Saturday 19 November 2011

CARBON COP(Y) 17


Anyone who can offer a view on what is happening in Euro Land and how it will impact the rest of us is going to be wrong within a few hours of making the prediction. The mess is deep, smelly and very unlikely to end well. Perhaps the only good to emerge is that it is revealing to plenty of people that most of their respected and trusted leaders are no more reliable or trustworthy than just about anyone else. Those leaders have the use of the presidential palace, plane and party planner but not much in the way of an idea of what to do except spray public money from a fire hose. And when the hydrant runs dry …..? It is very sad really. From a very simplistic viewpoint the single euro currency seems like a good idea and makes life easier for many of us. But the clever folk who said it was a doomed structure are starting to look as if they were right. But then recall the first sentence.
Most local company earnings continue to show growth and this week just a bank and a construction company unsurprisingly announced against that trend. Nevertheless the simpler valuation models still suggest very few compelling buys in the share market. A number of administrative and technical developments being made by the now all-powerful JSE are intended to make the bond market friendlier for small investors. With the unwarranted but inevitable confusion that will attend next year’s probable implementation of a new way of taxing dividends, bonds might seem like a safe haven. Outright purchases of bonds at these generational low yields are unwise though. However, there are a couple of instruments available for those who are not totally spooked by the thought of collecting taxable interest payments.
So Stats SA has followed my idea of enabling everyone to compute their own inflation rate.  At one memorable analyst meeting many years ago the usual moans of disbelief about the latest official inflation number were being voiced. The company economist was trying to fight his corner and support the data and pointed out to the senior partner that “… the CPI is not based solely on the price of Famous Grouse and aeroplane fuel, you know!” With the new Stats SA tool he can now check that point.
The levels of silliness and breathless excitement are mounting here in Durban as COP 17 approaches. This is not, as the name suggests, a new police series on TV but the next in a sequence of talking shops where hypocrisy trumps science and slogans beat reason.  The future tense will be in great demand and impossible promises will be made. Hoards of lavish-spending tax-funded delegates are eagerly awaited. There are private jet runways and first class lounges and top of the range suites which have remained unused since the World Cup except for the odd visit by local party big-wigs. The War on Carbon demands that its generals fight from the comfortable seats and the kingdom is delighted to provide them. Expect siren-wailing traffic-halting limo cavalcades sliding through red lights en route to deliver delegates to hector audiences about reducing their carbon footprint. Less welcome will be the footprints of the grubby takkie-shod and surprisingly numerous pavement preachers who mysteriously manage to find the price of a ticket to these salubrious and far-flung conference venues. Happily I shall be missing the circus. I shall be in the bush for a while and the tide will leave no marks.
Oh how nice it would be if the planners had remained with the original series of three tests against the Aussies. Two just doesn’t work – especially if we lose the second one.
James Greener
18th November 2011


Friday 11 November 2011

ELEVEN ELEVENS ARE ELEVENTY-LEVEN


It was another fine example of how impossible it is to get any consistency from economics. Mind you it does involve two so-called ratings agencies. These are organisations which usually demand a fee for their opinion and in spite of this have a pretty dismal record. A day after S&P announced that the good ship SA was “steady as she goes”, Moody’s said that they thought they could hear disturbing noises from the steering gear and perhaps the helmsman was battling to steer her away from the rocks that are looming. What is always consistent in these cases is the reaction of the newly “downgraded” entity and National Treasury’s indignant dismissal of this news was text book. It is true that our debt and financial positions are nowhere near as bad as Greece, Ireland or Italy but we should note that our own president seems to share the Italian fellow’s way with the ladies. And the proportion of our government’s spending that goes to service the interest on the debt is climbing. The main victim of the Moody’s announcement was the rand which moved down more than 2% against all major currencies. But then it more than recovered, presumably on the news that the wise women and men at the Reserve Bank chose to leave the repo rate unchanged. They did, however mutter that maybe the time will come when money ought to be made a bit cheaper. This encouragement of the borrowers at the expense of the savers is an uncomfortable policy at odds with the supposed needs of the country.
The same National Treasury have long failed to provide a satisfactory explanation for why they cannot ring-fence the income they derive from their taxes on fuel. This seems to be an obvious source for funding the construction and maintenance of all roads in the country. However, that cash disappears into the general state coffers where it is used amongst many other things on minister’s hotel bills and presidential jets. Instead the preference seems to be for toll roads. The welcome but costly improvements to the major routes around Joburg have been built with borrowed money that they intend to repay once the tolls begin to flow. The proposed toll tariffs caused an outcry and the implementation of the tolls has been delayed at least until February so that special interests can be placated. This in turn has alarmed the investors who lent the money in the first place and they have declined to lend any more.  Obviously desperate for some income, the Roads Agency has begun to market their so-called e-tags which offer a discounted toll fee compared to merely letting the computer read your number plate and post you a bill. Many of us are interested to see how the post office will cope with the volumes of mail this method will generate. Since the e-tag system can be linked to a bank account what remedy would one have if someone duplicated your number plate and spent the whole day travelling around the city clocking up toll fees and draining your account?
In the meantime the city around which they are driving is draining its own bank account pretty swiftly. The outstanding arrears of rates and services is an outrageous sum and it is high time they resorted to their old policies of hiring people like Jimmy Abbott the renowned heavyweight boxer and  Lions supporter to go and collect some debts.
The Financial Services Board has warned the industry that they will be very strict about ensuring compliance with their “Treating Customers Fairly” policy. Those of us who actually have customers and clients who are likely to take their business elsewhere unless they feel fairly treated, are offended and puzzled by the idea of yet another set of rules to be obeyed. What about having an alternative government to pay our taxes to because this one seems to pick on me most unfairly and often?
Now that was a rather special Test Match. Beating the Aussies in two and a half days is great. If it had gone on any longer I fear Tidemarks would not have seen the light of day and at least one local columnist would have been stuck for material next week.
James Greener
Armistice Day 2011

Monday 7 November 2011

BACK PEDALLING ON THE REFERENDUM


For the last three months the range between the day’s high and low value of the All Share has almost always been greater than 1% of the value of the index and frequently greater even than 2.5%. Overall, however, the market has really gone nowhere. In these circumstances even the best informed are bound to make what later turnout to be poor decisions. The point here is that even if one hopes that maybe the bull has returned there are still large pockets of uncertainty and inclined selling if the spin accompanying the latest news release is negative.
Unless you are one of those fortunate but dull suits who are being paid by the taxpayers of your own or probably some other nation, you will have no time or inclination to follow the ins and outs and ons and offs of the circus that is laughingly named the European Economic Union. None of those words seems fully apposite. A particularly amusing episode in this soap opera, seemed to be about asking the Greek nation whether they would like to work harder and pay more tax and take instructions from Germans and Frenchmen. The alternative seemed to be to return to a life of dancing on the beach, sipping ouzo, breaking the odd plate and forgetting to repay loans to Germans and Frenchmen. Unsurprisingly this referendum idea has been scrapped. The serious side to all this is that Europe is a very large and important cog in the global economy. No one wins when it is so jammed up.
A tiny and nearly invisible cog in the machine is our own stuttering economy here on the southern tip but nevertheless we scored an invitation to send some representatives off to the G20 meeting in Cannes. So far reports suggest that our folk there have delivered some hectoring socialist diatribes about taxing the rich. Provided that the rich excludes the delegations of politicians and bureaucrats who are also present this is often a popular theme. However, as already mentioned there are far more entertaining topics on the agenda.
Who knew that there was an organisation called the Airports Council International and that they have just held a “gala dinner in Marrakech”?  At this, no doubt glittering event, paid for by taxpayers and air travellers, both OR Tambo and King Shaka international airports were inducted onto the organisation’s “Roll of Excellence”. It is a pity that the report of this accolade appeared right next to one about how 75% of the baggage handlers at these places arrive at work intent on stealing stuff from the suitcases they are paid to load.
The idea that economics is a subject worthy of a Nobel Price is moot. There is no evidence that research and development in this subject has enabled the planet to organise its affairs so as to avoid the cycles of booms and busts that so savagely disrupt it. That said, I am obviously disappointed that the committee this year again failed to spot my contributions. I have never been to Stockholm. Another local contender must be the salesman who flogged ten electric bicycles to the Durban Metro Police. This event was celebrated with a photo of the mayor on board one of these machines cruising along the (flat) beachfront boardwalk and an enthusiastic promise by him to ride to work at least once a week. The forthcoming Climate Conference to be held here in Durban is spawning limitless foolishness. The blurb trumpeted that battery bikes are “eco-friendly” because recharging is achieved simply by plugging into a domestic power socket. Oh dear!  Prizes should be offered to the first reporter who snaps His Worship pedalling uphill to his Pinetown home once the juice runs out.
An equally alarming picture of the Springbok Sevens new strip has also been released. Surely the Y-front pattern on the shorts is a joke? Oh! And did you see? The Golden Lions ended the season at the top of the log. Rather satisfactory I think.
James Greener
4th November 2011