A RHODENT WRITES

 It’s not exactly a roaring bear market (yet) and the all share is off only about 2.5% but it’s a sufficiently large move to require that the talking heads come up with reasons for it. One popular theme is that Yemen is being bombed by its neighbour Saudi Arabia. Now most of us have only the barest ideas of just where these places are and further almost none of us have any idea why they need to be seriously nasty to each other. However, many of the world’s markets have reacted to these developments and so to show how grown up we are, the JSE drifted off as well. Actually it’s unnecessary to look to the Middle East for reasons to be anxious about our markets. There’s plenty going on at home to make one nervous.

The biggest number to worry about is the R1.61 per litre price rise coming next week to the petrol price. This is going to hurt disposable incomes and unavoidably affect retail spending which reportedly is already being hammered by ever stricter interpretations of consumer credit laws. The period of respite granted by a falling crude oil price has been cruelly terminated by a desperate National Treasury and a sagging currency.

Shortly after telling the nation that too many of we citizens are reliant on state handouts, the president promised that about a billion rand would be set aside for low interest loans for businessmen selected by race. Without dwelling on the likely unconstitutionality of that policy, the contradiction is stunning and is a perfect example of the lack of understanding of how economies work. Any business that survives only because of taxpayer subsidies is not adding any value. The president also complained that this step was necessary because commercial lenders were refusing to supply cash to these applicants but failed to spot that this was most likely because the banks saw a low probability that the businesses would be able to repay the loan. Governments of course have no such qualms.

There can now be no one with the naïve view that the migration of land based TV transmissions to a new system would be achieved at the lowest cost and the greatest benefit to all the country’s viewers. At a meeting of the potential manufactures of the so-called set-top boxes, violence ensued and guns were waved. The mentioned sum of R4.3bn clearly has lots of fat well worth fighting for.

Even if we are never able to determine exactly who did what, to whom and when, the indisputable fact is that where we are now is the consequence of every action by every one in the past. Many of those acts were wise or philanthropic and delivered benefits that are still being enjoyed today -- like having a developed nation over 100 years old. But equally, by current standards and context, many of those actions are alarming and deplorable, but most importantly, irreversible. No amount of yelling, poo-throwing, paint-spaying or even quiet discourse can change history and only immature and ignorant people would ever attempt to do so. Attacking and defacing symbols and images of the past is also deplorable even if there are grounds for relocating them. The “students” calling for the elimination of all references to Cecil Rhodes will never know the impact they are having on the contemplated generosity of future benefactors. They might however experience a reduction in the value of their own studies at an institution that bows to demands to deny history.

So with both the soccer and cricket trophy cabinets bare we must all now pin our hopes on the ‘bokke in October. With three out of four wins on the away tour the Lions are making the selectors’ job ever easier. The Sharks meanwhile seem to be intent on collecting a full deck of red cards. Talking of red, when will Ferrari start winning again?

James Greener

Friday 27^th March 2015

MEGARANDS FOR MILLIWATTS

Some analysts feel that they can discern a slight shift in attitude amongst the big official cheeses (aka central bank governors). While  some governors appear to rely on techniques not all that different from throwing bones and sifting through chicken entrails there are hints that rates may have to rise “…..but by just a tiny bit and not right now”. Bolstered by such fearless decisiveness, investors have returned to most markets with renewed confidence that no price is too high. Even the rand and the euro have strengthened.

Is there not a single name in Number 1’s address book who is an admirable member of the human race? It seems that every one of his cronies, appointees and advisors is deceitful, corrupt and dishonest. Even more lethal is that many of them are simply out of their depth, unqualified for and incapable of doing the tasks bestowed upon them by the chief.  After checking the size and date of the bonus payout and looking at the view from the lofty corner office window many of them have no idea what else to do.

Something has gone very seriously wrong at Eskom. Something even bigger than the fact that  less than three quarters of the nation’s generating capacity is actually operating. JZ has announced that he personally will take over the investigation that the chairman of the utility wanted to lead. This probably means that the main issue is not primarily a technical one since Zuma most assuredly has zero skills in that area. Perhaps some carefully crafted personal enrichment schemes have gone awry, “friends” have gone rogue, contractors are getting restive and too many paths are leading back to the presidential desk. JZ needs to move in fast and see what can be covered up and who deserves the blame – if not Jan van Riebeeck then maybe Cecil Rhodes. Is there anyone who has the ability and more importantly who could muster the political support needed to tackle the very challenging situation? Firing all the incompetent seat warmers would be the first step.

 In Greece the politicians are giving poor people free electricity and food. This is after all what they promised they would do if elected to power. The fact that their government has even less money to spend than our own lot doesn’t concern the Greek MPs. The attitude in Athens seems to be that the people who need to worry are those who lent them the money. In a way they are quite right. Back here at home red flags are being hoisted all around Megawatt Park warning lenders that the chance of getting any money back from Eskom is getting slimmer by the moment. Fortunately for most entities in dire straits there are always risk takers who judge that there might be adequate rewards and continue to advance more cash. Notably, however, said risk-takers are usually using other people’s money. In Europe the other people are mostly unhappy German taxpayers. In South Africa electricity consumers who actually pay for their power (as opposed to stealing it) are going to be milked. Hefty tariff increases are on the way.

What a simply splendid story. There are people on the government payroll who think that drones posed a security risk for the people inside the parliament buildings during the president’s recent gabfest. Therefore they installed a radio frequency jammer which unfortunately also jiggered cellphone reception. The real drone danger, however, was from JZ who sent many MPs off to sleep and death from boredom was much more likely than any threat from a model helicopter.

The Proteas’ defeat of Sri Lanka in the quarters was very satisfying. It is amusing to see how many of the other teams claim not to have noticed or cared about the result. Liars.  For the Sharks however, the route to the play off is still long and treacherous. Did anyone else notice the Lions win this morning?

James Greener

Solar Eclipse Day 2015

UNLUCKY THIRTEEN (rands per dollar?)

Just over a year ago we were all fretting that the rand might breach the 11.50/USD level. These days we are a rand worse off. Our currency at present has stalled just short of  12.40 to the USD and it doesn’t really help to say that this is mostly all about dollar strength. The euro is in fact faring far worse than us and the folks there should be bracing themselves for hordes of American tourists this summer. The All Share index is off around 2% so far this month with just the cell phone sector offering a bit of comfort. The miners are a train smash. 

Any pretensions we have to being a grown-up and serious nation must surely have been finally swept away by the events of this week. Yet another CEO of ESKOM, the power utility, has been kicked out almost before he gets to choose the new fittings for his en-suite wash-room. Number 1 put on an Oscar-winning display of hurt and puzzled ignorance of any accusations of his lamentably corrupt behaviour when he ventured back to parliament. And the official opening of a nudist beach on the south coast has run into a thicket.

Also starting to heat up is a stupid and pointless argument about the race of shareholders on the JSE. All kinds of folk have rushed into the fray waving calculators and data in support of their own view. The unexplained part is why or how anyone is able to issue any analysis broken down by skin colour. Even discarding for a moment the fact that very few shareholders are own name individuals, unless the JSE’s client broker accounting systems have changed recently, there has never been a field to record the race of a stockbroker’s client. And of course the race of an institutional account in the name of a pension fund or unit trust or an overseas bank and so on, is meaningless.

The government tripped up on a similar lack of information when it tried to interrogate the land ownership registry recently. It was unable to get the results its ideology was so sure must exist. And does the hopelessly inaccurate eNatis car registration system record the ethnicity of each vehicle owner? How would it classify rental fleets? It seems that most of our asset register systems are sensibly and agreeably blind to the matter of race.

With the rather disgraceful JSE exception of a handful of listed securities restricted (how?) to black shareholders in terms of the wealth destroying BEE schemes, all South Africans actually do have economic freedom to buy and sell any assets of their choice. Juju’s mantra has always seemed foolish when what he actually is demanding is money for himself and his supporters. But a “Give Us Money” party would result in the letters GUM on the red berets and that looks like a glue advertisement.

Who knew that a lowly wheelbarrow could attract duties as high as 32.32%? Apparently the Chinese are dumping these dumpers into our market and local manufacturers are screaming blue murder. Either the imports are flimsy rubbish unsuited to the local task of lugging crates of quarts from the bottle store, or something very odd is happening in the secret world of wheelbarrows.

It’s official. “Durban ranks as the highest city for the quality of life in South Africa.” There’s something wrong with the order of words in that boast from the mayor but the point is made. Now all we have to do is fix the rugby team. The Sharks are sinking fast.

The Proteas will meet Sri Lanka in the cricket world cup quarter-finals next Wednesday. I guess no team that got this far is a pushover and those chaps from Ceylon look very determined and hard to get out. It will be a tough match. Let’s hope AB and the lads carry us through. An unkind email doing the rounds points out that the English team is being carried by a British Airways plane to Heathrow.

James Greener

Friday 13^th March 2015.

FREE AIR?

Even for a physicist this relativity stuff is not easy. When priced in US dollars our currency has lost about 10% of its value in the last 12 months. But in euros it is almost 15% stronger over the same period. Our runt is also up versus the Yen and pretty much unchanged against the Pound since this time last year. This boils down to the conclusion that that there has been steady demand for the US dollar despite all the nasty things that are said about that country. In theory most of us shouldn’t be needing as many dollars as in the past, since oil, which is largely priced in greenbacks, has fallen so much in price in the past year. Indeed the dollar prices of a great many commodities have been falling. And yet folk want dollars.

Despite the deluge of rather good company results, the JSE has lost the momentum it enjoyed since the start of the year and is shying away from a convincing breach of the 53 000 level.

One would have thought that in the wonderful new world of immediate and universal internet communication there was very little that was really secret. The emergence of a tribe of brave whistle blowers has shone a bright and welcome light on all sorts of things that our leaders felt we really didn’t need to know. And yet it seems we have spies doing things. One of our spooks is especially incensed that his cell phone number has been revealed. Surely he doesn’t use his mobile phone for confidential chats? Isn’t there a big red telephone on his desk that connects him to Number 1 to warn him which wife could be adding toxins to his porridge?

South Africa is a party to a global agreement to close down in a few months time all “terrestrial free-to-air” TV broadcasts. This has to be done to release a slice of the broadcast spectrum for another technology and should be straight forward. The affected TV stations will broadcast their programs on other channels but using a digital format. They will continue to send out the signals from the high TV masts which are dotted about the place, hence the term “terrestrial” The very many viewers who receive their TV programs broadcast from these masts will need to acquire a small piece of equipment in order to handle the new digital signal. This “set-top box” is a digital-to-analogue decoder, very similar to the one used by the viewers who subscribe to the services where their programs are transmitted from a satellite. There are two problems that worry the government about this change-over. The first is that many of their supporters won’t be able to afford the set-top box and secondly, the lucrative business of manufacturing these boxes should ideally be parcelled out to friends and relatives.. To help solve the first problem they plan to issue at least 5 million of the set-top boxes for free to selected voters/viewers.. Undoubtedly a secondary market in decoders will immediately spring up and this will not do.  Controlling this, requires that the boxes have some way of being switched on and off remotely. Reaching cost-effective, appropriate and regime-friendly solutions to these and other problems has been the cause of prolonged and fierce squabbling. Despite claims to the contrary they are probably not yet all resolved.

The massive and bulky tomes comprising Minister Nene’s budget have not yet gathered their first layer of dust when one of the constituencies he asked to play along has demanded far more money than he offered. As predicted this “austerity” stuff is unappealing. Since many of the services we expect from our government are already subject to lengthy and error-ridden delays, perhaps the strikes will make little impact on our lives. It will, however, probably mean that the new revenue generators will prove insufficient and this time next year they will have been cranked up yet again. Although not yet enthusiastically promoted by most banks, the new tax free interest paying accounts deserve a close look by all investors.

Hopefully the Proteas’ confidence and momentum will see them very near the top of their pool at the Cricket World Cup. But then the really tense stuff begins because to win the cup they have to win four successive matches. We have never done that at the world cup before. Oh dear. And the Sharks really are going about getting to the Super 15 play offs the long way round.

James Greener

6^th March 2015