AT LAST JZ GETS TIME IN HIS FIREPOOL

As the popular saying has it. “My, but that escalated quickly!” JZ has gone. Arrests have been made. Dodgy characters have vanished. And all on Valentine’s Day, while the rest of us were dealing in roses and chocolates and basking in a spirit of love and tenderness. A president who, if nothing else, has just one wife is a great improvement and the markets are enjoying a burst of exuberant optimism. It’s really unkind to suggest that JZ’s rather sudden departure long before the time frame he seemed to have in mind only last week has anything to do with his notorious inability to count.

President Ramaphosa already has a packed diary and a huge task ahead of him doing what the Americans have termed “draining the swamp.” Most of us believe we can identify the ministers and officials who ought to get an immediate and large boot. However, Cyril will have to be careful about how many enemies he can afford to make. Further, finding competent replacements will not be simple. Anyway, just as soon as he makes a start, there will be a nice government contract out there to supply new framed portraits of the top guys for thousands of government offices. Apparently civil servants need the beady eyes of their superiors peering down at them from the wall in order to carry out their job of being servile and civil.

It’s surely too late for the new man to have any influence on the contents of the Budget due to be delivered on Thursday. The finances of the state are so dire that drastic measures are needed immediately and there’s probably scant wiggle room even for someone who understands finance.  It will take several years of prudent and incorrupt presidency to get matters back under control. The current Minister of Finance is either so clueless about the situation or resigned to being fired soon that he is comfortable whiling away the long boring hours in parliament playing computer games.

Anyone who takes a look at the motoring supplement of the newspaper must surely be struck by the fact that there are about 1700 new car models on offer in SA. And a very high proportion of these, based on price alone, are undeniably in the super luxury class. There are nearly 40 different models of Porsche, 14 Maseratis, 13 Bentleys, 9 Aston Martins, 9 Rolls Royces and 8 Lamborghini for the well-heeled to consider. Not to mention the literally dozens of Mercedes, BMW and Audi models available. Obviously, the world’s car manufacturers have pegged SA as a hot target market for wheels that mere wage earners can never even think of.   Juxtaposing these observations with the many guilt-inducing measures of just how desperate and poor most South Africans are, leaves one wondering about the depth of the pool of ill-gotten gains.

Frankly the compromise reached by the Olympic high-ups to permit sportsmen and women from Russia to compete in the Winter Games provided none actually says they are Russian, is hypocrisy of the highest order. Why was this ruse not used 40 years ago when South African athletes achieved Olympic qualifying standards but were banned from attending because the world wanted to “punish” the government?

So far, the winner by a country mile for the noisiest winter sport is women’s curling. Two teams of 4 girls on a rink in a hall with 4 rinks adds up to bedlam. Can all that shouting really alter the course of a large lump of stone sliding majestically over the ice? And the Super 15 season opens with that allegiance-testing match between the Lions and the Sharks. Usual compromise: Lions cap, Sharks shirt and a nice bottle of wine for the host. Did someone mention cricket?

James Greener

Friday 16^th February 2018

AN AWARD CEREMONY WE ALL MISSED

The rather spectacular collapse in the price of Bitcoin has had some interesting repercussions on the value of other securities which also depend a lot on being worth what their originators and custodians say they are. As the Steinhof debacle shows, the valuation of even ordinary shares depends upon the trustworthiness and honesty of the people who run the businesses and more importantly in the ability and professional integrity of those we expect to audit them. The view that a Krugerrand in the hand is worth more than a dematerialised share certificate in a central share depository is certainly archaic and the JSE has a proud record of converting to a paperless securities market with minimal glitches. However, nothing is really risk free and it’s important to recognise that and price it accordingly. With the almost 10% pull-back in many share markets experienced this week, breathless commentators have been calculating gleefully how much the vile capitalists have lost. Unfortunately for their narrative, the bounce back suggests that those capitalists just added to their holdings at the lower prices

One of the difficulties for believers in free markets is the presence in high office of people who think they know what the price of everything and especially money, should be. These central bankers (for it is primarily, they) fiddle incessantly with interest rates, adjusting them up or down in tiny increments, in the hope that the gigantic economies they think they command will respond appropriately. The very simple fact that we still experience periods of boom and bust, shows that either their measures are largely ineffective or else they don’t know what they are doing. If all the expert advice was just that, shouldn’t we all be educated, employed and content?

Astonishingly, there is a monthly periodical named Central Banking (what else?) which is apparently essential reading for the sort of people who wear a suit AND tie (or smart frock) to work. This is the journal that has declared our very own SARB Governor Lesetja Kganyago to be “Governor of the Year”. An accolade of which he must be very proud. But it doesn’t explain why citizens are being warned to expect very serious tax hikes in the forthcoming budget. Obviously taxing the proletariat into perdition is not a bad thing in Central Banking circles.

 It should be admitted that experiments with letting the markets set prices have not all worked. Often, powerful players (e.g. individual traders with dozy and greedy managers) contrive to operate a cartel and move prices to their own advantage. [viz. The LIBOR scandal!] This is a failure of the supervisors and regulators to exercise their powers with sufficient scepticism and diligence, not of the market.

The only people to be disappointed by the postponement of Number One’s  State of the Nation speech are those who have been taking their credit cards for strenuous outings around the malls. SONA has grown into a lavish social event for the P-list[1] celebrities to display their trappings earned as servants of the people. This gathering in parliament has during JZ’s term revealed little except sycophantic adulation of the benefactor of most of the cast. The real story in the postponement is that, to no one’s surprise (well maybe a few), having two different people as presidents of the ruling party and nation respectively is not working. JZ reportedly has agreed to an early departure from his post but first he wants to say good bye to some people like his cabinet. Since there are more than 70 of them and each will doubtless be very keen to get assurances about their place in the cash flows this farewell might take some time. Like through to 2019 perhaps, which is anyway the scheduled date for JZ to retire.

My understanding of winter sports appears to be similar to the knowledge the Proteas have of the ODI record at Newlands. Bowling first is as dangerous as putting on skis on with the pointy end backwards. And now that Alistair Coetzee has been asked to return the poisoned chalice to SARU who will they find to give it to next?

James Greener

Friday 9^th February 2018

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[1] Politicians and Pests

TOO MUCH INFORMATION

Someone has definitely prodded the bear and he’s out and about, rolling boulders and uprooting shrubs looking for the value that the equity market valuations promise. President Trump’s holiday on Wall Street is ending and the bill has been slid under the door of the honeymoon suite. US bond yields are at a 4 year high. Commodity prices are pushing higher. There is some evidence of a mistrust of “synthetic” instruments. These are the sometimes-complicated securities manufactured by the propeller heads to amplify the modest price moves of the underlying conventional shares or commodities.  Sleep with one eye open, folks.

The ease with which a hitherto unknown outfit like Viceroy can sow widespread doubt about listed companies is very interesting. It’s not unlike what’s happening in the Bitcoin market where in the absence of any recognised method for valuing these intangible beasties, just about any number seems to do. In the case of a listed company like Capitec Bank, however, there are published numbers and common methodologies. Nevertheless, banks are notoriously difficult entities on which to carry out a financial analysis as they can legally (perhaps) shift and rename troves of value and pockets of impairment (a polite term for dud loans) from one reporting period to the next. A few years ago, one of the big four banks sent shareholders an annual report weighing more than kilogram. Plenty of hidey-holes in that document to stash some skeletons.

Whether or not Viceroy have uncovered some moth-eaten donkeys in the Capitec stable of thoroughbreds will emerge for those of us on the outside (customers and shareholders) in due course. In the meantime, the sheriff is charging around firing into the air and threatening insiders with a plot on boot hill. He has little chance of success.

Multichoice, the privately-owned satellite digital broadcast system has told ANN7 that it will from August no longer provide them with a channel. Given the many strange TV stations that it does already broadcast to much of Africa and that this rather suspect and partisan news station is (in a roundabout way) owned by pals of Number One, it is safe to suggest that Multichoice’s decision is not entirely a commercial one.  If the government had only carried out its international obligation two years ago to have in place a publicly owned terrestrial digital broadcast  system,  then ANN7 would now have an alternative method for reaching its meagre audience of cabinet ministers eager to see themselves on TV.

Dismissed or suspended senior staff members at state owned enterprises often challenge their suspension or dismissal with such zeal that it suggests either that they really are not guilty or  that they know how tough it will be no longer to have a highly paid job with opportunities for patronage. Mind you its astonishing how often a dismissed and disgraced cadre, finally deemed unqualified, incompetent or sufficiently corrupt by one branch of government pops up in another. Diplomatic posting as ambassador to a country commercially important to us is a frequent reward.

SARS, the nation’s tax collector, is so desperate for funds that it appears to be on the point of stirring up a whole heap of trouble. It wants to have a close look at whether all the hundreds of churches in the country are being totally honest about their tax affairs. SARS too must have been intrigued by the sight of a humble rural pastor sliding out from behind the wheel of a Lamborghini. The heart of the problem is that religious institutions can apply to be exempted from various taxes and fiddling with that piece of legislation is going to face fierce opposition. Just defining such an institution is a several thousand-year-old problem.

The Proteas were handed a drubbing by India in the first ODI of a lengthy series. We didn’t look too clever in the third test either. It’s a funny game, cricket. This is going to be a tough summer if we have to watch more of this in the coming weeks. Already, however, the captain is telling everyone that he is focussing on the World Cup next year!

James Greener

Friday 2^nd February 2108