Friday 28 May 2010

EURO RESCUE MADE IN CHINA?


A notable feature of stock exchanges at the moment is that there are some pretty substantial volumes of shares being traded. Sceptical bears believe that this might be evidence of the so-called redistribution trade where institutions are the sellers and individuals are the buyers. The theory is that the wise and well researched have noted that the future looks bleak while the keen and ignorant think that there has never been a better time to buy shares. This neat categorisation of investors is nonsense. Institutions can and do buy stuff that they later wish they hadn’t. Thanks to the internet, information is ubiquitous and simultaneously available to everyone. The differences lie in the interpretation and inference and also in remembering that the investment industry’s income is largely based on someone buying something. The latest rebound in confidence is allegedly due to reports that the Chinese have professed admiration for the euro. Well, they sort of have to don’t they? There are not too many choices for them when they decide to diversify out of the several trillion US dollars that are knocking about their vaults.
It was hoped that the ruling party had muzzled Youth League Chairman Malema at least until the World Cup was over. Regrettably, he popped up this week to insist that he was solely responsible for announcing the government’s policy on mine nationalisation. Straight from the horse’s mouth as it were it was very muddled but interestingly appears to be intended for new projects only. Presumably that means that all the mines currently operated by the 16 listed mining companies that appear among the JSE’s largest 100 list would be unaffected by this proposed legislation. In one respect at least the local proposal might be better than the Aussie plans to dissuade investment. The horses’ mouth, however, is not known for doing sums properly and probably will be disappointed by how long it will be before the deserving poor will be able to order Breitling watches like his. Mining in South Africa is not a bowl of cherries. The aggregate price to earnings ratio of those 16 companies is around 25, and this climbs to over 80 if you omit Anglo and Billiton, who derive a lot of their income from offshore. In the last 150 years miners have naturally plucked the low hanging fruit in terms of the richest and shallowest ore deposits. The proposed state mining company is not only going to be faced with technically difficult  projects but will also battle to find private money willing to share the risks in return for the very meagre rewards that Malema is prepared to allow them.  Tax payers can look forward to even more outstretched hands.
Bits of the Gautrain will be working in time for the big event. The schedules of fares and running times have been released and show that management have conducted a careful needs analysis. Unfortunately it appears to have focused on the need of the staff to go home to bed, as the service will close down every night at 8:30pm which is the exact moment that the final match of the day kicks off. Fans needing to get back out to the airport after that match can forget the metro! And there could be lots of them as it was announced that 140 000 extra tickets have been found down the back of a sofa and have now gone on sale .Hopefully the demand will come from overseas fans who have realised that their press warnings to beware the venomous vipers in South Africa omitted to point out that these would mostly be confined to VIP boxes and blue light motorcades travelling the protocol routes.
There are certainly no tickets left for the Super 14 final at the Orlando Stadium tomorrow. People seem surprised that rugby fans had such a good time at the same venue last week. Did they forget that the place is situated in the nation’s largest per capita beer consumption neighbourhood so what was not to like. Go Bulls.
James Greener
28th May 2010.

Friday 21 May 2010

BEAR PASSES THE DOPE TEST?

It is probably worth reminding oneself that no one who believes that their views are really influential is ever going to make a very pessimistic call even if that is what they are thinking at the time. In one way or another most of us have at least a portion of our savings in the equity markets and savage bears are not welcome. It seems, however, that the beast is on the prowl right now and there are frantic efforts being made to find out who let him loose and how he can be tamed.  The German Chancellor’s ban on naked shorts is the current scapegoat. This sounds like a topic requiring closer observation, but I think that the dawning realisation that the world is not yet out of the economic slump is far more important for sentiment. People appear to be converting their money to cash. Even lending it to the government by buying bonds may be risky as in many places interest rates are on the rise. It is significant that there is huge demand for physical gold. Share markets are becoming unfriendly places.
Many governments’ programs of extravagant entitlement are running into trouble as the income side of that equation dries up. Proposals for reducing state expenditure are either trivially cosmetic or have triggered anger amongst citizens who have become used to the state playing Robin Hood. Nowhere in the story line does Robin tell the people that the rich have either also become poor or have disappeared, taking their money with them. The rand breaking above eight to the dollar is one manifestation of that last phenomenon.
Surely not too many people will shell out R15000 plus VAT for a table at a dinner where the FIFA boss will offer his views on “The Socio-Economic Impact of the World Cup on SA”. We already know that the answer is “precious little”. One reason for this is that in return for enormous sums of money, FIFA have assured their so-called commercial partners that the obedient South African authorities will close all possible competitor businesses for miles around the sacred grounds and routes. Fans coming to the Moses Basket in Durban for example, will find that the Sky Car which travels up the handle of the basket, the pubs, coffee shops and stores in the precinct all closed and shuttered throughout the tournament. Curio and trinket sellers have been chased away and their stock confiscated. There won’t even be beer for sale. Where is our fearsome Competition Commission when we really need it?
The “One Light One TV” headline was not a new electioneering slogan but the warning that in order to ensure enough power to keep the stadium lights burning, the rest of us might need to switch off all our other stuff. Reportedly one of the president’s wives is already setting an example in this matter.  Actually that might just make the parties go even better. Drink fast before the beer gets warm. We are going to have a great World Cup even if it is a round ball being chased by fragile and overpaid primadonnas.
President Zuma was “close to tears” after witnessing the dreadful conditions that some of his constituents are living in. The answer to his question the next day of why this had been allowed to happen was blindingly obvious. He was addressing his own Co-ordinating Council whose agenda was "unpacking the human settlements delivery agreement" and “putting programs in place”. Whatever this nonsense might mean, half a hundred delegates had doubtless travelled from far and wide to attend and lavish catering was a certainty. Actually doing stuff like staying at work, issuing orders and firing people who did not carry them out was definitely not on anyone’s agenda.
Will the Bulls and their fans really feel as if they are playing in a home semi-final when they play in the Orlando Stadium tomorrow? Legend has it that the grass available outside the grounds is just as good as the stuff on the field so it should be a wonderful occasion
James Greener
21st May 2010.

Friday 14 May 2010

LOEWS HAIRPIN IS NOT AS BENT AS FIFA

The economic situation has made folk very excited but also deeply confused. Daily turnover figures on the JSE have been regularly well over R15bn, which is nearly twice previous “normal” levels. The market has zigged and zagged quite sharply from one day to the next. Sellers presumably are taking the view that a loan of a trillion dollars to European nations that are already in debt is not quite as good an idea as some claim. They anticipate that businesses will sell fewer products and make smaller profits and that shareholders will have lean times. Buyers, however, are impressed by the so-called “shock and awe” rescue program being mounted by the world’s omniscient leaders and agree with them that it will restore confidence and that widespread wealth will be the inevitable result. Loyal readers will not be surprised by my scepticism about how the process actually makes the debts go away. Somewhere, is there not, there is a piper waiting to be paid. Austerity and public sector pay cuts are being announced all over Europe and it seems that many economies have not yet left the  recession behind.
Similar cost cutting could not be further from our own politician’s thoughts as they appointed a team of powerful people who can actually read and write and who will take on the hard work of making plans. Assuredly these very clever people will identify and solve the mysteries of the universe. Parliament can look forward to hearing from them in due course on how to fill potholes, generate electricity, treat sewerage and deliver all those annoying service things that ungrateful taxpayers ceaselessly demand. In the meantime they, the nation’s elected representatives, can pursue more important stuff like punishing computerised ticket sellers and beer brewers who are definitely getting unacceptably rich by working hard to satisfy their customers.
Governor Marcus and her team decided that developments in Euro land will have little impact on their domain and declined to change the price of money yesterday. It is probably true that the inflation threat as we used to know it has diminished a bit these days and in any case raising rates had no discernable effect on the scourge. The moans of us pensioners hoping for some increased interest income are also easily ignored.
Down here alongside the nation’s busiest port, however, the effects of the transport strike are very apparent with the number of ships idling at anchor growing daily and local news full of stories about urgent cargoes getting undelivered. Businesses affected by this activity are just the latest who would like to see lower interest rates.
One story that does deserve a lot more notice is that the country will turn 100 at the end of May. Over the years we citizens have picked some really bad governments to run the place and yet it has survived. It is however, currently facing a raid by the forces of FIFA who have laid down a huge smokescreen of imaginary foreign fans in order to plunder and pillage our pockets. Nonetheless the intention to have a good time has taken firm hold on us all and the World Cup party will be a fitting beginning for our next 100 years. I was amused to see that the exact same doubts and fears that we had 4 years ago are now emanating from Brazil – FIFA’s next victim.
Because the invitation obviously has got lost I shall again watch the Grand Prix from a deck above the Indian Ocean rather than one on a yacht moored in Monte Carlo. Mind you I am grateful that I also never received the invitation to go and watch cricket in the West Indies.
James Greener
14th May 2010.

Friday 7 May 2010

HAS THE SECOND DOWNTURN BEGUN?

The bear suddenly started to feed on what has looked like perfect bear food for some time. The main course is the situation in Greece, where in order not to default on paying off a debt which has fallen due, the government is borrowing cash from someone else. This seems sort of self-defeating but is quite a common procedure in the financial world where it is dressed up with names like “restructuring”. The implicit assumption is that the borrower will now turn over a new leaf and begin to spend less, earn more and so thereby have a bit over to pay off the debts. This proposition is proving deeply unpopular amongst the Greek folk who up to now were grateful recipients of their government’s spending programs but who lethally are allegedly among the world’s leaders in failing to be at home when the tax collectors call. Lenders to Greece and several other countries in the Euro zone, which are suspected of being in  similar very leaky boats, are now demanding that they be paid much higher interest rates on their loans to compensate for their risks. This is the financial market equivalent of kicking a man when he is down.
In the USA, politicians are trying to score points with the voters by kicking men who are anything but down but who are suspected of being too clever by always selling high and buying low. That the people on the other side of these trades are so-called valued clients is puzzling to both the affected clients and to others not actually working in these markets. The outcome will probably be more and stronger regulations on top of the ones which are already in place but are circumvented because that’s what human ingenuity is for.
The main question that has not yet been answered satisfactorily, however, is whether or not the world’s economy really is picking up. At the simplest level this is the same as asking if there are now more people employed in value-adding jobs earning more than before. Like all economic and social statistics this sort of data is notoriously unreliable but the figures released this week in SA suggest that the answer is no. Despite this, all of SA’s ports and railways are due to be shut down by a massive strike next week. While this will bring relief to the hard-pressed “brand police” trying to confiscate all the imported items from which the FIFA regime have failed to claim a tribute,  the number of ships lying in the outer anchorages awaiting berths will grow.  Many World Cup spectators will have to do without makarabas.
Defence and Military Veterans Minister Sisulu, however, proposed that the nation’s youth should put on “staaldoeke” and uniforms and learn how to march and shoot things. Given the widespread discontent about the government’s failure to deliver any services, arming the potential protestors seems a bit unwise. A better idea would to ditch the laws which make it so complicated to hire and fire people. Start with the one that asks about the employee’s skin colour.
The good news from the kingdom is that King Shaka airport is open and operational with a departures hall big enough to hold the World Cup Final but a road layout that routes both arriving and departing vehicles through the same crossroads. The SkyCar that hoists visitors to the top of the soccer stadium arch has taken a commendable R5m in ticket sales in just five months. This is a useful contribution towards the R3.1bn bill for the structure but together with other businesses in the complex, such as the excellent pub and grill, this tourist attraction will shortly be shutting down for a spell so as not to offend the sensitive souls of FIFA. Odd hey?
Keeping up with the Lions’ record breaking attempt to lose every single Super 14 match is rather diverting and I was a bit startled to notice that the pyjama cricket on the TV was no longer happening in India. The spectators were sitting in bright sunshine rather than grey smog. They were also way more mellow. It was surely that funny collarless shirt that denied the Proteas a win in that first match.
James Greener
7th May 2010.