Friday, 24 October 2014


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.