While it might
feel as though the share prices have fallen sufficiently for some tempting value
to emerge, the fact is that there is still a great deal of downside potential.
The main JSE indices (excluding those with the train wreck sectors that are our
mining industry) would need to fall almost 50% before offering PE ratios
similar to those enjoyed in 2008 and 2003. Of course, those same values can
also be achieved if company earnings doubled from current levels. But that
looks highly unlikely. The communists who now control nearly ever lever of
power in the nation this week held parties to celebrate the enactment of
minimum wage legislation. What no one cared to discuss is the concept of the
enterprise maximum affordable total labour costs. In many businesses, dividing
the latter by the former will yield a number lower than the current staff complement,
and in order not to break the law, that means job losses. This refusal to understand
that making a profit from contented customers and clients is the only way to
true economic freedom is heart-breaking.
When just one
man, albeit an ex-president with a litigious streak and shocking advice, can
ring up a legal bill of R16m and probably more, it explains those gilded lawyer
infested towers that are forever springing up in the smarter parts of town. At
a recent presentation of what the future might hold it was explained to the
audience that the legal profession was very nervous about the arrival of artificial
intelligence and what it would do to their income stream The argument is that since the law deals with facts and is
pretty much black and white (the old fashioned use of the term) it is ripe for
replacement by a robot that has been loaded not only with the laws of the land
but also has unparallel instant access to every judgement ever made. However,
it is not obvious that this potential impact has yet worried our own brand of
legal eagles. Even the slowest humanoid would have by now reached the
conclusion that calling publicly for the murder of all white people and for
good measure their pets was not only unsavoury but undoubtedly law breaking. But
the actual watchdog bodies responsible for controlling and punishing this vile
hatred however have gone off to “study” this disgraceful outburst. Let’s ask
Alexa the robot what she thinks.
A similar
forecast about the disappearance of cash in favour of purely electronic money
and value transfer leaves local observers wondering if the futurists responsible
for this have ever ventured out of the New York coffee bar where they thought
this one up. Exciting as it may seem to do away with cash and have every
transaction pass through a record keeping system, the champions of this idea
are perhaps naive about the scale of the informal and illegal economies where
records are neither required nor indeed wanted. Even if the formal banking
institutions agree to penalise cash handling further than they currently do,
the demand for undetectable money flows will persist for as long as governments
collect tax. And then what about the
tooth fairy’s coin?
Even retired
investment analysts can remain news-junkies for the rest of their lives. The
problem currently however is that each of the three main theatres of news for a
South African based reader have not really changed their underlying stories for
months. Locally our new president continues to spin a “good” story while barely
reacting to and even pointedly ignoring crises like the country running out of
electricity or egregiously incompetent cabinet ministers. In the US, President
Trump doesn’t bother with selling his story and continues to do what he
promised he’d do, with the bonus of utterly infuriating almost everyone else who
never thought it would be possible to be a US president with such a poor grasp of
most facts. And the mess that is Brexit is the most boring story of all. The
obvious losers are those who thought that their government would follow the instructions
that they asked the electorate for. There are no winners here either -- except
perhaps for the crowds of unelected Eurocrats who are still firmly aboard a gravy
train with multiple well-stocked buffet coaches.
Nearly Dakar
Rally time!
James Greener
Friday 14th December 2018
