Friday 19 December 2014

OILY PATCHES



What ever it was that investors saw a week ago that convinced them that the end of the world was nigh has now gone. Share prices have rebounded sharply and many bears will be nursing severely burned fingers. Except in the commodity markets where the price of most things we use and consume are plunging. Normally that would be taken as an indicator that economies were slowing down. And often that suggests that companies which make and sell things will have fewer customers and lower profits. And following on that theme it might be reasonable to assume that there is no need to pay ever more for shares in those companies. But it seems that this simple reasoning is obviously flawed and the share price correction was seen merely as a buying opportunity.  The All Share index is behaving like a pronking springbok. So much for a flat or even negative 2014!
The really big thing in markets is undoubtedly the collapsing oil price. It will be a long time before most of us get to read about all the aspects of this development where various global giants are waging a bitter war. The combatants include countries, power-blocs, massive public and private companies and certainly mischievous carpet-baggers. Even in rand terms the price of crude oil is back to 2011 levels when petrol was selling for well below R10 a litre. All we mere price takers can do is enjoy the unforeseen bonus for our spending patterns and wonder what the world will look like when the dust settles.
 The other big thing is the looming presence of and never ending intervention and interference in the markets by the Central Banks of the world. Their faith in their own ability to know the correct price for money is unfailing. Not a day passes when at least one luminary from one of these institutions warbles into a microphone and then stands back smugly to await developments. Presumably points are scored according to which markets respond and by how much. Central Banker of the Year award goes to he or she who causes the biggest reaction. It helps add to the confusion of course that most of us are unaware or even worse, uninterested in the detail that the National Treasury is quite different from the Central Bank. The fact that each can have very different opinions on the same topic is an endearing trait of the dismal science. The problem is that we have now all become far too concerned about what these allegedly learned leaders think and say.
It is intriguing to note that the Spar retail group market capitalisation is now again greater than that of Pick n Pay. This says nothing about customer market share of course, but investors are obviously pleased with developments at Spar, whose business model seems to be successful in creating a pleasant, welcoming and competitive place to buy the daily bread and milk. And even the sushi.
A somewhat puzzling feature of the current equity market is the punishment being meted out to the small range of pretty much risk-free variable dividend preference shares. At current levels of interest rates and market prices the highest quality of these instruments are offering pre-tax dividend yields of around 8.5%pa. And given the way inflation is being tamed by the falling oil price that seems very tasty.
What really is going on in the tax man’s offices?  Despite discarding the descriptive “Receiver of Revenue” name and rebranding itself as SARS, complete with snappy logo and the fiction that it is performing us a service, it is still the state agency none of us particularly like. In principle it seems a pretty easy task. Send everyone a form, apply the rules, compute the tax owing and lean on anyone who doesn’t pay. Now it seems that there may be a list of people who were not sent the forms or whose calculations always yielded refunds or who they didn’t lean on. In these days when the gap between what they collect and what their principal, the government, actually spends is getting ever larger, this breach on the income side is especially galling to those of us who failed to get onto that alleged list.
Sadly the body language of the West Indian side here to play a few Tests against the Proteas reveals that they are not all that interested  in cricket.  This makes it also hard to drum up enthusiasm to watch on TV let alone take the trouble to buy tickets and attend in person.
James Greener
Friday 19th December 2014

Friday 12 December 2014

HOT STUFF



The All Share index started off the year with a triumphant and dramatic surge through the 46 000 level. It peaked out seven months later at just over 52 000 and then pleased and teased the bears by plunging back to the opening value in mid October before bouncing back considerably. That bounce may however be running out of steam and it would take a mere 2000 point drop in the next fortnight for the index to end down on the year. This would be sad but not unexpected.  A great many ducks are standing just too far out of line for any reasonable arguments for a bull market to sound sensible. The rand, the rating agencies and the refusal to recognise a crisis are three interlinked reasons for the bear to take heart.
As usual the deluge of data that confronts the investor every day from both the official sources and the companies is very mixed and seemingly trendless. Bulls and bears alike are therefore equally able to make their cases. It may be worth noting that several property companies have recently come to the JSE to raise funds and seek a listing. These people at least think it’s a good time to be selling shares. Interestingly at least two of these funds have considerable portfolios of non-South African properties.
 No matter how the apologists for and supporters of the new regime try to explain otherwise, the plain fact is that far too many state-owned and run institutions are unable to deliver what we need in order to be a winning country. Presumably someone somewhere is keeping a spreadsheet (thank goodness for computers) that tracks the procession of clowns as they rotate through the posts of chairman, board member, CEO, COO, CFO and security guard at the  many parastatals. A second worksheet will be needed to join the lines of patronage, family ties and cronyism. And a third will be useful for recording the lies and deceits about education, experience, achievement and performance. Any idea of keeping a record of the flows of money in unusual directions will collapse because most of the numbers will cause overflow errors.
Also supposedly overflowing are warehouses around Joburg being used to store the assets of Muammar Gaddafi, once President Jacob Zuma’s best friend. This now deposed and deceased previous leader of Libya is rumoured to have entrusted the care of a great deal of his wealth to South Africa. This is a fascinating story but one that may turn out either false or badly. Custodians of valuable things are easily tempted and there may be great disappointment in store when the key is turned and the doors to the vault are thrown open. Noticeably, JZ’s newest best friends Presidents Xi and Putin are sending nothing here for storage except pieces of paper with their names on them as well as Jacob’s and perhaps a deposit slip for a bank in Lichtenstein. What do you suppose those two very serious power players think after our man and his wife of the day waddle up the stairs into the welcoming interior of the executive jet that whisks them back to Nkandla?
The government proposal to put a levy on the purchase of every electrical appliance and gadget is uninformed and very poorly timed. Undoubtedly there’s a problem with the proper recycling and handling of all the potentially valuable and hazardous gizmos that we toss out, but money collected by such levies is not usually ring-fenced for the promised purpose and disappears into the maw of general state spending (e.g. the fuel levy) Secondly, to raise this matter when we are not getting enough electricity to run anything is pretty tasteless.
Lets hope the Sevens lads don’t trip up against Wales like the ‘bokke did recently. It’s a great sport to watch if you can remember to turn on at 19:58 tomorrow evening in time to catch the 20 minutes of frantic action. Nevertheless it will still be much cooler in PE than at Leopard Creek where the Dunhill Championship golfers are facing mid 30s today! That should thin out the field.
James Greener
Friday 12th December 2014

Friday 14 November 2014

NO GRAVITY ON A COMET OR IN PARLIAMENT

It is puzzling and even rather tiresome how the government keeps trying to seek out presumed malfeasance in various private industries. The state has returned to fret about the alleged collusions in the construction industry half a dozen years ago. Of course when large sums of money are involved not everything is squeaky clean and misuse of public trust and funds does need to be exposed and punished. However, as the industry has wearily explained so many times, the capacity and resources of the nation did need to be allocated carefully in order to meet the expectations of hosting the Soccer World Cup. The JSE data confirms that the industry did enjoy a fourfold increase in earnings in the years before 2010. Shareholders and employees of those companies did benefit. But presumably someone important feels that he or she did not and so the witch hunt continues.
The ironies, however, are ceaseless. Many of the stadium location and design decisions were forced on the nation by FIFA, an organisation that must rank as one of the most corrupt and compromised on the planet. And closer to home our own parliament erupted into a violent uproar when the ruling party refused to allow any opposition to the idea that the nation deserves a president who fails to notice or even be curious when hundreds of millions of rands worth of renovations take place at his private home.
Only serious students of the political scene are able to explain the significance of the rupture between NUMSA and COSATU.  The confusion was compounded when one newspaper referred to the event as a “rapture”. For most of us, this all has much the same import as the news that the bowls club has expelled the croquet club because the members of that section were becoming a bit raucous after tea and threatening to damage the greensward. At its heart the issue is presumably about power and then undoubtedly money. Union leaders can depend upon the reliable cash flow of subscriptions which are deducted automatically from each member’s salary. It would be interesting to see just how numerous union membership would be if employees each month had to prioritise their union subscription against their other spending needs. Unions – and their overarching federation bodies – would truly have to fulfil a need in that worker’s life before he saw any reason to send off the money.
Only politicians and bureaucrats could believe that there will be any real impact from the imminent implementation of the driver’s licence demerit system. There is already a raft of regulations and laws which are ignored and not enforced. A great pity because our roads are very unsafe places these days. What’s the betting that the first drivers to be slapped with a demerit don’t have valid licences anyway?  
The most poignant remark to be aired about the comet landing event this week was a plea to “Jacob and Angie[1]” to at least fix the schools so that our children could learn to read. Deep Space Flight Dynamics could come later. Watching real rocket scientists at work was a deeply emotional experience. It was only when prodded by their fussing and anxious PR staff that they reluctantly faced the cameras and explained to the public – their paymasters – what was happening. Everyone was simply anxious to return to work and apply their enormous personal skills and expertise to the team effort. What a contrast to what is happening elsewhere in the world where ignorance, dogma and superstition are being celebrated and died for.
After last week’s comment about national sides winning went so badly awry it is best I say nothing today.

James Greener
14th November 2014.


[1] President Jacob Zuma and Education Minister Angie Motshekga

Friday 7 November 2014

MEDAL PLAY



Central Banks would appear to be a close-knit lot. No sooner had the US Federal Reserve stopped buying its own government’s debt with freshly minted dollars, when their opposite number in Japan started to do it. This seemingly never ending flow of crisp new money pouring  into the financial systems tempts investors to believe that stock market prices are underpinned and so they set off on another buying frenzy. This is very pleasing for the governors of those banks who can point out to the political decision makers that: “See, everything is just great!” Meanwhile the debts mount – but no one seems to mind. Paying them off will be someone else’s problem.
Quite correctly there has been scant hysteria so far about the announcement by one of the self-important rating agencies that as of last night it has moved SA down a notch on their ludicrously lengthy scale of credit worthiness. However, they also adjusted their outlook on the country from “stable” to “negative” and that deserves notice. Reasonable people will not dispute that view. The tax man published his survey of his “clients” this week and without drowning readers in statistics it can be noted that SA is a nation in which most citizens enjoy representation without taxation. While historically the converse of this has often triggered a violent response, in our case the heavily taxed are seeking quieter unostentatious remedies.
It is unlikely that economic growth and higher employment will return to this country until we are offered a government which doesn’t feel capable of interfering at every level of human activity. Furthermore, we need leaders bold enough to reject the race-based cadre-deployment policies that have plagued this nation for about a century. There are talents, skills and drives aplenty, just leave them alone to find out what works.
A typical example of how socialists fail to understand what investing is about appeared in a report prepared by three parliamentary researchers. After surveying cases of Foreign Direct Investment world-wide they reached the indignant conclusion that the money foreign companies invested can be overtaken by the remittances they send abroad. That, dear researchers, is the point! When you invest, as opposed to donate, you expect not only one day to get your money back but, also to get a return on that money. Frankly, the foreign firms are not that interested in that politically correct stuff like job creation and skills transfer unless they can see how it could make them more profitable. There is nothing wrong with this attitude. After all it creates economic activities that were not there before and, guess what the result is? Employment and taxes happen, and all that remains for you, the government, to do, is to stamp their passports and get out of the way.
A really alarming flyer was delivered to the house recently. Under the banner “You Deserve Better” three local political activists quote a quite terrible national crime statistic and urge the Durban municipality to do something about it.  Quite right too. We do deserve better. The puzzle is that the flyer is published by the present ruling party. Are they suggesting its time to vote for someone else?
National police commissioner Phiyega is surely busy sketching designs for a new medal. This one will be for officers who are attacked while lunching and first recipients will be the two members of her force who, while stopped at a roadside stall purchasing snacks, were robbed of their weapons and locked in the back of their own van. Another benefit is that it will undoubtedly soon  join the rack of undeserved other gongs that she sports on her chest.
Isn’t it fun to watch our national sides winning? Especially against the antipodeans. Any word on why the Aussie T20 side are dressed to look like All Blacks? Certain voices suggest that Ireland at home will not be easy for the ‘boks tomorrow. It’s such a late kick off it will not be easy to be fully alert to be able to watch.
James Greener
7th November 2014

Friday 31 October 2014

THE GHOSTLY ECONOMY



Is that it?  Has the bear turned out to nothing more than a cute and cuddly stuffed teddy with a button for a nose and a squeaky tummy?  There’s the All Share index soaring back to 50 000. Last month’s loss of 2.5% seemed to promise that we were in for a good solid October-style walloping. But despite some pretty steep and sharp excursions which must have really scared the day traders, this month’s All Share total return will be pretty much flat; much like the reputation of the pessimistic wing of the investment analyst’s society.  Mind you, the spread between the sectors is huge. The mining indices have been hammered. The Resources index has lost around a fifth of its value in the past three months as the different mining sectors have in turn taken a battering from just about every possible direction including, notoriously, their own government.
Just this week the mines would have been among the major industrial consumers of power who received a call from Eskom instructing them to cut electricity usage by 10%. The magic phrase being thrown about by the utility this time is “outage slips” which is code for “the ratio of engineers to administration staff in this place is way too low”. Naturally the politicians in charge do not appear to have noticed or even remarked on this severe and outlandish impediment to growth.
It also doesn’t help a resource exporter like South Africa that the prices of most commodities both agricultural and mineral are falling. Perhaps the most significant and interesting market at the moment is oil, where a happy and largely unpredicted collision between increasing supply and falling demand has overwhelmed even a powerful producer cartel like OPEC. The oil price is at a four year low in US dollar terms. Since the beginning of the year, oil producers must now sell 30% more barrels of crude oil in order to afford the same amount of gold bullion. Undoubtedly this is having an impact in many decision-making chambers. Pleasingly this is one ratio where SA is on the right side for once. We need less gold to buy the same amount of oil.
We are however not on the right side when it comes to getting people employed The latest official report to reveal this sad and desperate story has and will trigger official reaction and promises “to do more”. These are the same officials and reactions that appeared when the previous report was published and which have had no discernable effect. The sole sensible but rather diffident remarks came from Econometrix, a private sector think tank who suggested that there might be a link between having prescribed minimum wage levels and the number of people being paid those wages. Simple maths, however, is not a strong suite among ideologists.
The postal strike is affording us the opportunity to discover the true cost of getting items delivered. Fees charged by the delighted courier companies offering a replacement service are multiples higher than the price of a stamp. The real debate is not about postal worker’s wages but about the extent to which taxpayers ought to subsidise such a service. It’s a tough one taking place all over the world.
Market forces are indeed savage and indifferent to the needs of an individual or the wishes of a bureaucrat. In the sporting world at the moment there are at least two interesting examples of this. In Formula 1 and in West Indies cricket lethal combinations of regulation and price setting are changing the landscape. This weekend’s Grand Prix in the USA and this summer’s incoming cricket tour are both showing evidence of that.
James Greener
Halloween 2014

Friday 24 October 2014

GONE WEST



A chart of the various JSE sector indices for October so far, resembles a bowl of spaghetti with no emerging trends after the sharp decline last month. Despite the mild panic that broke out last month, it is interesting to note that very few prices have lost more than their gains since April this year. Real bears can wipe out years of work. We have yet to learn if this is a real bear.
Although it is customary to wail about the weak rand, the fact is that our currency is presently at just about its best levels this year against all the major currencies. But not of course against the US dollar which continues to be the beneficiary of some form of “flight to safety”. It’s fair to assume that the dollar’s strength is a consequence of the end of the Federal Reserve’s policy of flooding the market with crisp new notes. In the meantime the foreigner’s cash, after being converted to US dollars, is being loaned to the US government, a conclusion that can be drawn from the rather steep fall in bond yields in that country. Investors now have to be content with a 10 year interest rate of less than 2.25%. It’s hard being a saver in this world.
For some unknown reason, what should be a rather simple and low key mid-year update of the fiscal scorecard has blossomed into a grand event that requires the Finance Minister to buy a new tie and plonk down a 63-page “thud report” (plus annexures) on the parliamentary podium. The main Budget speech is only 4 months away so it seems all quite unnecessary. Only the saddest of economics wonks will wade through this tome which Minister Nene promised was full of strategic frameworks and road maps. The fact is that if the numbers can be trusted, out of every R100 that the government collects it spends about R114. The difference is obviously covered by borrowing and if nothing changes the total debt gets ever larger and people begin to notice and point fingers. The worst fingers belong to the ratings agencies who can at the jab of a keyboard alert the world to what’s going on and cause lenders to be more demanding.
A great deal of airtime and newsprint has been sacrificed on the news that the Minister feels he has no option but to make pips squeak all round. Taxes up and state spending down is the message. Very interesting is the threat to cut off at the knees many of the appallingly run parastatals and even sell off the family silver. The Post Office strike may seem like a picnic when the public service unions get the gist of this one.
Strangely, little seems to be made of the fact that while expenditure is increasing at around 8% pa, the revenue figure is showing almost 11%pa growth, so given time (about 7 years) the gap should close anyway. Presumably real economists have reasons for discarding such a simplistic yet optimistic sum. Nevertheless any attempt to curtail state expenditure – particularly the suspected massive sums lost to corruption and inefficiency -- must be welcomed, and we shall all watch Minister Nene’s new career with interest.
Here in Durban a dozen years ago it was decided that ratepayers, residents and anyone wanting to find their way around the city needed to be punished and seriously inconvenienced for their alleged previous crimes against humanity. The street names of most of the important thoroughfares were changed. While the significance of the new names (like indeed the old ones) is generally unknown to anyone except students of local politics, the nominees probably deserve their recognition. However, a wise authority would have allocated them to new developments and not thrust them onto the existing network. Further, it should be expected that the promoters of the new names will take care to get the details of their heroes correct. But Durban’s main city boulevard now requires yet another set of even longer street signs. Research and custom has revealed that Dr Pixley kaSeme Street should correctly be Dr Pixley ka-Isaka Seme Street. Can’t we just find the old West Street signs? Nobody now recalls if it is named after a local worthy or a merely a compass direction. It really is not offensive and is easy to remember.
I think I can safely wear my Lions cap for the Currie Cup final tomorrow.

James Greener
24th October 2014

BEARING DOWN



The 8% lost by the JSE All Share index is a good start and already there are some who are impatient to be buying again. Be wary though. This bear is probably not nearly finished with us yet. For the JSE market to return to the sort of valuation levels last observed in 2008 or even 2003, the All Share needs to shed at least a further 30% or so, which would take the index to below 35 000. Bears with longer memories can dredge up even harsher events. The market collapse in the mid 1960s took more than a decade to regain the former levels. That these days the markets are so very different is true but not, of course, a guarantee that the unthinkable could not reoccur.
The US Federal Reserve's program of injecting freshly minted cash into the American economy is drawing to a close. Those who managed to reap the biggest benefits from this process (principally the banks) are naturally downcast. However, the individual consumer in the shopping mall and worker in the office or factory hasn’t enjoyed anywhere near all the upside that the keen promoters of this program had predicted. Wal-Mart, that nation’s biggest employer and shopping chain with a turnover that rivals the SA GDP, was this week busy curtailing employee benefits. The technology revolution is conferring prosperity on far fewer people than expected and for most of the planet, living standards are not improving as the politicians and their economic advisors promised. The declining oil price is a very interesting development, which draws attention to the falling demand for many commodities and the resulting price weaknesses. This isn’t at all what was supposed to happen. Expect more and more strident cries for governments to do something. Unfortunately they probably will.
A group of concerned South Africans feel that Number One is doing a really good job and ought not to be pestered with mundane and trivial issues like arranging payment for the multimillion Rand upgrades to his personal home. Accordingly they are going to make the payment for him. National Treasury must be delighted by this news. Firstly, if the muttering of the uncharitable curmudgeons is true, then a possible source of this largesse could be from the earlier overpayments by the state to gravy train passengers. Secondly, monetary gifts to JZ, or indeed anybody, in excess of R100 000 per annum will attract donations tax at a rate of 20%. The national revenue fund is a winner twice over.
A number of people, including deputy president Ramaphosa, who really should know better, have been talking about starting a “State Bank” which will finance projects and people that they, the politicians, think are worthy causes. This is necessary, they say, because the usual lenders, the banks, are reluctant to take on clients selected by politicians in search of a vote. Most of us, including even the fabulously wealthy deputy president have a preference for getting our money back and we are perfectly entitled not to share his view of who or what represents a worthy cause and a good credit risk. Therefore in order to fund itself before lending to its clients, the proposed State Bank will probably have to resort to extracting money with menaces (i.e. taxation). The major benefit of this technique is that it complexly removes all the messy business of managing a liability portfolio and the obligation to pay anything back to depositors and share and bond holders.
It's just as well I ignored medical advice and watched the bokke beat the All Blacks last weekend. The result of that glorious game was undoubtedly superior medicine. As usual the forthcoming final weekend of scheduled Currie Cup games is always prefaced with a blizzard of conditional clauses. Only those skilled in logic can detail the conditions precedent for a Sharks home semi-final. I think they should have just simply lost fewer games earlier in the competition.
James Greener
Friday 10th October 2014.

Friday 3 October 2014

THE RAT CATCHER’S RETURN



This bear is growing up rapidly. Just a couple of weeks old and already he is inflicting some terrible damage and has clawed 7% out of the JSE’s All Share. Furthermore he has brothers who are ripping apart other markets including bonds and commodities both here and overseas. The reasons being offered for this change in attitude by investors are as numerous as they are inventive. A particularly interesting one is the sudden fall from grace of a man who managed the world’s largest bond fund in the US. Somewhat inevitably his market timing luck eventually ran out and the departure of both him and very many investors from that fund is said to be weakening the bond markets globally. Less easy to explain is why the dollar price of gold is weakening so swiftly.
In its current mood the market treats just about every published data point as bearish, no matter that a few weeks ago that same number might have been hailed as wonderful news. Against this trend however was the reaction to the news that almost 61 000 new vehicles were sold last month. Intriguingly rental companies absorbed almost a quarter of them. If they are seeing customer growth why can’t our national airline make money flying people to places to rent those cars?
Probably a number of those new vehicles were minibus taxis being delivered to the Western Cape. In that province fines for traffic related offences, such as unroadworthy vehicles have been raised very substantially. Naturally there has been an outcry about this, with claims that the fines will “cripple” the industry. The method that taxi drivers can use to avoid this painful outcome is obvious. However the news that the province has yet to collect R3bn in unpaid fines suggests that most tickets are utterly ignored anyway.
The slew of data this week included the government’s cash flow numbers which revealed that there is still absolutely no attempt being made to trim expenditure and that out of every R100 the state spends, R17 of that has to be borrowed. While on a personal scale that seems rather uncomfortable, economists have a variety of techniques for disguising this fiscal deficit so that it doesn’t appear all that bad. Great store is put on the fact that the government (unlike the rest of us) has no difficulty repaying loans because if needs be it can simply print the interest and capital money – provided of course they are in rands. Foreign loans are far trickier 
Another data point which was definitely worrisome concerned the so-called trade balance. The good news is that the nation’s appetite for imported goods has stabilised a bit, but the income received for exports has contracted. In aggregate over the past 12 months we received about R187bn less than the imports cost and this figure too is growing steadily. It would be so refreshing if for once politicians joined the dots and noted that their interventions are not working and that it was time to try something different. Like not telling everyone what to do and how to do it.
There are many aspects to the news that Johannesburg wants to introduce owls into areas of their World Class African City to try and control the exploding rat infestation. The first is that the rats must be particularly nasty and unpalatable for if they were not, the owls would long ago have moved in all on their own. Secondly it is disgraceful that the authorities are delinquent in executing this core responsibility of keeping the city clean and free of rubbish. Municipal service is undeniably humdrum and mundane but it is essential which is why the rest of us agree to pay rates and employ someone to do those jobs.
I am so glad I ignored medical advice and watched the final 20 minutes of the Wallaby game last weekend. I’m not sure if there will be an equivalent opportunity to switch on the All Black match tomorrow.
James Greener
World Smile Day 2014

Friday 26 September 2014

A VERY UNIMPORTANT COMMENT



It’s not just our own poor little runt that is taking a hit. There is a global shift into the US currency. Everyone’s money is losing ground to the US dollar.  The reason for this flight is uncertain. It could even be a sign of approval that the USA is now showing a bit of military might in the Middle East and humanitarian sympathy in West Africa. Adding to our own woes, there is a sprightly and toothy bear at large in the JSE. The average fall this week among the top 20 is almost 5% and this includes horrors like -17% by Kumba, the iron ore miner. Reports of a slowdown in China are being cited as a reason since this would cause a decreased demand for all the minerals that we dig out of the ground to sell to them. All that is really known is that sellers of many shares are starting to queue up and the only way to get to the head of that particular line is to offer a lower price than the current front runner. When that idea catches on we will see a real bear market develop.
Aside from all the usual questions about why so many officials including the president needed to be in New York for yet another pointless talk-fest, the interesting thing to emerge from the furore about the private jet was that it revealed the existence of a sort of Treats Handbook when it comes to flying in chartered aircraft. It seems that there is a caste system for important people, who are classified from being very very, through merely very, down to not very at all. In addition to four suitcases and five coat bags, each VVIP may take 10kg of carry-on luggage, which somewhat explains the need for a muscled bodyguard among the 14 permitted passengers. The boss man gets a private bedroom and en-suite bathroom with a shower on board the plane. Somehow this is not surprising. Everyone on board can expect 4.5kg of food and drink per meal which may not be all that generous after adding the weight of a couple of bottles of Johnny Blue.
Nevertheless all these details merely confirm that we have an obscenely self-important self-indulgent and nearly self-appointed troop of leaders who are rewarding themselves with levels of comfort which greatly exceed the value they provide to their paymasters. A perfect example of this swept the story about the chartered jet into the inside pages when it emerged that the country had been entered into a deal with the Russians for something to do with nuclear power stations. Scant details offered by one side were quickly denied by the other and now the whole affair has been draped with a cloak of secrecy. This immediately confirms that right at the heart of the “deal” there is a price which is egregiously wrong. That almost certainly points to money that will flow in unusual directions. A deeply ironic twist to this tale is that the arrangement which probably involves rands counted in trillions and watts measured in gigas was likely negotiated by a man who battles with numbers that comprise more than about five digits and by a woman who is delightfully unencumbered with any technical training or experience whatsoever. Some commentators are already drawing comparisons with the notorious and still opaque arms deal of almost 20 years ago.
A similar total refusal to reveal the truth concerns the small but heavily used Virginia Airport here in Durban North. Allegedly it is to be closed and moved. Where to? There is still only one runway at the huge new King Shaka facility north of the city.  Undoubtedly someone high up in the municipal structure has plans for an alternative use for the land and the secrecy indicates once again prices will be rigged and money will vanish.
I have only one flagpole and so just before the nerve-racking encounter with the Wallabies tomorrow I shall have a small ceremony to replace the Sharks flag with the ‘bok banner. Once again I am advised not to watch either and so will merely track the scores on Twitter in a quiet room.
James Greener
26th September 2014.

Friday 19 September 2014

RATES AND RATINGS



There were several points to take away from Governor Marcus’ appearance in front of the cameras at the end of the monetary policy committee’s meeting yesterday. The most interesting one is speculation about why she has decided to step down after just one five-year term as Reserve Bank Governor. Surely sheer boredom must rate high on the list of reasons. The “no change to the repo rate” announcement came after a three day meeting. It is terrifying to even try to imagine the amount of brain-numbing waffle and data nit-picking that must have taken place in order to fill all that time. Three months ago the same team edged the rate up  a near imperceptible quarter of a percent, but now whatever demons were spotted then appear to have disappeared! Another annoyance in the job might be polite but firm calls late at night from Nkandla or Luthuli House with suggestions of how things should be. The now aborted AngloGold unbundling deal noted that guidance on various matters had been received from the Reserve Bank. And the African Bank debacle must have been very wearying for the governor too. Ms Marcus must hopefully be off to do something far more fun.
It’s getting like a ballroom dance competition but without the spangled frocks. Long and intricate displays of fancy foot work are taking place in order to conceal the real fact that the government plus the large number of its dependant corporations is running ever deeper into debt. The competition judges are the ratings agencies who are already flipping through the score sheets to the “junk status” page and they will any second now be holding those sheets aloft for all to see. That term is misleadingly alarming and harsh. In practice it is simply a warning flag to lenders that in the opinion of the agency (who, by the way, have a blemished record on these matters) the borrowers are battling a little more than most to repay their loans. Actual default is not at all being suggested yet and for the moment SA will undoubtedly behave just like an “investment grade” borrower and continue to pay timely and in full. This is why the downgrade when it comes will be received in Pretoria with outbursts of indignation and contemptuous dismissal. Sadly however, there is no evidence that anyone in charge is going to do anything effective to slow the growing debt and in due course the rating agencies might be proved right. After all as a defaulter we do have form. Remember the “debt standstill” of 35 years ago? In the meantime the government this week managed to borrow $500 million for 5.75 years at a rate of just 3.9%. This is really cheap money and shows that some of the actual lenders are not as concerned about credit risk as the agencies think they should be.
The excited spokesman for the university that will be home to the Thabo Mbeki Presidential Library certainly introduced some different ideas about such facilities. According to him it will become a “living library” that will address knowledge production and peace building. That’s a far cry from a collection of dog-eared Marxist tomes, dodgy medical research papers, yellowing newspaper clippings, fading internet print-outs and used pipe cleaners that many of us would have expected to see in a collection of the previous president’s archives.
Far too much has already been said about that Scottish referendum, but it is interesting to note that a total of about 3.6million people voted. What a lot of noise they made. It must be the whisky. In our election this year 18.6million votes were cast!
Suddenly the Currie Cup competition has reached that stage where we get to play teams we had forgotten all about. The Sharks are making really heavy weather of the whole affair and my back-up Lions flag may come in handy as, ridiculously, we play local rugby right into October. The 2015 Super rugby program has been published and begins only a few weeks after the Christmas tree is taken down. Clearly this sport is now an industry with clamouring stakeholders.
James Greener
National Recycling Day 2014.

Friday 12 September 2014

THE HEART OF THE MATTER



Perhaps it does not feel like it, but for the past three months the JSE All Share index has trundled along inside a trading range of just 2000 points. This represents a variation of not even 4% of the average level of about 51 000. The JSE has been one of the most docile and pedestrian share markets on the planet. Of course no one knows when or in which direction the breakout will occur and it is unhelpful to state that the event is always getting closer. It is more than 5 years since this index recorded a double digit percentage monthly move. This was in July 2009 when a 10.1% gain occurred. Similar massive gains were also enjoyed in March and May of that year when the market was rebounding from the shock of the credit crunch.
Of course overall indices like this can conceal considerable pain or joy in individual sectors and shares within the market. Owners of mining shares – particularly platinums - have probably suffered the biggest erosion of value in this period. The news that AngloGold is rearranging its affairs has raised uncertainty levels as well. But because these days these companies have a much reduced weighting in the overall picture, their downward impact is easily matched in the calculation of the composite index by much more modest moves elsewhere. By the way, who really believes the AngloGold claim that SA political developments were not a factor in the decision to split the company?
Company results this week were largely rather good but there are still warnings being made that borrowers are not servicing loans as diligently as expected. The earnings of most workers are still too low to meet their aspirations and expectations. This is of course exacerbated by the examples being set by those who demonstrate that dishonesty and deceit are reasonable routes to influence and affluence. Under these pressures saving and providing for the future has scant relevance. Reportedly for example, teachers are resigning in scores in order to access pension savings. We may not have seen the last of the terrifying collapses.
The SABC is calling for proposals for the implementation of “an integrated internal control framework”. Presumably this is autobabble for something that managers should be doing as the main part of their job, but the national broadcaster wants outsiders to come and do it for them. Is this not perfect evidence that the obscenely overpaid, unqualified dodgy chief operating officer is incapable and should go? The problem is that his boss, the chair of the corporation has now also been found out to have lied about her qualifications and so also is not fit for purpose. It really is time that we all boycott the paying of TV licences and press for the privatisation of that sorry mess. It’s a tactic that definitely attracts the government’s attention as the e-toll saga demonstrates.
Perhaps one of the most alarming stories of the week is that the nation’s citrus industry has stopped exporting their produce to Europe. Apparently this avoids the probability of actually being served a permanent ban by the importers because some of the fruit is carrying a harmless but unacceptable black spot blemish. Clearly the industry has a huge problem on their hands and this is one occasion when an informed government intervention might help. However, in the meantime perhaps we could learn to drink Vodka and orange as presumably we must all do our bit and consume the unsold fruit.
The three rugby teams that I wanted to win last weekend all failed. The GP result was disappointing – can someone please develop an engine to beat Mercedes - and even the Bafana result was unimpressive. The cricket was great however, although the victory is being tarnished by numerous articles that point out that sport’s declining support in Australia.
My doctor has forbidden me to mention the All Blacks.
James Greener
Rhodes University Founder’s Day 2014.

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Friday 5 September 2014

MAIDEN DIVIDENDS?



Thanks probably to the developments in European markets (see below) a somewhat selective bull has returned to the JSE and the All Share index has nosed back over 52 000. The week’s batch of company reports were rather mixed in fortune and outlook suggesting that this is not a tide that is raising all ships equally. Not an easy market to buy. Mind you, it rarely is.
The folk running the finances of Europe are desperately fighting a battle against the wrong enemy. This week they cut interest rates for the euro even further in the near helpless attempt to get the citizens of that awkward and unhappy union to borrow and spend money. For at least  a decade and probably far longer, however, this method for stimulating economies has not been working. It would appear that the category of people who in the past might have been inclined to go into debt and also accept the obligation to repay that debt, currently have little interest in playing that game. Instead their feelings of prosperity and security are being overwhelmed by the impression that their governments are ceaselessly growing pools of self-enriching bureaucrats pursuing policies of entitlement and distribution.
The popular but obviously unsustainable belief that the many can be supported by the efforts of the few may be nearing its long overdue exposure as a lie. Hastening the arrival of this point are the baffling displays of disdain and animosity shown by a very unpleasant cohort of the beneficiaries towards their benefactors and their beliefs, faiths and customs. This disturbing and very unsettling development must surely be a factor in deepening the reluctance of the true wealth creators to play the roles that are being scripted for them by the leaders.
From Washington to Pretoria we are hearing another chorus of howls about how unpatriotic (but note, not illegal) it is for businesses to arrange their affairs to minimise tax. People who feel that citizens need to be “punished” for choosing business practices that maximise the value added simply don’t understand how economies work. A century or two of democracy and civilisation have created way too much legislation and far too many legislators. Growth will come not from tampering with interest rates but by reversing the growth in numbers of tax eaters compared to the number of tax payers. The pruning process needs to start with all those who have assumed the powers of price setting of everything from money to labour, for these are the most lethal and expensive of that group. Surely we now have ample laws on the statute books and need just to enforce them fairly and swiftly? And of course discard those that are needless.
Trying to get his voice heard in the same corridors of power where this week’s non-coup of Lesotho was getting attention was King Buyelekhaya Dalindeyebo of the AbaThembu who fears that his Certificate of Recognition is about to be cancelled. Is there really a department of layabouts who issue these things? Are they like a drivers licence requiring regular renewal after passing a test of sovereignty? What benefits and powers accrue to the holder? Is there a monthly stipend which can be collected by joining the queues of pensioners and mothers on the 1st of the month? And at the now infamous and salacious reed dance ceremony, another king in the region selected his 16th wife (a teenager) from the throng of swaying maidens.
The JSE are to be congratulated and admired for yet again nailing down the award for running the best and safest stock market in the world.
 There is something underwhelming about these triangular cricket tournaments – unless and until one’s side is winning I suppose. Beating the Aussies is always good. I am not sure if I have the courage to watch the ‘bokke face the Wallabies in Perth tomorrow. On recent evidence we should do OK as long as we don’t have to scrum, take part in line-outs or pass the ball too often. The Sharks too seem to wobbling a bit of late so perhaps this is not the right time to draw attention to the fact that the Lions are top of the Currie Cup log.
James Greener
5th September 2014

Friday 29 August 2014

PAY BACK THE MONEY



For a moment it felt as if August might actually see the appearance of a large and fierce bear. However, the All Share will close today probably only half a percent down on the month. Most of the damage was caused by the platinum mines and the so-called mining houses. Investors are alarmed by the clear signs that most of these enterprises are arranging their affairs to minimise the often lethal and frequently energy-sapping effects of South African state interference in their industry. On the bull side, the telecommunication sectors, both fixed line and mobile, enjoyed a wonderful month. The banks largely survived the obliteration of one of their number. Bears will just have to wait some more.
For all the apparent domestic problems in that land it seems as if the rest of the world is regaining confidence in the idea that the USA offers a safe haven for their money. The dollar is at a one year high against the euro, the yield on the US 10 year bond is sliding ever lower also to a one year record. Wall Street indices are sniffing all time highs. Money is obviously being sent out West as extremism and intolerance sweeps the planet.
After all, what can be wrong with a nation whose president spends so much time on the golf course and where the national pastime would seem to be emptying buckets of icy water over each other? Americans clearly have very little to worry about.
A bunch of MPs behaved rather badly in the National Assembly last week and the Speaker has written them each a letter inviting them to explain why they should not be suspended. Surely Madam Speaker has no illusions about what sort of replies she will receive and indeed already threats of court action are flying about. The next stage apparently is that an investigation will be mounted. It is all rather wonderfully courteous and old world. Possibly even colonial. Horrors.
The irony of the whole mess is delightful and endless. The chant of “Pay back the money.” has quickly become a mantra with widespread application. President Zuma missed a trick when he should have used it back against the leader of the noisy bunch who himself is reportedly catching up with his tax shortfall by making regular payments which, puzzlingly, are considerably greater than his monthly parliamentarian’s salary. So far, no one has yet used the phrase against the Chief of the Defence Force General Solly Shoke, who rather understandably failed to resist the temptation of booking himself into one of the ultra luxurious first class cabins aboard a flight to the Far East. After all if the airlines offer these facilities who else but high ranking government employees can afford to use them? And it was a terribly important meeting he was going to.
The big problem with that sort of consumption expenditure though, is that not even the most skilled spokesman can convert it into that universal currency of “jobs created”. Here in the kingdom, a proposal to place a 10% levy on the tourism industry was expressed in units of job creation in order to fend off criticism. The money will apparently be used to fund a project of enticing and inviting grand and prestigious events to use this eastern coast as a venue. The idea has all the hallmarks of bureaucratic ignorance of how the real world works.
By some sleight of hand, Stats SA produced the positive second quarter growth rate result that was needed to avoid the first half of 2014 being declared an official recession. Like the ‘bokke results against Argentina it was not a pretty thing but enabled the responsible officials to preen a little and claim that the things will improve “going forward”. However, that ODI win by the Proteas over Australia was highly satisfactory.
James Greener
29th August 2014

Friday 15 August 2014

THIS IS A CERTIFIED COPY OF TIDEMARKS



There is a feeling of unease in the JSE markets. Firstly one of the market darlings has disappeared in a flash of absent funds. Then an unsettling number of companies are muttering about results which are less than exciting and a slew of overseas and local indictors seem to have gone off the boil. The message seems to be Keep Calm but Keep Careful Watch. Note for example that the German Dax index is almost 8% below its July peak and that money is flowing into the US which appears to be regaining its reputation as a safe haven. The dollar and the US long bond are both enjoying price increases. On our own JSE the All Share has remained inside a very modest 700 point trading range for most of the week.
The SA government, however, does not share the view that our economy is fragile and persists in bludgeoning survivors. Gold Fields, for example were this week reminded that they have still not built the clinic and bakery that were supposedly conditions for them being granted the right to mine the technically very tricky South Deep ore reserve. The international airlines have warned that the inflexible and overzealous new visa arrangements for children are already impacting tourism bookings. Nevertheless, they have been dismissed with a flippant reminder to concentrate on their core competency (which) is to ensure that people travel so that they (the airlines) can make a profit.
One of the more dismal developments of the week is the news that “Compliance is now a recognised profession”. There is now such a large and odiferous pile of regulation and legislation that businesses are obliged to hire people to ensure they don’t forget to tick one box, certify one ID or confirm one place of residence. Bureaucrats promise each other that one day they will create the perfect rule which, when complied with perfectly, will reveal everything about everybody and from that information they will be able to save everyone from everything. However, events both deliberate and accidental will forever appear unannounced and ill timed to demolish even the most careful formed strategy and plan. All any enterprise can do is rely on vigilance, honesty and integrity throughout its workforce, customers and suppliers. A room full of signed and compliant documents will never be proof against frauds, losses and simple mishaps nor is it much help against the South African mantra. “It was not me. I was not there.
This will doubtless be the defence offered by robbers who visited the home here in Durban of the Deputy Minister of Science and Technology and made off with half a million rand in cash. The high rank of the victim is perhaps the reason for the amazing haste and skill shown by the police in quickly apprehending the half dozen suspects, although their claim that DNA profiling was used is barely credible. But more interesting would be to learn just how and why the honourable Ms KaMagwaza-Msibi managed to acquire and store so much petty cash. Even in R200 notes that’s a big chunk of change that will require an extremely large purse when going to the shops.
Another politician with a nasty problem he probably never foresaw is Police Minister Mkosinathi Nhleko. He has been asked to determine how much money his boss, President Jacob Zuma, needs to repay to the state for tarting up the Zuma family compound at Nkandla. Now this is a hot potato of note and no one will be surprised if he chooses his superior over the whines of a few taxpayers who probably never voted for him anyway.
Two Pumas teams to watch this weekend. The ones from Nelspruit are coming to Kings Park this evening and so the bowling club bar will empty early. And tomorrow the ‘bokke open their Rugby Championship campaign hosting the Argentineans at Loftus. Two satisfactory results are confidently expected. 
James Greener
National Relaxation Day (USA)

Friday 8 August 2014

BIG BANG THEORY



There were two huge bangs felt in South Africa this week. The largest one was a very unusual earthquake which happened about 10km below the surface right in the heart of the country near the Free Sate gold mining region. It is rumoured that government have set up an investigation to see whether or not the damage and fatalities (mercifully few) can be laid at the door of the previous regime. The second report was caused by the inevitable collapse of a business model founded on lending money to people who are always very close to the point of being totally unable to pay it back. This is what caused to so-called credit crunch in the USA and other places in 2008.
Disguised behind fancy names like “unsecured lending” and “micro lending” and drenched in good intentions – while charging eye-watering interest rates – far too many of African Bank’s  borrowers come from communities badly impacted by the loss of wages and jobs loss through strike action. And so this week it had to disclose that there was an R8bn hole in its accounts. Now the Bank’s funding model has little direct exposure to the savings of the man in the street and so the country has been spared the sight of depositors queuing to withdraw their money. However, the big financial institutions who have been lenders to and investors in African Bank are obviously going to have a very bad weekend doing some nasty sums and working out what to tell their own clients. One of these institutions with the largest exposure is the Government Employees Pension Fund and so assuredly the aftershocks will rumble on for quite a while longer. Politicians will become involved and that’s lethal.  It all happened so quickly. For detached observers it was fascinating to watch the speed and scale of the collapse of African Bank’s share price. Whether the person who bought at 689 cps on Monday was the same one who sold at 28cps yesterday we shall never know, but the spectacle has been a terrifying reminder of how savagely markets can work.
There is a really interesting story brewing over how the nation will get to watch the national soccer team on TV once the present contract between the SA Football Association and the national broadcaster expires in April 2015. Reportedly SAFA have sold the televising rights thereafter to an outfit called Siyaya TV for a billion rand. Opinions will differ about whether  this is the right price for watching Bafana Bafana but it is strange that SABC failed to renew the contract. Siyaya TV was licensed just a few months ago and is a brand new entrant to the pay TV business in SA. It intends to service its subscribers using digital signals sent out from conventional land-based antenna and reportedly will be far more affordable than the well established digital satellite TV service that excludes many soccer fans because of its cost.  But despite a frequent and repeated government assurance that roll-out of this technology is imminent it does not seem to catching on very fast. There is not a great deal of time left in which to get every soccer fan fitted out with the necessary decoder and contract. Once again there is a strong sound of money flowing in unusual directions.
This week a small space craft named Rosetta, which left Earth 10 years ago, reached Comet 67P/Churyumov-Gerasimenk. Now in orbit around this 4km sized lump of rock, Rosetta is taking a good look preparatory to landing on it. The pictures which are coming to us from 400m km away are of breathtaking clarity. As a planet we should all be very grateful that there is a nation which, for the time being anyway, has the resources and the skills to carry out such wonderful pure science.
Summer might be here. The first Yellow-billed kite swooped over the garden yesterday and soon it will be time to blow up the pool toys and crank up the ice making machine. The one concern of course is that the Currie Cup rugby season is only just starting and will run on all the way into October with a fiendishly complicated format that only the guru at the bowling club bar seems to understand. And then the Tests against the All Blacks and Wallabies. Perhaps it isn’t really summer after all.
James Greener
8th August 2014

Friday 1 August 2014

AUGUST HAS ITS UPS AND DOWNS



No one has yet actually spotted the bear in the camp site. But the evidence that he is close is mounting up and some of the more nervous campers are rolling up their sleeping bags and stamping on the campfire embers getting ready for a hasty exit. The markets around the world reported an astonishing range of different experiences in July. Russia and Germany both posted fair sized pull backs - though perhaps for very different reasons. Hong Kong and China both polled better than 5%. In SA the fellows down in the Cape of Storms were obviously too busy bailing out their offices to pay much attention to the market and the JSE All Share ended the month less than 1% up.
The jumpiness has become very evident  in the last few days when this index both set a new high (above 53300) and then plunged almost 3%. It is the resources shares which are responsible for most of the damage. Historically on the JSE, August is the month in which some of the most extreme performances have been experienced. A few readers may recall the 30% collapse in August 1998 and fewer still the 17% rise in August 1982. Records are set to be broken! However please don’t put too much money on the upside record being threatened in 2014.
Other numbers which allowed the scribblers to fill a few column inches were unemployment, inflation and the trade gap. This last is one of the more volatile of the monthly statistics that really tell a useful story only after heavy long term averaging. Unfortunately it is clear that we are not managing to grow the value of our exports very much at all while our demand for shiny and new stuff made by foreigners is insatiable. The reasons for the results on both sides of this equation are numerous and often complicated.
Ensuring that our exceptionally fine network of national roads is maintained and extended ought to be a task that is done quietly, competently, and more or less invisibly. Distressingly, however, our outfit with that responsibility, SANRAL, appear to be unable to do anything without a great deal of fuss. The e-tolling debacle in Gauteng looks as if it may infect the Western Cape, but no one is allowed to know because it is all a great secret. Clearly money flowing in unusual directions must be at the heart of the mess. It really is time for the fuel levy to be ring fenced in the National Revenue Fund so it can be  channelled to the purposes for which it is raised. It must not be used to help fund events like a R200 000 fly past at an inauguration.
Isn’t everyone being rather too casual about the 87 000 ounces of gold which a new accounting system at Rand Refinery allegedly managed to obliterate?  The implication is that the old accounting system was frankly useless and now the shareholders (the four big gold mining businesses) have obligingly filled the hole with R1.2bn in cash. Perhaps they hope that the next accounting system will find the gold and refund their money?
Another accounting wonder concerns the R7bn profit reported by Eskom accompanied  by incessant whining that they are not allowed to charge enough to cover their costs for the electricity they supply. Why do the simple sums never add up?
Gracefully I accept that the Proteas are back as Number One Test Playing Nation and that the Aussies should be sending the Mace back home where it belongs as soon as possible. However the Sri Lanka two-match series was not really satisfying and the Proteas need to notch up some proper victories in much longer series. In the meantime didn’t those Sevens fellows do well in Glasgow? The best part has been the New Zealand press grumping about the whole affair.
James Greener
International Girlfriend Day