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

28^th 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

20^th 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

14^th 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

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[1] Dr. Adrian Rogers