. The right asset allocation for you depends on your age, goals and risk profile – a good adviser will be able to help you decide which mix is right for you.

Q I am 65, recently retired, and will be going on an aged pension. I have $55,000 in super. I believe this would be taxed at 16.5 per cent for the first $41,000, with the balance as a taxed component, so I would have to pay $6765 tax on the $55,000. Do you think I should pay the 16.5 per cent tax and put the balance in a fixed-term deposit at 4 per cent or roll it over into the allocated pension fund, pay 15 per cent tax and an annual fee, and have to reduce the amount by withdrawing 3.75 per cent each year? I am leaning towards the fixed-term deposit as I would not have to reduce the amount each year and would get interest.

A Based on the information you have provided, it would appear that you lose 15 per cent no matter which strategy you adopt. In view of the relatively small amount you have in superannuation, it may be easier to simply withdraw it and invest outside the superannuation system.

Q I would like to invest in silver bars for my daughter’s university costs. It would be in her name and she has four years of high school left. What are the tax implications if we bought now and were to sell before she starts university?

A For starters, I wonder why you would want to invest in silver – why not gold, platinum or pork bellies? However, if silver is your thing, the profits will be taxed like any other investment asset. If you are carrying on the business of trading in precious metals, any profit will be added to your income and taxed at your marginal rate – if you are an occasional buyer, any profits will be capital profits and you will receive a 50 per cent discount if the asset is held for more than 12 months. These rules do not apply to collectables, which are taxed under a different system.

Q Our 19-year-old daughter has recently received $10,000 in back wages and compensation, which she sensibly wants to invest. We think she should lock it up for a very long period as she still lives at home and already has a small car. She can’t afford to seek help from a financial adviser and has been looking at term deposits. We have often read your advice about managed funds and term deposits but would not know who to contact to look at this form of investing. Any advice you could offer would be appreciated.

A It’s a pity the continuing ”reforms” of the financial advisory system have effectively priced lower-income people out of the market. A good first step for your daughter may be to read a book such as my own Making Money Made Simple and focus on understanding the difference between the way cash, property and shares work, and also the characteristics of short-term and long-term investments. The major benefit of share-based investments is that she can start with just $1000 to get a feel for that area.

Q My wife and I are in our early 30s with two children under five. Our combined annual income is $210,000 and we have a $300,000 mortgage on a home worth $700,000. I feel we should be more proactive in creating wealth but we have been too time poor to act. All our surplus income (after generous living expenses) is used to reduce the mortgage, as we consider a saving of 6 per cent to be better than most investment returns we would receive elsewhere, although this may be ignoring valuable negative-gearing benefits. Do you think we should be investing in shares or investment property, or is it better to reduce our home mortgage?

A I recommend that people try to reach a stage where they can pay $12 per $1000 a month on their home mortgage. On a mortgage of $300,000, this is $3600 a month. Repayments at this level will keep the term to about nine to 10 years, as long as rates stay at less than 9 per cent. Making bigger repayments than this means you are effectively wasting income that could be better placed to build wealth. For example, a spare $1000 a month could be used as interest on a home-equity loan of say $150,000 to buy quality share-based investments.

Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature. Readers should seek their own professional advice before making decisions. Email: [email protected]南京夜网.You can follow Noel on Twitter – @NoelWhittaker

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Pension criteria set to change

Centrelink uses the deeming rules when assessing eligibility for the age pension under the income test. This means assets such as cash in the bank, shares and managed funds are deemed to be earning a certain income. The rates used now are 2.5 per cent and 4 per cent, depending on the amount of financial assets held.
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However, a different treatment is accorded to account-based pensions. For income-test purposes, the amount that is assessed is the gross annual nominated pension payment less a deductible amount – this is calculated according to the recipient’s life expectancy.

For example, if Harry, aged 65, had a superannuation balance of $300,000, and began a pension of $20,000 a year, $16,949 of the payment would be the deductible portion and would be exempt. This figure is calculated as the account balance of $300,000 divided by the life expectancy of 17.7.

This means that only $3051 would be assessed as income for the income test. The rationale is that the $16,949 is a return of capital, and therefore should not be assessed.

If the pensioner chose to take the minimum payment, which would be $15,000 a year, the deductible portion would be in excess of that amount and the entire pension would not be assessed under the income test.

The account balance from year to year is assessed under the asset test.

Last month’s budget announced that from January 1, 2015, account-based pensions would also be subject to deeming and would not be assessed under the present method. Under the new rules, if Harry were single, he would be deemed to be earning $11,319 a year on his super balance of $300,000. The annual pension amount would become irrelevant.

The existing rules will remain for account-based pensions started before that date, unless the pension is commuted so as to start from January 1, 2015. This could occur if a pensioner changed income-stream providers, aggregated accounts for account-based pensions, started a new death benefit pension or added to an existing pension.

According to OnePath, the impact of these changes will depend on individual circumstances. It could include those receiving a defined-benefit pension from a government super scheme, an asset test-exempt income stream, employment or self-employment income, a foreign pension or a disability pension from the Department of Veterans’ Affairs.

The changes, if applicable, will have a bigger impact on non-home owners than home owners. Also, a large number of pensioners could be affected if the deeming rates start to increase – right now the rates are low.

It’s early days yet, but if the proposal becomes law, age pensioners who may be affected should take advice well before January 1, 2015.

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Large funds have life insurance covered

Most of us don’t have enough life insurance, so it’s good that large superannuation funds provide ”default” death and total and permanent disablement insurance to their members, who otherwise may not have any at all. It is default cover because the fund member receives it whether they ask for it or not. Consequently, almost everyone has life-insurance cover through their fund.
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But life insurance obtained through superannuation funds is getting pricier, with some large funds increasing the costs by up to 50 per cent. The price rises are across all types of super funds – non-profit, retail and corporate. The funds say it’s because they and their insurers are experiencing more disability claims as the economy remains weak and unemployment edges higher.

Insurers are also subject to higher capital-adequacy requirements. The current round of price rises comes after several years of price falls. Super funds are concerned by the underinsurance of their members and have been increasing the level of default cover. That means $1 of premium buys more cover than five years ago.

The amount of cover mainly depends on the member’s age. Most large funds provide the greatest amount of default cover to fund members when their financial responsibilities are greatest – usually between the ages of 35 and 45. This is the default arrangement, but most funds allow their members to decrease the cover if they wish.

Even allowing for the big price rises, life insurance is much cheaper through a large fund than buying the same cover outside super. And large super funds usually accept a fund member’s application for insurance with no questions asked about their medical history, up to the default cover amount.

Applications for cover above the default amount would usually require at least a record of medical history, and cover could be denied. Even if a member encounters health problems later on, they will still be covered up to the default cover limit and pay the same premium as other members of the same age.

Life insurance is so attractive through large superannuation funds that there is talk of self-managed superannuation fund trustees keeping a small amount of money with the large fund they were with before starting their own fund just to retain cheap life insurance with automatic acceptance.

It should be pointed out that ”disablement” is tightly defined under superannuation law. It is ”total and permanent” disablement. To make a successful claim, the fund member usually has to show that because of injury or illness, he or she will never be able to work in ”any” occupation.

There are policies available outside superannuation where the definition is wider. Some of these policies will pay a claim if the person is unlikely to work again in their ”own” occupation. Though easier to make a claim, these policies are more costly.

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How the Y factor turns some stocks into smash-hits

The search for yieldPerhaps the biggest influence on most big superannuation funds is the sharemarket.
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The typical managed fund has about half its assets in shares, so market movements can make a big difference to what is left for members when they hit retirement.

It’s worthwhile, therefore, to think about what’s driving the sharemarket, and whether it’s sustainable.

In the first 10 months of this financial year, rising share prices meant the typical super fund had returned a whopping 15 per cent, even if things cooled off in May.

But you can’t help but notice that these gains came against a weakening economic backdrop, with many companies complaining that things remain tough.

It begs the question: if growth is weak, why did share prices start 2013 so strongly? And, more importantly, can it last?

Most experts agree that shares have risen this year because of the extraordinary measures being taken around the world to reignite growth.

As central banks slash interest rates and pump money into the system, it has lowered the return on government bonds and forced investors such as pension funds to snap up other assets that can provide a good return.

In the jargon, there has been a mad rush for ”yield”, with investors piling into high-dividend stocks such as Telstra and the banks.

You can see this trend in the graph, which comes from Macquarie strategist Tanya Branwhite. It includes a ”high-yield” index of Aussie stocks, such as banks, telecommunication, listed property trusts and utilities. As the graph shows, these high-yields stocks have been a smash-hit with investors, rising 50 per cent since mid 2011, far ahead of the rest of the market. In short, the high-yield stocks have been driving market performance.

But the growing question on many investors’ minds is whether a rally built on a search for yield is sustainable.

In recent weeks, a growing number of experts have been raising doubts. Branwhite says the yield-induced rally is now ”maturing” and it may be time to look at ”growth” stocks, such as BHP.

Greg Perry, a former Colonial First State fund manager who was regarded as the best stock-picker in the 1990s, also describes the search for yield as ”very mature”.

What do they mean by mature? Basically, they are concerned that stocks have become too expensive. If investors are simply pushing up share prices because they are looking for yield, there are risks of bubbles forming.

The Commonwealth Bank, for instance, has been trading at a price of about 15 times current earnings, which analysts say is close to its highest ever level. With little in the way of credit growth, sceptics believe the bank is overpriced.

Even the $87 billion Future Fund, one of the biggest investors in the country, last week warned against chasing yield purely for its own sake.

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Getting super across to all

Imagine standing in the middle of a remote community using the only public telephone, waiting to talk to a person in an office in a far-off city. Photo: Tanya LakeWhile many Australians find super challenging, for those living in rural and remote areas – and especially for indigenous Australians – the difficulties are magnified.
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Imagine standing in the middle of a remote community using the only public telephone and you are on hold, waiting to talk to a person in an office in a far-off city whose everyday language you barely comprehend and whose jargon you absolutely do not understand, in the hope of discussing your super.

You don’t have your tax file number on hand, you’ve moved house a number of times in the 10 years since joining the fund, and don’t recall the address where you lived when you joined. It’s a recipe for disappointment, disengagement and disadvantage.

And financial exclusion is not limited to remote or country areas.

In urban Australia, where one-third of indigenous super members live, many don’t understand how to leave super to their descendants using the nomination process. People may want to leave super to descendants according to indigenous cultural protocols, and fund trustees may struggle to manage claims in a culturally appropriate way.

The Australian Securities and Investment Commission (ASIC) is taking a number of steps to address this disengagement. Recently in Melbourne, it held an industry-wide forum with 25 funds represented, which tried to break down some of the barriers Aborigines and Torres Strait Islanders face when engaging with the super industry. Participants discussed the need to address problems by developing practical measures, including increasing the numbers of indigenous staff employed in the industry, gathering more detailed information on members and their needs, and considering strategies to deal with the documents and information needed.

The commission has also improved financial literacy tools to better meet indigenous people’s need: ASIC’s revised publication gives information on the fundamentals of super in a booklet written in plain English.

Recognising indigenous consumers as a particularly vulnerable part of society, in 2009 ASIC set up an outreach program. Each year, the team visits about 30 communities around Australia to promote financial literacy.

In 2009, ASIC also implemented a Reconciliation Action Plan. As part of that ASIC has hired its first indigenous cadet and sent ASIC staff on short-term secondments in areas including Redfern and the Kimberley .

Similar to the broader Australian workforce indigenous Australians need to engage with the system to make decisions about such things as life insurance, access to retirement funds and beneficiaries.

Helping people make these decisions needs an understanding of their needs and the barriers they face. With industry’s help, ASIC will be able to dismantle these barriers faster.

Robynne Quiggin is ASIC’s senior manager – indigenous outreach.

Have you had difficulties accessing super? Tell us your stories

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Bali Nine members set to have life sentences cut

Four of the Bali Nine drug smugglers are poised to have their life sentences reduced to 20 years, though the decision still has to find approval from a gun-shy central government in Jakarta.
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Martin Stephens, Matthew Norman, Si Yi Chen and Tan Duc Thanh Nguyen applied in May for the sentence reduction. The corrections department in Jakarta has confirmed that prison authorities in Bali have found in their favour.

The final decision, though is up to the Minister for Law and Human Rights, Syamsuddin, who is under pressure from anti-drug campaigners to take a hard line on drug traffickers.

If the four are successful, though, their new sentences will be 20 years. With the eight years they have already spent in Kerobokan prison taken into account, they would have only 12 years left to serve.

Remissions for good behaviour — which in Indonesia are handed out twice a year — could reduce this further so that their likely release date would be 2020 or 2021.

A spokesman for the remission section of the Director General of Corrections in Jakarta said officials were now working on documents of the four, all of whom are serving life sentences without hope of release.

The documents had arrived “a few weeks ago”, the spokesman said. However, without specifying any limit, he said it would take “a long time” before the four to receive an answer.

It’s usual for remissions of sentence to be announced to coincide with Indonesia’s national day in August.

New regulations in Indonesia require drug prisoners, terrorists and others to promise to be “justice collaborators”, and that they express guilt and remorse for their crimes.

Fairfax Media understands that the four prisoners have now met those criteria to the satisfaction of Bali’s provincial authorities and Kerobokan prison leaders.

But in Jakarta the National Narcotics Agency BNN is running a hardline campaign for drug traffickers to be treated harshly. It’s still possible that Syamsuddin or a team of senior bureaucrats who advise him, will be spooked by that campaign and reject the applications.

One Bali Nine prisoner, speaking on condition of anonymity, said: “If they deny it I’ll be so devastated, but I can’t see how they can”.

It is the third time that Stephens, Norman, Nguyen and Chen have applied for remission. The first attempt, in 2011, was stopped with all other remission requests because of a riot in January 2012.

The second was rejected because of the “justice collaborators” regulation. The men made their third application in early May.

As well as expressions of remorse and willingness to cooperate with authorities, the applications include letters showing support from family members, prison guards and other prison officials.

The Bali Nine were convicted in 2005 of attempting to traffic 8.3kg of heroin from Bali to Australia. Two of them, Myuran Sukumaran and Andrew Chan, still face death sentences and have appealed to president Susilo Bambang Yudhoyono for clemency.

Renae Lawrence is serving a 20 year sentence and could be released as soon as 2016. The others are serving life. Michael Czugaj is appealing his sentence, and Scott Rush has exhausted his appeals, and has not yet lodged a bid for sentence remission.

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Manning a ‘broken soul, emotionally fractured’

Fort Meade, Maryland: A counterpoint to the enormity of Bradley Manning having dumped 700,000 classified US documents into the public domain is the fractured and confused nature of the young US Army private which surfaced in testimony at his court martial on Tuesday by Adrian Lamo, a convicted computer hacker in whom the army private confided.
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Under cross-examination Mr Lamo revealed a side of the leaker at odds with the prosecution claim that he had deliberately set out to put the top secret files of the US Government in the hands of Osama Bin Laden helping the enemy, as the most severe charge against Private First Class Manning is paraphrased.

The hacker’s account squared with evidence earlier in the day by a forensic digital examiner on contract to the US military, Mark Johnson, who said that none of the material found on PFC Manning’s computer related to terrorism or indicat[ed] a hatred of America.

The hacker Mr Lamo told army prosecutor Major Ashden Fein that PFC Manning had first

contacted him online on May 20, 2010 and that within 24 hours he had reported the soldier

to military intelligence, briefing agents on his dialogue with PFC Manning and in particular, on his references to Julian Assange, whose WikiLeaks anti-secrecy entity was the conduit by which the files became public.

The 30-something Mr Lamo was tight-lipped on the witness-stand, mostly agreeing with or slightly modifying statements put to him by the prosecution and defence lawyers.

Describing himself as a threat analyst and a grey hat, a hacking term, Mr Lamo confirmed that in 2004 he had pleaded guilty to computer fraud charges after he had hacked the networks of The New York Times and Microsoft, among others. On conviction, he had been sentenced to six-months home detention and two years probation.

But in response to questions by David Coombs, PFC Manning’s counsel, Mr Lamo said there had been no suggestion by PFC Manning, whose online identity was Bradass87, that he intended the leaked documents to aid the enemy.

Coombs: At any time, did PFC Manning ever say he wanted to help the enemy?

Lamo: Not in those words, no.

Coombs: At any point, did he say that the American flag doesn’t mean anything to me?

Lamo: No.

Relying on purportedly tamper-proof, real-time recordings of their several chats which were retrieved from Mr Lamo’s computers, Mr Coombs drew out the fragile nature of his client, who had told Lamo he had made a huge mess of his life.

Suggesting he was suicidal, PFC Manning had described himself as a “broken soul emotionally fractured.”

PFC Manning chatted about seeing incredible things, awful things” in classified files, “things that belonged in the public domain, and not on some server stored in a dark room in Washington DC.” He had told Mr Lamo the files revealed how the first world exploits the third, in detail, from an internal perspective showing diplomatic scandals wherever there was a US mission.

“I don’t believe in good guys versus bad guys anymore,” PFC Manning told him.

“Only a plethora of states acting in self interest.”

Mr Lamo told the court martial that he could appreciate, yes, a claim by PFC Manning that he needed to investigate to find out the truth. He confirmed having asked why PFC Manning was not selling the files to Russia or China to which PFC Manning had replied that the information “belongs in the public domain.”

As Mr Coombs itemised the particulars of PFC Manning’s life, Mr Lamo observed that the irony of the parallel with his own circumstances was not lost on him.

PFC Manning had sought him out because of his hacker’s notoriety, but also because of his activism in the lesbian, gay, bisexual and transgender community.

Mr Lamo was 22 when he was arrested in 2004, the same age as PFC Manning at the time of his arrest. And as PFC Manning had, Mr Lamo also had claimed to be motivated by public good.

Both suffered anxiety and depression. PFC Manning had shared with him his gender identity disorder and he — Mr Lamo — had Asperger’s syndrome.

Another irony was that the Manning-Lamo dialogue which led to PFC Manning’s arrest might not have happened.

Explaining that the soldier s initial approaches were a series of encrypted emails from both his personal and US military addresses, Mr Lamo said that he had ignored them because they were just more of the high volume of messages he received from strangers.

He had responded only on registering that one of the addresses was military and Iraq-based.

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