Friday, 5 June 2015


Already there are pundits saying that the bear can stop and return to its lair now and that 7% down in the last month is quite enough thanks. But just seven years ago market valuations were at a level which would be equalled currently only if prices fell another 50%. This shocker is merely the outcome of some simple arithmetic together with the assumption that company earnings stay more or less constant. But if earnings begin to leak away then all bets are off and even worse carnage might follow. It is worth noting that the decline is taking place in shares from all economic sectors. In the past few years it was often just the mining and resources counters which weakened. 
Unfortunately the runt and bonds are also taking a pasting this week. Money is definitely leaving the country, as overseas investors start to end their flirtation with so-called emerging markets. Proper pessimists might suggests that the new and overly onerous visa requirements for tourists considering coming to our freezing shores is reducing the demand for our money and so now a pound sterling will buy 19 rands. Wow!
This is all rather technical and decidedly gloomy and the probability of a sudden and lengthy collapse is quite small. Remember that research suggests that investors holding shares in quality companies with excellent managers and terrific brands almost never gain from selling those holdings with the intention of replacing them at lower prices. Rather just sit tight and wait to add to those holdings at leisure later on.
A decade ago Mr Schabir Shaik, the spectacularly unsuccessful financial advisor to the man who is now our president, Jacob Zuma, was convicted of fraud and corruption and sent to prison. Sadly he developed what was diagnosed as a terminal cardiac condition and was released on medical parole after serving just three years of his lengthy sentence. Fortunately sojourns in luxury game lodges and rounds of golf appear to have ameliorated the condition. But this week Mr Shaik requested a relaxation of his parole conditions in order to consult a medical specialist overseas. The more cynical amongst us wonder why he has not been referred to one of the Cuban doctors brought in by his former client. But perhaps Mr Shaik has other chores to attend to overseas.
The blattering that portfolios are suffering are nothing compared to the rapid decline in the fame and fortune of many soccer administrators.. The FBI, who until a few years ago didn’t even know what soccer was, have produced evidence and informants eager to confirm the extent  of the corruption practiced by  FIFA and its acolytes and associates. While most fans and players are certainly delighted with developments, there are pods of panic popping in plenty of places. Not least in South Africa where the government pushed Minister Mbalula out to the podium as the sacrificial spokesman. In his office, every dictionary and thesaurus is open at the word “bribe” in a frantic search to find a kinder word to describe the clandestine payment of money in return for benefits. His performances so far have been derisory and come hard on the heels of his colleague police Minister Nhleko’s explanation of why the president’s own cows and chickens compromise his safety. Maybe it really is time for us all to take to the streets in protest at paying taxes to these buffoons who treat us with contempt.
The Super Rugby tournament has reached that stage where the mental arithmetic wizards can command respect at the bar with the “ifs” and “thens” of which teams could make the playoffs. The rest of us are content to order another round and wait until it’s confirmed in the papers. In Formula 1 even the dead certainties can be derailed by team orders but it seems unlikely that anyone but a Mercedes driver will be this year’s champion. I wonder if the FBI has a file on Mr Ecclestone?
James Greener
5th June 2015