Friday 18 December 2009

EVERY YEAR IS DIFFERENT

Without hopefully any big surprises, the All Share will now stumble along to the end of the year with a modest 1% for the month and a totally unexpected 30% or so for the year. Compared to the giants of the emerging markets clan this performance was quite measly but it is right in line with the big boys like the Dow and the Footsie. Ex-Federal Reserve Governor Sir Alan must have again annoyed his successor by pointing out that the wealth increase created by this market gain has easily outstripped the stimulus package that Dr Bernanke has been promoting. Americans, he claims, are once again rolling in the green stuff and are ready  to resume their mission to spend the whole world rich. I shall wait to see how this one pans out. There’s a vital point missing there somewhere I think.

I do not, however, need to wait to wish the loyal readers of Tidemarks a very merry Christmas and a healthy and happy New Year. To my clients – thank you for your support. To my friends – may we see more of each other in 2010. To all the other readers who are not in either of those two categories – why not?

Even the boere in the English team were looking roasted out there on the Centurion pitch yesterday. Five day cricket is the real thing.

James Greener
18th December 2009.

Friday 11 December 2009

STARVE A TREE. DON’T BREATH OUT

A clever cartoon this week depicted a very overweight man, representing the developed nations, painting a bulls eye target on carbon emissions while lesser nations – represented by our very own Pres JZ – was painting a bulls eye on the fat man’s back pocket, out of which was bulging his wallet. Sure enough this morning came the report that one Lumumba Stanislas Dia-Ping of Sudan pitched up in Copenhagen and called on the world’s newest Nobel Peace Prize winner to “help free up $200bn in funds to fight climate change.”  It is amazing how many people have travelled to Denmark to promote their pet project for controlling the world’s most lethal and newly identified poison. I am not of course the first to suggest that if they all stopped getting excited and exhaling carbon dioxide so vigorously it would already be a good start.
Meanwhile the pictures coming from Oslo seem to suggest that the Nobel committee were a bit non-plussed to discover that the Mr Obama who had popped in to collect the peace prize was the same one who had just mobilised a large army. I am afraid that the concept of a “just war” has always proved to be flawed. People are going to die.
The All Share index is just about at the level it was in the first half of 2007. In the interim of course share prices went on to set record highs before collapsing to lows in March of this year. The 2009 recovery has taken us to a point about midway between these two extremes. It is interesting to note that company earnings and dividends are also at the same levels they were almost 36 months ago. Metrics like dividend yield and price earnings ratio are therefore similar too. The obvious question is that if in 2007 these share prices were cheap, are they not so now?  The problem, however, is that currently both earnings and dividends are plunging at rates approaching -25%pa with no sign yet of a bottoming out.  Buyers today will need to be patient. They should also not be surprised to see lower prices in 2010 in which case it would be prudent not to spend all their cash now in one go.
Daily volumes are still amazingly robust but will likely collapse after next week’s close-out event after the public holiday. In fact most true investors should have departed for the beach already and leave these dog days to the derivative desperados.
I doubt that it will ever be revealed how much actual money will be collected by the UK Chancellor’s vindictive and petty 50% tax on banker’s bonuses. Sure, we are all enraged and jealous that those fellows managed to score so much loot. But retrospective legislation stinks and my guess is the revenue raised will be risible.
The chaps down here in the kingdom are delighted with the FIFA draw and are hopeful that they might get to sell all the tickets in the new stadium for several of the seven matches it was built to host. The Portugal Brazil match on 25th June is especially promising. Several tonnes of  prawns and litres of pink stuff are not going to make it to the 26th.  The draw itself was baffling and it turned out that the lady with the American accent comes from Benoni while the man with the Boksburg haircut works in the US. Also a lot of goldfish were made homeless.
James Greener
11th December 2009.

Friday 4 December 2009

LOTS OF SPENDING – THE TAXING WILL FOLLOW

In October the National Treasury distributed more than R60bn to the various departments, deadbeats and the deserving destitute that are on their list of tax-eaters. While this was not a record – the September figure was R69bn – it was 25% more than the government managed to spend in October 2008. This figure I think explains somewhat why one continues to hear how busy it is in the shops and why the “What recession?” response is still common. The state is dishing out cash as fast as it can. And the beneficiaries are spending it just as fast.
This free spending approach to staving off the effects of the recession is merely following a wide-spread international model. And locally it conveniently provides a camouflage to disguise all kinds of dubious expenses like the alleged R65m refurbishments to the presidential family home. Government expenditure is now almost R750bn a year. This is a terrifying number for several reasons. Firstly it is more than 30% of the country’s GDP, up from any already worrying 26% just a year ago. Only wild-eyed committed socialists will be content with this trend. One wonders if at this rate there will be anything left to nationalise? Secondly the bigger problem for the present is that more than 20% of this spending is using borrowed money. Tax and other sources of government income are now yielding less than R590bn per year and are declining at a rate approaching 3%pa. Industrial shares annual earnings growth is now also negative. A few more months of these trends and one quarter of government expenditure will be deficit spending.
 The total disconnect between the two sides of the national budget is severely worrying and there is no sign that anyone allegedly in charge cares very much. The most likely response will probably some fearsome tax increases being imposed quite soon.  Brace yourselves.
About the only news to reach me during my holiday in the bush was about the collapse in the attractiveness of buying sand from people who have unlimited quantities of it. Even if the stuff has been arranged into islands with whimsical shapes like palm trees or national borders recognisable from the International Space Station, there is only a limited number of rich people who will fail to spot that a sand bank is a pretty ephemeral object and not, as the pamphlets insist, a lifelong investment. Did the salesman neglect to mention the hefty monthly levy to keep the pumps running?  A low latitude desert kingdom is also not a wise location for a winter sports resort even if it is something to boast about.  We can all be grateful to Dubai for having supplied us over the last few years with construction jobs, gee-whiz items to marvel at and a cheap but long way to get to Heathrow. It seems now that the game is over. Pity.
Tonight the World Cup draw will determine which teams will play in which venues come next June. Presumably that will initiate a scramble for tickets, once fans know where their teams will be playing and reduce the current alarming figure of 80% unsold seats. It will also provide a wake up call in South African geography for those fans as they pore over their old school atlases trying to figure out how to get from Nelspruit  to Nelson Mandela Bay (where?) in five days. And then back to Tshwane (again where?) given the news that there is no longer a single plane seat available at that time. As far as I know, the trains have not made much effort to meet this kind of demand either. When I was at school, we were transported to away matches in the back of a Bedford truck. I wonder if they are still running. As we locals are fond of saying; “Africa is not for sissies”.
James Greener
4th December 2009.

Friday 13 November 2009

CIVIL SERVANTS GET UNLUCKY

Although it is just mid November there are already a few Yuletide markers showing up in the shops and the market. Durban temperatures are at last edging up towards the 30s, and so tinsel and canned snow are putting in an appearance. On the JSE, the average daily trading range of most of the indices is contracting, which suggests that traders are starting to worry more about holiday plans than trying to chase prices up and down. However, the All Share index level itself in the last few weeks has been setting the year’s high and is 50% above the March low point when the 2008 crisis was declared to be “over”. At that time the gold price was at a record R10 000 an ounce, presumably an indication that the metal was being used as a safe haven. As the year wore on, however, the price declined substantially to just R7 000. Bears are eager to point out that the price has recently edged back to above R8 000 an ounce and the local sponsors of the NewGold  ETF had to buy 120kg of the yellow stuff and issue another 400 000 units to satisfy demand this morning. Is fear making a comeback?
 The president’s welcome move to rein in government salary increases by a whole 1% is more form than substance but assuredly there will be bleating noises about the counter attractions of the private sector and how the talent will leave the rigours of public service unless properly rewarded. Mind you, the average civil servant’s idea of how things operate out here is a bit fuzzy. This week the State Diamond Trader -- a government organisation with a socially laudable but commercially naïve structure and purpose – requested a return to the cosy fold of tax-payer funding. The model that the Trader would become a self-supporting interloper in an industry that is notoriously opaque and exceptionally price sensitive, proved unworkable. Costs exceeded income and the Trader’s customers were altogether too worried about prices! Well, yes. Life is like that.
 On Tuesday we get to watch our first central bank governor, who does not wear a tie, tell us about her plans for interest rates. For many years my research has shown that the colour of the governor’s tie was an accurate indicator of whether the change he was about to announce was up, down or unchanged. It will take a few appearances of Governor Marcus in front of the cameras before we can identify where she will wear the coded message. The widespread view is that rates will be left unchanged. I wonder if she might not like to start her job at The Bank with a worker friendly gesture and cut rates. After all, lopping 100bp off the repo rate might just give the rand the weakening nudge that many are seeking. And please the over indebted.
An international rating agency sliced a few gold stars off the report cards of most of the local banks this week. Myself and others are not overawed by the alleged prescience and skill of these self appointed super analysts. The fact that the one being rated is often the one paying for the rating does raise a few questions. Nevertheless the appalling games of musical chairs being played out in the executive suites of so many parastatal organisations at the moment will make even the most hardened Africa watcher amazed and fearful for his money. Locksmiths and IT teams have been kept busy changing locks and passwords to ensure that the latest departee can’t change his mind and wander back in to the office. In the meantime no one seems to be running the show.
Recycled Bafana Bafana coach Carlos all but agreed that the only way the national side will beat Japan in PE this weekend will be if the visitors obey the security advice to remain in their hotel and not venture out at all. Leicester it turned out was a very dangerous place for the ‘bokke. And isn’t Toulouse where they would have made the planes we cancelled a few days ago? No friends there tonight either.
James Greener
Friday 13th November 2009.

Friday 6 November 2009

DUELLING COMPUTERS RUIN THE RAND

It is very worrying that the newest hot button topic among the leadership is the concept of nationalising anything and anyone who catches their eye. What exactly is it that these excitable politicians have in mind? My understanding of the process of nationalisation is that the state identifies an enterprise which they believe is either too vulnerable or too valuable to be left in the hands of mere private citizens. The bureaucrats, almost none of whom have any skill or experience in working for a living, one day declare that they are offended by an organisation selling goods and services at prices which exceed the costs of creating and providing those goods and services. This practice is declared to be not “in the public interest” and it is “policy” that the state should gain control of that business. The price negotiations will be rich with irony and vested interests. The buyer is using public money which includes tax paid by the business and its employees. The sellers will include many cronies who had the foresight to pile into the shares before the announcement. The chorus will demand that the capitalists be punished.  You know how it ends.
So then how does one nationalise an individual?  Do they plan a deal where the state pays money to the families in return for these fellows becoming some kind of government slave?  Curious. Perhaps the word they were looking for was confiscation not nationalisation. Even more alarming.
But then of course another bunch of suits denied any knowledge of the government having plans to nationalise anything.
However there is widespread agreement that far too many people in the country are unable to find employment. The disagreement arises in how this ought to be fixed with many putting a lot of faith in policies that were agreed to last year at a talk fest in dusty distant Polokwane. So far however, the only obvious policy enactment has been to attack the practice of labour broking which does actually enable some folk to find some work. Nevertheless a rash of ministers announced with satisfaction that their frameworks, charters, targets and programs were in place and ready for implementation. None of them, I’ll bet, conclude that less intervention is required. Instead they will be tasks that the government wants carried out by people who already have jobs trying to satisfy paying customers. The tasks will probably result in costs that will ultimately be passed to the customer who will be tempted to go elsewhere, leaving no one better off. Central planning is a seriously bad idea.
It turns out that somebody forgot to switch off the computers when they left for the night and after hours the little devils decided to trade the rand all on their own. Before anyone could stop them, one was happily selling rands at more than 8 to the dollar and that triggered a whole lot of other computers to panic and start selling as well. It was only when the cleaners opened up the next morning it was found that the nation’s currency had been trashed and they turned the thing off at the wall. Happily real people are now back at their desks and the rand is around seven and a half to the dollar again. However the trade union’s insistence that interest rates be set at 3% will see a bit of a race for the exits again.
There were also scares in the equity markets with some heavyweight bears being granted airtime and terrifying the punters. This lightweight bear is also unable to assemble any reason to be fully invested right now and the sight of Nedbank’s very negative trading statement deepened the mood.
Now I had better go and look up Leicester on the map to see where the ‘bokke have been sent to. Is it like Bloemfontein, but wetter?
James Greener
6th November 2009.

Friday 30 October 2009

SO WHERE IS ALL THE BAD NEWS?

There was great excitement when the USA announced that growth in the third quarter was a stunning 3.5%. Importantly, this number was even better than expected and so it was “off to the races for the bulls”. Untroubled by concerns of valuation and similar dismissible nonsense, buyers must be sure that any shares they buy now will be sold shortly at a much higher price to someone even more optimistic than themselves. Bears and sceptics immediately began to dissect this growth figure, pointing to the very large impact that various government stimulus packages had made on the result. Since that was the object of the official interventions, the designers and supporters of the packages must be delighted.
In SA we watched the new Finance Minister do quite a good job of telling it like it is. However, despite declaring that he was no longer a communist, Minister Gordhan threatened to raise tax rates if growth alone did not see more money flowing into the state coffers. It is never explained why tax eaters are not subject to the same economic laws of supply and demand that so obviously affect tax payers. If income fails to meet expenditure, do what the rest of us do and slim down. Try shutting whole departments, like sport and arts and culture for starters and getting the rest to stop harassing their clients with annoying, counterproductive and demonstrably useless procedures. Why for example should it be necessary for the Minister of Basic Education to have an advisor who declares that “(school) syllabi would be a clear statement of what teachers needed to teach.”! Is this something new? Does the minister not already know this?
However, the Minister did announce some further relaxation in foreign exchange controls and gave citizens more freedom to make investment decisions. Regulations are now at the point where most ordinary people will be able to move much of their money wherever they like – provided of course that the taxman agrees. The announcement did cause a small weakening of the currency but nevertheless the rand has still been one of the best places to keep one’s wealth in the last twelve months. Anyone with what might now be termed Malema Money in a Swiss account also now has to worry about the gnomes telling the world about their hidden hoard. This turnaround in what we all took to be national characteristics of secrecy and confidentiality is amazing.
Any attempt to offset the huge increases in the electricity price with solar water heaters has been frustrated down here in the kingdom of late as the sun has rarely shone. That means that the meter has been clicking over at an alarming pace. Therefore it is very worrying to read that the Eskom boss is being encouraged to resign. It is not that he will be a loss to the business but it is the cost of his departure that is the problem. I doubt he will go with just a gold watch, some kind but insincere words and a paper cup of something warm and sparkling in the board room. A cheque with seven or even eight digits is not an uncommon memento after a couple of years warming the executive leather. The exit package could easily add another few percent on the next hike.
October performance on the JSE will be around a very useful 6% - an embarrassing result for those of us who wondered if an October correction might happen. Some shares and indices are approaching the records set a year ago. It has been an astounding recovery, based presumably on the view that the current slump in company earnings and cuts in dividends will be reversed and recovered within the next 12 months. Now that will be even more astounding.
There was a quite spectacular test of the lights in the new World Cup soccer stadium last night which only highlighted the darkness at Kings Park rugby stadium next door. Pubs will probably be offering cheap beer tomorrow just  to get me in to watch the Bulls lift the Currie Cup. Sharks supporters have gone fishing.
James Greener
30th October 2009.

Friday 23 October 2009

BULLET PROOF VESTS IN DEMAND

The problem facing the markets, as I see it, is that there is a second wave of debt related issues still to wash across the USA. An unimaginably large amount of money has been borrowed, much of it by the US government itself. The properties which act as security for many of the private sector debts are mostly now worth considerably less than the loan – a position known quite whimsically as “being underwater”. In the commercial and financial worlds the security for the debt has turned out too often to be a piece of paper bearing promises of future cash flows which are very unlikely to appear. In the government’s case the security is the Full Faith and Credit of the US nation, not to mention a printing press with helicopters on standby. One of the biggest lenders to the USA is China and it has recently been  looking at this rather tatty list in alarm and instead of providing any more loot is buying stuff that they can touch and store – like minerals.
The ability and indeed inclination to service the debt is hampered by people losing their jobs and firms losing their customers. Inflation, which is very often the mechanism by which the relative threat of a debt is reduced, is also not happening.  The state’s response has been to print money and virtually to give it away. The free money is landing up at the banks who are celebrating this bonanza by declaring record bonuses all round. Politicians and bureaucrats fearful of losing votes are thrashing about trying to regulate that every one gets what they need whether or not they deserve or earned it. But I doubt if they can manage to create yet another prosperity boom. Beautifully crafted quarterly earnings statements have been “beating expectation” and the trumpets blast another fanfare. The Emperor is reportedly gorgeously attired and none dare say otherwise. This situation demands a very large cautionary notice.
Meanwhile, on the JSE, reporting season has tailed off and it turns out that average earnings for financial sector companies are down almost 50% from a year ago. The share prices have not yet reflected that and the PE ratio of the sector index is close to 20. This seems way too high for an industry that has yet to disclose just how difficult South Africans are finding it to service their loans. The Governor made this task no easier this week by eschewing one last prod of the interest rate pedal before ambling off to his farewell party. Given his penchant for single malts I am sure that the Reserve Bank shareholders will have secured for him as a farewell present, at least one of the three bottles of 50 year old scotch priced at just R150 000 and now available in SA.
Despite the rather petulant claim by Minister Patel that his Economic Development Department was in charge of micro and macro economic planning, it seems that actually he is being left in the dark. Other people who boast of much better sources were all over the media with the mines nationalisation story again. And there was also a terrifying idea about pegging the currency that was denied as swiftly as it emerged. Nevertheless, the old smoke without fire adage is often useful and it is alarming to discover that there might be such lethally bad ideas doing the rounds in the corridors of power. The country’s major mining house set about its own program of reducing its potential value for anyone by losing a host of top brass and putting some assets up for sale. Mr Malema may need to hurry if he wants to try out an office at 44 Main Street.
Rather than ridicule the idea of visiting teams donning bullet proof vests we should be encouraging foreign players to consider full battle gear when trotting out on to fields here. With the opposition dressed up like that there is just a faint possibility that one of our Bafana Bafana stars might get lucky and outrun a defender.
James Greener
23rd October 2009.

Friday 16 October 2009

THE DOLLAR IS LOSING WEIGHT

There was a rather ironic symmetry in the headlines about the government finances this week. On the spending side it emerged that the army had neglected to include the extra R30bn to cover the motor plan for the eight rather smart military transporter aircraft that they have on order at a mere R17bn. On the income side the National Treasury seem a bit put out that capital punishment is no longer available to punish anyone who fails to devote every waking hour to seeking ways to pay more tax more frequently. Now widespread tax compliance is a fine idea, and I think the government ought to publish the tax return of every person in a state postion where the official salary attracts the top marginal tax rate. But the additional revenue that they are probably going to ferret out with the latest campaign will likely be less than the money saved if they were to let me rewrite this notorious handbook about ministerial expense allowances.
Bureaucrats around the world seem unwilling to accept that there is a serious slowdown taking place and that in the real world people are losing their jobs, paying off debts and cutting back on spending. Tax revenues are therefore falling. Outgoing Governor Mboweni’s claim that this is a minor recession is manifestly wrong.
But I am also puzzled why we need so many planes. Popular wisdom has it that the SA army does not have many tanks to transport anyway and the number of fit young soldiers acceptable to the peace-needing nations is not very large. And in any case in these days of a unionised military, the troops surely demand no less than business class on a scheduled airliner when travelling. This would cost a whole lot less than R47bn and should release large sums to provide some of the services that are so obviously missing where the distressing and violent demonstrations are presently taking place.
Although I was little sad when they did away with the Transvaal, I suppose I ought to be grateful that my leaders have thought it important now to ban the transfats. These, presumably rather greasy things are allegedly very bad for us and the state has decided that in lieu of controlling the many other very dangerous things we citizens face everyday they are going to sock it to the transfats.  There are probably only a handful of white-coated food techhies who could tell a transfat from a cisfat (?) but nevertheless life on the southern tip is about to become a whole lot safer and slimmer for us all. In the spirit of scientific enquiry I wonder if the average mass of the elected parliamentarians could be measured and logged over the next ten years or so in order to confirm the benefits of this scientific breakthrough.
It was reported that Australian sports fans find that rugby is hard to follow and prefer to watch a sport where frequently 90 minutes will pass without the net in either goal serving any function whatsoever. I agree, nil-all draws are undoubtedly a whole lot simpler to grasp. This nonsense with three different scoring values and the need to count as high as 4 tries or even worse, calculate score differences is way too hard. Talking of sums though, if just half the expected number of local fans who will attend the Sharks versus Cheetahs semi-final tomorrow each drink three beers, the cost will be way less than the state-supported Industrial Development Corporation blew on a farewell party for three departing directors. As I need always to remind myself, public service is all about the catering.
I watched the funny money channel as the Dow broke through 10 000 and their excitement was huge. No one, however, mentioned that gold has outperformed shares over the last six years. It is the falling dollar that is the problem. In fact it is everyone’s problem.
James Greener
16th October 2009.

Friday 9 October 2009

SHOE IN

Although the JSE All Share index is around 40% above its March lows it has actually been stalled within a 5% range either side of its average over the last 8 weeks or so. The resources have been slightly the more jumpy of the sectors, but nothing really has required much attention. The cement and minerals industries released doleful figures during the week showing that there is little demand for their products. It is hard to make a case for buying many shares. While the dollar price of gold is setting records, the strong rand is ensuring that local mines are getting only a disappointing reward for their efforts.
Potential bond buyers were also rather scarce. Capital raising plans are becoming popular and investors and lenders are holding back a bit to see what each particular slotted tin shaker is offering in return for their money. Among the less appealing proposals was the provision of luxury hotel suites as temporarily accommodation for a civil servant and his hangers-on whose official home is being renovated. Why could he not have moved to the back rooms and camped under drop sheets for a bit like the rest of us do when the painters arrive? Even more insulting, was the minister’s claim that he was unaware how costly the digs were. As the man in charge of the police, it is his duty to spot rip-offs.
To buy anyone a pair of shoes as a present is a little odd, but when the recipient is the state president it is bizarre. How well do you have to know someone before you can go shoe-shopping for them? Picture the scene when the president ripped open the tissue paper and muttered words of thanks, embarrassment and praise for the donor’s taste in style, colour and lacing layout. Did he try them on immediately and then sashay around the room? Did attendants murmur compliments or did they clap and whistle? Astonishing.
And it was of this ex-president that I first thought when I saw the headline that the ever-vigilant competition chappies had unearthed a pipe cartel. However, it turns out not to be tobacco pipes but the boring yet vital concrete and plastic sort. In the absence of anyone making enough money to pay tax, the state’s tack seems now to be to find reasons to slap fines onto people. This may not be a sustainable source of funds. Neither too are electricity consumers who are reportedly going to face tariffs that will more than double. Eskom’s plans on this matter were rightly thought to be so outrageous that even the leaked document carried a warning that it might cause unhappiness if the public were to see it!  The sole amusing side to this story, is that it provides another example of the utter failure of most folk to grasp that anything they write down or even say and perhaps just think, can leak on to the internet in a mouse click. And the more dirty the secret, the faster and wider it will travel.
Investment research was an early victim of this distribution technology. Today no snippet of information can remain secret for very long, but nevertheless regulators believe that they can now identify items that too few people knew about too early and fines are imposed! Not so long ago stockbroker’s research reports were typed, printed and posted. The most important clients were favoured with a phone call to alert them to what the analyst had discovered No one mentioned the clients who had to wait for the postman.  
Why are three “assessors” required to determine if the egregiously overpaid Coach Santana is up to scratch? A glance at the national football results tells a clear story that Joel and the boys of Bafana have yet to understand that goals are scored by popping the ball into the net. Perhaps the assessors will delay reporting until they too have spent a few weeks on the beaches of Rio which apparently are a far better site for a training camp than some damp field in the Freestate.
James Greener
9th October 2009.

Friday 2 October 2009

SPONSORED STUPIDITY

Those of us clinging to the quaint colonial notion of a calendar will have noted with alarm that we are now in the final quarter of the year and October has in the past often handed investors a wakeup call. Not only has the All Share index suddenly given up trying to stay north of 25 000 but the rand also seems to have lost interest in pursuing its recent bout of heroics. In the last week there was a rash of June year end companies reporting and very few of them had good news or even a dividend for their shareholders. The government similarly has admitted that it is collecting far less money that it is spending and suddenly there is muttering about the need to increase tax rates. Please have a look at the spending side of the book too chaps. For example it would help if polygamous city managers were prevented from spending more than half a million of public money on funerals for ex-mayors.
Another bureaucrat in the person of the frighteningly foolish Youth League leader sadly persisted in revisiting the recent appalling developments in SA athletics. Apparently his home language has no word for the tragic medical status of the young athlete and so it can not be considered to exist. Without a similar rejection of terms and items like car, plane, cell phone, executive lounge and Johnny Walker Blue, none of which existed in any language not very long ago, might I suggest his position is inconsistent? Sponsorship for commercial advantage is clearly also a difficult concept for the man.
Over at FIFA headquarters they have been cracking open the single malts to toast their court victory over the retailer who was found guilty of selling lollipops with an unauthorised picture of a football on it. The same court has also been asked to force the hitherto rather unknown Commission on Traditional Leadership Disputes and Claims to pronounce its position on one inkosi Melizwe Dlamini’s claim to “be recognised as a king and for his clan's lands (in southern KwaZulu-Natal) to be declared a kingdom”. Opposition to the claim is coming from the existing king who already has a kingdom hereabouts. Most taxpayers I think  also have little need for another king and dispensing with that Commission itself should save a bit too. Despite all the organisations in the country that have been set up to govern every aspect of our lives, South Africa has shamefully slipped to ninth place in the continent’s governance ratings. Where the continent stands on the global ranking was not mentioned, but top is unlikely. Pretty soon a talking head will reject the findings as imperialist and demand a commission to investigate the problem.
In the meanwhile, as ever, the real problem is crime and the latest official response has been to sanction the use of shoot-outs to control criminal numbers. One difficulty with this proposal is that the good guys appear to be out gunned! I would be interested to know what the experienced working policemen at the sharp end of this business would like to do. The apparent increase in the number of crooks using weapons that once belonged to the police and army, indicate that the drive to control firearms by imposing exams and inspections on gun owners has failed completely. Similarly the five yearly renewals of driver’s licences have done nothing to reduce traffic accidents.
The Proteas, however, did their bit for reducing traffic congestion in Gauteng this weekend by ensuring that they were not in either the semis or the final of the ICC Champions Trophy. Their sponsor must also be having doubts.
James Greener
2nd October 2009.

Friday 18 September 2009

TAX AND BEND

Yesterday the JSE turnover reached nearly R24bn  as one of those mysterious close-out rituals took place when computers appear to trade with each other for a couple of hours. On Tuesday the wind gauge outside this office clocked a gust at 51km/hr. I don’t think the events were related but there is certainly weird stuff happening which most people have never seen before. Demand for the rand and gold is surging. The All Share index is more than 40% above the March low but the big banks continue to warn about severe and lengthy contraction in their businesses. Bears are baffled. Patience is no longer enough.
It is both amusing and infuriating to watch the responses of the politicos to the realization that they are collecting a whole lot less tax than they hoped for. Ideas for new and sexier taxes are sprouting everywhere. There was even some very confused waffle about prostitution being a viable employment (and presumably tax generating) enterprise. Almost completely absent has been any suggestion that they might like to compensate for the shortfall by trimming back on the costs side of their business. After all, that is exactly why tax receipts are slowing. Employers are cutting back on wage bills and consumers are cutting back on spending. Government needs to follow suit. Why not start with the big ticket items? For example, lop 15% off the salary of every civil servant earning over R50 000 a month, and another 10% off salaries over R75 000 a month. The usual bleat that the state and its various agencies need to pay this sort of money in order to retain top talent and prevent it defecting to private industry deserves to be tested. My guess is that there are very few people who are currently driving desks and BMW’s on the public payroll who will be swamped by calls from the head hunters. The latest figures from National Treasury reveal that while Revenue receipts are growing at a disappointing 4%pa, the figure for the Requisitions side is 20%pa. Minister Gordhan himself has noted that it is the larger of these numbers that needs attention.
Equally silly ideas for changing the face of South Africa for the benefit of its people include turning game farms and golf estates into mielie lands. I am pretty sure that the rates and taxes currently paid by both those types of enterprises are now far greater than they ever were in the past and certainly create far more wealth than any mielies which might survive on them in the future. The reason for being able to say this is that simply the desire to maximise income and return will have guided the private landowner’s choice of use for the property.
However, someone close to government did this week take a giant step in the war against obesity by airing the idea of complete nationalisation of all food production. In a related move their colleagues over at the Competition Commission are taking a close look at the supermarkets. Rest assured the moment that the bureaucrats start to interfere, food will disappear and we will once again be a thin and fit nation. This will in any case be very necessary if we are to mobilise an army able to start a third world war as threatened by some dimwit, who has managed to escalate a terribly sad incident caused by incompetent sports administrators into a international mocking contest.
It is reported that each soccer world cup venue will need the services of 100 chefs on match days. Their task will be to revive with tempting viands the high Pooh-Bahs of FIFA who arrive at the suite shocked and exhausted by the unaccustomed horrors of life on the southern tip. They might even have glimpsed a rogue sign for a non-approved beverage or credit card that the local authority had failed to purge from their so-called protocol route. Just how big was the fee and to whom was it paid, that has permitted FIFA to drape the rest of this country over a barrel?
James Greener
18th September 2009.

Friday 11 September 2009

DANCING WITH DATA

So Governor Mboweni feels that “SA labour laws are good”. How on earth can they be considered good when so many people in this country are without jobs? Only when pretty much anyone who needs paid work can find it, may any government congratulate itself on getting things right. Ironically it is probably only when bureaucrats and their interfering laws are largely absent from the process, that full employment becomes possible.
To the extent that any economic data is reliable or accurate it does appear as if the things are not deteriorating quite as fast as previously. However, I was worried by the announcement that ABSA are prepared to grant mortgages to the value of 110% of the house to be bought. Furthermore these products will be available only to those earning below a certain quite modest amount. Now isn’t this almost exactly way that banks in the US and UK triggered the whole credit crunch in 2008 with so-called sub-prime mortgages?  After congratulating ourselves on more or less avoiding this problem in SA, are we now about to play catch up?
The strike by the minions at SARS added a quite unnecessary extra twist to the irritation I experience each year when gathering the numbers required for completing the tax return. Someone, however, is still working at Revenue House as I have received SMS messages reminding me of the exquisite torture that awaits me should my form not be on time. The brouhaha about supplying suitable cars for the three dozen ministers also has come at an inopportune moment for us taxpayers. Not only do I see my money going to provide high-end in-car entertainment systems for people who should be taking a moment in the quiet between meetings  to catch up on paperwork. It now emerges that a bling set of wheels is particularly necessary for visiting the comrade voters to deliver the services they were promised. Anything below the super luxury standard and the citizens will not take you seriously.
 The news that Winston the pigeon was able to transport a data chip across the kingdom faster than the Telkom network could transmit the same information has generated plenty of comment not least from Telkom who thought the stunt was a cheap shot. Well of course it was but it was still very funny. But what caught my eye though was the fact that there is a company that collects so many gigabytes of data every day from recording phone calls. Presumably there are many other similar organisations also collecting this sort of data. And presumably further, there is a demand for it. If Winston had been nailed by a Peregrine Falcon who knows who might have got their hands on all that information. Why does the phrase Identity Theft keep popping up in my mind?
The dollar gold price tried on four figures this week after a long break and is looking quite natty and comfortable. Isn’t it a pity that the fellows at Eskom don’t have similar standards of fineness and quality for the coal they buy for their power stations? Some of that organisation’s huge loss was caused by paying for “mud and rocks” which was delivered instead of coal. The most of the rest arose by getting on the wrong side of a derivative trade. Now where have we heard that before? If by some slender chance the trade had worked out in Eskom’s favour, would we have avoided the 30% plus electricity price increase?
At least two cultural dancing events are scheduled to be held this weekend. Both are intended catch the attention of non-dancers and both involve near naked people. Up the road it will be the Reed Dance featuring hundreds of young maidens selected for their beauty, modesty and purity. In New Zealand, 15 burly lads of somewhat less unsullied reputation will perform the Haka in an attempt to shock the ‘bok coach out of his boredom. If the ‘bokke win properly you can be sure that even more dancing will break out here on the southern tip. Probably without reeds though.
James Greener
11th September 2009.

Friday 4 September 2009

ASYLUM IS NOT FOR SISSIES

Negative interest rates are an odd concept. Deposit money in the bank and once a month the bank charges interest, which they deduct from the deposit so now the deposit is less than before. If this goes on for long enough the deposit falls to zero. Not a good investment idea. In some places commercial banks are now being charged negative interest on certain funds that they have on deposit at the central bank. The powers that be hope that this penalty will encourage the banks to take up a sort of reverse crime and anti-mug their clients by stuffing folding money into their purses and wallets. The next step of the plan calls for the bank clients to return to their old habits and become consumers once again. But that is not what is happening. People are paying off debts and building up savings instead of spending. Large and chunky spanners are appearing in the works.
Almost all indicators of growth are still getting worse, although in some cases at a slower rate. As I write, the talking heads on the screens are getting very excited by a US data release about how many jobs were lost last month. Whether the number was better or worse than expected tells us no more than that the expectations were wrong! The real point is that fewer people are at work in productive jobs and it may be a long time before that situation reverses. It will be even longer before the situation regains the old peaks. Investment bears like myself are pretty sure that the time is coming when the markets realise that they are priced for an altogether much happier and quicker outcome than is actually taking place and they need to go through a big correction again.
The Handbook that reportedly allows for a minister to spend upwards of a million rand each on a brace of cars is in dire need of revision. The current tax regime ensures that most ordinary folk have to fund their own wheels, so why not a cabinet minister. By all means have a smart landau and four round at the state stables for the odd ceremonial jaunt where you want to expose yourself and your guests to the exciting sights, sounds and smells of an African city. But for tooling over to the ministry from home (also state provided) why not one of these Rea Vaya things or maybe a Corolla that you can wash in the driveway at weekends? Only when, as they all claim, their meagre packages expose them to temptation of being lured away from the sweat and toils of public service, should they experience the joy of true executive travel, including charter jets that do not run short of fuel. What exactly happened there in the DRC to our Dep. Pres. Coming back from a junket in Libya? Did the Colonel refuse to accept the national petrocard?
Forget the Niagara Falls. The Canadians have opened a much bigger deluge. What’s the saying about lunatics running the asylum? That Brandon Huntley chap has found one warming a chair up there in the 51st state  who clearly had little clue about where or what South Africa is. I’ll bet he is finding out now. The courier services have had to lay on extra flights to Toronto to handle the applications that are pouring in from the southern tip. Not mine though. I have seen the photos of the thermometers pointing at the big negative numbers and think I’ll stay here in the kingdom thanks. It was well over 30 degrees here on Tuesday. But maybe what we are seeing is a ploy that will allow Canada to field a rather more threatening rugby team at the next world cup and someone who will understand Victor’s line-out calls.
I am a bit alarmed by the rather boastful claims about sheer perfection that are coming from the ‘bokke camp. Let’s wait for the clean sweep chaps, before getting that cocky.
James Greener
4th September 2009.

Friday 28 August 2009

NOTES FROM GAUTENG


So it is good bye to August and the Soccer World Cup 2010 draws ever closer. Or it might do if it could get on board the busses that have been planned for it. The uproar that has broken out about the plans that have been made for this segment of public transport is getting really ugly and the world is watching with alarm. Bullets are about to replace the insults flying about. About the only common ground between the antagonists would appear to be the emergency lanes and central reservations which the taxis have long regarded as part of the road network anyway.
It is also goodbye to the 25 000 All Share level as the bull runs wild and the streets named prudence and caution and value are renamed foolhardy, bravado and speculate. My view that they were also cul de sacs is turning out very wrong. The market is now far closer to revisiting the all time highs (33 300) than testing the most recent lows (17 700). I am baffled and embarrassed but not convinced.
I have spent a day back in the dealing room and it has been wonderful to be surrounded by colleagues again and to hear the gossip and rumours. However, I am alarmed to be reminded how closely watched is the stream of almost meaningless numbers and definitely useless opinions that pour out of the screens dotted around the room. The defence is of course that every other dealing room is also watching the same gibberish and knee jerks need to be co-ordinated. Unsynchronised swimming is not pretty.
In an obvious fit of jealously and pique a regulatory suit in London has labelled some of the activity that goes on in the halls of banking and finance as “Socially Useless” and has proposed that taxes be levied on the profits so obtained. Presumably he believes that there are other folk who could spend the money in a socially useful manner. I would be interested to know what he believes that would be. Is he unaware for example that the workers at the a certain luxury car maker are in danger of being laid off and that buying a Porsche would undoubtedly be socially useful in preventing them being laid off.
Unfortunately there seems to be no mention of laying off any of decision makers at Eskom who managed that organisation into a R9.7bn loss despite having sold almost every single unit of their product. That displays truly awesome incompetence. But they should care less, the customers have no where else to go. Meanwhile over in the army the phrase “military discipline” has become a curiosity. People of my generation watch in amazement at the unruly mobs of alleged troopies behaving in a very unmilitary manner and wonder what happened to the “Korporals” who used to be more powerful and scary than even the worst bear market.
It seems that the press in Perth have thankfully had no time for tomorrow’s tri-nation encounter as there is some Aussies Rules encounter which is far more important. That means that the translators who were sent along to render our coach’s observations into short and meaningful sentences have been unused. Much better to let the ‘bokke do the talking at noon tomorrow.

James Greener
28th August 2009.

Thursday 20 August 2009

RACING TO GET AWAY


The GDP figures that were released this week were alarming and my conviction that the world wide equity bull markets are unsustainable has been strengthened. It is going to get ever harder for most companies to grow their earnings or even make a profit in the next year or so. The average historic price earnings ratio of 13 on the JSE does not excite me at all. The trend of P rising while E falls is really not a great buy signal. Obviously there will always be companies that will buck the trend and find customers even in a recession, but the real hunt must be on for those organisations that manage the downturn, survive the drought and get positioned to benefit quickly from the recovery whenever it is. Many of the big names – especially in the financial sectors – seem to me to be unlikely to make that cut. Among the headwinds they face is the gale of legislation and costly administration that is now required to ensure that they are operating in accordance with codes that have nothing to do with profitability and customer service.
Education is an area in which we are all total experts having each spent at least a dozen of our formative years in close contact with the industry. Several saddening and infuriating stories broke this week about the ever deepening mess that government is making of providing the nation with motivated and enthusiastic youngsters eager to earn a living and able to read, write and work out the VAT on a dozen cans of condensed milk. It appears that almost a year after last year’s school leavers began to sit their final exams, those that passed are still waiting for some bureaucrat to approve the design of the near worthless certificate that will celebrate the event. The fact that the forgers have already been eagerly supplying certificates for those who failed merely exacerbates matters. And now we have the unedifying sight of universities and education departments circling each other growling about whether or not the ability to add AND subtract is a necessary condition for entry to the nation’s halls of academe.
I am intrigued by the observation that the Chinese appear to have been unimpressed by the assurances of the fellows from Washington that a strong dollar is national policy. The boys from Beijing are very worried about the threat to their reserves that is posed by a falling US dollar and are exchanging them for tangibles in the form of minerals, mines and meadows. This has been causing spikes and peaks in some commodity prices and despite the excited yells from the lookouts that have been posted to check for green shoots these are probably not harbingers of consumer recovery.
Tidemarks is coming to you a day early this week because I am going on holiday. Admittedly it is very hard to distinguish between days when I am working from days when I am not working. Venue and attire are not good clues and it is hard to go somewhere where the cell phone and internet coverage are no different from what I enjoy here at my desk. So it will just have to come down to discipline. A longer beach walk before breakfast, double the post-lunchtime nap and open the first Castle earlier than normal. Perhaps even more fishing time. I am suddenly looking forward to this break.
And sadly, once again the whole issue of race has raised its head in South African sport. This time it has to do with whether one of our athletes at the world championships should be running in the girl’s race or in the boy’s race.
James Greener
20th August 2009


Friday 14 August 2009

THERE IS MORE TO KIMBERLY THAN A BIG HOLE


So Governor Mboweni could not resist the opportunity to invite Governor-Designate Marcus to observe the finer points of pedal-stomping. After the speech he ushered her to the top floor eyrie and sashayed over to the corner and mashed the rates-down pedal into the floor a full 50 clicks. There are now only 700 clicks to go before the pedal hits the metal and I am sure the two started to talk about how deflation is suddenly a greater threat than inflation when Tito had to take a call from Minister Gordhan complaining that the rate cut had scared the rand badly and would further reduce the tax take. I expect he also has had to field calls from the banks, pointing out that their earnings are already being crushed and that letting borrowers pay less interest was not going to help. Lenders are likely to withdraw their cash and find somewhere for it to work a bit harder. The words “bail-out” will be popping up in local banking conversations.
Just like the phrase “toxic assets” is reappearing in articles about the US banking system. It seems that skeletons are falling out of cupboards where bankers did not even know they had cupboards. Many years of what was proudly called “financial engineering” created structures where the latter word turned out to be very badly abused. Plenty of flashing lights, sliding hidden panels and whirring fans to impress the punters but not a firm foundation or solid wall in sight. The string and chewing gum fastenings are failing. The only pieces of paper that have any value – and that may also be short lived – have pictures of dead presidents on them. The Chinese government has a lot of those dollars and recently has been asking in increasingly nervous tones just how many more President Obama plans to print. The US dollar would appear to have settled back into a trend of slow but determined weakening.
The rand too may have run out of steam and we have had a few weeks of fairly steady levels against most currencies. It is not impossible that the next big move may be further strength but most of us would accept that the higher probability is for the rand to weaken. It is interesting that there has been quite a surge in trading activity in the traditional rand hedge shares like Liberty International.
Despite some surprisingly large earnings declines being reported by the banking giants, the overall market is still keen to go on up and the All Share has breached the 25000 level almost exactly a year after it passed through it on the way down. Most of the heavy lifting so far this month has been provided by the mining and resources counters but they have had to work hard to overcome falls in the bank prices. Bears who thought that 2009 would be one of theirs are looking gaunt and worried. But patient.
And patience is what I need when I try to understand the nonsense that pours from any official who lectures us about their pet project. This week’s special concerned Rea Vaya, the trendy name given to Johannesburg’s plan to move people in large buses instead of in small ones. Transport Director Seftel offered the assurance “Unlike Metrobus, which the city subsidises, we (Rea Vaya) will …. provide a service …  at a much lower cost. If patronage works out it shouldn’t be a problem. If not, we will have to put in (ratepayers) money. We guarantee a minimum return (to the operating company)”!  Once again Physicist Pauli’s observation that this is “not even wrong!” seems apt. To be a little fair, however, these Bus Rapid Transport plans popping up everywhere in time for the World Cup have flushed out more organisations claiming to represent the minibus taxi industry than there are taxis. Understandably really when the BRT plans sort of mentioned that there might be money in it for the taxi owners and drivers.
Bit of a crunch happening this weekend when the Lions meet the fellows from round these parts. But it is somehow all rather academic while we try to figure out who these unbeaten Griquas are.
James Greener
14th August 2009.

Friday 7 August 2009

“WHAT ONE PERSON RECEIVES WITHOUT WORKING FOR, ANOTHER PERSON MUST WORK FOR WITHOUT RECEIVING” [1]

The US is running another wonderful experiment in economics to prove that folk are always delighted to be a seller when the buyer has more money than sense. The idea is simple. Drive to your local auto dealer and trade in your old car for a brand new one and also collect several thousand dollars in cash, generously provided by taxpayers. The gloriously named Cash for Clunkers program whistled through the first $1bn of public money in a just a few days. Now the decision makers, pleased to have found a scheme that is popular and eager to buy the votes of those who were slow to grasp the attractions of the trade and pitched up too late for the first tranche, have now tossed a further $2bn into the pot. Until the money runs out, this scheme nurtures the illusion that the car industry is recovering.
I tried hard to understand just what was decided at Wednesday’s meeting of very important politicians. Certainly, the press interpretation of events usually adds a further layer of confusion to events but I still could not discern, what, if anything the government plans to do beyond convening yet more meetings to talk about how they will fix “the crisis” Apparently much the same people who were in charge when “the crisis” began, now have the skills to make it end.
It was not even clearly stated what “the crisis” was. There is a sort of sulky suspicion that developments are being orchestrated by elements in the public sector who in addition to laying off staff are also colluding to overcharge for their products while avoiding tax. The response is to forbid them from firing anyone, investigate them for anti-competitive practices and send the tax police in to kick down their doors. Economic slow down is not a concept grasped quickly by those on a government payroll and pension scheme.
The bald truth is that the whole world is now facing payback time for spending money it did not have on things it probably did not need. For most people the value of their largest asset (their home) has fallen substantially, the banks want their money back and their job is uncertain. Prices of many things are going down and anyone who is contemplating a purchase is intrigued by the idea that possibly even lower prices are on the way. The Federal Reserve’s worst nightmare of deflation is a galloping stallion.
So-called stimulus packages serve only to disguise and postpone the inevitable and also provide the extra annoyance of seeing the smug grins on the faces of the few who got their paws on the handouts. It has helped enormously if your business is one that is deemed “too big to fail”. In this country, that soubriquet is desperately sought by anyone with anything to do with hosting next year’s soccer world cup tournament and this is undoubtedly delaying the roosting of some very dishevelled chickens.
In marked contrast to the fuzzy waffling of the alleged rulers of the country I was privileged to listen to two CEOs explain in clear and unambiguous terms what their companies did, what the problems were (not a “challenge” in sight) and what they had planned for the future. Their intimate knowledge of the costs, prices and drivers of their total businesses was awe inspiring and their pragmatic approach to the future was devoid of anything but an appreciation that there is always competition trying to steal your customers. Keep an eye on both Tongaat and Metmar.
Challenge is also not a word to be used when considering tomorrow’s match against the Wallabies.
James Greener
7/8/9


[1] Dr. Adrian Rogers

Friday 31 July 2009

REVENUE IS RUBBISHED

It seems as if no one believes that there is any bad news anymore. I do not agree. Yesterday the National Treasury published the June exchequer accounts and the two crucial figures are accelerating away from each other at an ever escalating and hugely alarming rate. Government expenditure is now increasing by around 20% pa while government revenue is growing at well below 8% pa. In the second quarter of the year the state spent R184 billion on, amongst other things, ensuring that ministers made full use of their car allowances. This is R40bn more than was spent by the bureaucrats a year ago. Now add to this the fact that revenue for the same period was a mere R120bn (compared to R136bn last year) and you have the makings of what Mr Charles Dickens described as “misery”.
On a rolling twelve months basis the deficit is a staggering R83bn. A simple, but hopefully, unduly bearish extrapolation of the trends suggests that the annual deficit might be R140bn or almost 7% of GDP. Not only is it clear that the new minister of finance is going to have to put on his big borrowing boots but also that the tax payers are in a very bad way, while the tax eaters are off and flying.
The government is obviously very determined to keep the economy afloat by taking over the job of spending money from the embattled, impoverished and increasingly unemployed citizens. Without a very sharp change to these trends, by year end the state will comprise nearly one third of the South African economy. Capitalism under caution?
The markets, however, are not at all worried. Most commentators are confident that the present bad news was what the smart and prescient investors were already discounting during the March crash. Now the worst is over they say, the worrying can end and it is time to be fully invested.
Money continues to flow in to the country and the rand has had another excellent week. So too, by the way, has the Aussie dollar, so perhaps it is a commodity thing. Long bond yields held reasonably steady and the JSE of course kept on surging. But several heavyweight companies either reported or issued trading statements this week and not one was optimistic. The once mighty Anglo American completed a very poor year by failing to pay any dividends at all. I was pleased to note that inflation is falling quite sharply as this means that savers reluctant to leap into shares can find some modestly positive real interest rates. 
Away from the markets, we were treated to the uniquely South African sight of angry protestors singing and dancing while empting rubbish bins all over the streets. This latter action has the satisfying benefit of irritating and alienating the initially sympathetic but powerless ratepayers who will ultimately bear the costs of it all. It also ensures that there will be plenty of overtime for picking it all up again later. I have been mulling over the idea that every parastatal organisation should publish their total wage and salary bill as well as their head count. I think that a simple average per capita emolument number might be very interesting for everyone. To really spice things up how about including the costs of consultants but excluding their number from the staff lists! I have my doubts about the popular belief that public servants need salaries high enough to prevent them defecting to the private sector. Business will poach anyone who will generate more wealth than their salary.
There’s a huge dilemma here in the kingdom this weekend. The sardines have put in a very belated appearance and so the men in shorts are torn between watching the rugby or hunting fish. It’s a tough decision.
James Greener
31st July 2009.