Thursday 22 November 2012

THE MATHS HURTS

And now it seems that the French have also not been all that accurate with their sums. Their generous leaders might just have promised quite a few more goodies than there are euros in the kitty to pay for them. Oops. So the dreaded ratings agencies are all over their case and downgrades are in the wind. Now that the summer in euro land is over and the suits are back at work, the cupboards are found to be just as full of skeletons as they ever were. Readers of this column anyway will not be as surprised by this information as many of the politicians over there profess to be. We have seen it coming. And across the ocean there’s Mrs Cliff’s son Fiscal threatening to expose himself to the population.
But even if the debt swamp is growing larger and deeper and stickier, equity bulls in SA can’t see how that will cause companies to stop making money and are happy to pay more and more in order to participate in this anticipated profit bonanza. The All Share index is within a whisker of racking up the three zeros at 38 000. As well as investors, shops and their customers are on a roll. Newer and more expensive retail offerings are opening every day. Consumers – presumably those fortunate enough to be on someone’s payroll – are spending merrily.
It is notable however that everyone is avoiding mentioning one very worrying fact. Amid all the demands for higher wages and salaries little has been said about the arithmetic formula which shows that a fixed total wage cost for an employer  divided by higher individual pay packets for the employees equals fewer employees. This is the inevitable footnote to almost every drama and violent protest that has taken place in recent weeks.
Just days after the last chicken bone and empty whisky bottle have been cleared away from the opening ceremony for a Chinese motor vehicle assembly plant near Joburg, it has been decided that it will not be used to build the Inyathi taxi. Allegedly the South African National Taxi Council (Whatever happened to their plans for an airline?) have been unable to guarantee the quality of the product and have instructed their members not to buy the new minibus. They might have said so before the party. But no worries. The Chinese have another model they are sure we will like. Presumably, the Santaco bosses will spend the weekend in overalls crawling over a prototype preparing their guarantees for their members. I wonder if anyone has thought to conceal wads of folding money in various unobtrusive parts.
Money, but considerably more of it, appears to be a stumbling block to the clinching of another deal between two mining behemoths. The complaints seem to be that  not enough of it is flowing in the right direction where it would sooth and boost egos, self-esteem and attitudes. Minority shareholders somewhere will one day probably discover that the stick they are left holding is the short end. It is the fighting elephants and trampled grass story.
Who knew that the nation has a “berry corridor” somewhere near Stutterheim where blue-, rasp-, black- and strawberries are farmed? The southern hemisphere consumes 100 000 tons a years of these beauties and the fellows in the corridor reckon that with a bit of balance sheet restructuring (i.e. send cash please) they can increase their 2% share of this demand. As someone who once picked strawberries for beer money (6 punnets equals one pint) I can confirm it will be hard work but they deserve to succeed. Hopefully no busybody politician plans to swing by and make foolish promises.
With Sebastien Vettel’s F1 champion ship not yet wrapped up, the Proteas letting the Aussies break batting records and the ‘bokke looking tired and lost with England still to play,  it might be a weekend where being away from the TV is a good idea.
James Greener
JFK assassination anniversary 2012

Friday 16 November 2012

TITLE? INDEED



If not yet a fully grown bear there is a pretty boisterous cub gambolling around our market these days. He (or perhaps it might be a she) has already clawed nearly 1000 points off the All Share since its peak earlier this month. From the look of the rand, much of the selling could be foreigners resuming their scramble for the exit as this place appears increasingly to be clueless about the requirements of a competitive economy in an unsentimental world.
There are nearly as many rumours and stories about what is actually happening in the labour unrest as there are folk singing and dancing their protests and claims. While there are undoubtedly some callous and cruel employers in every industry, the blame for this unrest must lie largely with the government. Their policies, spokesmen and ministers are raising hopes and expectations far beyond what almost all the actual industries and businesses can feasibly deliver. Their often illegal and unconstitutional statements and promises about what their constituents can demand are conveniently diverting attention from the same government’s failure to fulfil their own promises of delivery of services and infrastructure.
There must have been a worried call from head office to a bank in Zululand this week after President JZ claimed that his rather splendid home of many features was financed with a mortgage bond. This, he said, happened after a family decision to rebuild the place after it had twice been burned down.  The suits in Joburg will be asking the mortgage department at the branch some tricky questions. Like: Have you seen and are you holding title deeds? Did you take into account the fact that the mortgagor is in a temporary post which he might possibly even lose in Bloemfontein next month. Further do you know how many wives and children he has to support on his income before servicing the loan? And does he have adequate fire insurance? The main revelation here is that the pres. has somehow obtained title for his piece of Africa despite the fact large tracts of government owned land in these so-called tribal areas are mostly unregistered.. Many citizens occupy their homes at the whim of a “traditional leader” or chief and it has long been a concern that without title those residents can not use the land they have lived on for generations to raise capital. JZ’s mortgage might just be a glimmer of some really good news for the many dispossessed.
The Metro police closed off large numbers of roads and ramps last Sunday to allow a bike race to take place. This is not uncommon as the kingdom is full of folk who frequently feel the need to travel large distances on foot, bike and even canoe. Motorists are somewhat used to being redirected to allow these poor souls to complete their mission. However, this time the cops somehow forgot that they had done this before and even while witnessing the gigantic traffic chaos develop they declined to offer and indicate alternative routes. When challenged about this, their boss denied the shambles and invited motorists to write to him with suggestions about what they should do next time! My guess is that most motorists will want to cancel the races.
The Telkom story is a deep and sorry mess and is surely now a case study for the impact of government interference. With a market capitalisation of just R8bn (when listed in 2009 it was R30bn) it is about to fall out of the top 100 shares on the JSE. Undaunted by the en masse resignation of directors and executives, the state as major shareholder claims that there are plenty of candidates  with the skills and experience to fill the vacancies. Can that be true? After all it took Telkom more than a week to find someone to come and investigate why my phone line was crackling. And that was after I endured a hectoring lecture on what it would cost me if, woe betide, the techie found that the noise was my fault! At Telkom, the customer is a darned nuisance.
As expected by the end of the late kick off test in Dublin last week everyone was all over the bar, shouting. It was dreadfully close so let’s hope for a smoother win from the ‘bokke over Scotland tomorrow.
James Greener
16th November 2012

Friday 9 November 2012

UNCLE SAM MEETS FISCAL CLIFF




The JSE All Share index set a new high on US Election Day. Whether it was disappointed in the outcome of that contest we can’t say but it has been dribbling away from that peak ever since. Nothing as sharp as Wall Street itself, mind you, from where confident sightings of a huge bear are being recorded. Also the senior suits in the euro zone have talking tough this week but the euro would appear to be losing the courage and strength it conjured up during its summer hols. That drama is going to be an annoying background hum for the world’s financial markets for a long time.
Reporting season is hotting up, with about three dozen companies either releasing results or issuing so-called trading statements that are supposed to warn investors of larger than normal earnings changes. Fewer than ten of these announcements have been disappointing which unsurprisingly include gold and platinum miners who have been experiencing torrid labour issues. Here and there are grumbles about how slow and difficult the government infrastructural spending program is becoming but oddly not every company in the affected sectors have that complaint. Mostly, however, while acknowledging that business conditions are tough, management teams are finding ways to keep earnings growing and dividends flowing. Many are looking outside the borders for new customers and even new offices and bases. As the saying goes, the boere are making plans.
The fellow who came up with the phrase Fiscal Cliff to describe the latest crisis in the US economy must be delighted with the way it has caught on. Opponents of President Obama are giving him no time to savour his election victory and are pushing him to the edge of the precipice as hard as possible. But whatever the name it’s the same old story told for centuries. No good can come from spending more than you earn, year after year. The problem is that while increasing income by raising taxes always yields less than expected, (folk are very adept at discovering loopholes), decreasing spending is really really unpopular with just about everyone. Not least, are the elderly, ill and indigent who have become totally reliant on the government paying the bills. And then there are government employees, and the politicians themselves, who have little appetite for taking a pay cut or perhaps being fired. No newly elected politician has ever been brave enough to start his or her regime by slashing expenditure in the hope that memories will have faded by the time the victims next enter a polling booth.
Here on the southern tip our tax collector has embarked on a program of sending banal and emotion-filled messages to taxpayers thanking them for funding tax eaters. TV ads, phone text messages and a website provide heart-warming stories of people who, because of the government’s allegedly wise and effective provision of education, health services and other nice goodies, were able to fulfil their hopes and achievements. Fine, but note that it is also the hope of every taxpayer that they can achieve invisibility. Which is not something the new bank notes can claim; their colouring is rather aggressive.
The inflation rate plays a large part in our lives, with so many things compared against it as a bench mark. That it is an very poorly understood statistic was highlighted this week when a new set of weights for its calculation was released. One has to trust the skills and accuracy of the compilers of this data but various oddities do come to light. For example the average consumer spends more on tobacco than on health services! We spend less on paying for education than we do on buying clothes, and our booze bill is greater than our electricity bill. Our spending on recreational equipment is greater than what we need for dairy products. The average SA consumer sounds like a smartly dressed party animal dancing in the dark.
The cricket in Brisbane has started slowly but satisfactorily. However, the ‘bokke test against Ireland starts so late tomorrow that many of the Natal faithful may not be in fit shape to notice that their baa lamb is in the starting line up.
James Greener
9th November 2012

Friday 2 November 2012

COUNTING GROWS



It has all gone ominously quiet – except here on the southern tip where the All Share marches on and upwards. Investors obviously can see no reason why earnings should not keep improving and anyway cash these days is definitely not king but pauper!  Already the bold are sniffing out recovery situations among the miners where the high wage settlements are starting to be followed by the inevitable and tragic retrenchments. The platinum sector gained over 6% in October. Banks, on the other hand, were eschewed.
One cause of the reigning peace was of course the closure of markets and near closure of everything else on the eastern seaboard of the US where cyclone Sandy demonstrated that not even presidential candidates have as much power as nature. In Europe the squabbling about who should pay for whom to do what has subsided for the moment as well. But not for long I suspect. There are some deep and heart-felt bitterness’s dying for an airing.
Overseas players have slowed their rush for the exits. The rand has settled down, although at weaker levels. Most people are getting resigned to the near inevitability of having Jacob Zuma staying on as president. There really doesn’t seem to be a candidate brave enough to mount a challenge. And anyone slightly competent chooses to feed at the trough from outside the sty.
The Statistician-General – in reality a just a mid ranking government employee with a preposterously grand title  – but much respected  for being one of the few in government who is able to do sums, got to wear his dubious yellow suit again and handed over a lavish tome of Census results to anyone within reach. As well as generating the usual froth of disbelief and criticism it seemed to tell us nothing that hadn’t already been guessed. Within a day, however, the pres. started to fret about accusations that his government had failed to reduce wealth disparity but seemed unable to find any numbers in the great work to contradict the charges. Odd that.
 The government is now spending at an average rate of more than R2.5bn a day – including weekends. That’s a great deal of money and furthermore is R400 million a day more than the taxes it collects. Now I know that the borrowing requirement is OK and the deficit is within manageable proportions but it is still worrying to this old bear to think that every morning the nation wakes to find its debt has increased by nearly half a billion compared to yesterday. Some talking head in government has suggested that bankers need to take sociology courses. He believes that this will make them realise the callousness and dangers of lending money to poor people. The bankers should agree but only if he first attends courses on economics and finance so that he can realise the callousness and dangers of talking nonsense.
That bankers are indeed heartless fiends was demonstrated vividly by the way that one outfit in the City simply deactivated the key cards of a number of employees overnight so that they first discovered that they were unemployed only when they were unable to get in the front door of their offices the following day. Can you just imagine arriving at work to see your colleagues milling about outside and having to try your own key in the slot? They were not even afforded the opportunity to fetch the photo of the kids from their desk, sneak a copy of the client phone list or leave rude messages on the internal email system. Bang. Thanks for coming. Have a nice day.
I am delighted that Sebastian Vettel is looking set to retain his world championship in Formula 1. It provides a sporting topic which is not rugby. You won’t believe how many Province supporters have appeared from the readership of this column to jeer at my trashed claim about the deserved new home for the Currie Cup.
James Greener
2nd November 2012