Why do you think our President JZ went to see the Colonel in Tripoli earlier this week? I really hope it wasn’t to offer him the facilities of the state guest house now just refurbished after the last despot departed. Aside from boosting sales of Deep Black hair and moustache dye in Pretoria there seems to be no other upside to hosting that rather tatty character here.
The news that the economy had grown at its fastest pace in more than three years was received with some doubt by us bears. The puzzling detail was that the biggest single contributor to this growth was the manufacturing sector which does not currently seem to be happy with its order book. During the second half of 2010 the Industrial index earnings base did put in a rise of about 8% from the depressed level that followed the 2009 decline. Since then, however, reported earnings from JSE listed industrial companies have been pretty flat and we will need to look elsewhere for something to propel the GDP as much as this. Another satisfying result of the unexpectedly perky growth is that many of those other statistics that are expressed as a percentage of GDP are looking much healthier. In particular the R149bn government deficit is now just 5.2% of GDP. This is a ratio that many other nations like Greece, Portugal and the USA would be very pleased to have. Furthermore, government expenditure has also backed even further away from breaching the 30% of GDP level. If all these numbers are true and valid we have lots to be proud of. But why are so many people unable to find work?
However, it will take a much bigger fall than we saw on the JSE this week before most shares on the JSE are no longer overvalued and trading at prices that are discounting earnings rises far larger than can reasonably be expected. A number of new listings and plenty of capital raisings are doing their bit to suck up the cash that is looking for a home. Amazingly even the outfit that builds and operates the toll roads saw its bond offer many times subscribed. Some of that debt is government guaranteed but still they are the guys who have built these roads but have not been allowed to collect their tolls yet.
But lending money to suspect outfits is all the rage. In the USA long bond yields are far below even the official inflation rate and yet many investors seem anxious to pile in and enjoy an assured erosion of their wealth. One day someone in Washington is going to discover the lever that lifts interest rates and give it a hefty tug. “Then”, as a colleague once said “it will be viewing unfit for children.”
About the only crime that Wal-Mart has not yet been accused of wanting to commit now that at last they have been granted permission to come and risk their own money in SA, is that they will be selling contaminated German cucumbers to the poor and helpless consumer. I do hope that someone is keeping a list of all those people who have predicted that the opening of a new shop will cause the end of the world. It would be fun to see which of those on that list might actually be tempted by the allegedly low prices of this new entrant.
The words “if” and “then” are getting a vigorous airing in the pubs of the kingdom at present as Sharks fans work out the various combinations that will get them to the final. In the event that things go awry I suppose that there will be widespread support for the opinion that the Super Rugby season has been far too long, especially as this is a World Cup year. Lions supporters have an easier sum to do.
James Greener
4th June 2011
