PLEASE MR PRESIDENT BE NICE TO OUR BULL MARKET

Now that he has consolidated his position as kleptocrat in chief for the next half dozen years President Zuma has obviously decided to let his true nature show through. He appears to have dispensed with the services of those minders who hitherto have so skilfully managed his “best friends with everyone” persona. Just days after axing suspected enemies from the inner circles JZ has now identified animal lovers as unsuitable role models for people of his race and culture. Given his penchant for draping himself in the skins of rare cats when dancing and praying, this announcement should really come as no surprise.

What was puzzling, however, was his choice of bribes for the rural community where he was speaking on Boxing Day. While undoubtedly useful and welcome, items such as wheelchairs, and lawnmowers are not obviously icons of African culture. The jackpot prize was a 4 room house and a bed which I am sure the lucky winner was much happier with than a beehive grass hut and a rush mat on the floor. In closing proceedings our newly assertive president promised more of the same every December 18^th. Presumably someone had pointed out that dishing out goodies to the poor on the day after Christmas might be construed as a tad colonial and Eurocentric. The President travelled to his next appointment in a German car.

And of course the so called developed lands across the equator are not with out their own lunacies. In the USA there are websites counting down the time to the moment (next Monday apparently) when that country plunges over a fiscal cliff. This deadline – set so long ago when it all seemed an unlikely scenario – will enforce simultaneous tax cuts and spending boosts with possibly dreadful consequences. The simple guess, however, is that nothing much will happen this time either as the world has become quite used to the USA’s large and growing level of debt simply because their currency, the US dollar, is still the only game in town. Unavoidably there will be a day when the ridiculousness of letting one of the world’s greatest debtor nations provide the global currency standard will dawn. It will happen without any warning and very very quickly. Massive fortunes will be made and lost and the rest of us will have to stand on the sidelines and clutch our Krugerrands.

Current amusement in Euro land comes in the form a list of Greek citizens who, it is alleged, could solve that country’s budgetary crisis  at a stroke – if only they were to pay the tax they are thought to owe. The list, it seems, keeps getting lost! And when found again it is a few names shorter. Has no one managed to tap these names into a spread sheet? Is it still a grubby piece of paper bashed out on the office Olivetti many years ago?  Those of us in the real world are only too aware of the dreadful ubiquity of anything in electronic form.  In a heartbeat there are copies everywhere and it becomes impossible to lose. Clearly there is no one in the Athens bureaucracy who has any appetite for making the call to even the first name on that list asking that they pop in to the tax office for a chat. More than plates will get broken.

Have you noticed and been impressed by the sight of the All Share sniffing the 39 500 level in recent days? Undoubtedly the weekend newspapers will have hunted down excitable and quotable analysts who will gladly blather on about reaching 50 000 in 2013. After all, that’s merely 25% away. This very unexcitable old bear is still worried that the earnings that appear to driving this bull market are based on consumer spending which has “leaked” from the government’s capital budget. There really is scant evidence of that long promised and much needed infrastructural spending taking place. And that index? Well, it has been achieved on miniscule volumes. Let’s wait and see if the institutional fund managers come back from the beach in a mood to join the ride or feed the ducks.

Have a really wonderful and safe and prosperous New Year

James Greener

Full Moon December 2012.

NEAP TIDEMARKS

So it turns out that the forecasters of ancient Mexico were no better than today’s analysts at getting the future right. It is bright and sunny here in the nation’s holiday capital and no apocalypse has been evident. Not unless you count the disappointment that has overwhelmed the bulls now that the All Share may have delayed its assault on the 40 000 level. That treat looks as if it has been delayed until the New Year. Another disappointment for both bulls and bears here on the southern tip is that shortly after noon today the Earth reached the position of midsummer and will now begin to tilt the other way. That means that the hours of sunlight in each day will begin to decline as we slide downhill all the way to winter again. Very sad.

So now we know where Manguang is if not what it was for. In the words of Shakespeare’s Macbeth : “It is a tale. Told by an idiot, full of sound and fury. Signifying nothing”.  Surprisingly for one who normally wants everybody to be his friend, Jacob Zuma took note of who backed the wrong horse and indulged in a spot of vigorous reshuffling of his pack. The discards probably have little to worry about, however, because many of the replacements also have copybooks which are far from blot-free. One does not remain a pariah for long in politics especially if you can deliver a constituency of malleable voters. Will readers of my age please explain to their younger colleagues about nib pens, ink wells and copy books filled with rows of “pot hooks” displaying the desirable characteristics of “thin up and thick down”. Perhaps a word or two about blots and blotting paper will also be enlightening. Hopefully it will not be necessary also to explain who Shakespeare was.

It remains to be seen if shoehorning a highly successful billionaire into a cabinet of communists will cause a reappraisal of the rapid, alarming and soon to be unsustainable policy of entitlement. The wealthy gent in question has already  instructed his people to take a good look at any possible conflict of interests  and them presumably to act speedily to arrange the ex-trade unionist’s affairs so as not to trouble the tax man too much. There’s no point in letting the government white-ant your nest egg even if you are that government.

Despite being told what to watch for in the slog and scatter form of pyjama cricket I still find it hard to take the results too seriously, especially when we lose.  I am also baffled by yet another crisis which has just broken out at Cricket SA. It involves the SABC and money and therefore sounds pretty hard to fix. Us armchair umpires have little idea what goes on behind the scenes so we can watch the game on the small screen at home where the fridge is close at hand and the seats are much more comfortable. I suppose we ought to play our part and actually watch the adverts rather than take the opportunity to go and tend to the braai fire.

Please do have a happy and merry Christmas

All the very best

James Greener

Summer Solstice 2012.

GONGED OUT IN MANGAUNG

Unless there is a fearsome counter-reaction to the latest news from China that their economy is supposedly on the mend, the JSE All Share index will be delivering a total return of around 22% for 2012. This is splendid and certainly unanticipated by most pundits (especially me) this time last year. Obviously the very steep rises in energy costs such as petrol and electricity had a far smaller impact on the wage-earning population than was forecast. Somehow and from somewhere plenty of people found more money to spend on stuff and well-run companies were able to turn this spending into better earnings which resulted in share prices being pushed up. The numbers in that category of spenders obviously swamps those on fixed incomes, who are undoubtedly having a much tougher time.

In conflict with this is a conclusion drawn from the October government cash flow data which show that the deficit is growing larger and faster than expected. The chief cause is a result of revenue (tax) collections being less munificent than forecast. This is not what might be expected if there really is a growing middle class who should be making contributions by way of income tax and VAT. Now monthly data is naturally volatile and National Treasury says that everything is going fine and not to worry. Indeed, the expenditure side is, so far, reasonably on track. However, politicians rarely do anything that will reduce spending and if the deficit worries them they will probably try and fix matters by poking about in the taxation legislation. This morning for example Chamber of Mines felt it necessary to point out that any further tax increases in their industry will be a case of flogging a dead horse. I reckon we are all pretty much taxed out these days.

Given the seemingly haphazard way in which the delegates for the ruling party conference have been selected, their powers are a bit worrying. Not only do they get to pick a party leader who will then be the nation’s (unelected) president, but they apparently will pronounce on all manner of other topics. Like the business strategy for the country’s major utility suppliers. Mind you, anyone who knows anything about telecoms, broadcasting, power generation, railways and harbours have long since been fired or retired so why not ask the delegates in Mangaung how to run a phone or an airport company. The government is now totally in thrall to a centrally planned economy and the “reds under the beds” that the previous lot warned us about are now out in the open, bouncing on the mattress and holding on to the curtains for support. Eventually something will fail.

Amid scenes of simulated amazement and astonishment, the suits in euro land claimed to discover what the rest of us have known for ages. That Greece was bust and that most lenders of money to that government were not going to get much of it back. Reportedly this admission and realisation is a “good thing” and will clear the air and encourage another set of experts to rush in and lend even more to a nation that has become very used to living beyond their means.

The 12th World Toilet Summit here in Durban has passed with very little to show for it. About the sole topic to receive any publicity was the presentation by a local team of a new waterless loo. Unfortunately for them the incessant rain and severe flooding in the province somewhat diluted the message that waterborne sewage is a luxury in places like Africa. Disappointingly there was no final communiqué from the toilet-masters about the correct way to rig a toilet roll – with the loose end on the outside. An opportunity missed.

Unless you are keen on watching golf played in hot and muggy places there is not much sport to catch the eye. The Kings meanwhile have announced their target of finishing in the top four of the SA conference of the Super 15. This is just a clever way of saying they don’t want to come last.

James Greener

14^th December 2012.

THE MATHS HURTS

And now it seems that the French have also not been all that accurate with their sums. Their generous leaders might just have promised quite a few more goodies than there are euros in the kitty to pay for them. Oops. So the dreaded ratings agencies are all over their case and downgrades are in the wind. Now that the summer in euro land is over and the suits are back at work, the cupboards are found to be just as full of skeletons as they ever were. Readers of this column anyway will not be as surprised by this information as many of the politicians over there profess to be. We have seen it coming. And across the ocean there’s Mrs Cliff’s son Fiscal threatening to expose himself to the population.

But even if the debt swamp is growing larger and deeper and stickier, equity bulls in SA can’t see how that will cause companies to stop making money and are happy to pay more and more in order to participate in this anticipated profit bonanza. The All Share index is within a whisker of racking up the three zeros at 38 000. As well as investors, shops and their customers are on a roll. Newer and more expensive retail offerings are opening every day. Consumers – presumably those fortunate enough to be on someone’s payroll – are spending merrily.

It is notable however that everyone is avoiding mentioning one very worrying fact. Amid all the demands for higher wages and salaries little has been said about the arithmetic formula which shows that a fixed total wage cost for an employer  divided by higher individual pay packets for the employees equals fewer employees. This is the inevitable footnote to almost every drama and violent protest that has taken place in recent weeks.

Just days after the last chicken bone and empty whisky bottle have been cleared away from the opening ceremony for a Chinese motor vehicle assembly plant near Joburg, it has been decided that it will not be used to build the Inyathi taxi. Allegedly the South African National Taxi Council (Whatever happened to their plans for an airline?) have been unable to guarantee the quality of the product and have instructed their members not to buy the new minibus. They might have said so before the party. But no worries. The Chinese have another model they are sure we will like. Presumably, the Santaco bosses will spend the weekend in overalls crawling over a prototype preparing their guarantees for their members. I wonder if anyone has thought to conceal wads of folding money in various unobtrusive parts.

Money, but considerably more of it, appears to be a stumbling block to the clinching of another deal between two mining behemoths. The complaints seem to be that  not enough of it is flowing in the right direction where it would sooth and boost egos, self-esteem and attitudes. Minority shareholders somewhere will one day probably discover that the stick they are left holding is the short end. It is the fighting elephants and trampled grass story.

Who knew that the nation has a “berry corridor” somewhere near Stutterheim where blue-, rasp-, black- and strawberries are farmed? The southern hemisphere consumes 100 000 tons a years of these beauties and the fellows in the corridor reckon that with a bit of balance sheet restructuring (i.e. send cash please) they can increase their 2% share of this demand. As someone who once picked strawberries for beer money (6 punnets equals one pint) I can confirm it will be hard work but they deserve to succeed. Hopefully no busybody politician plans to swing by and make foolish promises.

With Sebastien Vettel’s F1 champion ship not yet wrapped up, the Proteas letting the Aussies break batting records and the ‘bokke looking tired and lost with England still to play,  it might be a weekend where being away from the TV is a good idea.

James Greener

JFK assassination anniversary 2012

TITLE? INDEED

If not yet a fully grown bear there is a pretty boisterous cub gambolling around our market these days. He (or perhaps it might be a she) has already clawed nearly 1000 points off the All Share since its peak earlier this month. From the look of the rand, much of the selling could be foreigners resuming their scramble for the exit as this place appears increasingly to be clueless about the requirements of a competitive economy in an unsentimental world.

There are nearly as many rumours and stories about what is actually happening in the labour unrest as there are folk singing and dancing their protests and claims. While there are undoubtedly some callous and cruel employers in every industry, the blame for this unrest must lie largely with the government. Their policies, spokesmen and ministers are raising hopes and expectations far beyond what almost all the actual industries and businesses can feasibly deliver. Their often illegal and unconstitutional statements and promises about what their constituents can demand are conveniently diverting attention from the same government’s failure to fulfil their own promises of delivery of services and infrastructure.

There must have been a worried call from head office to a bank in Zululand this week after President JZ claimed that his rather splendid home of many features was financed with a mortgage bond. This, he said, happened after a family decision to rebuild the place after it had twice been burned down.  The suits in Joburg will be asking the mortgage department at the branch some tricky questions. Like: Have you seen and are you holding title deeds? Did you take into account the fact that the mortgagor is in a temporary post which he might possibly even lose in Bloemfontein next month. Further do you know how many wives and children he has to support on his income before servicing the loan? And does he have adequate fire insurance? The main revelation here is that the pres. has somehow obtained title for his piece of Africa despite the fact large tracts of government owned land in these so-called tribal areas are mostly unregistered.. Many citizens occupy their homes at the whim of a “traditional leader” or chief and it has long been a concern that without title those residents can not use the land they have lived on for generations to raise capital. JZ’s mortgage might just be a glimmer of some really good news for the many dispossessed.

The Metro police closed off large numbers of roads and ramps last Sunday to allow a bike race to take place. This is not uncommon as the kingdom is full of folk who frequently feel the need to travel large distances on foot, bike and even canoe. Motorists are somewhat used to being redirected to allow these poor souls to complete their mission. However, this time the cops somehow forgot that they had done this before and even while witnessing the gigantic traffic chaos develop they declined to offer and indicate alternative routes. When challenged about this, their boss denied the shambles and invited motorists to write to him with suggestions about what they should do next time! My guess is that most motorists will want to cancel the races.

The Telkom story is a deep and sorry mess and is surely now a case study for the impact of government interference. With a market capitalisation of just R8bn (when listed in 2009 it was R30bn) it is about to fall out of the top 100 shares on the JSE. Undaunted by the en masse resignation of directors and executives, the state as major shareholder claims that there are plenty of candidates  with the skills and experience to fill the vacancies. Can that be true? After all it took Telkom more than a week to find someone to come and investigate why my phone line was crackling. And that was after I endured a hectoring lecture on what it would cost me if, woe betide, the techie found that the noise was my fault! At Telkom, the customer is a darned nuisance.

As expected by the end of the late kick off test in Dublin last week everyone was all over the bar, shouting. It was dreadfully close so let’s hope for a smoother win from the ‘bokke over Scotland tomorrow.

James Greener

16^th November 2012

UNCLE SAM MEETS FISCAL CLIFF

The JSE All Share index set a new high on US Election Day. Whether it was disappointed in the outcome of that contest we can’t say but it has been dribbling away from that peak ever since. Nothing as sharp as Wall Street itself, mind you, from where confident sightings of a huge bear are being recorded. Also the senior suits in the euro zone have talking tough this week but the euro would appear to be losing the courage and strength it conjured up during its summer hols. That drama is going to be an annoying background hum for the world’s financial markets for a long time.

Reporting season is hotting up, with about three dozen companies either releasing results or issuing so-called trading statements that are supposed to warn investors of larger than normal earnings changes. Fewer than ten of these announcements have been disappointing which unsurprisingly include gold and platinum miners who have been experiencing torrid labour issues. Here and there are grumbles about how slow and difficult the government infrastructural spending program is becoming but oddly not every company in the affected sectors have that complaint. Mostly, however, while acknowledging that business conditions are tough, management teams are finding ways to keep earnings growing and dividends flowing. Many are looking outside the borders for new customers and even new offices and bases. As the saying goes, the boere are making plans.

The fellow who came up with the phrase Fiscal Cliff to describe the latest crisis in the US economy must be delighted with the way it has caught on. Opponents of President Obama are giving him no time to savour his election victory and are pushing him to the edge of the precipice as hard as possible. But whatever the name it’s the same old story told for centuries. No good can come from spending more than you earn, year after year. The problem is that while increasing income by raising taxes always yields less than expected, (folk are very adept at discovering loopholes), decreasing spending is really really unpopular with just about everyone. Not least, are the elderly, ill and indigent who have become totally reliant on the government paying the bills. And then there are government employees, and the politicians themselves, who have little appetite for taking a pay cut or perhaps being fired. No newly elected politician has ever been brave enough to start his or her regime by slashing expenditure in the hope that memories will have faded by the time the victims next enter a polling booth.

Here on the southern tip our tax collector has embarked on a program of sending banal and emotion-filled messages to taxpayers thanking them for funding tax eaters. TV ads, phone text messages and a website provide heart-warming stories of people who, because of the government’s allegedly wise and effective provision of education, health services and other nice goodies, were able to fulfil their hopes and achievements. Fine, but note that it is also the hope of every taxpayer that they can achieve invisibility. Which is not something the new bank notes can claim; their colouring is rather aggressive.

The inflation rate plays a large part in our lives, with so many things compared against it as a bench mark. That it is an very poorly understood statistic was highlighted this week when a new set of weights for its calculation was released. One has to trust the skills and accuracy of the compilers of this data but various oddities do come to light. For example the average consumer spends more on tobacco than on health services! We spend less on paying for education than we do on buying clothes, and our booze bill is greater than our electricity bill. Our spending on recreational equipment is greater than what we need for dairy products. The average SA consumer sounds like a smartly dressed party animal dancing in the dark.

The cricket in Brisbane has started slowly but satisfactorily. However, the ‘bokke test against Ireland starts so late tomorrow that many of the Natal faithful may not be in fit shape to notice that their baa lamb is in the starting line up.

James Greener

9^th November 2012

COUNTING GROWS

It has all gone ominously quiet – except here on the southern tip where the All Share marches on and upwards. Investors obviously can see no reason why earnings should not keep improving and anyway cash these days is definitely not king but pauper!  Already the bold are sniffing out recovery situations among the miners where the high wage settlements are starting to be followed by the inevitable and tragic retrenchments. The platinum sector gained over 6% in October. Banks, on the other hand, were eschewed.

One cause of the reigning peace was of course the closure of markets and near closure of everything else on the eastern seaboard of the US where cyclone Sandy demonstrated that not even presidential candidates have as much power as nature. In Europe the squabbling about who should pay for whom to do what has subsided for the moment as well. But not for long I suspect. There are some deep and heart-felt bitterness’s dying for an airing.

Overseas players have slowed their rush for the exits. The rand has settled down, although at weaker levels. Most people are getting resigned to the near inevitability of having Jacob Zuma staying on as president. There really doesn’t seem to be a candidate brave enough to mount a challenge. And anyone slightly competent chooses to feed at the trough from outside the sty.

The Statistician-General – in reality a just a mid ranking government employee with a preposterously grand title  – but much respected  for being one of the few in government who is able to do sums, got to wear his dubious yellow suit again and handed over a lavish tome of Census results to anyone within reach. As well as generating the usual froth of disbelief and criticism it seemed to tell us nothing that hadn’t already been guessed. Within a day, however, the pres. started to fret about accusations that his government had failed to reduce wealth disparity but seemed unable to find any numbers in the great work to contradict the charges. Odd that.

 The government is now spending at an average rate of more than R2.5bn a day – including weekends. That’s a great deal of money and furthermore is R400 million a day more than the taxes it collects. Now I know that the borrowing requirement is OK and the deficit is within manageable proportions but it is still worrying to this old bear to think that every morning the nation wakes to find its debt has increased by nearly half a billion compared to yesterday. Some talking head in government has suggested that bankers need to take sociology courses. He believes that this will make them realise the callousness and dangers of lending money to poor people. The bankers should agree but only if he first attends courses on economics and finance so that he can realise the callousness and dangers of talking nonsense.

That bankers are indeed heartless fiends was demonstrated vividly by the way that one outfit in the City simply deactivated the key cards of a number of employees overnight so that they first discovered that they were unemployed only when they were unable to get in the front door of their offices the following day. Can you just imagine arriving at work to see your colleagues milling about outside and having to try your own key in the slot? They were not even afforded the opportunity to fetch the photo of the kids from their desk, sneak a copy of the client phone list or leave rude messages on the internal email system. Bang. Thanks for coming. Have a nice day.

I am delighted that Sebastian Vettel is looking set to retain his world championship in Formula 1. It provides a sporting topic which is not rugby. You won’t believe how many Province supporters have appeared from the readership of this column to jeer at my trashed claim about the deserved new home for the Currie Cup.

James Greener

2^nd November 2012