The task of finding value in the share market has been made a lot
harder by the understandably desperate but significantly above range wage
settlement offered by the beleaguered Lonmin mining house this week. Undoubtedly
the operations of this company are going to be severely affected by this
settlement and hardships will likely follow. Workers elsewhere and not just in
the mining industry have noted the 22% figure and expectations are surely being
reset. Living costs feel as if they have surged far more than the rather benign
5%pa suggested by the CPI.. Investors are nervous about what a settlement like
this will do for earnings. It is not a good time to bet the farm.
The worthies attending the Monetary Policy Committee meeting in
Pretoria this week were apparently about to consider reducing the price of
money by 50 basis points (i.e. cutting the repo rate by half a percent) when
the tea lady appeared with an extra packet of chocolate digestives. In a flash,
while someone was tearing off cellophane, it was agreed to leave the rate
unchanged, downgrade the estimate of GDP growth for this year and next and
send. Governor Marcus out to tell the press. She retuned to an empty committee
room and crumbs.
All over the world low administered interest rates do not seem to be
having the desired effect of encouraging people to borrow money and spend it.
Rather, individuals and even businesses appear still to be focussed on reducing
their debt. This sort of behaviour is unfamiliar to bureaucrats and officials
for whom the economy means spending other people’s money and then borrowing
more to support their habit. The sad and ironic part of this situation is the
reluctance of everyone to recognise that more of what got us into this mess is
unlikely to get us out of it.
We bears wonder, when or indeed if, there will be a time when the
absurd overvaluation of intangible entities such as fiat currencies,
intellectual capital and counterproductive bureaucracies will be recognised.
Certainly the dignity of manual labour is a filthy myth but it would be
interesting to see what would happen if supply and demand could be allowed to
find the level of remuneration for tasks such as doing some one’s ironing or running
a near-monopoly fixed-line telecoms company into the ground. In term of value
to customers those two pay scales ought to be nearly equal. While many of the
current reams of labour legislation need to be scrapped there is also a crying
need for the meaning of the phrase “performance bonus” to be defined and
enforced.
It was announced that the president’s basic salary will now be R218
546 per month. Not only is this a rather odd number but after tax it must be a
real struggle to keep the uxorial entourage in dresses and lipsticks No wonder
we are unable to attract any real managerial skills into applying for the job
and it looks as if the Bloemfontein conference will have no choice but to grant
JZ a second term. After all, one of the possible alternative candidates was
spotted paying around R18m for a buffalo recently – that’s not going to be easy
on a presidential salary. Unless of course he can work something out with the
so-called “spousal support unit”.
Finance Minster Gordhan and his investment industry regulators are
rightly concerned about “rogue investment advice”. While I definitely agree
that advising people to put their hard earned savings into black holes is
despicable I would suggest that the regulators are naïve to expect to see
marketing material which contains many hard facts mainly because this is a business
that is pretty short of those sorts of things when it comes to what is going to
happen. About the only certainty for savers is that any profits, gains or
income they might score will definitely attract the attention of Mr Gordhan’s
tax collectors.
The mood at the bowling club will be tense this evening as
tomorrow’s Currie Cup fixture between the Golden Lions and Sharks looms. The
result is obvious.
James Greener
Vernal Equinox 2012
