Friday 25 September 2015

TICKET TO RIDE



In case you missed it, SARB left the repo interest rate unchanged but the local markets were much more interested in planning for an extra-long weekend and heaping scorn on the Springboks. This allowed the rand to test the waters north of 14 to the USD and look comfortable at worse than 21 to the GBP. Without the huge contribution from SAB responding to the takeover talks, the All Share index performance would be negative instead of the misleading 1% positive it may record. It is distressing to note that the platinum sector index lost as much ground in the month as the beverage sector index (in fact just SAB) gained. That is more than 20% in each direction.
The sole simple fact to emerge from this incident about Volkswagen diesel engines coughing out far more nasty gasses than the rules allow them to, is that simply no one wants to pay tax. Governments world wide with near zero understanding of the sometimes rather complicated relationship between the waste products of an industrial economy and the health of our planet have nevertheless been delighted to have been handed something to regulate and tax. Because of this aforementioned (and quite understandable and reasonable) ignorance they have relied on the easily targeted emitters like car manufacturers to report just how much gas and tax they are responsible for. The outcome was obvious, and interestingly much of the global official fuss has been about the missing revenue not the filthy fumes. Now will the smug US regulators will turn their attention to Yellowstone Park where the geysers belch perhaps as much as 20million tonnes of carbon dioxide every year. Dreadful!
Very little is known about our brand new minister of mining. He may have a teaching qualification and has worked at as a teacher, a politician and was the Free State Provincial Minister for Agriculture. Mosebenzi Zwane is supposedly friendly with the Gupta family who have benefited enormously from in turn being close friends of Number 1. But the worst thing about the man is that he is prepared to dress himself in the skins of endangered animals. It remains to be seen if he hastens, slows or even reverses the fortunes of our desperately endangered mining sector.
The government officials responsible for steering the new contentious Promotion and Protection of Investment Bill through parliament have been forced to agree that the proposed legislation is mostly silent on the first word of the name and so have agreed to drop it. The problem is that most of us in the private sector think that it is the second word which is the real problem. In particular the bill can be interpreted as in fact decreasing protection for foreign investors and we all know what happen when they feel unhappy. Cue more rand weakness.
Clearly many municipalities are finding it hard to tempt anyone to lend them money. Presumably all the usual lenders are already “full on the name” and are wondering if they will ever see their cash again. Hence the bright idea being floated that someone (presumably the taxpayers) should start a new bank dedicated to lending just to municipalities. This is rather like the Brics Bank idea but without the deep pockets of China and India. Avoid.
As usual Heritage Day spawned an outbreak of burning boerewors, colourful costumes and popular presentations. Transnet, the somewhat disgraced state owned utility that recently bought trains that don’t fit through all the tunnels, seized the day to direct our attention elsewhere. Bravely it linked heritage to the ports that it operates in the Eastern Cape. Among the historical gems it offered is the news that Port Elizabeth was once known as “The Liverpool of the Cape”. This is easily the most interesting thing to emerge from the public holiday. Clearly the similarity dimmed, especially when the Beatles appeared.
There is nothing left to say about either the ‘boks or the Sharks. The score line is all that matters now. I really don’t like these Grand Prix raced under floodlights. Fortunately, though Ferrari do.
James Greener
Friday 25th September 2015

Friday 18 September 2015

BEER AND TV TIME

Anyone who doubted that we have been celebrating Recycling Week hasn’t been paying attention to what the media was been regurgitating about either US interest rates or the Rugby World Cup. On both topics the pundits have been forced to fill screen time and columns with history, conjecture and waffle.
 In the end Governor Janet decided that the price of money in the USA at 0.25%  is just as perfect now as it was almost ten years ago when the last adjustment was made by her predecessor Helicopter Ben. We must all be grateful to these omnipotent and omniscient people who know what’s right for us. Just look how well the world works.
Also significant this week was the news that the world’s biggest brewer is keen to buy the world’s second biggest brewer which is of course the erstwhile employer of Charles Glass, the legendary creator of Castle lager. This exciting news caused the market value of SAB to increase by more than 25%. This added R260bn to the JSE’s total market capitalisation and caused the All Share index to tick up markedly and confuse people who weren’t paying attention to the details. In fact this month, except for the Consumer Goods sector which is home to SAB, almost all other major sectors are well down for the month.
Predictably, however, the regulators have appeared on the scene muttering that this merger of giants might not be a good thing and could harm consumer’s interests.  However, beer drinkers are a very discerning bunch and the astonishing growth of the so-called craft beer industry shows that many folk have already decided that big is not beautiful. Surely this is one of the most price and quality sensitive consumer markets in the world and both parties will tread very carefully. Messing with a man’s (and woman’s) beer is not a good idea.
Another unsurprising development is that all the published plans for getting the nation’s viewers into the 21st century and equipped to receive digital TV signals have turned out to be nonsense. Mysteriously the market is already swamped with cheap set-top boxes. Outrage and finger pointing has broken out as this was a project earmarked as a nice little earner for selected cronies. Interestingly the region identified for the first installation of this kit is that surrounding the large and growing radio telescope installations in the Karoo. Astronomers are not keen on watching SABC when trying to listen for messages from deep space.
R9.4m is the astonishing price which someone has paid for Hercules, a seven year old Kudu bull with 1.7m horns, It does seem to be a great deal of money for what in the end will probably be biltong and a gloomy stuffed head on a wall.
Meanwhile another bull has also grown (much smaller) horns and the rand has very slightly reversed its headlong plunge into oblivion. The prospect of a large and sustained recovery is quite poor while our politicians and their cronies continue to display woeful ignorance of economic realities.
Already some shifty and oleaginous characters have appeared in the frame to reassure us that the Commonwealth Games won’t hurt Durban ratepayers a bit. It’s all going to be assembled on a shoestring and will be so much fun. Well that may be but one wonders if the country’s rather stringent new visa regulations will have been relaxed by then otherwise all the overseas athletes under 18 will have to bring Mom and Dad along just to get through immigration. But perhaps that’s the plan. You sell more hotel rooms that way. And we sure need the money. A recurring theme in the local press is that the city is battling to make ends meet.
Finally the Rugby World Cup begins today and spirits will soar and crash over the next few weeks. The Russians, who are not taking part in this tournament, have arranged a counter celebration for tonight. The 2018 Soccer World Cup will kick off in their nation in exactly 1000 day’s time so that outranks any old rugby game.
James Greener
Opening Day of the 2015 Rugby World Cup

Friday 11 September 2015

DANGER. BEARS RESTING


The amplitude of the swings in share prices has declined substantially and levels on average are about where they were at the start of the year. Interestingly the latest crop of company results has contained some quite good news and there has even been deal-making in the ruins of the mining industry. It’s unlikely however, that the bear has finished his work and the majority of valuations are near historical highs. The temptation to buy shares at last year’s prices is strong but perhaps even lower levels are still coming.
Minister Red Rob Davies thought the nation deserved to hear his ideas about the nine-point plan to reignite the economy. All this hot air about moving up the value chain and assurances that the government thinks that the nation is facing a challenge is tedious and alarming in its naivety. Forget the ratings and surveys and indicators and all the stuff that the hand-waving grave-faced talking heads use to warn us that the end is nigh. That plunging rand is telling us all we need to know; which is that no one at all is very keen on SA at the moment. Not even tourists are coming.  Even the ideologically blind can’t fail to read this crystal clear message. What our “leaders” have been doing for us these past few years is definitely not working. It is urgent that they stop allocating the nation’s resources to places where the market would not place them. That’s assuming of course that we have those resources in the first place. How many teachers of Mandarin are there in the country?
A further illustration of this unrelenting micro management is the complicated algorithm for determining how much a City Manager should be paid. The appalling Department of Co-operative Governance and Traditional Affairs has declared that the top man in one of the nation's bigger cities could be pulling down R275 000 a month. Ratepayers and their elected councillors appear to be out of the loop on this one.  And the lucky incumbent does not even have to write his own annual reports. And neither do his staff. A very surprising call for tenders reveals that the tough job of boasting about one’s accomplishments is outsourced to a successful bidder. So what actually do all these civil servants do all day? As the adage goes, they may not look out of the window in the morning because then there would then be nothing to do in the afternoon.
It’s all very exciting finding yet another Hominim species in South Africa.  Deputy President Cyril Ramaphosa, who was obviously pleased to have been sent on a job that for once didn’t involve meeting angry people, was even moved to press a welcoming kiss on Homo Naledi’s missing lips.. Since these little guys were undeniably here before any of us, can we expect a land claim on their behalf soon?
Regrettably but unsurprisingly, it seems that we have been lied to once again about the national sports teams. When it was noted the ‘boks RWC jersey would have the  Springbok on the sleeve and not the breast, the story was that it was a RWC rule so as not to clash with the sponsor’s logos. But now looking at the All Blacks strip, that excuse seems to be hogwash. The new cricketing formats mean that three Proteas squads have to be selected for the tour to India and it looks suspiciously as if the racists have been whispering in Linda Zondi's (Convener of Selectors - didn't you know?) ear. And over in the Bafana Bafana soccer camp it is blindingly obvious that something is seriously awry when we lose 1-3 to a country one tenth our size.
James Greener
14th Anniversary of 9/11

Friday 4 September 2015

THE GRASS IS ALWAYS GREENER



The JSE All Share index has caused a great deal of anxiety with a trading range of more than 8% over the past ten days. This level of variability tends very quickly to expose the forecasting shortcomings of the experts who now have to wave their hands more than usual and talk of things like the VIX, which is a volatility measure in the USA. This analyst also has a home-grown measure of the potential for the market to inflict pain on a perennial bull and that measure is currently standing at more than twice the average level. In simple language it’s scary out there.
On the JSE this morning a single krugerrand was sold for R16 000.10 which is not far below the record of R16 200 set in November 2012. But unlike then, today’s price is a result of a very sad rand. For people who value their gold in US dollars, however, today’s price is $800/oz below the peak. Number 1 who was cutting the ribbon on just one sixth of a power station (the other five sixths being way behind schedule) seems to have acknowledged that economically the country is not where it ought to be. Nevertheless his speech also asked the commercial sector to “look past profit margins” and employ lots of people. Hopefully someone sidled up to him afterwards when the tea and cake part of the ceremony was in full swing and pointed out that only profitable companies pay tax.
The report that the North West Provincial Government had identified 34 000 employees on its payroll who simply don’t exist but draw R19bn a year in salaries and benefits was very short on any other facts. Aside from all the obvious questions and outrage that come to mind, the effect of terminating this flow into the economy of the poor and under populated province must surely be catastrophic. That’s of course assuming that these “ghost” employees are actually going to be fired and have their names taken off the list.
Even the local newspaper relegated to below the fold on the front page the news that Durban had won a competition that no other city chose to enter. The excited group of citizens pictured celebrating this city’s honour of being appointed host to the 2022 Commonwealth Games all looked to be too young to be tax or ratepayers. The photographer may have had some difficulty finding them.  But enough curmudgeon; it will surely be a wonderful and exciting event and we can look forward to a long and entertaining series of the old show called “follow the money” beforehand.
A somewhat whimsical but silly idea that the ‘bokke  need to get their boots dirty on South African turf before each world Cup match may not find much approval from the customs people at Heathrow Airport. Firstly the fellows in green and gold will need to explain that the slab of grass in their luggage is not the medicinal sort. Then for a nation that decimated the national cattle herd after an outbreak of foot and mouth disease, the prospect of allowing entry to a grassy sod from the disease-ridden southern tip of Africa is unlikely to be a winner. The boys are just going to have to be content wiping their boots with pictures of Loftus or Newlands. The other rugby story to raise eyebrows is that the EP Kings players have not been paid and have threatened not to travel to their away match at Ellis Park this weekend unless the cash appears. This is just further evidence that the nation really doesn’t have the necessary resources to have six or probably even five sides in the Super rugby tournament.
James Greener
Friday 4th September 2015