The story goes that the US
and the UK
governments’ are creating fresh money (instead of borrowing it) to pay their
bills and salaries, and that some of that extra cash is appearing in the share
markets where it is driving up prices. This is offered as a reason why our
share prices are going up. There is also
a story going around explaining why everyone is selling gold bullion (in both
the metal and the ETF form). Apparently the global situation is not as
uncertain as it was before. Really?
The poor old runt is getting mauled. No one seems to need or want
even the shiny new Mandela notes and so it is collapsing in value relative to
the US dollar and even the euro. Presumably these two currencies are the
principal ones used by foreign investors, who, it is alleged, have been scared
off from SA by our recent outstanding examples of inept government.
Because of the collapsing currency, the magnitude of the
disaffection with bullion has been muted here in SA and both Krugerrands and
NewGold are not that far off their all-time highs. The real reason for any
market price moves is probably unknowable as they are the outcome of millions
of individual decisions, some of which may indeed have a foundation in the
phenomena and sentiments mentioned. Personally I am too convinced of the
veniality and corruption of governments to not own some gold as insurance. As
far as share prices are concerned, the investment decision as always remains
trying to estimate whether the likely future cash flows of income and possible
sale proceeds are sufficient to warrant the purchase at the current price.
Undoubtedly the many of the shares on the JSE today fail that criterion.
It is results season again and of the two dozen or so reports
released this week only three might be classified as disappointing. Despite the
rafts of regulation and state interference, most of corporate SA seems to be
moving along OK. Unfortunately this is not being converted into jobs as it
would seem that installing machines is preferable to dealing with staff who are
told by self-serving union officials that their labour is worth more than it
is. The nation really is in a sorry space at the moment in this regard but
still no one in charge seems able to spot the correlation with increasing the
rules and regulations. In this industry, the fairly effective method of “know
your client” is being supplanted by a blizzard of box ticking and paper trails
which frankly still doesn’t seem to catch the determined crooks either. SA
seems to have a particular weakness for Ponzi schemes and it is astonishing how
large they can grow before the regulators look up from their paper shuffling long
enough to spot them.
Among the most important announcements of the week is that Tiger
Brands has acquired Mrs Balls Chutney business from Unilever. South Africans
worldwide will be pleased that ownership of their favourite relish has been
wrested away from a foreigner and is now home again. No word yet on whether Tiger
Brands will move its head office to KingWilliamstown to complete the circle.
Apparently the great and good from the BRICS nations are pitching up
soon here on the edge of the Indian Ocean for a spot of surfing, game viewing,
and sluicing and browsing between bouts of chin wag. Press reports warn that
ratepayers are looking at a sizable bill for the privilege of avoiding convoys of
wailing blue-light flashing cars speeding through the city. Surely if the countries
concerned feel these meetings are worth attending they should be picking up the
bar bills that their delegates will run up. Our own mob can use the train to
come down from Pretoria
and bring packed lunches from home. I hope someone warns the supplicants and
salesmen at each traffic light cluster that they are about to get tidied away.
So this weekend we get to se if the Kings
really are rugby side or merely a collection of
mercenaries gathered under a flag of convenience in the company of a man
who would rather puke on than wear the national jersey.
James Greener
8th March 2013
