MERRY CHRISTMAS

Some much needed rain is falling here on the kingdom’s beachfront territory today. This will drive visitors and locals alike into the malls and shops and in a few weeks it will be announced that a record retail Christmas period has been achieved.  The Reserve Bank’s figures reveal that there is currently about 15% more notes and coins in circulation than a year ago and this is way above inflation so one must conclude that, on average, folk have more spending power in their pockets and purses. Which is a good thing. On some days that bad ol’ recession just vanishes into the haze.

Which is what I am about to do and I hope you have already done. The JSE is closing early to day and next week is open for only two and half days as Tuesday is a holiday. That will  be time enough, however, for the foolhardy to issue their 2012 forecasts.

Have a wonderful, safe and merry Christmas.

James Greener

23^rd December 2011

MELLOW BRIC ROAD

In the ongoing and seemingly limitless confusion about what is happening and more importantly what may happen in the European markets and currencies, the talking heads have seized with relish on the very obvious fall in the price of gold. At last there is a significant number to waffle about and “definitions” of bear markets have been dusted off and draped around the shoulders of the yellow metal. Of course it depends entirely on which currency you are pricing the stuff in and here in SA the fall has really not yet been severe enough to attract the term bear. This is because the rand has sagged a lot in response apparently to some heavy selling of our shares and bonds by non-residents.  For those who feel they don’t have enough insurance coverage against politician stupidity and currency weakness this is a handy dip for some more accumulation.

It is not difficult for bears to find sustenance just about anywhere one looks. My own particular favourite at the moment is the news that all sorts of bubbles may be bursting in China. Reportedly the property market there is plummeting and credit is becoming harder to obtain. One commentator remarks that the “BRICS are falling like bricks” but despite our effective self-nomination and election to this club our markets have not followed suit and the JSE will probably be among the smallest losers of the year. Nevertheless if every Chinaman consumes just one fewer item than the world was hoping for, then producers are in for a less than merry Christmas. Perhaps, however, the news from the USA, still by far the biggest and most important economy, is on balance rather more bullish. Sure, the debts and cut backs in public services at all levels of government continue to provide satisfying stories for us to gloat over. But there are signs that the worst may be over and the less visually challenged bulls claim to have sighted some indicators of returning jobs.

As matters stand, going into the last few days of the year the All Share total return for 2011 is around two and a half percent. This is disappointing and quite liable to be erased (or doubled) in a short burst of now commonplace excitement between lunch and tea on any day between here and Hogmanay. It definitely isn’t the 20% pa that we need to re-establish that wonderful trend that we enjoyed for so long. Equity investing has become defensive and a tad boring. Bonds, however, do seem particularly risky as both interest rates and inflation are edging upwards.

One of the JSE’s big ideas driving their takeover of the Bond Market was to make it more accessible and friendly to individual and small investors. While the merger is now a fact, I am not surprised that the private investor has yet to surge into that market. It was not that long ago that bond yields here were well above 10% and some of us can remember 20% This would destroy a bond portfolio bought at present levels. For the insistent there is a very satisfactory ETF that tracks the government bond index and also be aware of the newish ETF that buys just the so-called inflation linked bonds also issued by the state. Both of these instruments offer almost risk-free (but not necessarily loss-free) investing. In passing, it is amusing to read about the dismay and panic that has followed the news that bond rates in several euro zone nations are now above the allegedly disaster level of 7%!

Some of the earliest of the renamed streets here in Durban are back to their original names following the unearthing of some legal glitch in the original process. Nothing was said about that process being insensitive, unnecessary, costly and stupid. The argument against changing a name from one now unremembered and possibly dubious dignitary to another whose fame is equally mystifying has nothing to do with disrespect for the newcomer but everything to do with continuity and history. Surely the number of roads being created in this ever expanding metropolis far exceeds the number of folk deemed worthy of being remembered by a length of tarmac.

But now it’s time to go and watch some test cricket.

James Greener

Day of Reconciliation 2011.

COP OUT

The residents of Durban poured into the streets last night to gaze in awe at the skies above the International Conference Centre. Hopefully the dramatic fireworks display that was reflected in the tears of pride and appreciation that rolled down the faces of the gathered rate and tax payers marked the end of the COP 17 boondoggle. We were humbled that our leaders were using our money to stage such an appropriate nature-friendly display of extravagance to thank the Parties who had attended the Conference for the 17^th time. Those residents lucky enough to live alongside the roads linking the gritty downtown venue with the luxury hotels of the north coast were able also to see for the last time the weary and exhausted delegates as they were whisked past in their police-escorted, blue-light flashing, traffic-law flouting convoys. Some found comfort in the knowledge that these hard-working servants of the people would soon be in their comfortable sea-facing rooms with well stocked mini-bars and 24-hour room service.

By most accounts it seems that the conference was an outstanding display of hypocrisy and privileged consumption. No document or memorandum that could not have been knocked up by people staying at home and using the internet was published. But lots of folk got to spend several days in Durban (sorry about the weather chaps) practicing very bad science, displaying some astonishing ignorance, arrogance and bad manners. As with all these international gatherings one rarely gets to see a final set of accounts to see if the costs were greater or less than the benefits, but I  do hope that at least some members of the hospitality industry here in Durbs are feeling better off today..

I was extremely fortunate to be out of town for all but the dying moments of the circus, but one excited news item I did see insisted that the gathered throngs had discovered a new and magical business strategy that would bring prosperity and create jobs. It seems that manufacturers and businessmen need only make their products and services eco-friendly and a hitherto untapped community of wealthy and eager customers and clients would be delighted to pay premium prices and drive up sales and profits. And so, to cater for this wonderful new demand, employers would need to throw open their gates and welcome the large numbers of well trained and disciplined workers waiting outside. Who would have guessed?

Equally amazing is that despite some recent heroic intra-day excursions by the market indices, the average investor is merely 10% better off than they were at the 2008 market index peak. Significantly, all of this return has been derived from the dividend portion only. This is why mostly only well-managed, dividend-paying companies remain my choice for investment portfolios.

And why, if the Euro Zone is in such a mess, has the euro currency not completely tanked. In the same way that an excess demand for shares has not emerged in the last few years, no overwhelming supply of euros has swamped the currency markets in the last few months. Puzzling, but it suggests that many people are rather certain that the euro will survive.

It is also puzzling if not very embarrassing for someone that one of the Durban harbour pilot boats managed to miss the enlarged harbour entrance by a country mile and fetch up on the beach after bouncing off some rocks. These are the guys that the big ships are obliged to pay to have on board when entering or leaving port. Fortunately, no one except taxpayers were injured as the damage repair estimated at R1 million was described by the port captain as “minimal”. So not only is the 5 cent coin being withdrawn, the amount of R1m is apparently barely worth mentioning.  Inflation is undoubtedly on the rise.

 Thank goodness that some test cricket is starting again in a few days. It really is the ultimate in sport but let’s hope that the New Year sees the departure if not the arrest of the crooks and thugs who ludicrously are in charge of this and many other sporting codes.

James Greener

11^th December 2011

CARBON COP(Y) 17

Anyone who can offer a view on what is happening in Euro Land and how it will impact the rest of us is going to be wrong within a few hours of making the prediction. The mess is deep, smelly and very unlikely to end well. Perhaps the only good to emerge is that it is revealing to plenty of people that most of their respected and trusted leaders are no more reliable or trustworthy than just about anyone else. Those leaders have the use of the presidential palace, plane and party planner but not much in the way of an idea of what to do except spray public money from a fire hose. And when the hydrant runs dry …..? It is very sad really. From a very simplistic viewpoint the single euro currency seems like a good idea and makes life easier for many of us. But the clever folk who said it was a doomed structure are starting to look as if they were right. But then recall the first sentence.

Most local company earnings continue to show growth and this week just a bank and a construction company unsurprisingly announced against that trend. Nevertheless the simpler valuation models still suggest very few compelling buys in the share market. A number of administrative and technical developments being made by the now all-powerful JSE are intended to make the bond market friendlier for small investors. With the unwarranted but inevitable confusion that will attend next year’s probable implementation of a new way of taxing dividends, bonds might seem like a safe haven. Outright purchases of bonds at these generational low yields are unwise though. However, there are a couple of instruments available for those who are not totally spooked by the thought of collecting taxable interest payments.

So Stats SA has followed my idea of enabling everyone to compute their own inflation rate.  At one memorable analyst meeting many years ago the usual moans of disbelief about the latest official inflation number were being voiced. The company economist was trying to fight his corner and support the data and pointed out to the senior partner that “… the CPI is not based solely on the price of Famous Grouse and aeroplane fuel, you know!” With the new Stats SA tool he can now check that point.

The levels of silliness and breathless excitement are mounting here in Durban as COP 17 approaches. This is not, as the name suggests, a new police series on TV but the next in a sequence of talking shops where hypocrisy trumps science and slogans beat reason.  The future tense will be in great demand and impossible promises will be made. Hoards of lavish-spending tax-funded delegates are eagerly awaited. There are private jet runways and first class lounges and top of the range suites which have remained unused since the World Cup except for the odd visit by local party big-wigs. The War on Carbon demands that its generals fight from the comfortable seats and the kingdom is delighted to provide them. Expect siren-wailing traffic-halting limo cavalcades sliding through red lights en route to deliver delegates to hector audiences about reducing their carbon footprint. Less welcome will be the footprints of the grubby takkie-shod and surprisingly numerous pavement preachers who mysteriously manage to find the price of a ticket to these salubrious and far-flung conference venues. Happily I shall be missing the circus. I shall be in the bush for a while and the tide will leave no marks.

Oh how nice it would be if the planners had remained with the original series of three tests against the Aussies. Two just doesn’t work – especially if we lose the second one.

James Greener

18^th November 2011

ELEVEN ELEVENS ARE ELEVENTY-LEVEN

It was another fine example of how impossible it is to get any consistency from economics. Mind you it does involve two so-called ratings agencies. These are organisations which usually demand a fee for their opinion and in spite of this have a pretty dismal record. A day after S&P announced that the good ship SA was “steady as she goes”, Moody’s said that they thought they could hear disturbing noises from the steering gear and perhaps the helmsman was battling to steer her away from the rocks that are looming. What is always consistent in these cases is the reaction of the newly “downgraded” entity and National Treasury’s indignant dismissal of this news was text book. It is true that our debt and financial positions are nowhere near as bad as Greece, Ireland or Italy but we should note that our own president seems to share the Italian fellow’s way with the ladies. And the proportion of our government’s spending that goes to service the interest on the debt is climbing. The main victim of the Moody’s announcement was the rand which moved down more than 2% against all major currencies. But then it more than recovered, presumably on the news that the wise women and men at the Reserve Bank chose to leave the repo rate unchanged. They did, however mutter that maybe the time will come when money ought to be made a bit cheaper. This encouragement of the borrowers at the expense of the savers is an uncomfortable policy at odds with the supposed needs of the country.

The same National Treasury have long failed to provide a satisfactory explanation for why they cannot ring-fence the income they derive from their taxes on fuel. This seems to be an obvious source for funding the construction and maintenance of all roads in the country. However, that cash disappears into the general state coffers where it is used amongst many other things on minister’s hotel bills and presidential jets. Instead the preference seems to be for toll roads. The welcome but costly improvements to the major routes around Joburg have been built with borrowed money that they intend to repay once the tolls begin to flow. The proposed toll tariffs caused an outcry and the implementation of the tolls has been delayed at least until February so that special interests can be placated. This in turn has alarmed the investors who lent the money in the first place and they have declined to lend any more.  Obviously desperate for some income, the Roads Agency has begun to market their so-called e-tags which offer a discounted toll fee compared to merely letting the computer read your number plate and post you a bill. Many of us are interested to see how the post office will cope with the volumes of mail this method will generate. Since the e-tag system can be linked to a bank account what remedy would one have if someone duplicated your number plate and spent the whole day travelling around the city clocking up toll fees and draining your account?

In the meantime the city around which they are driving is draining its own bank account pretty swiftly. The outstanding arrears of rates and services is an outrageous sum and it is high time they resorted to their old policies of hiring people like Jimmy Abbott the renowned heavyweight boxer and  Lions supporter to go and collect some debts.

The Financial Services Board has warned the industry that they will be very strict about ensuring compliance with their “Treating Customers Fairly” policy. Those of us who actually have customers and clients who are likely to take their business elsewhere unless they feel fairly treated, are offended and puzzled by the idea of yet another set of rules to be obeyed. What about having an alternative government to pay our taxes to because this one seems to pick on me most unfairly and often?

Now that was a rather special Test Match. Beating the Aussies in two and a half days is great. If it had gone on any longer I fear Tidemarks would not have seen the light of day and at least one local columnist would have been stuck for material next week.

James Greener

Armistice Day 2011

BACK PEDALLING ON THE REFERENDUM

For the last three months the range between the day’s high and low value of the All Share has almost always been greater than 1% of the value of the index and frequently greater even than 2.5%. Overall, however, the market has really gone nowhere. In these circumstances even the best informed are bound to make what later turnout to be poor decisions. The point here is that even if one hopes that maybe the bull has returned there are still large pockets of uncertainty and inclined selling if the spin accompanying the latest news release is negative.

Unless you are one of those fortunate but dull suits who are being paid by the taxpayers of your own or probably some other nation, you will have no time or inclination to follow the ins and outs and ons and offs of the circus that is laughingly named the European Economic Union. None of those words seems fully apposite. A particularly amusing episode in this soap opera, seemed to be about asking the Greek nation whether they would like to work harder and pay more tax and take instructions from Germans and Frenchmen. The alternative seemed to be to return to a life of dancing on the beach, sipping ouzo, breaking the odd plate and forgetting to repay loans to Germans and Frenchmen. Unsurprisingly this referendum idea has been scrapped. The serious side to all this is that Europe is a very large and important cog in the global economy. No one wins when it is so jammed up.

A tiny and nearly invisible cog in the machine is our own stuttering economy here on the southern tip but nevertheless we scored an invitation to send some representatives off to the G20 meeting in Cannes. So far reports suggest that our folk there have delivered some hectoring socialist diatribes about taxing the rich. Provided that the rich excludes the delegations of politicians and bureaucrats who are also present this is often a popular theme. However, as already mentioned there are far more entertaining topics on the agenda.

Who knew that there was an organisation called the Airports Council International and that they have just held a “gala dinner in Marrakech”?  At this, no doubt glittering event, paid for by taxpayers and air travellers, both OR Tambo and King Shaka international airports were inducted onto the organisation’s “Roll of Excellence”. It is a pity that the report of this accolade appeared right next to one about how 75% of the baggage handlers at these places arrive at work intent on stealing stuff from the suitcases they are paid to load.

The idea that economics is a subject worthy of a Nobel Price is moot. There is no evidence that research and development in this subject has enabled the planet to organise its affairs so as to avoid the cycles of booms and busts that so savagely disrupt it. That said, I am obviously disappointed that the committee this year again failed to spot my contributions. I have never been to Stockholm. Another local contender must be the salesman who flogged ten electric bicycles to the Durban Metro Police. This event was celebrated with a photo of the mayor on board one of these machines cruising along the (flat) beachfront boardwalk and an enthusiastic promise by him to ride to work at least once a week. The forthcoming Climate Conference to be held here in Durban is spawning limitless foolishness. The blurb trumpeted that battery bikes are “eco-friendly” because recharging is achieved simply by plugging into a domestic power socket. Oh dear!  Prizes should be offered to the first reporter who snaps His Worship pedalling uphill to his Pinetown home once the juice runs out.

An equally alarming picture of the Springbok Sevens new strip has also been released. Surely the Y-front pattern on the shorts is a joke? Oh! And did you see? The Golden Lions ended the season at the top of the log. Rather satisfactory I think.

James Greener

4^th November 2011

IT JUST WILL NOT ADD UP

The more cynical amongst us think that all those who marched around Gauteng to promote their demands for “Economic Freedom” have a fairly narrow definition for the phrase. This would entail the transfer of hard cash into their outstretched hands on the grounds that their undoubtedly penurious and disadvantaged background entitled them to it. It is not meant to be either cruel or flippant to point out that everyone now has the Economic Freedom to participate in any enterprise for which their skills and training fit them. The protestors would get much more sympathy if they directed their anger at those government polices which make it difficult for capital and labour to negotiate without pre-conditions that ignore the supply and demand situation. What ever the well-fed, beret-wearing, t-shirted firebrands on the truck leading the march might proclaim, the bare fact is that there is insufficient wealth in the entire country for everyone’s present demands to be met in full. Eventually one realises that arithmetic is far more powerful than promises. And that is why I worry about the bull market.

One economic freedom that we can all enjoy is to refuse the ruling party’s centenary offer of a limited number of 1 kg commemorative gold medallions priced at almost three times the value of the gold they contain. Whatever your level of veneration for President Jacob Zuma, his stamped profile can not add that much value to a disc of the yellow metal. For those looking for something more portable there are also one ounce coins, bearing celebratory images and text, on offer at R72 600. Compared to Krugerrands trading on the JSE at around R14 000 this is also an outrageous premium despite the enticement of a Certificate of Authenticity signed by the president himself. The selling agent’s breathless marketing claim that the actual trading prices will easily exceed these indicated opening auction prices is dubious. Be warned, the secondary market for these baubles is very very thin.

Maybe the suits in Euro Land have solved the crisis. Or maybe they haven’t. In fact probably all they are trying to do is make it go away until they can retire with their enormous tax-payer guaranteed pensions. The compelling irony is that it is these numerous tax-payer funded guaranteed benefits and entitlements which are a major contributor to the crisis. Another factor is the cost of lawyers whose task it is to trawl through the multi-lingual thesauruses for euphemisms for “broke”, “default” and “dishonest”. As mentioned before, this arithmetic stuff can be so darn inconvenient.

The increasingly impressive Finance Minister Gordhan laid out some undeniable arithmetic facts in the half-time budget speech in Parliament on Tuesday. He does become a little over-excited about the fiction that taxpayers should share his idealism for frequent and copious contributions to Treasury. Nevertheless the fact that the government spends lots more than it collects and therefore has to borrow more and therefore has a bigger interest bill was cogently made. I also liked his plan to claw back money allocated to departments but unspent. If you leave it there it will grow legs. Already, however, his warning about the modesty of next year’s salary rises has been rejected by the unions.

I watched in awe as All Black captain Richie McCaw lifted the Webb Ellis trophy totally without assistance from any politician or official. Our own captains have always been accompanied by a president or two to help them heave the golden trophy into the night air. Richie must be very strong. Presumably Golden Lions captain Josh Strauss will not risk the Samson effect of shaving off his luxuriant but repellent beard before he hoists the Currie Cup at Ellis Park this weekend.

James Greener

28^th October 2011 (and a pox on stores with Christmas decorations up already)

IS THE BULL FEELING DRAINED?

The October recovery has run into trouble with the JSE All Share developing a huge attraction for the 31 000 level these last few days and becoming unwilling to venture elsewhere. In the meantime the rand has sagged badly against all other currencies. There was a bit of cheer in the retail sales growth figures which might be a statistical glitch but equally could be real as all that mislaid government cash seeps into the system via personal pockets.

Plenty of politicians and others who should have known better have, over the years, travelled to Tripoli to shake the Colonel’s hand, give him a hug and enquire about the health of his oil fields and treasury. They must now all be pretty alarmed at what has befallen their friend whose last move was into a storm drain in an unsuccessful attempt to avoid his constituents.  

One of the downsides about being the boss of a country is that you meet some rather unsavoury characters in the course of your job. The sleaziest are often themselves leaders of nations. Our own president seemingly has not yet met a despot he doesn’t like and he is currently entertaining the rather unappealing president of Equatorial Guinea. The two of them were probably sitting side by side on the newly upholstered presidential couch last night watching with growing panic the TV images of angry citizens all over the world venting their fury at the lifestyles and habits of the rich, famous and corrupt. The staff would have been instructed to double-check that the electric fence was properly switched on.

Also going down the drain is any idea of what is happening in the Euro zone. Ratings agencies are dishing out red and yellow cards in all directions. Some talking heads are predicting that Portugal is going to be right behind Greece in telling its creditors a sob story. Share markets disliked the news that France and Germany were bickering about how to launch the lifeboat and it has now been estimated that it should be equipped with about a trillion euros of bailing-out money if everyone is to be saved. No mention, however, of where that money is going to come from, but taxpayers can surely expect a call.

There is still no good economic news coming out of USA but attention there is shifting to the Republican nomination debates. That contest is becoming personal and entertaining but appears to be successful in temporarily diverting people from the fact that they, their cities and their states are rapidly going bust. Back home a similar political beauty pageant is taking shape within the ruling party. One possible candidate expects this campaign to be characterised by “divisions and fast-forming cliques and cabals, pigeon-holing of unsuspecting individuals, innuendo, gossip, back-stabbing, character assassination and even physical assassination”. That pigeon-holing sounds particularly savage.

The atmosphere in the Massmart boardroom is probably verging on the violent too as they wait for the next shot across their bows from the government. Scores of politicians, bureaucrats and labour leaders none of whom have ever run a corner café, let alone a giant retailer, are desperate to impose unique conditions on the firm all because it is now part- owned by Wal-Mart, one of the biggest retailers on the planet. Wouldn’t it be fun to trawl through the Makro customer data base to see which of these interfering idiots buy Johnny Walker Black and plasma TVs at the stores they are threatening?

Reportedly the national grief that would follow an All Black defeat at the World Cup final on Sunday would be sufficiently large that it would sink that island forever. Now we can’t have that as we need to have a worthwhile team to beat from time to time so I wish them well and a memorable victory. A win for the Lions in their semi against Province is more of a problem though.

James Greener

21^st October 2011

WHO READS THE RULE BOOK ANYWAY?

It has been another week that is best described as volatile although some will claim that the bull did show himself at times. Sensibly, Reserve Bank Governor Marcus swiftly shut down any idea that SA would join its new best friend BRIC nations and send money to help Euroland get out of the its current financial embarrassment. More sense too from a senior mining executive who pointed out that nationalising an industry whose raw material is already owned by the state is foolish.

In the last few years a small unit that should be quietly and efficiently collecting the data that the state feels it needs in order to plan effectively has assumed an attitude far beyond its real status. The grandly named Stats SA is run by an erratic but colourful and highly visible civil servant who can be alarmingly belligerent towards anyone who questions his results or publishes competing data. He was so busy protecting his turf that he obviously failed to devote enough time to thinking about the huge census forms that his staff began delivering this week. Why, for example, are there more than a dozen categories of education level? Is there a need for so many income brackets each defined by limits stated to six significant figures? Why don’t they want to know about any bathrooms in the dwelling – surely a much better indication of living standards than the puzzling enumeration of rooms for “multiple-use”? If you have not yet been counted, be warned that there is a near obsession with your parents’ state of health and do, if you can, watch the way in which your full name is recorded without spaces. Note too that interruptions to power and water supplies are of interest to the government only if they persist for more than two days and not if they stopped you watching the cricket. Results of the census are expected in 2013.

By which time I hope someone will have put the Ministry for Women Children and People with Disabilities out of its miserable existence. Surprisingly the atrocious name has yet to attract the attention of the easily offended but the news is that it has attracted only 20% of its intended staff complement. Despite this understaffing the minister concerned claims that all is well. If so, why employ any more?

I am delighted to see the reappearance of that large and beautiful yacht in the advertisements for one of the nation’s bigger financial asset managers. The picture of this luxury craft cleaving the waves with sleek and wealthy people draped around the deck is exciting and suggests that toys like this will become within reach of clients who entrust their savings to the manager. Please remember, however, that the yacht belongs to the managers and not their clients. And while on the topic of asset growth, it is the time of year for glossy catalogues of tempting goodies and the 50 year-old Glenfiddich single malt whisky at R159 000 is clearly priced for government officials and youth league hot-shots. The 40 year-old at R28 900 is interesting. If you put it away for 10 years could you expect it to taste 16%pa better?

Something must be done about these Aussies. Last weekend the Wallabies gave the ‘Bokke a lesson in rugby rule interpretation and then last night their compatriots gave the Proteas a 5 wicket hiding. But at least on the soccer field they will never beat our national team’s slick victory dance routine. Bafana apparently devote a lot more time to rehearsing that dance than practicing goal-scoring because despite achieving only a nil all draw with Sierra Leone, they still put on the dazzling display when in fact it turns out that a goal would have much more useful.

Go Wales and the Golden Lions.

James Greener

14^th October 2011

THE SEAT-BELT LIGHT IS STILL ON

These must be very tough and worrying times for folk whose job it is to monitor the risks of dealers sitting at trading desks. Positions will be soaring from hero to zero and sometimes back again in the space of a few days and even hours. Commentators feel obliged to find a reason for each excursion and are always grateful when some index, statistic or price is published that differs from expectation. Another excellent scapegoat is a man in a suit (rarely a woman) preferably with a beard or glasses assuring the audience that, despite being in charge for many years, the current situation has nothing to do with them and they now have just the remedy to make it all better. Throwing large sacks of money at organisations that have already ill-used the previous delivery of money is a common remedy. A different outcome is very unlikely, however.

One indicator that is not bouncing around and has assumed a steady downward trend is an index of the dollar price of commodities. This might indicate a drying up of demand. Since it is widely assumed that China dominates consumption of these things, it is a reminder to keep a closer eye on other indicators from that country for sign of a cooling off. Contagion will be inevitable colds will be caught which will be considerably worse than the sniffle which has infected one of our noisier youthful socialist mouthpieces. This infection has conveniently caused him to be admitted to hospital instead of attending a disciplinary hearing. Because it is apparently “unethical, immoral and despicable” to enquire further on this unqualified woodworker’s health we have not learned if it was a private or a state hospital which is tending to the patient.  Anyone looking for a “Get Well Soon” card must be sure not to buy a “Sorry You Have Lost Your Job” one that is now selling well in the USA. Desperate times.

Right now the market index is poised about midway between the August low and the May high, both of which are about 8% away. No one knows where it will be at year end or even next week. Bears worry that that many companies are reporting disappointing profit growth and others are unwilling to commit cash to expansion. Growth among businesses that actually add value to raw materials is meagre and far too many resources are being devoted to fulfilling regulatory obligations. My particular favourite is the obligation to demonstrate sustainability – whatever that is. A sustainable mine is an oxymoron. As has been pointed out by many others, the end result of a successful mine is just a hole in the ground. Even paper-shufflers in the money industry are capable of sustaining little more than ignorance and greed. But this has been cause enough for crowds of folk to spend late autumn camping in lower Manhattan on an “Occupy Wall Street” campaign.

It is doubtful if anyone at all understands what is happening in the Euro zone. This week Italy received a downgrade which is financial gobbledegook for “might not be able to repay its debts” Other such pronouncements by the so-called rating agencies, that it should be pointed out have a poor record in these matters, are likely. Earlier this year an exercise to “stress-test” many banks was carried out. Banks were asked to report how much money they had has lent to which borrowers and then an accountant prodded some buttons on the calculator to see what would happen if the borrower went “poof”. Naturally no bank wished to be seen to fail this test and so many probably succumbed to the temptation not to reveal all the skeletons in all the cupboards. This week however, as the Greek mess moved closer to “poof”, bones fell clattering to the floor in several places and it is depositors and shareholders who are now being stress-tested.

Back home our stress peaks at 7am on Sunday when the ‘bokke meet the Wallabies in the quarterfinal. Close to many billions of words have been written about this event so all I can add is “Go Bokke”!

James Greener

7^th October 2011

EMBRACE THE BEAR – HE IS UNCOVERING VALUE

It is both month and quarter end. Neither has been kind to investors. From tonight the wheels at Stats SA start to grind and in about two months time the GDP figure for this period will be revealed. By then the rest of us will be grappling with who knows what other issues including the onset of Christmas. We will have little interest in the Statistician General’s announcement about whether we became richer or poorer in the three months after June. Only the analysts will be attentive because it will provide us with something to talk and write about. Real people already know that it has been a time when most businesses are battling, jobs are scarce, prices are rising and only leaders and their cronies seem to be flush.

Politicians obviously must know things that we mere taxpayers will never be allowed to see. This can be the only reason why a parliament full of them in Germany agreed to send yet more money to the hopelessly bust Greeks when they know full well that their own electorate think it is a very bad idea? And there is our own Minister of Money mumbling about stuffing “a couple of hundred million dollars” into the slotted tins being shaken by the folk whose own tax collectors are unable to do their job. No no. Bad idea. If you and your cabinet colleagues think it is a worth showing support for some dubious and debatable common ideal then go ahead and use your own pension fund. Don’t you dare touch ours. And by the way, “a couple of hundred million dollars” is a great deal of spondulicks

Somewhere down south of here, is a local authority who bask in the charming and evocative name of Hibiscus Coast Municipality. I guess that most of us think of the area as a seaside holiday destination, a wonderful place to retire to or with luck to live in and quite a lot of sugar cane. But there is something big happening down there. They have grand plans to become an aviation centre for the country, for why else would they be calling for tenders for the supply of an aircraft training simulator.  Have the ratepayers been asked about this?

The Department of Labour has been running a large full-colour advertisement reminding businesses in a slightly hectoring tone of an approaching deadline. Owners and managers must yet again devote resources to compiling and submitting a report about some aspect of their firms which you can be sure has nothing to do with enhancing productivity. But the crowning insult for those who employing people and working to cover their tax liabilities, is the large slogan across the panel proclaiming: “Department of Labour, working for you.” Eish!

For a few days I have been experiencing a very annoying intermittent fault on the Telkom line that I use for delivering all the data that I use to pretend that I am a proper stockbroker. My fault report was handled courteously and efficiently and while there is still no sign of improvement – you may receive this letter later than expected – I am reluctant to point out that Telkom has issued a trading statement warning of much lower earnings. With an effective virtual monopoly over large segments of the industry, a fearsome tariff structure  and a seeming tacit government approval to keep the country in the bandwidth dark ages it has been a very disappointing share to own.

That ‘bok performance against Samoa this morning was rather worrying. But the good news is that they need to win only three more matches to become the World Champions. The Lions have further to go to hoist the Currie Cup and the chaps down at the bowling club are suddenly looking rather cocky about the Sharks.

James Greener

30^th September 2011

GIVE THAT BEAR A CASTLE

It is difficult to agree with the Monetary Policy Committee’s apparent view that the economic situation has remained unchanged in the past 10 months. Or that not much is likely to happen in the next two months either. This presumably was the reason why they left the price of the money they lend to the banks (the repo rate) unchanged at 5.5%. Nevertheless, the recent attraction of SA assets to foreigners evaporated overnight and they sold plenty of their holdings of bonds, shares and currency. The runt is now lower against most major currencies than at any time in the past two years but this might cheer up the exporters.

This week’s bear market has been blamed in part on certain influential people overseas cagily admitting that perhaps things are not getting better as quickly as they intended and that maybe it will help if their previously ineffective remedies for the mess are reintroduced with another name. Operation Twist is QE3 seen from a different angle. It will still result in new dollars being printed and lent to the US government to spend. Slowly the causes of the crisis are being admitted. Far too many entitlements and desires have been provided and fulfilled using too much debt granted or assumed by entities which are unable and now increasingly unwilling to repay it. But rectifying this situation by curtailing entitlements, denying desires and letting imprudent lenders take the consequences of their decisions would cut short the careers of politicians and bureaucrats who know nothing else except how to spend other people’s money. So it just won’t happen soon.

There must be some public employees who are competent, honest, not on a year’s sick leave or about to move on to a better job. These are the folk to whom we must be really grateful that some services and systems are delivered and do work. The rest are dreadful. Take the clowns who think that more regulation is needed to reduce the appalling death toll on the country’s roads. Already in place are laws that specify excellent standards for drivers, vehicles, roads and critically, the traffic police. But compliance is minimal, enforcement is patchy and almost any incident can be ameliorated with a bribe. The irony and tragedy of a Minister begging for help from the experienced professionals that her government were eager to ease into early retirement a decade ago is heartbreaking. The meaningless waffle about what will happen in the future instead of present action is infuriating. One clueless bureaucrat has produced some sums that purport to demonstrate that the ruinously unaffordable National Health Initiative will actually save the country money by making everyone well and able to work. Indeed.

One of the few economic statistics that may be reasonably reliable and possibly accurate is the daily announcement by the Reserve Bank of how much money in the form of notes and coins are in circulation. This amount varies monthly and annually in a fairly regular and explicable manner, and the current value of cash in circulation is around R82billion. This includes the coins that have slipped down the back of the couch and are lost forever. To compensate for this attrition as well as to cater for growth and inflation, the total amount in circulation is allowed to increase slowly over time. In the first half of this year the rate at which fresh notes and coins were being issued into circulation was an average of R33m a day. However in the past three months that rate has accelerated sharply to an average about R60m a day. What is happening? Why the sudden need for so much more cash? Would it be naïve and malicious to suggest that corrupt “leakage” of government money is more useful when converted into untraceable folding money and there has been a big increase in this kind of flow.

Can you imagine the dismay and panic in the Wallaby camp now that it almost inevitable that they will have to meet the ‘bokke in the quarter finals?  And to make matters even worse, SA Breweries has just bought an Aussie beer company. When they get home they will have to drink Castle.

James Greener

23^rd September 2011. Vernal Equinox

ANOTHER TRADING STRATEGY GOES UP IN SMOKE

 In the last few weeks the daily range of the All Share index has usually exceeded 600 points and on at least three days reached 1000 points. This is variability with a capital “ouch” and even the most skilled and aware trader will have had some scary moments. Some will have been carried out (see next story). Private investors have wisely kept away from this market although the odd glimmer of value has emerged at some of the low points. Once again most of the recent company reports are of better earnings than last year, but globally and locally the economic indicators are not pointing to an imminent or even modest recovery. Only governments appear to be taking on staff and that is seldom a good idea.

There will be great disappointment among certain traders in the City of London today.  There has been a fellow over at a Swiss bank who could pretty much be relied upon to buy expensive and then sell cheap. This dealing strategy caused several billions of his employer’s money to be lost to other institutions and traders. Eventually his boss noticed the flaw and he has been taken off the desk. What do the folk who claim to run these banks do all day to deserve their huge salaries? Risk mismanagement on a heroic scale. Reportedly the rogue trader in his blog a few days ago noted that he was in need of a miracle. Indeed.

Earlier this year we were proudly informed that SA had joined the big league and was now the S in BRICS. Together with Brazil, Russia, India and China we were an emerging nation to be noticed and respected.  The fun and bravado has been short lived, however. Some of our club have become worried by the big financial problems developing in Euroland and are proposing to wade in there and help. Perhaps by buying bonds. Whoa! Hang on a bit. That’s not how it works. The money is supposed to flow the other way. No one said anything about helping Europeans. We are Africans. It is our hands which are outstretched. Get us out of here.

A large full-colour advertisement promises that for the rather modest sum of R2550, business owners can spend a day being informed about the “… host of new laws and regulations that will force them to change the way they do business, secure data, report, audit, advertise and interact with customers in the next two years.”  Whatever the alleged merits of the new rules, it is likely that they will increase costs and unlikely that they will increase sales. The state is choosing a really poor moment to “punish” the private sector for trying to make a profit. And an especially infuriating aspect of this regulatory urge is that the state’s own institutions seem exempt from them.

No one would deny that wealth is unevenly distributed in most economies and that here in SA it may be particularly skewed. The demand for redistribution is a sure-fire attention getter frequently used by political and labour leaders. Slogans like “Economic Freedom” and “Living Wage” are satisfyingly emotive but hard to define and so the people who lead these campaigns should be asked to sit down quietly and do some arithmetic. Using actual data of the current situation they must specify firstly the processes of their redistribution ideas. And then, critically, prove that the resulting new distribution is capable of providing sufficient tax to fund their beloved socialist agenda of providing pretty much everything for free. But then again politicians are not much good at sums, except if they are counting votes.

The ‘bokke need to win just the next six games to be certain of winning the World Cup. Oh dear. Thank goodness I had a heart upgrade this year. Now just let me check where the Lions are on the Currie Cup points table. Ah yes, still on top.

James Greener

16^th September 2011

ALREADY I AM BORED WITH NEW ZEALANDER’S TONGUES

Once again the markets were supposed to be poised for a speech by President Obama in which he would reveal solutions to problems. This time it was a lack of jobs and even in the unlikely event that any bureaucracy can create jobs by other than standing back and letting private individuals start businesses, the speech had no lasting or visible impact on markets. The 10^th anniversary of that terrible atrocity in the USA may be having a greater effect as folk are nervous that there are many crazies out there who would like to seek infamy by doing something stupid today.

It was another week where many companies revealed and promised good and even excellent earnings growth numbers. FirstRand, the JSE’s second largest bank indicated that its earnings should be more than double last year’s. The nation and the Reserve Bank’s bank supervisory department can be rightly proud that the sector survived the global crisis so well and appears to be ready and able to survive the next one which seems imminent.

Down here in our particular kingdom the cost of berthing a containership in the harbour is causing alarm. Sea traffic is allegedly looking for alternative ports because the harbour costs here are claimed to be among the highest in the world. Now instead of getting the harbourmaster to make a few calls and assemble some facts and come to a decision, the dread hand of delegation has appeared with the call for tenders to “[develop] a pricing strategy and determine charges to be implemented for services and facilities offered by … Ports Authority.”  I detect a hugely expensive contract involving international travel over 3 months and a report which says nothing unwanted. After all there are more than 20 ships sitting out in the roadstead right now waiting for a berth.

There has been a conference this week where one of the topics was about broad-band access to the internet. It was saddening that many voices were raised in favour of improving things in a slow and controlled (i.e. regulated) manner allegedly so as to ensure that all sorts of spurious goals will be met. Like ensuring that people who live in the sticks get exactly the same service as those who live in a city. The communications industry is moving and changing so fast that a near-monopoly part state-owned business like Telkom will never be able to catch up. And of course it does not want to. The response of the puzzled and frightened executives and politicians to demands that we join the 21^st century will to appoint commissions and avoid letting the market work.

A long defunct and derelict US satellite is falling back to earth. As much as 500kg of this thing might survive the re-entry into the atmosphere but NASA has stated that the chance of being hit by a piece of this space junk is extremely small. Nevertheless the quoted odds of 1 in 3200 are either hopelessly wrong or worth a bet. Winning the lottery is 5000 times less likely. I must look out my hard hat.

The Rugby World Cup is going to do terrible things for productivity. The car park at the local Mall was almost deserted during the opening ceremony this morning. Beer and boerie roll suppliers are going to be about the only beneficiaries of the excitement of the next few weeks. The trade unions did manage to get a bit of publicity from the news that not every replica ‘bok rugby jersey had been made in SA and wanted to pick a fight over the matter. No one was much interested as pretty much every consumer item that we buy today regrettably is made in China.

On Sunday we will be having leeks on toast for brunch. Go ‘bokke.

James Greener

9^th September 2011

THE THREAT OF BEING BLACKBALLED

Despite at one point being more than 10% down in August, the All Share Index actually delivered almost flat performance over the whole month.  But today it seems that some or other economic measurement out of the States has disappointed or surprised or worried the talking heads and woosh it is all going down again. In parts of Euroland, the suits decided to ban naked short selling which can at times be just as exciting as it sounds. Watching bears getting stripped by bulls is not advisable for people who are easily shocked. The suits would be appalled to learn how many profit opportunities their ban will have created for the clever and swift.

This kind of meddling with the market by bureaucrats who believe they know what the price of everything like labour and assets ought to be usually has only a short-lived impact, particularly in reasonably liquid markets. Such markets soon adjust prices so that they more exactly reflect the current balance of supply and demand. But because labour markets involve voters, the price discovery process often takes far longer. A huge industry of securities analysts tries to make a living from determining the “appropriate” price for assets and then encouraging clients to buy the cheap ones and sell the expensive ones. Of course the value of a company can and does vary a great deal both because of the state of the business itself and equally importantly because the overall market mood and environment can change its opinion on the asset class or market sector. Much of the current volatility in the share markets today is due to the latter factor.

Even experienced market people are perplexed when the market’s reaction to similar news or data announced perhaps just months apart can have a completely different impact on sentiment and prices. Hence this old bear’s advice to avoid buying when relative valuations are high and to select those companies which are well run (as far as one can tell) and have a record of paying reasonable and regular dividends. Selling from a portfolio constructed over time in this way will be necessary only when it is clear that the management of a company have clearly and irredeemably lost the plot or been seduced by some unrealistic vision of the future.

July was a pretty cold month and for the first time since leaving Joburg we were running heaters and wondering if not building a fireplace had been a good idea. Nevertheless the country used less electricity in July than a year ago which is probably a good indicator that business activity was cool as well. The GDP results for the second quarter confirmed that the manufacturing sector is suffering a dreadful 2011 so far. Even if we and the rest of the world manage to avoid having our economies declared officially to be in recession again, most of us are definitely not feeling better off than at any other time in the recent past.

 Isn’t a political party really similar to a club that you join and pay a subscription to in order to be among other people who wish to share the benefits and ethos of that club? Most of us would never consider joining a political party because they don’t seem to have a clubhouse and well-stocked bar with a big flat-screen TV for watching sport. So what’s the worst thing that your club can do to you if you break the rules? Throw you out? Is that really worth bringing downtown Joburg to a halt for?

The tallest tree in South Africa is a Sydney Bluegum and stands 80m high. This doesn’t upset just the environmentalists trying to rid us of invasive alien species. Haven’t we had quite enough of tall Aussies in the Tri-Nations casting shadows over our line outs? And in all the excitement about the ‘bokke setting off for the World Cup, few will have noticed that the Lions are still clear leaders at the top of the Currie Cup log.

James Greener

2^nd September 2011

SURVIVAL OF THE RICHEST

Only a few brave and agile traders will remember the amazing volatility in August with fondness. Problems were triggered when a ratings agency suggested that the US was not quite as good at servicing its debt as it used to be and dropped it from the AAA club. Opponents of this view rightly pointed out that since the USA actually printed the dollar bills, there was no chance that lenders would not get their money back. The ten year bond yields fell to the ludicrously low level of nearly 2%. What received less publicity, however, was the undeniable fact that the very act of printing those dollars was simultaneously eroding their value and so lenders would definitely be repaid with less value. That seems a fair enough reason for the rating downgrade.

Even before the month is over another potentially market-moving event is taking place in Jackson Hole in Wyoming. This sounds like the venue for a shoot out between the bad guys and the sheriff, and in a way it is. US Federal Reserve Chairman Bernanke has been attending a meeting there and is scheduled to report on its deliberations later today. It is unlikely that the talking heads will have been able to resist the temptation to “fix” things, and indubitably their interventions will provoke the bull and then later the bear.

Mr Warren Buffett, possibly the world’s richest man, has infected his peers and competitors with a very dangerous disease. Its symptom is the demand that they be allowed to pay more tax. This reveals their entirely mistaken assumption that governments will distribute their money to the poor more effectively than they could. Tellingly, the disease has yet to surface in SA. In the meantime, Mr Buffett has arranged for the Bank of America to take a $5bn deposit on which it will pay the astonishing yield of 6%pa. Which of that bank’s other clients are going to be paying for that generosity? Probably it will be the poor ones with overspent credit cards.

It is rumoured that the missing despot from that troubled North African country has been spotted at a traffic light in Pretoria selling flags, naartjies and coat hangers. After all we have been the only country to complain that the manner of his removal from power was undemocratic and it is possible we have offered him tea, sympathy and a job. Noble sentiments, but unlikely to impress the young men wielding those terrifying automatic cannons fitted on the back of a bakkie careering through the streets of Tripoli. With so much weaponry on the loose it may be a while before the ballot box is seen as a practical alternative.

Allegedly the SA Rugby Board is considering a plan where a side in the Currie Cup will lose points merely on the basis of the names on its team list. Just think where this could lead. No longer will it be necessary for coaches to pick the 15 players who they hope will have the best chance of beating the opposition in 90 minutes of physical encounter on a rough or muddy field.  Instead each week they will merely submit a team list of individuals they think will meet the Board’s criteria and await news of how many points they lose. The best actual and aspirant rugby players in the country will drift off to play somewhere where they are required to don a jersey and boots to prove their worth. This of course is a concept and technique becoming all too familiar elsewhere in the nation. Potential ability and skill to fill a post, counts for less than name, gender and ancestry. Sadly the one or two cabinet ministers who have expressed concern about this deeply unfair and hugely inefficient labour policy, have been reprimanded for straying outside their ambits.

James Greener

26^th August 2011

THE BEAR IS GETTING WARMED UP

For many months the JSE share market was stuck in a trading range and the list of factors that were being scrutinised for a sign of which way the breakout might go was getting longer. Frankly I think that we bears had the better and more compelling list. And so it has proved to be although it is quite uncertain what finally pushed matters past the tipping point. Personally I single out the US debt situation but right now it doesn’t matter. All those factors are still there and many of them will be exacerbated by the damage that the bear is doing to share markets around the world. It is not yet anywhere near the time to begin looking for bargains.

Undoubtedly all the usual “experts” like the central bankers, politicians and bureaucrats will soon be barging in and distributing other people’s money in yet another attempt to “fix” things. This fixing is really just about not letting capitalism and markets do their job of culling the weak and sick businesses and ideas and making space for fresh and novel ones. The problem is that in many economies the government and business are mutually dependant for survival and they both hang on long past their usefulness.

Here is SA this does not seem to be the case as there is a growing antagonism within the ruling political class towards the organisations and individuals who probably pay most of the tax. Lead by a so-called “youth league” the kleptocracy are raising their eyes from the tax to the income on which the tax is levied. The demand is for “economic freedom” which as far as I know they have not defined beyond the phrase “nationalisation without compensation”. The core principal, however, appears to be the acquisition of unearned income. Their point is indeed attractive and given just how hard it is to start and run a private enterprise where earnings exceed costs, their marches might attract support from everyone in the country not already dependant on the state for a living. Sustainability is obviously some else’s problem

The latest crop of company reports show a slight bias in favour of disappointing earnings often considerably lower than a year ago. Even MTN, the cell phone company, failed to reach double digit percentage growth. Some niches are doing better, however. The demise of Transnet as a reliable service has certainly helped the trucking industry, and the low profile unglamorous businesses that stock and supply the parts that keep the big machines running are OK for the moment too.

Finally here along side the Indian Ocean the Yellow Billed Kites have returned. For me they are the indicator of the start of summer and it has indeed warmed up considerably. If we have another cold winter like that down here next year I shall have to think about moving! Sutherland, I believe is a poor alternative. Thank goodness I never pursued my idea of a career in astronomy.

SAB are finding the Foster’s defence against their takeover bid as fierce as the Wallabies defence of their try line against the ‘bokke last week. Meanwhile the All Blacks are returning our favour of resting their stars for the test in PE tomorrow. Unfortunately not every ‘bok supporter will be clad in green and gold. In a huge triumph against crime and corruption the police have unearthed and impounded a large consignment of counterfeit ‘bok shirts. It’s hard to see why we should not be allowed to choose to buy them over the genuine article. After all many suggest that even the ‘bok coach is not the real thing. May I once again point out the unbeaten Lions at the top of the Currie Cup log?

James Greener

19^th August 2011