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