Friday 22 June 2012

AND WE NEVER EVEN MENTIONED GREECE


The All Share Index has been playing a great game of tease. This week it even set a new all-time high at 34 800 and pretended that it was about to make a significant upside break-out in total defiance of my forecast. But that failed to materialise and a sharp and nasty correction has trapped a few bulls. The talking heads have offered several excuses for this behaviour. The dead giveaway that they too have no idea what is happening is that the same excuse is offered for both the up and the down excursions. Headline grabbing news of the moment is the decision by the US Federal Reserve once again to gallop to the rescue with sacks of money and buy US government IOUs (sometimes called bonds). In turn, the government can use this fresh money to rescue their favourite causes – mainly banks. This puzzles ordinary folk, as rightly they wonder why organisations that cheerfully admit to losing a couple of billion, merely because their counting isn’t very good, deserve such largesse. Hence the yo-yo behaviour of the share prices as investors try to decide if all this market intervention is good or bad news.
Another very puzzling decision right here at home is the announcement that our delegation to the G-20 meeting in Mexico agreed to pop US$2bn of the nation’s foreign exchange reserves into an envelope and leave it on the hall table for the International Monetary Fund to collect when they next come down this street. Only the brightest and most sophisticated analysts and economists are able to explain why this is a good idea. Apparently it will make SA look all grown up and cool hanging out with the good guys and doing what they do. The rest of us who can think only in terms of piles of folding stuff languishing in a vault are baffled. That the cash is destined for something called the “firewall” only adds to our misgivings. We will watch carefully to discern what return this “investment” delivers.
The bureaucrats have come up with a proposal to create yet another database of names and addresses to which we will have to supply copies of our documents. This time it is the present national driving licence system which has been declared suspect and forests will die to provide the paper to fill another warehouse. And of course provide a rich source for anyone contemplating a spot of identity theft.
This comes on top of the allegations that a similar database of cell phone users has utterly failed to reduce the crimes that were going to be eliminated by knowing where everyone lived. Similarly, despite all that FICA stuff the baddies still appear able to open and operate bank accounts that are more effective than a laundrette, while I may not trade for a client of 25 years standing who has recently moved house but failed to send in the inevitable certified copy of proof of residence.
And then there is the ever growing list of restrictions on the sale, advertising and use of cigarettes and liquor. When I last checked these were still perfectly legal methods for calming the nerves after dealing with stupidity and the state happily pockets revenue from their use. Surely there are many other life-threatening dangers which are not the result of free choice to which the government more urgently ought to be directing its attention. We would like to see the perpetrators of violent crime being pursued at least as vigorously as someone who leans over the garden gate with a fag in their mouth and a beer in their hand.
At last the Solstice has passed and we are into the season when the shortening evenings get filled with ever more sporting extravaganzas from around the world. The ‘bokke are on the verge of scoring a hat trick against England and yet there are fools fretting that this winning side does not meet some irrelevant distribution standard of province and parentage. Anyone who wishes to support a national side that rarely beats the opposition is directed to the soccer team which is delivering a master class in providing poor value for their sponsor’s money. Go ‘bokke. Make it three out of three.
James Greener
22nd June 2012

Friday 15 June 2012

TOP BEAR vs. TOP GEAR


 Despite the recent excursion down to 33 000 the JSE All Share index has really done nothing decisive or even very terrifying for four months.  Such periods do of course have to end though when, and in which direction, one should not predict. Nevertheless, I can see no reason why it should move up sharply in the near future and rather think that the next piece of surprising and market-moving news is likely to be bearish. It seems that world economies are slowing down sharply and we may experience a longer and deeper recession than the titchy one that visited us in 2011. That one, however, was ended when politicians discovered that they could order their central banks to open the taps and spray voters with money. It’s a sure bet they will try that trick again if they need to. Would it work again?
It is quite obvious that the designers and champions of the euro currency system have no idea about what to do for their failing experiment. Its success was very dependent upon member states and their citizens being honest and truthful about their situation and obediently following the rules. The inevitable triumph of human nature to pay as little as possible while claiming as many benefits as possible has now come to the fore and the experiment may need to be shut down. The politicians’ belief that they alone are able to allocate resources in an equitable and acceptable manner is exposed for the idiocy that it always is. The sole solution on offer involves ever increasing amounts of debt but the problem is that the lenders are now alarmed by the possibility that they may not get repaid and the borrowers have become used to and in many cases utterly dependant on someone else’s money. Now even we distant observers, perched on the southern tip are feeling the effects of this meltdown as our customers and friends in that part of the world are increasingly preoccupied with their domestic issues and are not all that interested in our problems or products.
But maybe our woes are about to be solved by the re-shuffle of the cabinet announced by President JZ this week. Unfortunately, many of the really incompetent and ignorant faces are still there, albeit some are now lurking under different hats. There is a certain schadenfreude in seeing that a particularly arrogant lady has been moved to the portfolio where her immediate task will be to deal with the civil service wage claim and probable strike. The pres also appointed a new police commissioner, opting this time for a woman with no policing experience at all but reportedly a whiz at administration. If nothing else she will hopefully compile a neat list of unsolved cases – on a very long piece of paper. Can it be right that she already is using the title General?
Still on the government’s speed dial is Professor Stiglitz, the economics Nobel Laureate who gets trotted out to deliver appropriate opinions more or less on demand. He has just starred in the latest episode of the never ending soap opera of the state trying to find a way of stopping Wal-Mart bringing their damaging free market methods and ideas to SA. The professor helped draw up a plan where the American retailer donates a vast sum of money that will be used to identify which local producers are unable to supply the store with the goods they need. Bureaucrats and certain economists are unable to grasp that this is exactly what the marketplace is doing 24/7.
The road to the bowling club this evening may be closed. The Durban Council have unconvincingly attempted to demonstrate that the city will benefit from spending public money to get the three stooges from the Top Gear BBC TV show to drive fast cars aggressively around the streets of the city. The organisers may have forgotten the Umgeni Road Taxi Association also use these roads and are inimical to the idea of road blocks at peak hour. Watch for the 14-seater Toyota minibus with the coloured wavy stripes.
The ‘bokke did alright last Saturday, but England are going to be especially pumped up tomorrow at Ellis Park. I must remember my ‘bok cap.
James Greener
15th June 2012

Friday 8 June 2012

FIXING THE FIXERS


This week it felt as if the government’s hatred for and onslaught against wealth and capital and private enterprise had been ratcheted up several notches. There was an endless parade of talking heads boasting about meetings that had “identified needs” most of which were about telling business what to do with their own money. There was one small beacon of sense from Minister Manuel however, who complained about the state’s penchant for interference – particularly the recent veto of the Telkom deal with some Korean money and skills. Undoubtedly in due course he will receive a severe lashing for stepping out of line but so far the fury and indignation at his effrontery has rendered the critics mute. The saving grace is that virtually none of these “needs” will receive any attention beyond appearing on the agendas of yet more meetings. The leaders appear to be beyond caring or embarrassment that the nation now knows that they can’t actually fix anything that needs fixing.
Ratings Agencies are rather innocuous members of the market landscape largely indistinguishable from the research departments of investment institutions. They do much the same job of pretending to be able to forecast the future, in particular whether or not an organisation or even a country will be able to service their debts. They probably have no more raw data than other analysts, even in those cases where the entity being rated has arranged and paid for that rating. Nevertheless, their track record of success is not noticeably better and like any of us in this business they have made some great blunders.  Their impact and importance is inversely proportional to the experience and sophistication of the user of their results. Thus they tend to send politicians screaming for help when they make an unpopular call which questions policy. And so now there is proposed legislation to allow the state to charge and punish anyone who makes a rating call that might in some way be suspect.
Now most analysts will stoutly maintain that their work is as robust and rigorous as the combination of data and skill will allow. Their product is only an opinion about future possible outcomes and is clearly undeserving of being hunted down by some bureaucrat who believes it to be inexact or mischievous or unsupportable. The market will do that long before the law does.
In the next few years the country’s conventional TV broadcasts – mainly from the state broadcaster SABC – will change over from analogue to digital and if you really want to watch that stuff you will need to get a box to plonk on top of the TV set to convert the signal. Those viewers who subscribe to the satellite broadcasts that require a dish antenna are very familiar with this decoder box. Naturally government is terrified that its propaganda might not reach the audience after the changeover and so has identified a large number of poor households who, despite already owning a TV and paying the annual licence fee (?), will receive a share of a R2.7bn handout to help them buy the converter. And of course the state is also drawing up a list of manufacturers who will be permitted to make these boxes. Why? This smells of special deals for chums. I wonder how long it will be before cheaper knock-off converters appear in the stores? And if you don’t have a box do you need a licence?
The Lion’s easy win over the Sharks last Saturday was a wonderful reprise of the Currie Cup final but will thin out the number of people prepared to talk to me at the bowling club tonight should I mention the topic. The ‘bokke will find England a bit harder to subdue so perhaps I should let the conversation dwell on tomorrow’s test at Kings Park. Are we really fielding the best 15 rugby players in the land?
James Greener
8th June 2012

Friday 1 June 2012

THE EXTENDED BEAR MARKET


At first glance, the -3.59% total return (including dividends) for May was not as bad as the September 2011 figure of -3.61%. However since the 1st of April the tax man has been grabbing 15% of our dividend income and so actual returns for most of us will be lower than suggested by the indices. Actually it was a rather dreadful month, with very few of the very many indices that are now calculated to baffle and entertain us, able to add much during that unusually long month.
The real tragedies lie in the mining sector where now the platinum sector has followed gold mining into the abyss. To what extent this destruction of value is directly due to government interference will be argued for years. Was there too much – and see what has happened – or maybe there was too little – also see what has happened. Official involvement was either lethal or useless. There are no mining skills in government. That much has been proven.
It is wonderful news that SA is going to host a large chunk of the world’s next giant science project. The Square Kilometre Array is indeed a huge piece of kit – well lots of pretty large pieces actually – and in common with all big science these days will generate torrents of terabytes of data. Handling this will require somewhat more connectivity and bandwidth than that available from an off-peak dial-up line through the Calvinia telephone exchange. Together with the giant optical telescope at Sutherland also spewing out digital data at a mighty rate these projects should have been seized upon by the near-monopoly Telkom as a business opportunity to lift their revenue and profile. Instead the sorry story continues with the news that Telkom will be replaced in an international index by Mr Price, the clothing store and Sharks sponsor which now has a superior market capitalisation. Mind you the utility is subjected to exceptional helpings of useless interference from even the cabinet. Today they were told to send their new best friends from Korea straight back home. Bafflingly it seems we need neither their money nor their skill.
Basel 3 is not a remake of a TV sitcom with Mr Cleese as the embarrassing guest house owner. It’s even funnier. It’s the name given to the current edition of a set of guidelines about risk levels and solvency ratios and other good banking stuff that bankers think up for themselves mainly in an effort to impress politicians and divert them from trying to perform the same but undoubtedly far more damaging stunt. The problem with Basel, however, is that bankers and taxi drivers are very similar. Just as in the e-tolling saga where some classes of driver think that someone else ought to pay for the roads they use, there are bankers who would like others to pay for the risks they take. What seems prudent in one place is claimed to be ruinous in another. For mere mortals it is a mystery but predicting higher banking charges will result is a sure winner.
The “little fella” Grant Henry’s advice to Argentina on how to beat the big three when they join the expanded Tri-nations competition later this year is simply to score more tries. That’s real wisdom and has, I hope, been noted by the Lions ahead of the Sharks fixture at Ellis Park tomorrow. In the meantime one has to sympathise with Lion’s coach John Mitchell’s plea to be told the truth about next year’s SA teams line-up for the Super 15. So far all we are getting is SARU mathematical gobbledegook about how five is divisible by six with no remainder. And shouldn’t it be The Four Nations competition anyway if the Pumas are coming along?
James Greener
1st June 2012