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.