Friday 26 April 2013

SWALLOW THE MONEY



Because of its liquidity, NewGold – the exchange traded fund that tracks the rand price of gold bullion – it is a very useful indicator of local conditions. While everyone was busy dancing on the grave of the gold bulls, locally the slide was a modest 15%. This did however briefly take NewGold to its lowest price in almost 2 years, but the recovery from there has been substantial and the fund is already back to the levels it enjoyed in August last year. Even more surprising is that the JSE shares, excluding the mining and resources sectors, have all but erased this April’s bear market. Unfortunately, while this may sound like good news it merely further delays when we can hope to see satisfactory buying opportunities in these sectors. Whether or not it is time to be bargain hunting in the basement where the mining shares are languishing is the really hard question, however.
Indications are that relations between employers, government and labour are at a very low ebb and impossible wage demands accompanied by hugely damaging strikes are imminent and unavoidable. Despite their stated commitment to education the government seems to have a secret admiration for striking teachers and have done nothing to put an end to that current appalling stay away. News emerged this week that state money was distributed to demonstrators in the winelands last year to enable them to buy musical instruments. It is never boring here on the southern tip, but it’s hard to find good investments.
The Black Management Forum is one of those strangely South African racially exclusive clubs that somehow is not racist. It is seeking sponsors for its annual dinner and has set up a kind of alms race. Half a million rand will earn Diamond status for the donor but a Platinum level is available for R100 000 more. However, on the podium already, as Anchor Sponsors, are Mercedes-Benz – understandably keen to assert their position as supplier of wheels to the rich and famous – as well as Transnet and Eskom. The presence of these last two state-owned organisations is concerning, since neither is in peak financial health and often themselves seek sponsorship from the tax-payers. Also there is no mention of just why so much money is required over and above the ticket price of R2000 a plate for 1000 expected guests. Nevertheless, provided no politicians are invited to speak it could be a very jolly evening of sluicing and browsing.
When it comes to politicians speaking, Minister Rob Davies totally gave the game away in his blustering defence of the asinine plan to increase regulation on anyone bold enough to try and make a living by operating even the most micro of businesses. He let slip that word “tax”. Socialist control freaks are deeply affronted that anyone should make money for themselves without sharing it with the state. This country so badly needs a Margaret Thatcher clone.
Forecasting the outcome of the Super 15 tournament which is now about half way through its season is just as foolish and difficult as calling the gold price or the market. However, it does look as if the South African sides and especially the Sharks are determined to take the long way round to the playoffs. Ever since I acquired my black and white flag, the Natal team has barely scored a try. It is said the coach begins each training session by jogging the fellows to the ends of the field to remind them what the try line looks like.
James Greener
Almost Freedom Day 2013

Friday 19 April 2013

PLEASE REMOVE ME FROM YOUR MAILING LIST MR TAX MAN



The mood is bleak here at the top of the beach. Yet again, good friends had their home and lives threatened and violated. The incident was just a further reminder that our country treats its citizens as simply a source of wealth to be plundered in one form or another. No one is spared in this appalling and frightening despoliation of our beautiful homeland. An elderly pensioner waiting in the sun for her pension payout got into the path of a bullet earlier this week when an armed gang raided a rural pay point. She was killed. Despite even big wigs getting hit, the elected leaders appear unconcerned about this awful wave of lawlessness that is breaking over us all. Criminals are gladly taking advantage of the dreadfully low rates of detection, arrest, conviction and punishment.  Like education, health and defense, the other areas where we sorely need but do not have competent government, there are scant skills and virtually no experience left to call upon.  The astonishing reservoir of goodwill and optimism that was discovered twenty years ago when we first unfurled the flags of the new South Africa, is nearly empty.
National Treasury is virtually the sole department operating effectively and perhaps we should think about using that channel to send the message that we are scared and desperate. Calling outright for a tax revolt is probably rather frowned upon, however. But here is a small idea that might raise awareness that every one of us is actually paying for this useless and bloated bureaucracy and their political bosses. The suggestion is that businesses amend their invoices and till-slips so that the actual cash amount of the VAT contribution is given huge prominence. It could also be accompanied (in the case of a R100 bill naturally) by a narrative such as: “R14.00 of your payment is tax and will be handed to the government.”   Most of our fellow citizens are ignorant of what terms like VAT and % actually mean to them and their purse. Recipients of social grants will likely be horrified to see that a fair proportion of their payout heads straight back to their benefactor. It is also not widely grasped that the only money the government has, it pries from each of us with threats, menaces and on occasion heart-warming stories of grateful beneficiaries.  
Highlighting the actual amounts that one is paying to the state at each visit to the shops might hopefully start a groundswell of dissatisfaction at the dreadful value for money everyone is receiving! Dissatisfaction with poor service delivery could intensify when it is discovered that no one is exempt from paying for it. Getting people to focus on the revenue side and what it means for them might just catch the politicians’ attention.
Investors who think that sharp drop in share prices this week was the bear market and that now it is all done and dusted are likely to be disappointed. It is going to take way more than a 7% correction – even now being erased – to return the majority of shares to the value level they showed in 2008/9. Even the dollar price of gold is displaying some resilience despite chalking up some sort of record intra day loss. The fact remains that the same suits with much the same ideas about massive debts being not serious are still in charge all over the world. In these circumstances gold is unlikely to lie down for long.
A standoff between fans determined to uphold the tradition of gathering on the fields around Kings Park for a braai and a beer and embarrassed authorities slamming a stable door promises to be as fierce as the match in the stadium itself. Perhaps the promised deluge will dampen both contests.
James Greener
19th April 2013

Monday 15 April 2013

SPLINTERED BENCH



Average earnings of the 30 shares that make up the financial & industrial index continue to grow at slightly better than 15%pa. This is very acceptable as it easily outweighs inflation and the miserable cash yields now offered to savers. However, despite the pullback in the average price of these shares (commonly called the index) the pe ratio is still far too close to 20 for buying anything but carefully selected shares – and only if you really have to.
The US share markets are enjoying another sharp upward lunge and index prices are rising at an average rate approaching 70% pa. That’s very steep and investors are probably taking way too optimistic a view on the scale of the economic recovery in that country. Debt and government spending are still by no means under control. Many contend that technically the world’s richest and most powerful nation is bankrupt. Hopefully we are not watching the inflation of another bubble.
A very recently burst bubble, however, is the price (note not value) of the putative internet currency known as a bitcoin. From over $200 to under $100 a coin in a matter of hours. Fortunately there are deliberately not very many bitcoins in circulation and ownership is largely confined to people who understood fully the risks, but it must have been quite a pop. Bitcoins may or may not become an alternative to the fiat currencies issued by sovereign states, but they are definitely intriguing especially for those of us who dislike and distrust governments and their endless meddling in what we do.  Be warned, however, that you will spend many hours on the internet if you decide to research this fascinating concept.
Meanwhile our rand enjoyed a small recovery presumably as buyers returned indifferent to the spat about how far back we can attribute blame or indeed kudos for a current situation. Useful stuff like wheels and grapevines were introduced ages ago by brave and avaricious explorers and entrepreneurs. But substantial differences in the standards of living of different folk probably date back even further than that, with no government until the current actually making its eradication a policy. Sadly, the very recent past has been characterised by official hostility to experience and skills that allegedly were obtained unfairly but which are so grievously needed now to help implement that fine policy. It is impossible to unwind history and everyone must pragmatically accept that and criticise all attempt to do so.
While Britain makes the preparations for the funeral of a political icon, here in SA the bickering about the legacy of our own is hotting up. Most South Africans would like fondly to believe that Madiba’s wealth is safely stashed away in the various charitable trusts and foundations and funds that bear his name. We are hopeful that benevolent, wise, prudent and honest trustees and managers will ensure that the money will endure for years and be distributed to the deserving cases – especially children – that we all know Mr Mandela cares about so passionately. Sadly however, already his offspring are hiring lawyers and staking claims and a curtain of murk is descending from which no truth and precious little charity is likely to emerge.
What has emerged from the legal fraternity, however, is the firmly stated principle that when selecting judges, race is much more important than qualification or ability. Oh dear. This is a highly litigious country with people readily resorting to ever higher courts until a satisfactory verdict is obtained. This seems particularly to be the case when the state or one of its agents feels that it needs to teach a lesson to some citizen who has the temerity to suggest that the state has made a mistake. Poor judgements all round.
The Sharks ought to come back from Newlands with a victory tomorrow but it will be tough and probably messy.  And let’s hope that we all have to sit up late on Sunday to watch a South African shrug on the Green Jacket in Augusta.
James Greener
Yuri Gagarin Day 2013

Friday 5 April 2013

BYE BYE EASTER BUNNY



It was a bleak short week on the JSE with the ten biggest value losers collectively giving up more than R100bn in market capitalisation. This had the effect of erasing the gains that the All Share index so valiantly managed last month. There was scarcely any good news on the winner’s lists either. Reporting season for December month-end companies is largely over and so there was scant local data that investors could digest. It has gone ominously quiet overseas as well, apart from the huge din being made by a tragically unhappy young man rattling his sabre in North Korea. No one is taking his threats about starting a war with nuclear weapons seriously but all the same it is quite nice to be down here out of the way on the southern tip.
Thank goodness that there are always fresh new analysts coming on to the scene. They are delightfully oblivious to the perils of forecasting and so this morning there are headlines that the gold price will reach $1800 an ounce by year end. We slightly wizened cynics know that neither the forecaster nor anyone else has any idea what the future holds, but nevertheless it is fun to watch the youth making these bold stabs. Quite what we should do with this prediction is unclear since ideally we also need  to know what the rand/dollar exchange rate will be at the same time before deciding if any of the gold mine shares are worth a buy.  My own dislike of that sector stems less from the price of their product and more from the fact that the mining industry in general seems to be firmly in the sights of government and labour. These bodies believe that the industry deserves to be punished for a myriad of real and alleged transgressions. This is not to deny that mine management themselves also don’t make some odd near self-destructing decisions from time to time. Mining businesses seem to change bosses with nearly the same frequency as the other sick men of the nation – the parastatals.  It’s obviously tough when you have to keep taking advice and instruction from the Union Buildings.
Perhaps it is just me and living in Durban but of late I have found that trips to the shops to buy specific common items are frequently unsuccessful. Hardware stores have pitiful stocks of standard sized fasteners like nuts and bolts and nails and screws The tools on offer are cheap and nasty and are sure to fail after a few uses. In clothing shops popular sizes and items are always sold out with no prospect of replenishment. The list goes on. Is this a temporary situation resulting from a global and local slowdown? Or is it more sinister, reflecting the loss of skills, experience and institutional memory at shops and their suppliers? One particularly infuriating local shortage is of cheap and plentiful bandwidth connectivity with the internet. It is embarrassing to see SA’s low ranking in the league tables of nations on this score. And, as ever, the responsible authorities are in yet another meeting following which they issue more valueless promises that they are planning to do something about it. The shortage of this particular commodity is holding back growth and development in a big way.
Swimmers are just the latest crop of sports men and women who find that they are unable to afford to attend important overseas meetings. Their plea for some state money is quite understandable but sadly hard to support while there are still unacceptable situations like children in this nation who go to school hungry. Of course equally unacceptable is the unexplained disappearance of government funds into corruption, boondoggles and maladministration. The first step to helping those who make personal sacrifices to pursue their sporting dreams would be to abolish the Department of Sport and allow generous tax benefits for all who sponsor or support national teams.
The mood at the bowling club tonight will be tense as the fans sink a few stiffeners before repairing to the Shark Tank for what might be a very tough encounter with the Crusaders. I shall unfurl my new flag and wave it vigorously.
James Greener
5th April 2013