Friday 15 November 2013

DON’T MENTION THE WIND



Whatever it was that panicked the market in the middle of the week has now been forgotten and the All Share index is striving upwards again. This bull is not easily discouraged and the weakness of the rand suggests that it is not non-resident money that has been coming in to push things along. However resources company Glencore did arrive from London for a secondary listing on the JSE this week and has rearranged matters a bit amongst the heavyweights. Glencore has a market cap of around R700bn and is now the third largest share on the JSE behind British American Tobacco and SAB Miller. Traditionalists might be shocked to learn that Anglo is today only half the size of the newcomer and is just the ninth largest share on the JSE. Naspers, at R400bn, is our largest truly South African listing at present. Likely you could win a few bar bets with that fact.
The European Central bank cut its benchmark rate from 0.5% to 0.25% and this has spawned a blizzard of comment mostly saying it’s a good idea and it ought to have the desired effect of raising both inflation and economic activity in the area. Many proper economists believe that a little inflation is a good idea. They cite the Japanese example where that nation has suffered deflation and a never ending recession. The concerning thing for those of us who think free markets are best able to set the price of most things is that the committee of suits who make these decisions is the same one  whose earlier decisions led to this situation.
We already all know what we ought to see in the Public Protector’s report on Nkandla.  That a great deal of unauthorised spending of taxpayers money went into making sure that No1’s little country cottage in Zululand is comfortable and safe. However, the report takes almost 360 pages to say this, so obviously there must be quite a bit more there than we suspected. It certainly prompted some rather rattled behaviour from a cluster (what a lovely evocative word) of cabinet ministers who are of the view that the report might reveal things about the president’s home that the public doesn’t need to know. What ever could that be?
Legislation is pouring out of parliament at a terrifying rate and none of it appears to be lessening the burden of regulation and red tape in which we are drowning. The law that can be used to put you in prison if you dare to suggest that severe weather is on the way has reached the statute books. While hoaxes can undoubtedly be annoying and even costly for the gullible, this does seem an extreme use of state powers. In this internet age many of us now use weather forecasts generated by overseas services so what will the weather police do if Wind-Guru warns the kite-surfers to expect gales and all they get is a gentle zephyr?
Last year 91 public entities wasted an average of R3bn each of public money in “unauthorised, irregular, fruitless and wasteful expenditure”. There is outrage that as yet not a single civil servant has reportedly been fired for fraud or incompetence. This indeed is a great deal of money but it is less than 3% of the state’s total annual expenditure of about R1 trillion. Most of us probably fritter away at least that sort of proportion of our own spending every time we go to the shops. Just start with the tip for the car guards. Nevertheless they really ought to be a lot more careful with our money. Another comparative amount is that the tax man has so far this year refunded R21bn in overpaid taxes. That’s also a great deal of money,
Sachin Tendulkar must have been very pleased not to have emulated Sir Donald Bradman and scored a duck in his final innings. That is what he nearly did score in the world cup final at Wanderers in 2003 when I went to watch him for the first time. The Little Master managed a mere 4 runs. People who had travelled much further than I were incensed and shouted for his return to the crease. 
It is going to feel odd watching test rugby on a Sunday evening. But then I don’t have to go to work the next day.
James Greener
15th November 2013.

Friday 8 November 2013

GANTRY GANTRY BURNING BRIGHT



Buyers on the JSE have demonstrated their belief that companies are around 15% (after allowing for about 5% inflation) more valuable than they were when the year began. The All Share Index has tested the waters above the 46 000 level. But it is now very tempting to suggest that the bull has now run out of steam. An important downside factor that feeds us bears is the government’s seemingly deliberate and concerted attempt destabilise the business operating environment. For foreign participants particularly, the ground rules are being changed at a startling rate. Only Minister “Red” Rob Davies can see how the scrapping of bilateral treaties with major trading nations will comfort investors. Fresh from this disaster he is terribly excited by the plan to “cleanse” credit histories and so deny lenders some potentially useful and pertinent information about borrowers. This is very foolish when already many parties on both sides of that transaction are in difficulties. So-called unsecured credit providers are reporting an ever growing pile of bad debts while deeply indebted borrowers are also struggling. So much so that Minister Trevor Manuel pointed out that this was a factor fuelling labour unrest. Don’t these guys ever talk to each other?
Does anyone in charge even read? It is very frustrating to watch how in the face of all evidence and prior examples the government still insists that South Africa will be converted into a socialist utopia.  Of course the powerful glitterati have scant time for anything except for whizzing about attending meetings and ceremonies that are invariably followed by lavish catering. An amusing example of this apparently deliberate indifference to information includes President JZ claiming that he had no knowledge that his nickname amongst his staff is “Number One” and so the Number One who allegedly facilitated the landing of a friend’s private plane at a military airbase was not him.
The picture of a burning toll gantry proved that the southern tip is not alone in having aggrieved citizens. The green and forested countryside next to the highway turned out to be in France where a few furious farmers were demonstrating their disappointment with their government’s attitude. Reportedly, however this act of arson caused them to change it!
There was huge excitement at the New York stock exchange this week when a new listing nearly doubled in price on its first day. The company concerned was Twitter; one of these Internet based so-called social media sites. At the peak it was being valued at around R300bn which is bigger than Standard Bank. Now that I have a bit more time on my hands I signed on with Twitter a few weeks ago.  After discovering that one can filter out all messages from the hundreds of millions of bored teenagers, and also from anyone who wants to send you a picture of their lunch, it turns out to be a rather interesting way of wasting incredible amounts of time. The point, however, is that so far it has cost me exactly nothing to participate and so it’s quite hard to see where all that value in the company lies. Sell Twitter buy SAB.
Hopefully the fellows at AECI who have just sold 1600 hectares next to their dynamite factory in Modderfontein to a Chinese developer, have checked that no one buried a rejected batch of product on the site. An unexpected bang could quite ruin the developer’s plans to spend R80bn and build the “New York of Africa”. This would be a bargain price for not even one run-down block in the Big Apple so something’s not adding up. Nevertheless the artist’s drawings show that that style and grace are not part of the design brief so Sandton might just be facing a challenge.
History and form are on the ‘bokke’s side in their match against Wales tomorrow. Pity the match will overlap the Proteas perhaps clinching the ODIs.
James Greener
8th November 2013

Friday 1 November 2013

WHO’S AFRAID OF THE GREAT BIG BEAR?



Halloween marked the end of a four month period during which the JSE All Share index has gained around 20%. This is heroic stuff but in theory, unlikely to continue, as it has hoisted all the usual valuation measures into equally heady territory. It is definitely no longer glass half full or half empty stuff but glass brimming over and “last orders” taken.
Most analysts are confident with the view that these bull markets are largely due to the US Federal Reserve pumping USD85billion a month into the US system via its infamous Quantitative Easing program. The explanation warns that when that program comes to an end, or even just slows down – the infamous taper – then the bear will strike. However, there is satisfaction that the track record of Janet Chellan, the new Governess-elect, suggests that she is only too pleased to tell markets what prices are appropriate. Some of this might be true but since securities prices are set by mutual agreement of buyers and sellers it seems unlikely that slowing down or shutting off the money pump could be the sole reason for prices to fall.
Once again our socialist government has arrogantly and patronisingly decided that we all need to be further controlled.  Without offering any evidence that a ban on liquor advertising could have an impact on reducing alcohol abuse state officials now express surprise and disappointment at the vehement defence and reaction from those whose industry they are about to destroy.
The nation’s accelerating slide towards increasingly violent behaviour and utter contempt for the law is terrifying. What we need is immediate and pitiless enforcement of existing legislation, regardless of the alleged status and apparent influence of the perpetrators. No suspension on full pay for state employees. That ought to create pressure for speedy resolutions. No prison parole, especially for undiagnosed terminal illnesses. No lengthy and expensive appeals resting on spurious and dubious claims.
The never ending saga about how to fund the (exorbitantly) expensive but fine roads around Joburg drags on and has now become an electioneering topic. It is unlikely that many of Julius Malema’s supporters yet own cars (if they did, they would be at work paying them off not dancing in the streets) and their opposition to an impost they are not in danger of being asked to pay is puzzling.  Aside from the problem of ring fencing the proceeds at National Treasury, no one has yet produced a credible piece of simple arithmetic that shows why a modest increase in the fuel levy is insufficient. In the meantime the fellows in Austria who supplied the fancy equipment to read number plates and calculate tolls must be wishing they’d never heard of Gauteng!
To what extent the woes of the textile and clothing industry over the past decade have been caused by management ineptitude, labour intransigence and government incompetence will provide wonderful material for dozens of studies by future students of industrial relations. However, the sad fact is that the Made in South Africa label is an endangered species and many businesses in this sector have moved elsewhere or are for sale. Seardel, the listed company, has managed to sell its clothing manufacturing business for R105m only by first lending the buyer R77m. The interesting part of this deal is that the buyer is the union that represents most of the workers in that business. This is an amazing and unusual departure for a body which is normally so critical of how the industry is run. Everyone will wish them well with this venture and hope that not only do they save the 2000 jobs at risk but also manage to restore growth to this ailing sector.
It just as well the Currie Cup final was not held at Kings Park last weekend. Not only was it incredibly wet but Province supporters would not have been allowed to leave before the end as they did at Newlands. They would have been expected to behave politely and congratulate the Sharks when they lifted the trophy.
James Greener
All Hallows 2013