Friday, 19 December 2014


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