There are a few more trading days left in 2010 and it looks as if the All Share may just fall short of breaching the 33 309 peak set in May 2008. Mind you, one Christmas-tide many years ago the Russians suddenly decided that they needed to learn about Afghanistan the hard way and that popped 5% on the index overnight. So far the overall market index has delivered around 17% total return for the year. That will be way better than most investors were hoping for or pundits were forecasting which probably means that most of us will have missed much of the rise by being too liquid. And interest rates came down too. This is a very difficult and weird game.
It may be worth pointing out that the actual quantum of earnings being reported by the Top 40 companies today is about the same as was being declared way back in 2007. In the intervening period, after one more quarter of excitement the credit crunch snapped down, earnings collapsed and it has taken many months of hard work to recover even this far. But share prices today are nearly 15% higher that they were then, which implies that buyers are expecting a very significant improvement in company profitability into 2011. In my view there is little evidence to support such a development. There is a rather too much hope and faith resting on the promise that the government’s infrastructural spending plan is well underway. Indeed construction has been one sector where earnings have not improved in recent years. My own suspicion is that because of corruption and maladministration much of budgeted expenditure has been diverted directly into private consumption without first having travelled through professional services, procurement and fabrication. It is alarming how many businesses appear able to declare director’s bonuses before actually starting the task they have been appointed and paid to do. This model neatly deals with the expected profit margin up front without the tiresome and messy task of doing and completing the job and then preparing accounts to see if there is any profit left over.
It is just too easy to poke fun at the World Youth Festival which appears to have been particularly successful in attracting rain if not the advertised celebrities to drop off in Pretoria. The theme of the festival is “Let’s defeat Imperialism” - a term which my reference suggests is not easy to define today and which is now often used as a term of abuse. Nations practicing “true” imperialism are rather thin on the ground in the early 21st century although some particularly skilled and well trained youth claim to be able to detect “ideological imperialism” just about everywhere.. I would have thought that gambling and lotteries were despicable Imperialistic practices, nevertheless the festival organisers were extremely efficient in liberating a useful R40m from the Lotto, an act that has proved to be just about the last thing they have managed to do successfully. The defeat of imperialism has given way to the more bourgeois matters of shelter, warmth and food. The good news for the rest of us is that it cost taxpayers way less than a single world cup match and some of the delegates might actually like the place and return one day as rich tourists. The KZN delegation, however, has already returned as grumpy kids.
All year two quite big and sometimes excitingly violent rows have been taking place where the only people interested are the participants and the newspapers, thankful for something to fill their pages with. Both concern organisations known by their four letter acronyms which if they settled down and worked properly might make a huge contribution to the country. In the mean time the rest of us will continue to have no interest in either the SABC or COPE.
The way the third Ashes test is going, I think all 22 players might be asked to undergo a lie-detector test or donate a sample for analysis. It’s a funny game cricket – but not weird.
James Greener
17th December 2010
