Friday 23 December 2011

MERRY CHRISTMAS


Some much needed rain is falling here on the kingdom’s beachfront territory today. This will drive visitors and locals alike into the malls and shops and in a few weeks it will be announced that a record retail Christmas period has been achieved.  The Reserve Bank’s figures reveal that there is currently about 15% more notes and coins in circulation than a year ago and this is way above inflation so one must conclude that, on average, folk have more spending power in their pockets and purses. Which is a good thing. On some days that bad ol’ recession just vanishes into the haze.

Which is what I am about to do and I hope you have already done. The JSE is closing early to day and next week is open for only two and half days as Tuesday is a holiday. That will  be time enough, however, for the foolhardy to issue their 2012 forecasts.

Have a wonderful, safe and merry Christmas.

James Greener
23rd December 2011

Sunday 18 December 2011

MELLOW BRIC ROAD


In the ongoing and seemingly limitless confusion about what is happening and more importantly what may happen in the European markets and currencies, the talking heads have seized with relish on the very obvious fall in the price of gold. At last there is a significant number to waffle about and “definitions” of bear markets have been dusted off and draped around the shoulders of the yellow metal. Of course it depends entirely on which currency you are pricing the stuff in and here in SA the fall has really not yet been severe enough to attract the term bear. This is because the rand has sagged a lot in response apparently to some heavy selling of our shares and bonds by non-residents.  For those who feel they don’t have enough insurance coverage against politician stupidity and currency weakness this is a handy dip for some more accumulation.
It is not difficult for bears to find sustenance just about anywhere one looks. My own particular favourite at the moment is the news that all sorts of bubbles may be bursting in China. Reportedly the property market there is plummeting and credit is becoming harder to obtain. One commentator remarks that the “BRICS are falling like bricks” but despite our effective self-nomination and election to this club our markets have not followed suit and the JSE will probably be among the smallest losers of the year. Nevertheless if every Chinaman consumes just one fewer item than the world was hoping for, then producers are in for a less than merry Christmas. Perhaps, however, the news from the USA, still by far the biggest and most important economy, is on balance rather more bullish. Sure, the debts and cut backs in public services at all levels of government continue to provide satisfying stories for us to gloat over. But there are signs that the worst may be over and the less visually challenged bulls claim to have sighted some indicators of returning jobs.
As matters stand, going into the last few days of the year the All Share total return for 2011 is around two and a half percent. This is disappointing and quite liable to be erased (or doubled) in a short burst of now commonplace excitement between lunch and tea on any day between here and Hogmanay. It definitely isn’t the 20% pa that we need to re-establish that wonderful trend that we enjoyed for so long. Equity investing has become defensive and a tad boring. Bonds, however, do seem particularly risky as both interest rates and inflation are edging upwards.
One of the JSE’s big ideas driving their takeover of the Bond Market was to make it more accessible and friendly to individual and small investors. While the merger is now a fact, I am not surprised that the private investor has yet to surge into that market. It was not that long ago that bond yields here were well above 10% and some of us can remember 20% This would destroy a bond portfolio bought at present levels. For the insistent there is a very satisfactory ETF that tracks the government bond index and also be aware of the newish ETF that buys just the so-called inflation linked bonds also issued by the state. Both of these instruments offer almost risk-free (but not necessarily loss-free) investing. In passing, it is amusing to read about the dismay and panic that has followed the news that bond rates in several euro zone nations are now above the allegedly disaster level of 7%!
Some of the earliest of the renamed streets here in Durban are back to their original names following the unearthing of some legal glitch in the original process. Nothing was said about that process being insensitive, unnecessary, costly and stupid. The argument against changing a name from one now unremembered and possibly dubious dignitary to another whose fame is equally mystifying has nothing to do with disrespect for the newcomer but everything to do with continuity and history. Surely the number of roads being created in this ever expanding metropolis far exceeds the number of folk deemed worthy of being remembered by a length of tarmac.
But now it’s time to go and watch some test cricket.
James Greener
Day of Reconciliation 2011.

Monday 12 December 2011

COP OUT


The residents of Durban poured into the streets last night to gaze in awe at the skies above the International Conference Centre. Hopefully the dramatic fireworks display that was reflected in the tears of pride and appreciation that rolled down the faces of the gathered rate and tax payers marked the end of the COP 17 boondoggle. We were humbled that our leaders were using our money to stage such an appropriate nature-friendly display of extravagance to thank the Parties who had attended the Conference for the 17th time. Those residents lucky enough to live alongside the roads linking the gritty downtown venue with the luxury hotels of the north coast were able also to see for the last time the weary and exhausted delegates as they were whisked past in their police-escorted, blue-light flashing, traffic-law flouting convoys. Some found comfort in the knowledge that these hard-working servants of the people would soon be in their comfortable sea-facing rooms with well stocked mini-bars and 24-hour room service.
By most accounts it seems that the conference was an outstanding display of hypocrisy and privileged consumption. No document or memorandum that could not have been knocked up by people staying at home and using the internet was published. But lots of folk got to spend several days in Durban (sorry about the weather chaps) practicing very bad science, displaying some astonishing ignorance, arrogance and bad manners. As with all these international gatherings one rarely gets to see a final set of accounts to see if the costs were greater or less than the benefits, but I  do hope that at least some members of the hospitality industry here in Durbs are feeling better off today..
I was extremely fortunate to be out of town for all but the dying moments of the circus, but one excited news item I did see insisted that the gathered throngs had discovered a new and magical business strategy that would bring prosperity and create jobs. It seems that manufacturers and businessmen need only make their products and services eco-friendly and a hitherto untapped community of wealthy and eager customers and clients would be delighted to pay premium prices and drive up sales and profits. And so, to cater for this wonderful new demand, employers would need to throw open their gates and welcome the large numbers of well trained and disciplined workers waiting outside. Who would have guessed?
Equally amazing is that despite some recent heroic intra-day excursions by the market indices, the average investor is merely 10% better off than they were at the 2008 market index peak. Significantly, all of this return has been derived from the dividend portion only. This is why mostly only well-managed, dividend-paying companies remain my choice for investment portfolios.
And why, if the Euro Zone is in such a mess, has the euro currency not completely tanked. In the same way that an excess demand for shares has not emerged in the last few years, no overwhelming supply of euros has swamped the currency markets in the last few months. Puzzling, but it suggests that many people are rather certain that the euro will survive.
It is also puzzling if not very embarrassing for someone that one of the Durban harbour pilot boats managed to miss the enlarged harbour entrance by a country mile and fetch up on the beach after bouncing off some rocks. These are the guys that the big ships are obliged to pay to have on board when entering or leaving port. Fortunately, no one except taxpayers were injured as the damage repair estimated at R1 million was described by the port captain as “minimal”. So not only is the 5 cent coin being withdrawn, the amount of R1m is apparently barely worth mentioning.  Inflation is undoubtedly on the rise.
 Thank goodness that some test cricket is starting again in a few days. It really is the ultimate in sport but let’s hope that the New Year sees the departure if not the arrest of the crooks and thugs who ludicrously are in charge of this and many other sporting codes.
James Greener
11th December 2011