TICKETS FOR TAX PAYERS

I have just seen the suggestion that the JSE could close the year 20% higher than where it is now. Statistically this sort of rise in just four months is not impossible or unprecedented. I would be interested to know what proportion of this pundit’s personal portfolio is invested in the market today. Anything more than say 10% liquidity and I would suggest that he, like me, actually feels that this kind of move is economically unlikely. You may have noticed that some surprising companies have been blaming consumer spending cutbacks for slower earnings growth and even dividend cuts. Of course there have also been several delightful results and companies have showered their shareholders in money.

I watched the Olympics closing ceremony and stared open mouthed at the scruffy performance put on by London, the next host city. And that was just its mayor, who clearly had not coped with the time zone shift. Still wearing the suit he had slept in, he lurched onto the stage to collect the flag and wave it about in a dazed manner. Elsewhere in the stadium a straggle of equally scruffy alleged thespians did odd things with umbrellas and a badly made model red double-decker bus. An elderly musician survivor from swinging London managed to stay upright for long enough to strum a few chords and an American soccer player emerged from the roof of the bus to kick a ball. However, was it so bad that the pound deserved to be marked down severely this week? Or perhaps it is just the rest of the world noting that it will cost the UK a lot of pounds over the next four years to lift their game?

In contrast, various stories have surfaced about how demand for gold coins has exceeded the supply of even the largest producers and suppliers. That this alleged demand has not really yet shown up in the price of these shiny dense discs leaves me a tad suspicious about the reports, but it is fun for us gold bulls to hear this kind of thing.

What is not fun for tax-payers, however, is the size of the tab that we have been landed with to pay for lawyers to represent the leader of the ruling party at his forthcoming trial. Just why this bill should be handed to the nation has not been made clear and it is especially irritating to see this news today when provisional tax payments are due. It is also hard to reconcile this use of public money with Minister Manuel’s claim that “Tax collecting enables development.” Unless of course, he is referring to the development of those lucky lawyers’ lifestyles.

Another equally banal and foolish statement that “Economic growth (is the) antidote to poverty in Africa” is apparently the conclusion to a study carried out by the World Bank. You really have to wonder what many of these semi-official organisations are for when you encounter this presumably high-priced nonsense.

Thanks to the recent squabble about how to calculate inflation, when this week’s very bad (old style) numbers were published, folks were uncertain whether to whine or blow raspberries. Having just been told that the price of bathroom taps will go up tens of percent on Monday I belong to the whining school and must now dash off to the plumber to see if we can avoid using wooden bungs in the new house.

No matter how you try to do the maths of GDP per ball, or swimming pool per city or medals per mouth we are doing very badly at sport right now. I scored zero fish too. I declare the bar open.

James Greener

29^th August 2008

A QUADRILLION IS NOT AN EQUESTRIAN EVENT

It was another week when inflation as a topic captured far more headlines space than it deserves. First off some one announced that prices in Zimbabwe are going up by about 5% a day and a picture of a rubbish bin filled with bank notes in denominations of as much as Z$500 000 was doing the rounds. It makes one wonder just what it is that keeps alive the fragile trust that a citizen has in a piece of paper printed by a central bank. The only good news from that mess is that we have all learned what comes after a trillion. Then from Euroland came mutterings that inflation was starting to get way too high. And finally the National Treasury seems to have decided that they will soon be able to discard the CPIX statistic that was created especially for them several years ago with the sole reason of making an easier target to hit. As we all know their record in hitting that target has become as tattered as the baton-passing record of the relay team.  Presumably between themselves and Stats SA they have hatched a number that might be more obliging, even if it bears no relation to the spending experience of the consumer.

From what I can discover this is a very popular ploy used by governments world-wide. Any suggestion that this constitutes a hefty shift of the goal posts is met with cries of outraged disbelief that they would even think of such a thing. However, it will not be long before you will be able to spot carefully disguised statements pointing out why it would be inappropriate to link senior civil servant salaries to the new CPI.

About two dozen listed JSE companies reported this week and several others released trading statements. Most of those firms which are connected to the business of producing and shipping minerals and commodities delivered satisfyingly increased profits. The main disappointment to catch my eye was from Woolworths where a modest year on year fall in earnings was reported. In contrast, however, fellow retailer Massmart delivered rather good growth in profits.

Earlier this month the all share index was more than 20% below its May all-time high and some commentators felt that such a correction was about all one might expect from a bear market. Certainly since then, that index has experienced a 5% recovery but as is often the case with indices, this statistic conceals disparities as wide and as puzzling as the example of the two retailers quoted above. Despite the suggestion that the commodity boom is over, a careful sifting through the details indicates that financials are still underperforming resources. Patient readers will know where this is leading, which is my fear that the uncomprehendingly large debt levels in the US must inevitably continue to erode the US dollar and the financial edifice that rests on this now very shaky foundation. Not one person a year ago would have believed that we could now be at the point where gold plated banking names from places as solid as Switzerland were announcing write off amounts that grew almost every week. Not only does this suggest that they had been doing business with some very dodgy names but also it was terrifying to realise that their record keeping was so bad that they did not actually have the faintest idea of how much trouble they were in!

Maybe I should try that approach in my provisional tax return to SARS next week and say that my records are in such a mess (in fact, the dog ate them) that I’ll take a tax holiday, change my name and year end and start afresh in 2010 when I don’t feel that any of my tax will be used to subsidise someone else’s conversion to digital TV.

Plenty of sport this weekend with the ‘bokke assured of at least the bronze in the tri-nations. I am going fishing.

James Greener

22^nd August 2008.

PLAYING TO THE CROWD

 Contrary to popular belief I do consult charts from time to time but only to see the context of the current levels. I have little trust in my ability to project the darn things forward into the wild blue future. One of my favourites shows the daily history of six exchange-traded funds here on the JSE. In August so far it is impossible to discern any trend or signal emerging from what is nothing more than a tangled multicoloured bowl of spaghetti. No one sector or type of share is this month’s current winner or indeed clear loser. There must be some very sorry and also some very exciting tales being told by the fund managers who have been trying to spot and trade this market.

Students of my school of interest-rate prediction will have known the instant that Governor Mboweni tuned to face the microphones that he was not about to change the repo rate. Sure enough, after several minutes of soporific delivery of allegedly important but undoubtedly dubious economic numbers he announced what his cool blue tie had been screaming. In due course as his fear of being photographed deepens he will need only to hoist his tie on the Reserve Bank flagpole and the world will know the decision.

It has been another week when the most eye-catching financial news has been the strength of the US dollar. To bet against the greenback has been such a winning trade for so long that the severity and strength of the recovery must have destroyed many hopes and careers. The only cries of pain I have not yet heard are from American exporters who will surely soon begin to wail for protection? The thing that puzzles all us dollar bears is that there really so far has been not one scrap of news to suggest that the worst is over for that economy. But perhaps that in itself is the signal that the end is nigh.

Finally this country’s largest bank announced their half year results and managed to scrape together double-digit earnings growth and so overshadow the competition. Can this be the time to begin buying the financial shares again?

Look out for mielies and cows in Gauteng sporting short whip antennae. They will be customers for Gauteng’s proposed Geo-Referencing project for high Value Crops and Livestock. Why the country’s least agricultural province needs to use satellites to watch over its few farmers is not explained. Also never explained is why the state finds it necessary to relaunch, at regular intervals, its lamentably ineffective antipoverty campaign. Aside from the obvious attraction of lavish festivities at each event, will it never dawn on socialists that the costs and temptations of any program of sanctioned robbery and distribution has never worked?

I wonder if this coastal lifestyle thing is not starting to soften me up a bit. At half-time in the first tri-nations test I was so wound up that I went outside to breath deeply and watch the sea – and never returned to the TV after realising that whether I watched or not would not affect the result. Although tomorrow’s match is taking place at an hour when soothing chemical help is more palatable I am uncertain if I will switch over to at Newlands. After all I really can not miss a single round of women’s beach volleyball. And have you seen the ferocity of that handball business? Far more bruising than any front row battle. Who knew there were so many ways to work off a good lunch?

James Greener

15^th August 2008.

LET THE MEDAL COUNT BEGIN

There seems to be an avalanche of news and developments that could affect market sentiment. It is quite hard to keep tabs on them all. Is the sudden outbreak of a nasty little war in South Ossetia significant? Is the European Central Bank’s decision to leave rates unchanged important? Just how does it affect one group of shareholders when a signed and sealed corporate deal is unpicked and repriced because another group does not like the fact that prices go down as well as up? How will the government implement the union’s demand that the prices of food and fuel be reduced? Will the JSE remove the No Smoking signs when the largest stock on the boards is a tobacco company? Is the commodity price boom really over now?

I have suggested before that currency exchange rates are perhaps among the more reliable of market gauges. They are certainly universal in that they reflect the aggregation of huge financial flows. Therefore I am very intrigued to see that the US dollar is definitely showing signs of recovery, although when I look at all the other data for that nation I can see absolutely no reason why, but there you are! Money is flowing into the greenback. The rand, on the other hand is displaying evidence that its recent strong spell may have ended. Suddenly there are rand sellers everywhere.

The All Share scared everyone by spending more than 24 hours below the 25 000 level before the fund managers began to waffle about buying opportunities and name-dropping their worst hit holdings.. Fortunately for them this prompted some buyers into chasing up the prices but they need to go a long way further yet to offset the dreadful performance that most managers will have to report for July.

So far the half-year results from the financial sector have mostly revealed positive growth in earnings albeit only in single digits. This is indeed laudable when compared with the losses measured in billions of dollars that we keep on hearing from the US banks. Nevertheless it is pretty patchy with some surprising companies having to tell the shareholders that things are getting grim.

Governor Mboweni, however, seems to have identified an unexploited source of economic growth. Despite attending a function presumably intended to highlight the precarious financial position of one of the country’s few remaining ballet companies he noted that the performing arts provided “significant employment opportunities for all gender categories - but mainly women and younger people.” This statement leaves many unanswered questions, but as he and I share much the same sort of shape, I suppose that we represent a gender category unlikely to find a job in dance.

It seems that I was correct in my previous complaint that the navy has little need for three (or indeed any) submarines. One of them has reportedly been sitting well clear of the water in dry-dock for several months. A spokesman claimed that this was standard operating procedure. Apparently there will be plenty of time to refloat the vessel when South Africa experiences its next maritime threat. In the meantime a very large contingent of government officials are in Beijing to lobby hard for the inclusion of “Catch the Kick-back” in the next Olympic games.

James Greener

8/8/8

MAN OF THE MATCH : THE SOUTH AFRICAN RAND

In the last few years I have I come to the point where I can acknowledge and even enjoy the market’s complete unpredictability. On average exactly half of everyone’s forecasts are comprehensively trashed, often embarrassingly soon after they are published. It took a mere three days for my claim that the All Share was not about to breach 28 000 to be rendered nonsense. Who knew that the Dow would indulge in leaps and dives of record proportions even while yet more news of the awful position of the US financial situation emerged? The sole reason for wanting to be president of that nation just has to be the perks and pension plan.

The few verities in this business include the observation that the attendance at most gatherings is proportional to the quality of the catering promised at that meeting and that the idea of appointing a committee to decide on the price of money is a bad one. These two items are not unrelated.

A number of data items have surfaced to provide plenty of material for analysts firstly to fill space with warnings that the terribly high official (but possibly incorrect) inflation numbers would leave the wise ones with no choice but to raise rates. Then someone noticed that in those markets where interest rates are determined by supply and demand, the interest rates are actually going down. Now the word is that next week’s meeting at the Reserve Bank will send Governor Mboweni out in front of the floodlights to perspire his way through a speech (already  written) and then with a flourish to declare ‘no change”. And there’s plenty of time and space yet for confident calls of a rate cut.

Apparently the rand currency market believes that this last choice is very unlikely as it appears that folk have been happily selling other currencies and buying rands (or equivalently not selling rands and buying foreign currencies). Our little runt has gained almost 5% versus the mighty British pound this week. I know that their summer weather has been dreadful but surely they don’t need to send their money down to the southern tip for a sunny break?

My battle with Telkom continues and now a handicap in the form of a strike by most technicians has been declared. My excitement at being told by a robotic voice that my queuing time is approximately 25 minutes is low. At the end of one of many unsatisfactory calls to the ludicrously named Help-Line I decided to follow the advice in the Phone Book and asked to be put through to the CEO. The response was to refer me to Directory Enquiries for his telephone number! My link to the outside world is as thin and tenuous as my temper.

And I really need my email. How else will I be able to submit my proposal to the goons at Gauteng Provincial Legislature who are calling for proposals to form a Body Shop for their Economic Development and Planning Framework? Did someone “borrow” it and crash it into a lamp pole?

I guess the US president does get to scramble several thousand fighter places into the sky when he grabs the red phone and pushes the button. Our own man will merely hear a recorded message that neither of the two planes is ready yet and anyway the pilots are “on a course”.

James Greener

1^st August 2008.