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