Friday 29 April 2016

STATE OF THE PERCENTAGES

Next week will be the last of the Autumn Series of four- (or fewer) day weeks that we enjoy here on the southern tip each year. Productivity is not a part of our culture.  Neither, any longer is mining, at least as far as the stock market is concerned. None of the top five market cap counters on the JSE is a mining company. Booze and smokes take the top three places with Naspers, a media company, number four and Richemont, the luxury goods outfit in number five. What an amazing turnaround from the good old days of open outcry trading on “The Floor” where the man (and only much later the woman) who held the de Beers “pad” was the rain maker. Today three out of the four (all very small) listed diamond mining companies are loss making.
By contrast all but one of the more than two dozen companies in the Consumer Goods sector are reporting profits. We are a nation of consumers. A fact supported by the astonishing crowds who thronged the opening of a new and very large shopping mall between Joburg and Pretoria yesterday. Reportedly the traffic jams were awesome and some of the shoppers went home in cars that did not belong to them. Both of these phenomena confirming out national competitive advantages of breaking and stealing stuff.
Before fretting about the news that our largest trade union (metalworkers) believe their members deserve a 20% pay rise this season, consider the take home package increases of more than double that being scored by some bank bosses and the severance pay for a cell phone company executive. Now the whole field of executive remuneration is a minefield patrolled by eagle eyed consultants and administered by hardly disinterested remuneration committees and commented upon by jealous scribes. Almost the only shareholder to grumble a bit is the state pension fund. It all rather adds to the unreality that is this country.
A further example is the epidemic of State of the Nation/Province/City addresses by head honchos whose domain is not always not in a state deserving boastful claims. Presumably displeased that his shindig will not be televised to a rapt audience, Executive Mayor Parks Tau of Johannesburg has bought pages of print space to assure everyone that no fewer than 13 radio stations will clear their schedules in order to relay his words to adoring ratepayers. Well run entities don’t need to boast.
In a quaint and moving but perhaps rather colonial ceremony, various National Orders were awarded to a long list of deserving worthies yesterday. A common theme in the citation for the recipients of the bravery order (most of who are now dead) was that they had a steadfast belief in the equality of all citizens. How disappointed they would now be to see how that cherished hope has been trashed. The difficulty of naming public places after people was highlighted when it turns out that The Order of the Companions of OR Tambo has nothing to do with a convivial airport but is awarded to grateful but perhaps startled foreign nationals who were thoroughly friendly, particularly in their support for “the struggle”. This year’s list of recipients included an Algerian diplomat, a Dutch arts and culture manager and the president of Chile.
Sports minister Mabalula wants to impose retribution on certain sporting bodies who ins his view still select ability before race. Even if he has the authority (debatable) he certainly doesn’t have the money to help solve what he sees as the problem.  One of his department’s tasks is to develop and promote sport for youngsters so as to reveal passion, talents and skills. Clearly this task requires cooperation and understanding from schools and teachers willing to provide resources like facilities and adult supervision and coaching. Realistically at this time in our history this is not possible for everyone, so to punish those who do emerge from this morass is just silly.
James Greener
29th April 2016

 

Friday 22 April 2016

BLACKED OUT



With just one week of April left (and it’s a short one at that) the All Share is barely 1% better on the month but the dispersion across the various sectors is huge. Some mining shares are up over 20%. This is another piece of evidence that the dreadful and prolonged slump in commodity prices may be over. What isn’t over are the arrangements for the merger of Anheuser Busch In Bev and SAB Miller. Many parties, particularly SAB management are anticipating substantial windfalls when the deal is finalised, but this news has caught the attention of employees less highly placed on the food chain and they are threatening to derail the process unless they too share in the bounty. Those of us who also forgot to buy SAB a few years ago share their frustrations.
One of the saddest developments in our country in the past decade has been the rise in officially practiced and condoned racial discrimination of our citizens. Together with unpunished outbursts of terrifying hate speech and near treasonous incitements to violence, it is not just Number One who is in contempt of the Constitution. The possibility of all South Africans getting the country we were promised is fading.
The present government has resurrected the immoral and inhuman race classification criteria in order to identify people who it believes should benefit from a political allocation of resources. That now nearly half of the country’s millionaires are from a previously disadvantaged background shows that this policy has certainly worked for the well connected. But there are problems and issues with this redistribution program
For example, the percentage of black-owned shares in a mining company may never fall below 26%. Therefore, if a sale by a “black” investor would cause a breach of that limit, the seller must hold off until a bid from a sufficiently “black” buyer appears. Bids from “white” investors cannot be accepted. The seller is immeasurably disadvantaged all over again. The market’s reaction will be to have two prices for the same thing. Ironically the “black” market price will generally be the lower. This is already happening with the listed “blacks only” counters on the JSE. Surely this is not the state’s intention?
The purely practical difficulty is that the investment industry (like all law-abiding entities) does not record the race of each of their clients, customers and shareholders. To do so would mean that someone would have to meet and classify each client which would be an impossible and illegal task. And further, the race of an investment fund is meaningless. But despite these facts, every day brings news of further edicts which apparently have been compiled mainly to hassle, hamper, hurt and hinder a shrinking proportion of the population which poses no threat to government power but ironically supplies it with most of its money. It is as we said at the outset, so sad.
There was recently a meeting in Washington of most of the world’s finance ministers and central bank governors. It would be fascinating to learn what this crowd thought of the fruit of their labours on the global economy. Negative interest rates, deep recessions, volatile currency exchange rates and widespread poverty and unemployment are hardly chapter headings for a success story!  Only half a dozen of the 100 or so delegates posing for a rather overcrowded group photo are not in suit, collar and tie and they are all women. But that small group does include the two most powerful people there. Namely Mesdames Yellen and Legarde who are among the handful of heavy hitters seated in the front row, of which our own Governor Lestja Kganyago occupies the end seat. Goodness. “Respect” as they say! But perhaps he was just late for the photo session and the bleachers were already full.
The mood at the bowling club bar will be a bit lighter this evening with the amazing last minute victory achieved by the Sharks this morning in New Zealand. Fortunately, there are no Cheetahs fans to rain on the parade. This rather unusual scheduling with two SA sides completing their weekend fixtures before the Friday beer is quite unsettling.
James Greener
Earth Day 2016

Friday 15 April 2016

BUTTER SIDE DOWN


Intriguingly the rand is today stronger than it was before Number One felled all the skittles and fired Finance Minister Nene who was irking him by refusing to pay for the presidential patronages. And while the political landscape is littered with wreckage of constitutional expectations and discarded principles, the financial one is swiftly back to normal. Buyers of shares are inclined to pay more for fewer earnings. Consumers are paying more for purchases. And the cost of credit is also on the up. Enough rain has yet to fall in the right places. Anyone with a bullish forecast must have their fingers crossed firmly behind their backs.
A clever analyst has developed a neat way to price politicians by expressing it as the number of median sized taxpayers it takes to cover each salary. Unfortunately, the data he used is a bit old, but in 2012 One President needed 56 taxpayers to get him through the year. Today with almost 100 members of the cabinet it is probable that upwards of 4000 taxpayers are required to pay just the top layer of government.  That’s pretty much the readership of Tidemarks. Just saying.
Only highly skilled and trained economists will be able to understand the agreement that Grain SA has with government not to allow the price of imported wheat to fall below $294 / tonne. The current global wheat surplus (for places not suffering a drought) has caused the international price to drop, but this windfall is not to be enjoyed in SA. The agreement automatically places a tariff on all imports of this important food to keep the price at this special level in US dollars. In rands, however, it obviously has soared and the probability that bread prices must go up in an election year is causing alarm even amongst those who eat little of the stuff. This agreement is just another example of a special interest group getting government support and money to control their market. Every industry and business occasionally attempts this stunt in some way and the trump card in the negotiation is often the threat of unemployment amongst important voting groups.  This terrifies politicians of every party and usually the principle of free markets fades away to be replaced by the dead hand of bureaucracy slumped across the controls of that section of the economy. Once upon a time, here in SA there were battalions of control boards roaming the corridors of power in Pretoria and it is a surprise to learn that they have not all gone extinct. 
The imminent formation of a company that will brew and sell almost one third of the entire world’s beer is worrying the suits who are sure that no good will come of such a giant. One particularly stupid demand is that the new company should brew and sell low and zero alcohol beers. Rest assured, if there was any demand for such a vile product the folk at Anheuser and SAB would have been onto it years ago. Nevertheless, the competition cops feel this will keep the chinks open for competitors. Actually competition is already emerging from the Craft Beer industry which seems to attract the big spending so-called hipsters. Some restaurants no longer stock even Castle Lager. Who is Charles Glass anyway?
The suspicion is growing that Minister van Rooyen during his 96-hour tenure in the Finance Ministry did perhaps do slightly more than check the en-suite facilities and measure for curtains. One ringing alarm bell is that shortly before his appointment, Desmond spent one day in Dubai “on holiday”. The brevity of this break he said was because it was all he could afford.  If nothing else this admission should alert local holiday resorts to bombard him with pamphlets about more affordable vacations. Now Dubai was also the place where our president made a very brief unscheduled stopover recently and it was the first destination of the Guptas who gapped it. Clearly there is something or someone important in that place. Our country’s meagre reputation and perhaps wealth are getting a thrashing. 
Why did SARU think that the announcement yesterday that Allister Coetzee would be the new ‘bok coach was news? It wasn’t even a secret let alone a badly kept one. However, all we want is for the coach and his team to pick a winning team game after game. Deliver us a victory over the All Blacks for the next five years and I will certainly be proud to boast that we both come from Grahamstown.
James Greener
15th April 2016

Friday 8 April 2016

COURTING DISASTER


There is not yet any evident reversal in the plunge of company earnings captured by the various market indices. In most sectors, this fall has outstripped the recent decline in prices with the result that pe ratios are at all-time highs which is an unappealing time to buy. But inflation appears to creeping up rather quickly – to the extent that some “real” interest rates are now negative – and usually this is an incentive to preserve value through buying shares – particularly the rand hedge counters. It’s never easy!
Isn’t the internet amazing? Any document, picture, movie or data which is stored in electronic form can be made widely available instantaneously and perhaps more importantly largely anonymously. A week ago no one had heard about a Panamanian law firm with the improbable name of   Mossack Fonesca. But an electronic doorway in that firm’s computer was opened a crack and to the delight of sleuths and muck-rakers, torrents of data escaped.  Soon we all knew that the firm specialises in helping people conceal their money from nosy voters, relatives and of course tax collectors.  But the bonus was the publication of   Mossack Fonesca’s client files. Naturally this triggered an epidemic of frantic, embarrassed and astonished denials amongst the powerful, rich and famous. Most, including a prominent (in every sense of the word) “entrepreneurial” nephew of president JZ, have offered a variant of the well-worn defence of “It was not me. I was not there, I know nothing. My advisers let me down.” An early victim of the incriminating revelations has been the prime minister of Iceland who quickly heeded his electorate’s demands that he resign.
However, our own Number 1 has yet to demonstrate us similar civic integrity following the judgement delivered by the highest court in the land. He very politely thanked the court for their efforts which he said showed that the advice he had received was wrong and that he would be more careful next time. The party praise singers howled with glee that this “apology” was brave and manly and have clustered around him in a perk-protecting phalanx. Suggestions that the necessary response to the judgement should be that Zuma spend more time with his family and none running the country as a personal gravy-train were rejected with disdain. Barring a few pods of dissident democrats trying to mobilise an impeachment movement, it’s business as usual. The next hurdle for the ruling party is how to get around the rule that everyone on the Voter’s Roll must have a verifiable address. This is a tough call. Actually, voting in local elections ought anyway to be restricted to only those people who are ratepayers. There is no need at all for local government to be a political battleground. Years ago my mother (as the registered home owner) was the only one in the household able to cast a vote for the local ward councillor. She delighted in ignoring my father’s polling advice. Ratepayers by definition have an address. Problem solved. A useful consequence of this idea is that there would be great pressure on everyone to transfer land from the state to individuals.
Following some horrible and spectacular traffic offences committed by young overpaid professional soccer players, the Minister of Transport has laid the blame at the door of that sport’s governing body. Her view is that “(T)he PSL leadership…have the responsibility … to educate soccer stars about road safety.” A startling idea but surely one that follows only after her own department ensures that all drivers and their vehicles meet the existing laws and standards.  
Its Sharks vs Lions this weekend and as usual I shall wear the colours of both sides. It is however preferable to the kit being foisted on some of the Super Rugby teams at the expense of dignity, sense and team identification. The Kings versus Sunwolves match last week was a riot of  reds. Utterly frustrating. Just like the obviously untested new Grand Prix qualifying system (now fortunately scrapped) which produced long periods of empty track. At least The Masters sticks to an old formula of 72 holes of golf and a Green Jacket for the winner.
James Greener
8th April 2016