BEER AND TV TIME

Anyone who doubted that we have been celebrating Recycling Week hasn’t been paying attention to what the media was been regurgitating about either US interest rates or the Rugby World Cup. On both topics the pundits have been forced to fill screen time and columns with history, conjecture and waffle.

 In the end Governor Janet decided that the price of money in the USA at 0.25%  is just as perfect now as it was almost ten years ago when the last adjustment was made by her predecessor Helicopter Ben. We must all be grateful to these omnipotent and omniscient people who know what’s right for us. Just look how well the world works.

Also significant this week was the news that the world’s biggest brewer is keen to buy the world’s second biggest brewer which is of course the erstwhile employer of Charles Glass, the legendary creator of Castle lager. This exciting news caused the market value of SAB to increase by more than 25%. This added R260bn to the JSE’s total market capitalisation and caused the All Share index to tick up markedly and confuse people who weren’t paying attention to the details. In fact this month, except for the Consumer Goods sector which is home to SAB, almost all other major sectors are well down for the month.

Predictably, however, the regulators have appeared on the scene muttering that this merger of giants might not be a good thing and could harm consumer’s interests.  However, beer drinkers are a very discerning bunch and the astonishing growth of the so-called craft beer industry shows that many folk have already decided that big is not beautiful. Surely this is one of the most price and quality sensitive consumer markets in the world and both parties will tread very carefully. Messing with a man’s (and woman’s) beer is not a good idea.

Another unsurprising development is that all the published plans for getting the nation’s viewers into the 21^st century and equipped to receive digital TV signals have turned out to be nonsense. Mysteriously the market is already swamped with cheap set-top boxes. Outrage and finger pointing has broken out as this was a project earmarked as a nice little earner for selected cronies. Interestingly the region identified for the first installation of this kit is that surrounding the large and growing radio telescope installations in the Karoo. Astronomers are not keen on watching SABC when trying to listen for messages from deep space.

R9.4m is the astonishing price which someone has paid for Hercules, a seven year old Kudu bull with 1.7m horns, It does seem to be a great deal of money for what in the end will probably be biltong and a gloomy stuffed head on a wall.

Meanwhile another bull has also grown (much smaller) horns and the rand has very slightly reversed its headlong plunge into oblivion. The prospect of a large and sustained recovery is quite poor while our politicians and their cronies continue to display woeful ignorance of economic realities.

Already some shifty and oleaginous characters have appeared in the frame to reassure us that the Commonwealth Games won’t hurt Durban ratepayers a bit. It’s all going to be assembled on a shoestring and will be so much fun. Well that may be but one wonders if the country’s rather stringent new visa regulations will have been relaxed by then otherwise all the overseas athletes under 18 will have to bring Mom and Dad along just to get through immigration. But perhaps that’s the plan. You sell more hotel rooms that way. And we sure need the money. A recurring theme in the local press is that the city is battling to make ends meet.

Finally the Rugby World Cup begins today and spirits will soar and crash over the next few weeks. The Russians, who are not taking part in this tournament, have arranged a counter celebration for tonight. The 2018 Soccer World Cup will kick off in their nation in exactly 1000 day’s time so that outranks any old rugby game.

James Greener

Opening Day of the 2015 Rugby World Cup

DANGER. BEARS RESTING

The amplitude of the swings in share prices has declined substantially and levels on average are about where they were at the start of the year. Interestingly the latest crop of company results has contained some quite good news and there has even been deal-making in the ruins of the mining industry. It’s unlikely however, that the bear has finished his work and the majority of valuations are near historical highs. The temptation to buy shares at last year’s prices is strong but perhaps even lower levels are still coming.

Minister Red Rob Davies thought the nation deserved to hear his ideas about the nine-point plan to reignite the economy. All this hot air about moving up the value chain and assurances that the government thinks that the nation is facing a challenge is tedious and alarming in its naivety. Forget the ratings and surveys and indicators and all the stuff that the hand-waving grave-faced talking heads use to warn us that the end is nigh. That plunging rand is telling us all we need to know; which is that no one at all is very keen on SA at the moment. Not even tourists are coming.  Even the ideologically blind can’t fail to read this crystal clear message. What our “leaders” have been doing for us these past few years is definitely not working. It is urgent that they stop allocating the nation’s resources to places where the market would not place them. That’s assuming of course that we have those resources in the first place. How many teachers of Mandarin are there in the country?

A further illustration of this unrelenting micro management is the complicated algorithm for determining how much a City Manager should be paid. The appalling Department of Co-operative Governance and Traditional Affairs has declared that the top man in one of the nation's bigger cities could be pulling down R275 000 a month. Ratepayers and their elected councillors appear to be out of the loop on this one.  And the lucky incumbent does not even have to write his own annual reports. And neither do his staff. A very surprising call for tenders reveals that the tough job of boasting about one’s accomplishments is outsourced to a successful bidder. So what actually do all these civil servants do all day? As the adage goes, they may not look out of the window in the morning because then there would then be nothing to do in the afternoon.

It’s all very exciting finding yet another Hominim species in South Africa.  Deputy President Cyril Ramaphosa, who was obviously pleased to have been sent on a job that for once didn’t involve meeting angry people, was even moved to press a welcoming kiss on Homo Naledi’s missing lips.. Since these little guys were undeniably here before any of us, can we expect a land claim on their behalf soon?

Regrettably but unsurprisingly, it seems that we have been lied to once again about the national sports teams. When it was noted the ‘boks RWC jersey would have the  Springbok on the sleeve and not the breast, the story was that it was a RWC rule so as not to clash with the sponsor’s logos. But now looking at the All Blacks strip, that excuse seems to be hogwash. The new cricketing formats mean that three Proteas squads have to be selected for the tour to India and it looks suspiciously as if the racists have been whispering in Linda Zondi's (Convener of Selectors - didn't you know?) ear. And over in the Bafana Bafana soccer camp it is blindingly obvious that something is seriously awry when we lose 1-3 to a country one tenth our size.

James Greener

14^th Anniversary of 9/11

THE GRASS IS ALWAYS GREENER

The JSE All Share index has caused a great deal of anxiety with a trading range of more than 8% over the past ten days. This level of variability tends very quickly to expose the forecasting shortcomings of the experts who now have to wave their hands more than usual and talk of things like the VIX, which is a volatility measure in the USA. This analyst also has a home-grown measure of the potential for the market to inflict pain on a perennial bull and that measure is currently standing at more than twice the average level. In simple language it’s scary out there.

On the JSE this morning a single krugerrand was sold for R16 000.10 which is not far below the record of R16 200 set in November 2012. But unlike then, today’s price is a result of a very sad rand. For people who value their gold in US dollars, however, today’s price is $800/oz below the peak. Number 1 who was cutting the ribbon on just one sixth of a power station (the other five sixths being way behind schedule) seems to have acknowledged that economically the country is not where it ought to be. Nevertheless his speech also asked the commercial sector to “look past profit margins” and employ lots of people. Hopefully someone sidled up to him afterwards when the tea and cake part of the ceremony was in full swing and pointed out that only profitable companies pay tax.

The report that the North West Provincial Government had identified 34 000 employees on its payroll who simply don’t exist but draw R19bn a year in salaries and benefits was very short on any other facts. Aside from all the obvious questions and outrage that come to mind, the effect of terminating this flow into the economy of the poor and under populated province must surely be catastrophic. That’s of course assuming that these “ghost” employees are actually going to be fired and have their names taken off the list.

Even the local newspaper relegated to below the fold on the front page the news that Durban had won a competition that no other city chose to enter. The excited group of citizens pictured celebrating this city’s honour of being appointed host to the 2022 Commonwealth Games all looked to be too young to be tax or ratepayers. The photographer may have had some difficulty finding them.  But enough curmudgeon; it will surely be a wonderful and exciting event and we can look forward to a long and entertaining series of the old show called “follow the money” beforehand.

A somewhat whimsical but silly idea that the ‘bokke  need to get their boots dirty on South African turf before each world Cup match may not find much approval from the customs people at Heathrow Airport. Firstly the fellows in green and gold will need to explain that the slab of grass in their luggage is not the medicinal sort. Then for a nation that decimated the national cattle herd after an outbreak of foot and mouth disease, the prospect of allowing entry to a grassy sod from the disease-ridden southern tip of Africa is unlikely to be a winner. The boys are just going to have to be content wiping their boots with pictures of Loftus or Newlands. The other rugby story to raise eyebrows is that the EP Kings players have not been paid and have threatened not to travel to their away match at Ellis Park this weekend unless the cash appears. This is just further evidence that the nation really doesn’t have the necessary resources to have six or probably even five sides in the Super rugby tournament.

James Greener

Friday 4^th September 2015

GETTING WATERED DOWN

Some rather high profile experts have declared that this is not a bear market but simply a correction. Well maybe. The JSE’s All Share index is still (just) up on the year and has clawed back a shred of decency in that last few days but the currents against it are strong. Probably the biggest headwinds are the weak commodity prices. Given the robust and even frightening growth in the global population the reasonable assumption for years  has been to assume that demand for stuff to eat and materials to fashion into things like shelter and transport would at the very least be steady. The prices say otherwise. In the words of Warren Buffet, “Now that the tide has gone out we can see who has been swimming naked”. Seemingly much of the now absent demand was a result of (principally Chinese) politicians insisting that they could allocate resources better than markets. The alarming development for us is that our politicians here are still getting ever keener to control ownership and set prices.

Adding to the gloom was the publication of one of those numbers that only the really initiated claim to understand while the rest of us display the appropriate knee-jerk reactions. Stats SA revealed that (economically at least) the country went backwards at a rate of 1.3%pa in the second quarter. It is not known if the slightly eccentric, grandly-styled Statistician General had alerted Number 1 to this shocking news before his “All is well” speech a few days ago. Perhaps he ignored it, because proper economists need a second consecutive quarter of negative growth before officially declaring that a recession has been sighted. It would be unsurprising therefore if next time somehow, Stats SA churns out a positive figure. A close and sceptical inspection of the published GDP figures of the past decade makes one uneasy about their integrity. Economies are actually giant lumbering animals difficult to turn around sharply and the published quarterly growth figures are suspiciously volatile when compared to the data sets before about 2008. Collecting data is a boring thankless job and political patronage and recognition is hardly ever lavished on those with a bad story to tell. Just saying.

Despite the news about the skill and powers of some extremely nimble and somewhat dodgy trading rooms, it remains the case that of all the markets, currencies probably most accurately reflect the relative weights of supply and demand. And the poor old runt is still getting hammered which indicates that even all the jetting about by the high and mighty in planes owned by ones dubious friends has not yet encouraged foreigners to accumulate any (rands)!.

There’s something rather odd about a government outfit that builds dams and pipelines calling for tenders for someone to provide professional services to develop and implement a cultural heritage plan. One would think that heritage is something nurtured by individuals who believe their society has something worth remembering and preserving. It’s not the sort of thing that involves meetings and mission statements and action plans and all the other things that sleek and slick consultants will gleefully prepare for a majestic fee.

And on the topic of water and heritage it turns out that the half page full colour advertisement about “Empowering Women in Water” has nothing to do with synchronised swimming. It’s a conference, which amongst other things will see the launch of The Women in Water Entrepreneurship Incubator. That sure ticks lots of boxes. But it’s puzzling that no one has yet noted how condescending and ironic this notion is. Around here, the task of fetching water has always been women’s work. It’s a Heritage thing.

In preparation for tonight’s ‘bok World Cup squad announcement a very clever check list for fans has been published to help them vent their outrage, indignation and despair. The point to remember, however, is that the teams we meet will also have been sent off with the criticisms of their fans ringing in their ears. It’s going to be tough for everyone.

James Greener

28^th August 2015

THAT’S NO LADY. THAT’S MY BEAR

So far the deterioration (almost 9% since March, with half of that this month) in the All Share is similar to that experienced in 2011.But it’s showing every sign of needing to go down a great deal more. And the weak rand signals that foreign buyers are not showing up. All that’s happening is that locals are swapping scrip for cash at ever lower prices. Only the very nimble and brave should try to squeeze trading profits from the market in these circumstances.

The South African government is now paying anyone prepared to lend them rands for a period of 10 years, a yield which is over 600 basis points greater than the yield that the US government is paying its similar period dollar creditors. Even this record high difference is failing to stop rands fleeing the country at 13 to the dollar and 20-something to the pound. Clearly there is a fear that whatever money is returned to rand investors in 10 years time won’t be worth collecting. Alarming.

Worth noting, however is the fact that despite the dollar gold price plunging more than a third in the past three years or so, the local price of that metal as reflected in Krugerrands and the gold ETF is off only about 5%. Not exactly a perfect store of value but a reasonable defence against the rand’s collapse.

Despite all our deepest scepticism and suspicions it has to be acknowledged that according to the monthly figures published by National Treasury the government is slowly bringing its spending rate down while increasing its collections rate. After applying the friendliest of averaging techniques these growth rates turn out to be 7.9%pa and 10.1%pa respectively. Mathematically at least, and if trends persist, this significant difference implies the elimination of the fiscal deficit within a decade. The resulting surplus could then be directed to extinguishing the rather worrying debt that has accumulated. The list of things that could derail this thesis would run over onto the next page and so we must be content with just keeping an eye on these numbers. Next week the second quarter GDP results will be released and ought to be a little better than the awful March 2015 result of 1.3%pa. Mind you there have been precious few company results published in the last few months that signalled resurgence in growth. Few of our supposed leaders seem to grasp what a tight-rope we are walking.

Hopefully no one boarded a flight to New York from SA on Monday clutching a copy of Business Day. For that news paper carried a financial notice addressed to the shareholders of Oceana, a fishing company. And emblazoned along the top of that “tombstone” advertisement was the curious and pointless injunction that it was not to be seen by any one in the USA, Canada or even Japan. Few people will remember why regulators thought it was important to protect the sensitive investors in those places from news about rights issues here on the southern tip. but anyway the  internet has made those ideas a nonsense.

To the delight of some and consternation of many, “hackers” have breached the security around an internationally used website purporting to offer a service for those seeking a bit of “skelm”. For non-South African readers this is the delightfully evocative local term for an extramarital partner. Fervid reporters are pawing through the now published client lists from the site and it seems that SA civil service email addresses are strongly represented, which confirms what we suspected these folk do with most of their time. Expect a rash of explanations along the lines of “It is not me. I was not there.”

Apparently the decision to send the ‘bokke out to play dressed in white jerseys last week was a “commercial” decision. Excuse me? It was definitely a very stupid one ignoring not only traditions but also the laws of optics. In the fading Argentinean afternoon light the light blue and white hoops were almost indistinguishable from the ‘bokke’s strip. These decision makers display the same understanding of rugby that Number 1 has of finance.

James Greener

Friday 21^st August 2015

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)