Friday 21 April 2017

AND YOUR NEW PRESIDENT IS …….



Most people are very pleased to get their hands on some unearned wealth. Legacy and larceny are probably the two main sources for this kind of loot. Unfortunately, the second source is now commonplace in this nation. Mr Molefe, who suddenly left the corner office at Eskom after not even 2 years, to become our newest member of parliament will get a leaving present of R30 million. That’s definitely unearned but has undoubtedly help to dry up the tears he shed when explaining his departure.
Our brand-new Finance Minister appointed an advisor who notwithstanding being a professor of economics has failed to notice that Marxism has been widely discredited.  Reportedly, his advice is that in addition to utter failures like SAA, Eskom, SABC, etc. the state should also own the insurers, banks and mines. Fortunately, Minister Gigaba has apparently rejected the advice but alarmingly not yet the advisor. He is now overseas with an admirably small team but probably large luggage (our minister is a snappy dresser) trying to find money.
The presidential succession question seems to have been answered while we were wondering what overseas investors were making of Minister Gigaba’s road show. Based on column inches of newsprint alone Dr Dlamini-Zuma would seem to be a done deal. No messy internecine squabbles and divisive nominations necessary. Democracy is a very colonial thing. Our next leader appears to have been decided – perhaps in the Saxonwold Shebeen – and we are already being fed her views and opinions on many topics. And very unappealing they are too. Displaying scant regard for facts let alone constitutional niceties this lady has made up her mind that a minority of the population are foes and will need to be discriminated against, a practice that we all hoped was abolished two dozen years ago. It’s extremely worrying.  The faint hearted are advised not to Google for more details on this clever, cunning campaigner.
The arrival of the computerised spreadsheet a quarter of a century ago filled the hearts of the number geeks with glee. Never before had it been so easy to collect, manipulate and misinterpret data. One of the finest examples of this is the consumer price data spreadsheet released every month by Stats SA. Sliced and diced into almost 750 categories of commodity types, geographical areas and income and age groups, a decade’s worth of monthly price data are indexed and made freely available. Just one row in the latest spreadsheet reveals the so-called Headline Consumer Price Inflation for All Urban Areas of 6.1%pa, about which a certain amount of optimism was expressed this week.  However, elsewhere on this huge schedule one can discover that hard-pressed Northern Cape consumers are now paying 26% more than a year ago for their sugar, sweets and deserts (sic). It’s not as if they’re short of sand in the Kalahari! At the other end of the scale, telecommunication equipment in KZN was a whopping 12.5% cheaper.  Both of these results ( and many others) feel suspect. The booklet accompanying the data hints at the effort and perils of collecting the raw numbers to populate this spreadsheet. Indeed! For example, Rugby Ticket prices are sampled in February and August while Cricket Tickets are monitored in October. There’s no mention of Soccer Tickets though.
With the second four-day week coming to an end today, people have become accustomed to the holiday feeling and although only Thursday next week is (yet another) public holiday, Friday will be mostly a no-show and so a mere three days of early rising beckons. It’s really hard on we retirees having to work out when’s the best time to go to the bottle store and when the beaches will be empty.
A sleek newspaper insert slid to the floor this morning as I was searching for the funnies. It was a Guide to Preparing for the Comrades Marathon taking place on June 4th. This information might be a bit late for those actually taking part. But the sections on eating and drinking during the race and pain management were particularly pertinent for me because that’s what I’ll need to worry about when slumped on the couch in front of the TV. It will also be useful for enduring the half-dozen Super Rugby back-to-back matches tomorrow. And the London Marathon on Sunday. No guidance about the “Remote Thumb Syndrome” though.
James Greener
Friday 21st April 2017

Thursday 13 April 2017

JUNK FORECASTS



The waffle level reached new heights when another of the ratings agencies threw its hat into the ring and also declared us to be junk. There is widespread puzzlement that markets have not plunged as far and as fast as the prophets of doom would like. In fact the JSE All Share is at the year’s high.  Part of the reason for the muted immediate response to the news is that real analysts running actual portfolios had long ago formed their own opinions about the likelihood that SA would default on its international debt obligations and made the appropriate adjustments to their positions. Hopefully for reasons of objectivity ratings agency people don’t have exposure to the markets on which they so grandly pass judgement. But who knows. There are small scraps of tantalising evidence that some insider trading took place ahead of the recent cabinet reshuffle and subsequent events. After all there were presents to buy for a president celebrating his 75th birthday this week.
The new Minister of Finance is very excited about the policy of Radical Economic Transformation. He is sure that this will place South Africa firmly on the path to growth and wealth. This is an outcome everyone would welcome but the details of how it will work are scant. It seems to lay great store in the ability of politicans to allocate resources and assets. Unfortunately, few governments have managed to do that successfully but this escapes the attention of the people in charge who mysteriously are always the first in line for the allocated goodies.
The difficulty of trusting and interpreting the deluge of data available to investors was nicely illustrated by the juxtaposition of the news that the nation’s 12 largest retailers reported sales of R600bn in 2016 while the net wealth of households declined by R120bn. Many people including our president can’t grasp just how much money these numbers represent and only accountants know what these terms mean but something is not quite right. Are retail shares a buy or a sell? It’s not easy.
It’s an excellent piece of advice: “Don’t Get a Traffic Fine This Easter” is the message placed in the newspapers by an outfit called The Road Traffic Infringement Agency. Sadly, it is doubtful if this message will have any effect on the customary accident-fest we endure at holiday times. Just who RTIA are is unclear but they seem to be yet another of the innumerable organisations that we so love forming here in South Africa. A resolution of the bus driver’s strike affecting large swathes of the country depends upon the South African Bus Employers Association and the Commuter Bus Employers Organisation reaching agreement with the strikers’ representatives at the South African Road Passenger Bargaining Council. And have you noted the outbreak of ombudsmen? They’re popping up everywhere, in theory to help citizens fight the injustices of their government. But really to swell the tally of state employees.
Most ratepayers were rather relieved when the Commonwealth Games were taken away from Durban. The financial benefits to a city of hosting these jamborees are never certain nor clearly revealed. However, next month the World Economic Forum circus is coming to town so we will once again be privileged to watch the great and good blasting through our streets in multi-vehicle cavalcades. The whooping sirens and flashing blue lights are so exciting. It won’t be as chilly here next to the Indian Ocean as the delegates experienced in the snows of Davos but nevertheless Number One and his entourage are sure to use the opportunity to wear those trademark scarves in SA colours. Have they wondered perhaps if those garments also signal to other delegates that they should dash for the exits and avoid the begging bowl.
Amidst all the information washing up around us one piece in particular is quite horrifying. Beer volume sales have declined! Even the new folk running SA Breweries have admitted that this is unexpected. This country is in far worse shape than any of us thought.
It’s a bit unfair that the criteria for selecting which two teams to drop from next year’s Super Rugby competition will be the balance sheet and not the score sheet. If the Bulls carry on as they are they will be lucky to come last and yet they can’t be dropped because they have money.
James Greener
Maundy Thursday 2017

Friday 7 April 2017

GOING GIGABA



As the saying goes: “My, but that escalated quickly”. Messers Standard and Poor must have been lurking behind the door with fingers poised over the speed dial keys. Allegedly they didn’t even wait for April Fool’s Day but called Number One, as well as his brand new Finance Minister, Malusi Gigaba on Friday 31st to give them the news that they were now doubtful if this nation was either capable of – or worse still – concerned with repaying loans. Accordingly, they (S&P) had dropped South Africa a few notches down the ratings scale to a level below the arbitrary, but still feared, Junk Status barrier. A short description of what this means can be found here[1]. It was not until more than 72 hours later, on the following Monday, that the rest of us were told the news. If this is indeed true it raises the question of why. Inside information of that kind is extremely valuable and we know that our president is quite prepared to profit even when his country does not.
Except for selecting luxury cars, the ministerial grasp of some of the more technical trappings of colonialism is often tenuous. Minister Dlamini told the Constitutional Court that her report to them on why she had failed to do her job was late because it was so big that the email “bounced back”. Further comment is superfluous.
The byte as a unit of information is quite familiar. A thousand million of them is of course a Gigabyte. The ba is obviously a unit of ministerial ignorance and incompetence and so the Gigaba is just perfect. Thanks so much for that, Buddy.
Commentary on the credit status downgrade has ranged from the wise to the asinine. We have indeed been here before but only the silver haired will recall the debt-standstill. It is not easy to climb back up the ratings ladder and suggestions that junk status is a good thing won’t help anyone to grasp the sacrifices that are essential if SA is to regain financial health and achieve economic growth. The first and largest cuts should be made in the public sector, but this is unlikely. The redistribution / transformation mantra is already being chanted louder than ever with calls for the punishment of the ever-diminishing tax-paying private sector being repeated in the chorus. But Economic Freedom is at hand already. Anyone can start any business. What is missing is Economic Literacy and the understanding that governments consume wealth not create it.
An alarming and foolish regulatory intervention is starting to seep across the investment industry. Naïve and suspicious suits have noticed that certain types of institutions like stock brokers and investment banks maintain compounds where clever people are kept and made to do research. These so-called sell-side analysts, horror of horrors, freely distribute their work to the clients (the buy-side). The regulators see this practice as an inducement for clients to do business with the providers of the research. Well yes! That’s exactly right. “But that’s wrong and evil and akin to bribery.” say the suits. “And in future clients must pay for research”. The axiom in our industry is that only half of the research is useful but no one knows which half. Accordingly, clients are not going to pay very much for something which is likely to be wrong half the time and this will probably result in many of those analysts being told to leave the building. While it is true that an outright forecast of an economic statistic or corporate result has a 50% chance of being correct, the buy-side does appreciate and make use of the deep understanding and useful contacts that good sell-side analysts have made in their market sectors. In addition, their skills are invaluable on the other side of the so-called Chinese wall where corporate deals are planned and structured. Oops. Wait ‘til the busybodies find that out! Why don’t these bureaucrats just leave us alone? In fact, it’s the state’s policing and prosecuting systems that fail to complete the task of timeously catching and punishing the bad guys after they are exposed by data transparency and competitors.
With anger, intolerance and mayhem threating the nation today it seems trivial to remark that in the real world, there are so many sports events that deserve our attention as well.
James Greener
Friday 7th April 2017