BANGING ON

Although the All Share index has been leaping about a great deal recently it has remained more or less within a 6% range on both the upside and down side this year. This means that we have definitely not yet seen the real bear market. While  a50% correction would not violate historical valuations it is highly unlikely. It remains very worrying, however, that the rand continues to sink and now even against the euro is at the year’s low. Simply no one can see a good reason for owning our currency it seems. Unsurprisingly company earning growth reports have been averaging 10%pa, a great deal less that enjoyed for many years. This too is a reason not to chase share prices higher. It is time for circumspection and caution.

Financial headlines this week have been dominated by the Yuan devaluation. Most of us will never learn either what this means or whether we should be happy or sad. Certainly it has triggered a rash of articles using the word “contagion” and grave talking heads on TV. A far bigger Chinese explosion this week involved actual bangs, loss of life and massive destruction of great quantities of manufacturing capacity and stockpiled goods. This may turn out to be the more important event, although the Chinese are often as reticent about these embarrassing events as our own energy minister is about her “secret” plans to order impossibly expensive nuclear power stations.

The government has obviously become worried that citizens are threatening to reach their own conclusions about the “state of the nation” and so we are being treated to frequent official updates on this subject. Unfortunately these events subject Number 1’s formal speaking skills to a severe test. Better known for a jovial impromptu singing and dancing communication style, these dreary lists of dubious achievements of his government put everyone, including himself, to sleep. It was interesting however, that someone seems to have got him to realize that the new draconian visa requirements are seriously impacting tourist numbers. He also seems to have noticed that not having reliable power supplies is pretty inconvenient as well. And summer is coming. It’s going to be great.

Over-excited Durban city fathers have been seen tearing about the place in blue flashing light cavalcades accompanied by the worthies who decide on the venue for the 2022 Commonwealth Games. Now there is little doubt that this city does already have a wide range of the facilities required for such an event. They are mostly all conveniently located along the Indian Ocean shorefront, and it would indeed be rather exciting to play host to the games like this. However the big issue is the price estimate of R6.4 bn; a number far more easily said than raised and definitely way lower that the final outcome. Glib hand-wafting explanations that the cost will be shared between government, the city and the SA Olympic committee are wildly optimistic. The government has yet to provide the expected and necessary guarantees.

Tonight's away Test against Argentina will be hard to watch for a number of reasons, not least of which is that kick-off is getting a bit past bedtime for some of us. Also it may prove to be even more embarrassing than last week’s calamity here at Kings Park. But never fear, the trade unions have now started to take an interest in rugby. Unfortunately, however, their involvement will probably just result in more pay for fewer players and longer half-time. There should however be a full 11 man Proteas squad on the pitch at Kingsmead this evening as the series against New Zealand begins. The stadium is looking rather splendid these days following a cleanup and a huge fancy multicoloured score board. Now all we need is for Eskom to keep the lights on.

James Greener

14^th August 2015

HIGH(?) JUMPS

The prices of most industrial commodities continue to plummet sharply and the companies that make a living from extracting them from the earth are having a very tough time. The problem with trying to call a bottom is that Chinese demand is the key factor and we are learning (although we should probably have guessed) that even if they know the facts themselves, they are not telling anyone else the truth. The JSE All Share index is holding up rather well and that is because mining shares nowadays are making their smallest ever contribution to the overall index.. Smokes and beer are numbers one and two!

Yet again the proceedings at the National Assembly deteriorated into near chaos and demonstrated that this is now a meaningless body in the governance of the country. Ministers and bureaucrats have taken over the business and dictate how things will be done. For example it has emerged that the president was unaware that one of his cabinet had simply withdrawn the operating licence from a mine whose labour policies displeased him.

There is now a well-worn path to the courts from the boardrooms and executive suites of almost every state owned enterprise as a procession of indignant malcontents seek compensation for their alleged unfair dismissal. If it wasn’t for this case load of aggrieved tax eaters the judges would have more time to attend to real crimes. The added insult is that it is the taxpayers who fund the defence of the claims of the almost always over-compensated departing employee. The nation is getting very little value for a great deal of its spending.

Socialists believe that they have the skills to allocate resources. One of their favourite interventions is land ownership. The most recent report from the state body charged with this task, however, is that many beneficiaries are now asking for the money instead of the real estate. Frankly, owning land in some places and circumstances is not always attractive and this decision is understandable but also it signals that it is time to bring this land claim program to an end.

Apparently if you know how and presumably have a suitable internet connection it is possible to watch the TV coverage of sports events for free. Without making too much of a moral judgment on this practice it is worth joining a few dots here. TV rights paid to sporting bodies are a very significant reason why a few athletes and administrators are super rich. But are we now about to see the next industry to be hollowed out by the inexorable power and reach of the internet? Taxi drivers, musicians and bond analysts have all had their lunch stolen by this monster. Why not ball-kickers?

So apparently just about every Olympic medal winner has probably made use of chemical help at some stage in their career. Oddly, the people that seem most worried about this are the commercial sponsors who fret about the damage that could do to their reputations. And of course those competitors who are “clean” also have a gripe. Fans are seemingly not that fussed as long as the contest is exciting and punters presumably are placing bets on who has the better pharmacist! Yesterday’s dismissal of the Australians for 60 runs before lunch on the 1^st day of the Test makes one wonder if someone mixed up the potions and handed out the dozy pills to the lads under the “baggy greens”. Fans of the ‘bokke have long known that the coach of the day is smoking his socks and making crazy selections and substitutions. We had better wallop the Argies at Kings Park tomorrow or else save a ton of money and cancel the tickets for the World Cup.

James Greener

7^th August 2015 (happy 40^th birthday Charlize Theron)

ALL HANDS TO THE PUMPS

Despite some very wild share price swings in the last few weeks, the JSE’s All Share index total return for July is going to emerge very close to zero! Some short term traders and punters are going to dispute the news, but most investors will see little change in their valuations. This may change quite alarmingly by year end however, as a number of chickens appear to be searching for roosts.

Only properly trained economists believe that there is any real value or truth in the deluge of figures that swamp us every minute of the day. Other people have long doubted that China really was growing as fast as its leaders claimed, or that Greece (and many other countries besides) has any intention or ability to repays its debts. And then there’s all this talk of the USA raising interest rates and the European Central Bank indulging in a spot of quantitative easing (which is jargon-speak for minting cash that is used to buy near worthless IOUs from profligate governments).

It seems as if nobody needs or more importantly wants to own Rands at the moment.  The talking heads are offering complicated explanations for the plunging currency all of which boil down to sellers having to offer buyers more and more Mandela’s in return for a single one of their George Washington’s or Queen Elizabeth’s. This declining interest in possessing rands is double-sided as well. That is, locals are trying to get hold of foreign currency and foreigners have no need of runts as demand for our products declines and our immigration authorities have become rather unwelcoming. It’s all rather alarming, particularly as the communists who control our government seem to be either unaware of or content with developments.

There are many very sad illustrations of how times and fortunes change of which amongst the most poignant for South African share holders must be Anglo American. This one-time behemoth of the open outcry market in Diagonal Street, and other venues before that, is now no longer even in the top ten on the JSE ranked by market capitalisation. At R220bn it is way less than even half the value of either Glencore or BHP Billiton. This week Anglo’s CEO went on stage to explain what needed to be done by both him and the government to try and stem the rot. It’s not even certain that a huge and certainly unexpected surge in the prices of all the minerals it mines would help. This empire is declining. "O tempora o mores"

Poor old Number 1. How embarrassing and ignominious for him to have his very modest and quite tacky private swimming pool shown to the world. Yet another thing for his BRICs colleagues to snigger about. He really does choose his advisors poorly. This time it’s his architect who’s let him down, although the saving grace is that it was the taxpayers who got shocking value for money.

For centuries, opponents of the idea of a tunnel under the English Channel cited the problem of unwanted pests like rabid dogs and onion-draped French hawkers swarming onto the “sceptred isle”. No one predicted the astonishing scenes of desperate African refugees overwhelming the noticeably sparse number of French police at Calais. Despite claims of European solidarity in dealing with the problem, the Continental countries must be rather relieved to watch these poor souls disappearing down the tunnel.

Trite but true. Cricket is a really funny old game. But best not played in a place and time where the Monsoon is likely. Given a full 5 days of play Bangladesh would be rather tricky to subdue. And now what’s going on with The Ashes? Such massive changes of fortunes feel very odd. Surely there’s no FIFA-like match fixing likely?

James Greener

Friday 31^st July 2015

MANY PRICES. HIDDEN VALUES

Supporters of the curious belief that committees are far better than markets in setting prices will need to explain to the rest of us just what effects they expect from adding 25cents a year to the cost of borrowing R100. Allegedly this week’s adjustment to the repo rate is going to send a message to all those who are supposedly conspiring to raise the rate of inflation above a level which has been deemed appropriate (by another committee, naturally). Always assuming of course that we can agree just how much inflation is happening and what is causing it – two very unlikely events.

So far the share, bond and currency markets seem utterly indifferent to the result of two days of strenuous thinking at the Reserve Bank. They all do still have an air of edginess about them, however – especially the currency market and especially against sterling. Whether this is because the apparent official campaign to discourage tourists is having its largest impact on potential visitors from the UK is hard to prove. Certainly the anecdotes in the media suggest that SA as a destination is falling off the radar screens. The minister responsible for this strange policy has yet to offer a credible reason for his stubborn stance.

Those who believe that gold is merely a resource like all other minerals extracted from the earth will be smug to point out that its price is also falling sharply  together with the prices of just about every other “hard” commodity. Notably however, the prices of most food commodities have been steadily rising in the past few months. Explanations for both phenomena are plentiful and many have the common factor of just how big and significant China has become when working out who consumes what. And the suggestion is that they are eating more and building less. If any omniscient committee of bureaucrats saw this coming they failed to do anything effective about it and now the markets are sorting it out for themselves. Here in SA the steel business is in survival mode with the iron ore miner (Kumba) missing a dividend and steel manufacturers mothballing plants. Somewhere here, however, there are bargains to be found.

With the demise of the steam locomotive perhaps the desire of every small boy to be a train driver has declined somewhat. But not for the guys who run our railways it seems. They have been spending wads of cash on bigger and newer trains and in the process teaching the rest of us new words and meanings like perways and gauges and depots. Allegedly, however, some of the new toys don’t quite fit the existing layouts and we are not yet invited to come and play with the new kit. Extra track and adjustments to the platforms and scenery may be needed. Unkind folk are suggesting that it may turnout to be a tremendous waste of money. That’s a great pity because one of the features of driving through the great South African landscape is the paucity of freight trains on the railway lines running alongside the truck-filled road. So much stuff including people ought to be travelling by train.

The interfering fingerprints of politicians are all over the design of next year’s Super 18 rugby tournament. The increase of three over this year’s complement is achieved with the inclusion of the Kings from the Eastern Cape and a side from each of Japan and Argentina.  Unsurprisingly the Aussies and Kiwis have rejected any change to their local arrangements and South Africa will be the victim of a biased restructuring of the competition. Cricket fans are also battling to find enjoyment at present as the Proteas are being forced to take the long routes in Bangladesh. At least the pleasingly many South African connections in the Tour de France are providing some pleasure for this couch sitter.

Why, do you think, does the Johannesburg City Power Department need to call for tenders from Gym Freelancers (Locum)? And don’t tell me it’s because the full-time one is on leave!

James Greener

Friday 24^th July 2015

HEADS UP

Yet again it’s wonderful to watch the efforts of officials who believe that mere citizens don’t know what’s good for them. This time it’s taking place on the Shanghai stock exchange where sellers are so keen to exit their holdings that they are outdoing each other by making ever lower offers. Buyers naturally are holding back to see what happens but this is alarming the people who think their status and positions empower them to know better. It has been rumoured that sellers are being threatened with arrest! Several other markets have felt the warm breath of the bear on their necks and the Dow is pretty much at its low point for the year. Adding to the joyous mix is the fact that the New York exchange went off line for a while with a “technical glitch” which the easily excitable have claimed is evidence of a computer hack. The JSE has seen some fairly epic swings this week, but is still more than 5% up for the year, although some traders will be in the burned fingers ICU this weekend.

The fact that the Greek debacle sets and then duly misses so many absolutely final deadlines for resolution simply shows that no one has any idea what to do next. As is the case in almost every financial disaster, lenders are confronting the awful truth that they have lent far too much money to borrowers who now have neither the resources nor the intention to repay it. There can never be a mutually satisfactory solution in this situation and the sad thing is that all the grave comments about this being a lesson for the future will not prevent the next one. Spending money you don’t have is a wonderful pastime and in recent years imprudent lenders (banks) have far too often been rescued by governments using (prudent) taxpayer’s money. The Greek situation runs across national boundaries which complicates things enormously.

So far there has been no answer why The Jacob G Zuma Foundation appears to be sponsoring a sport as exotic and removed from South Africa as battery powered racing cars. Obviously there must be exciting financial flows for someone and a bet that our president is a beneficiary is likely to be a far better call than the favourite in last weekend’s Durban July horse race.

Buried in the unsurprising story about utter failure of an expensive scheme to train municipal ward committee members how to do their job, is a reference to the poor catering. It seems that as well as funding the classes, ratepayers were feeding the people attending the course. However, insufficient and bad food was a reason for the poor attendance and disappointing results of the scheme. Nevertheless, those who have stuck it out can expect to receive a certificate, which is more than the chief engineer of the passenger rail company can produce. A witness aboard the inaugural celebratory demonstration run of the new and very expensive imported train set reported that the locomotive damaged the overhead power lines because it may be higher than regulation. The chief engineer, who up to that point had been boasting of his team’s role in designing the shiny new kit, is now under investigation for perhaps not being all that he claims.

Strike season is upon us, although so far incidence and effects have been minimal. The least momentous, however, will probably be the threatened industrial (?) action by the 2 039 headman in KZN. These worthies cost the taxpayer R171m a year and it is unclear exactly what work it is that they will stop doing if and when they carry out their threat to strike. Allegedly their importance lies in their ability to deliver suitably compliant and instructed voters to the ballot boxes at election time.

At least I don’t have to choose which cap and jersey to wear when joining the braai to watch the ‘bokke this weekend. Tens of thousands of expert amateur selectors and coaches will be offering opinions on the team as this is the first run for the national side in a year that peaks with the World Cup. My cardiologist has suggested that I exercise restraint and imbibe only herbal tea. Well hops are a herb.

James Greener

10^th July 2015 (which is celebrated in Liverpool as Beatles day!)

PLACE YOUR BETS

With just a few exceptions like some severe losses among Chinese shares and patches of untidiness on Wall Street, most markets are trucking along blissfully unaware that the bears are gathering. It’s nearly impossible to make a case for adding to any holdings of any of the large capitalisation shares on the JSE and the bond market still looks very rich to those of us who can remember yields in the ‘teens.

Unsurprisingly it was the taxpayers who got the worst of the deal in the sale of the government’s large shareholding in Vodacom to the state employee’s pension fund. Apparently it was “agreed” the fund would acquire the investment for about 90% of its market value. That this little “gift” amounts to about R3bn, shows once again that most people playing with these numbers actually have no grasp of just how much money this is. Shortly after this news, we were treated to the sight of the tax commissioner and his staff padding about in t-shirts bearing the message “Together we make tax easy”. Since there is absolutely nothing easy about handing over our money to an incompetent and corrupt regime unable even to keep the lights on, this message is an outrageous display of contempt towards the sector of the population that pays the most while being subjected to ever increasing discrimination and prejudice.  

The government will use most of the approximately R30bn raised by the sale to make yet another loan to Eskom. Most of us suspect, however, that the first call on this cash will be for the top brass to secure their ridiculously undeserved bonuses and that the regulator’s warranted refusal to grant the utility a further huge price increase  will be trotted out as an excuse for more and longer power cuts.

Among the other people who didn’t receive the money they were expecting this week were those who have made loans to the Greek government and to Edgars, the local chain store. The official word for this sort of event is “default” and all manner of nasty things can happen once this happens. Chiefly of course it is that no one wants to lend more money to a defaulter except under the most strenuous terms. i.e. at high interest rates. An alarming aspect of the Greek development is the suggestion that the government has been eyeing the personal savings accounts held in local banks as a potential source of funds to keep things (like pensions and government salaries) going. This is not unprecedented but it is a very bad habit. It will be interesting to see if there has been a surge in demand for the so-called cyber-currencies like Bitcoin which are much harder for politicians to steal. It can be noted though, that the gold price hasn’t flinched. Edgars creditors are probably going to receive some of their money back in the form of notes printed by Edgars themselves. These are usually called share certificates.

Free market disciples are delighted by the operating model of the Uber personal transport service. It appears to be the near perfect marriage of modern communications and customer demand. Understandably there is considerable squealing coming from the traditional cabbies who are merely the latest occupation being required to adjust to technology. Their remedy is obvious. Local authorities however, are very alarmed that passengers don’t seem to care that their ride is neither licensed nor inspected and perhaps not even furthering the aims of “transformation”. This municipal concern is really about the throttling of a revenue stream as drivers and fares now have new ways to judge the quality of each other part in the transaction.

Now this is that weekend in the year when sport bursts out of every pore and the potatoes give the couch a pounding. There are horses, and tennis and cricket and rugby and bicycles and Grand Prix and golf and athletics and even woman’s soccer.  I notice that FIFA boss Sepp Blatter will also be at home in front of the TV and won’t attend the women’s world cup soccer final in Vancouver. It can’t be that he’s anxious about having his collar felt by the Canadian Mounties can it?

James Greener

Friday 3^rd July 2015

SCRAMBLED IN TRANSMISSION

The markets are pretending that they have recovered from the visit of the small but ill-tempered bear and only the rand / pound sterling exchange rate chart hasn’t reversed. Surely it can’t just be rugby fans preparing for their trip to the soggy island for the World Cup who are selling rands and buying pounds in such quantity? Barclays must be pondering their purchase of ABSA. So far, however, no large international bank has yet listed South Africa among the regions where they are withdrawing so they must making money here still.

Understanding the Greek situation is easy. One side has run out of money, the other has run out of patience. The various forecasts of what happens next are going to be tested. The answer is probably “not much”. Lenders are going to get IOUs instead of money and Greek citizens expecting a steady flow of pensions, salaries and hand-outs will likely be very disappointed. But it is likely that the euro will survive for a while longer, mainly because the European Central Bank has chosen to do something it’s not supposed to do and print money. For millennia this has been the remedy adopted by the rulers of empires and it will work this time too. The interesting question is: Which nation will be next? There are many candidates.

Once again Eskom has become the centre of attention with the publication of their argument in support of massive price rises. Several analysts have pounced on the numbers and gleefully demonstrated flawed assumptions, simple errors and perhaps even misleading nonsense. Here in Durban domestic consumers are paying just over R1.15 per kilowatt hour, a tariff which is 80% higher than 5 years ago. Eskom claims that the cost of the same amount of power from the woefully behind schedule and exorbitantly expensive new coal fired power stations will be R1.00 so clearly there is very little margin for everyone else in the chain to be able to afford the better things in life! Unless the regulator has the clout and resolve to insist that Eskom carries out a massive clean-out of its wasteful and profligate units and practices it seems inevitable that they will be forced to allow the egregious increase. Even some politicians have begun to notice and to complain that the utility is strangling the growth out of the country, but whether they have the knowledge and skill to craft a solution to the problem is doubtful. More candles please Jeeves.

So the date by when we had to stop broadcasting TV in a way which is no longer efficient and suitable, has passed. This ranks South Africa alongside a handful of nations who are also baffled by this new technology stuff. But not to worry, the minister has assured everyone that the government is right on top of the problem. For a start, she has visited those of our neighbours who have made the internationally scheduled changeover and begged them not to “leak” their smart digital signals across the border and interfere with the electorate’s ability to watch parliamentarians behaving badly and similar soap operas on their old steam-powered televisual apparatus. Part of the delay in implementing the changeover arises from the state’s intention to woo voters with free and subsidised converter equipment. Naturally this intervention will distort the market and the parties who hope to benefit from the mispricing that will occur are squabbling fiercely. Just another day on the southern tip.

With just one SA team in the Super 15 playoffs, many of us will have to suppress our natural instincts and support the Stormers. Hopefully they won’t be overcome by the occasion like the baby ‘bokke were at their U20 World Cup semis. So the US golf chiefs decided to mark the centenary of the Great War by playing this year’s US Open on a course that resembles a battle field from that conflict. Even if you are not a golfer just take a look at it sometime this weekend. Already there have been some notable casualties. For a moment it sounded as if the Vatican were entering a team in the Tour de France. But then it turned out that an Encyclical is merely a 200 page message about the dangers of carbon dioxide.

James Greener

Friday 19^th June 2015 (World Sauntering Day)