PLEASE MR PRESIDENT BE NICE TO OUR BULL MARKET

Now that he has consolidated his position as kleptocrat in chief for the next half dozen years President Zuma has obviously decided to let his true nature show through. He appears to have dispensed with the services of those minders who hitherto have so skilfully managed his “best friends with everyone” persona. Just days after axing suspected enemies from the inner circles JZ has now identified animal lovers as unsuitable role models for people of his race and culture. Given his penchant for draping himself in the skins of rare cats when dancing and praying, this announcement should really come as no surprise.

What was puzzling, however, was his choice of bribes for the rural community where he was speaking on Boxing Day. While undoubtedly useful and welcome, items such as wheelchairs, and lawnmowers are not obviously icons of African culture. The jackpot prize was a 4 room house and a bed which I am sure the lucky winner was much happier with than a beehive grass hut and a rush mat on the floor. In closing proceedings our newly assertive president promised more of the same every December 18^th. Presumably someone had pointed out that dishing out goodies to the poor on the day after Christmas might be construed as a tad colonial and Eurocentric. The President travelled to his next appointment in a German car.

And of course the so called developed lands across the equator are not with out their own lunacies. In the USA there are websites counting down the time to the moment (next Monday apparently) when that country plunges over a fiscal cliff. This deadline – set so long ago when it all seemed an unlikely scenario – will enforce simultaneous tax cuts and spending boosts with possibly dreadful consequences. The simple guess, however, is that nothing much will happen this time either as the world has become quite used to the USA’s large and growing level of debt simply because their currency, the US dollar, is still the only game in town. Unavoidably there will be a day when the ridiculousness of letting one of the world’s greatest debtor nations provide the global currency standard will dawn. It will happen without any warning and very very quickly. Massive fortunes will be made and lost and the rest of us will have to stand on the sidelines and clutch our Krugerrands.

Current amusement in Euro land comes in the form a list of Greek citizens who, it is alleged, could solve that country’s budgetary crisis  at a stroke – if only they were to pay the tax they are thought to owe. The list, it seems, keeps getting lost! And when found again it is a few names shorter. Has no one managed to tap these names into a spread sheet? Is it still a grubby piece of paper bashed out on the office Olivetti many years ago?  Those of us in the real world are only too aware of the dreadful ubiquity of anything in electronic form.  In a heartbeat there are copies everywhere and it becomes impossible to lose. Clearly there is no one in the Athens bureaucracy who has any appetite for making the call to even the first name on that list asking that they pop in to the tax office for a chat. More than plates will get broken.

Have you noticed and been impressed by the sight of the All Share sniffing the 39 500 level in recent days? Undoubtedly the weekend newspapers will have hunted down excitable and quotable analysts who will gladly blather on about reaching 50 000 in 2013. After all, that’s merely 25% away. This very unexcitable old bear is still worried that the earnings that appear to driving this bull market are based on consumer spending which has “leaked” from the government’s capital budget. There really is scant evidence of that long promised and much needed infrastructural spending taking place. And that index? Well, it has been achieved on miniscule volumes. Let’s wait and see if the institutional fund managers come back from the beach in a mood to join the ride or feed the ducks.

Have a really wonderful and safe and prosperous New Year

James Greener

Full Moon December 2012.

NEAP TIDEMARKS

So it turns out that the forecasters of ancient Mexico were no better than today’s analysts at getting the future right. It is bright and sunny here in the nation’s holiday capital and no apocalypse has been evident. Not unless you count the disappointment that has overwhelmed the bulls now that the All Share may have delayed its assault on the 40 000 level. That treat looks as if it has been delayed until the New Year. Another disappointment for both bulls and bears here on the southern tip is that shortly after noon today the Earth reached the position of midsummer and will now begin to tilt the other way. That means that the hours of sunlight in each day will begin to decline as we slide downhill all the way to winter again. Very sad.

So now we know where Manguang is if not what it was for. In the words of Shakespeare’s Macbeth : “It is a tale. Told by an idiot, full of sound and fury. Signifying nothing”.  Surprisingly for one who normally wants everybody to be his friend, Jacob Zuma took note of who backed the wrong horse and indulged in a spot of vigorous reshuffling of his pack. The discards probably have little to worry about, however, because many of the replacements also have copybooks which are far from blot-free. One does not remain a pariah for long in politics especially if you can deliver a constituency of malleable voters. Will readers of my age please explain to their younger colleagues about nib pens, ink wells and copy books filled with rows of “pot hooks” displaying the desirable characteristics of “thin up and thick down”. Perhaps a word or two about blots and blotting paper will also be enlightening. Hopefully it will not be necessary also to explain who Shakespeare was.

It remains to be seen if shoehorning a highly successful billionaire into a cabinet of communists will cause a reappraisal of the rapid, alarming and soon to be unsustainable policy of entitlement. The wealthy gent in question has already  instructed his people to take a good look at any possible conflict of interests  and them presumably to act speedily to arrange the ex-trade unionist’s affairs so as not to trouble the tax man too much. There’s no point in letting the government white-ant your nest egg even if you are that government.

Despite being told what to watch for in the slog and scatter form of pyjama cricket I still find it hard to take the results too seriously, especially when we lose.  I am also baffled by yet another crisis which has just broken out at Cricket SA. It involves the SABC and money and therefore sounds pretty hard to fix. Us armchair umpires have little idea what goes on behind the scenes so we can watch the game on the small screen at home where the fridge is close at hand and the seats are much more comfortable. I suppose we ought to play our part and actually watch the adverts rather than take the opportunity to go and tend to the braai fire.

Please do have a happy and merry Christmas

All the very best

James Greener

Summer Solstice 2012.

GONGED OUT IN MANGAUNG

Unless there is a fearsome counter-reaction to the latest news from China that their economy is supposedly on the mend, the JSE All Share index will be delivering a total return of around 22% for 2012. This is splendid and certainly unanticipated by most pundits (especially me) this time last year. Obviously the very steep rises in energy costs such as petrol and electricity had a far smaller impact on the wage-earning population than was forecast. Somehow and from somewhere plenty of people found more money to spend on stuff and well-run companies were able to turn this spending into better earnings which resulted in share prices being pushed up. The numbers in that category of spenders obviously swamps those on fixed incomes, who are undoubtedly having a much tougher time.

In conflict with this is a conclusion drawn from the October government cash flow data which show that the deficit is growing larger and faster than expected. The chief cause is a result of revenue (tax) collections being less munificent than forecast. This is not what might be expected if there really is a growing middle class who should be making contributions by way of income tax and VAT. Now monthly data is naturally volatile and National Treasury says that everything is going fine and not to worry. Indeed, the expenditure side is, so far, reasonably on track. However, politicians rarely do anything that will reduce spending and if the deficit worries them they will probably try and fix matters by poking about in the taxation legislation. This morning for example Chamber of Mines felt it necessary to point out that any further tax increases in their industry will be a case of flogging a dead horse. I reckon we are all pretty much taxed out these days.

Given the seemingly haphazard way in which the delegates for the ruling party conference have been selected, their powers are a bit worrying. Not only do they get to pick a party leader who will then be the nation’s (unelected) president, but they apparently will pronounce on all manner of other topics. Like the business strategy for the country’s major utility suppliers. Mind you, anyone who knows anything about telecoms, broadcasting, power generation, railways and harbours have long since been fired or retired so why not ask the delegates in Mangaung how to run a phone or an airport company. The government is now totally in thrall to a centrally planned economy and the “reds under the beds” that the previous lot warned us about are now out in the open, bouncing on the mattress and holding on to the curtains for support. Eventually something will fail.

Amid scenes of simulated amazement and astonishment, the suits in euro land claimed to discover what the rest of us have known for ages. That Greece was bust and that most lenders of money to that government were not going to get much of it back. Reportedly this admission and realisation is a “good thing” and will clear the air and encourage another set of experts to rush in and lend even more to a nation that has become very used to living beyond their means.

The 12th World Toilet Summit here in Durban has passed with very little to show for it. About the sole topic to receive any publicity was the presentation by a local team of a new waterless loo. Unfortunately for them the incessant rain and severe flooding in the province somewhat diluted the message that waterborne sewage is a luxury in places like Africa. Disappointingly there was no final communiqué from the toilet-masters about the correct way to rig a toilet roll – with the loose end on the outside. An opportunity missed.

Unless you are keen on watching golf played in hot and muggy places there is not much sport to catch the eye. The Kings meanwhile have announced their target of finishing in the top four of the SA conference of the Super 15. This is just a clever way of saying they don’t want to come last.

James Greener

14^th December 2012.

THE MATHS HURTS

And now it seems that the French have also not been all that accurate with their sums. Their generous leaders might just have promised quite a few more goodies than there are euros in the kitty to pay for them. Oops. So the dreaded ratings agencies are all over their case and downgrades are in the wind. Now that the summer in euro land is over and the suits are back at work, the cupboards are found to be just as full of skeletons as they ever were. Readers of this column anyway will not be as surprised by this information as many of the politicians over there profess to be. We have seen it coming. And across the ocean there’s Mrs Cliff’s son Fiscal threatening to expose himself to the population.

But even if the debt swamp is growing larger and deeper and stickier, equity bulls in SA can’t see how that will cause companies to stop making money and are happy to pay more and more in order to participate in this anticipated profit bonanza. The All Share index is within a whisker of racking up the three zeros at 38 000. As well as investors, shops and their customers are on a roll. Newer and more expensive retail offerings are opening every day. Consumers – presumably those fortunate enough to be on someone’s payroll – are spending merrily.

It is notable however that everyone is avoiding mentioning one very worrying fact. Amid all the demands for higher wages and salaries little has been said about the arithmetic formula which shows that a fixed total wage cost for an employer  divided by higher individual pay packets for the employees equals fewer employees. This is the inevitable footnote to almost every drama and violent protest that has taken place in recent weeks.

Just days after the last chicken bone and empty whisky bottle have been cleared away from the opening ceremony for a Chinese motor vehicle assembly plant near Joburg, it has been decided that it will not be used to build the Inyathi taxi. Allegedly the South African National Taxi Council (Whatever happened to their plans for an airline?) have been unable to guarantee the quality of the product and have instructed their members not to buy the new minibus. They might have said so before the party. But no worries. The Chinese have another model they are sure we will like. Presumably, the Santaco bosses will spend the weekend in overalls crawling over a prototype preparing their guarantees for their members. I wonder if anyone has thought to conceal wads of folding money in various unobtrusive parts.

Money, but considerably more of it, appears to be a stumbling block to the clinching of another deal between two mining behemoths. The complaints seem to be that  not enough of it is flowing in the right direction where it would sooth and boost egos, self-esteem and attitudes. Minority shareholders somewhere will one day probably discover that the stick they are left holding is the short end. It is the fighting elephants and trampled grass story.

Who knew that the nation has a “berry corridor” somewhere near Stutterheim where blue-, rasp-, black- and strawberries are farmed? The southern hemisphere consumes 100 000 tons a years of these beauties and the fellows in the corridor reckon that with a bit of balance sheet restructuring (i.e. send cash please) they can increase their 2% share of this demand. As someone who once picked strawberries for beer money (6 punnets equals one pint) I can confirm it will be hard work but they deserve to succeed. Hopefully no busybody politician plans to swing by and make foolish promises.

With Sebastien Vettel’s F1 champion ship not yet wrapped up, the Proteas letting the Aussies break batting records and the ‘bokke looking tired and lost with England still to play,  it might be a weekend where being away from the TV is a good idea.

James Greener

JFK assassination anniversary 2012

TITLE? INDEED

If not yet a fully grown bear there is a pretty boisterous cub gambolling around our market these days. He (or perhaps it might be a she) has already clawed nearly 1000 points off the All Share since its peak earlier this month. From the look of the rand, much of the selling could be foreigners resuming their scramble for the exit as this place appears increasingly to be clueless about the requirements of a competitive economy in an unsentimental world.

There are nearly as many rumours and stories about what is actually happening in the labour unrest as there are folk singing and dancing their protests and claims. While there are undoubtedly some callous and cruel employers in every industry, the blame for this unrest must lie largely with the government. Their policies, spokesmen and ministers are raising hopes and expectations far beyond what almost all the actual industries and businesses can feasibly deliver. Their often illegal and unconstitutional statements and promises about what their constituents can demand are conveniently diverting attention from the same government’s failure to fulfil their own promises of delivery of services and infrastructure.

There must have been a worried call from head office to a bank in Zululand this week after President JZ claimed that his rather splendid home of many features was financed with a mortgage bond. This, he said, happened after a family decision to rebuild the place after it had twice been burned down.  The suits in Joburg will be asking the mortgage department at the branch some tricky questions. Like: Have you seen and are you holding title deeds? Did you take into account the fact that the mortgagor is in a temporary post which he might possibly even lose in Bloemfontein next month. Further do you know how many wives and children he has to support on his income before servicing the loan? And does he have adequate fire insurance? The main revelation here is that the pres. has somehow obtained title for his piece of Africa despite the fact large tracts of government owned land in these so-called tribal areas are mostly unregistered.. Many citizens occupy their homes at the whim of a “traditional leader” or chief and it has long been a concern that without title those residents can not use the land they have lived on for generations to raise capital. JZ’s mortgage might just be a glimmer of some really good news for the many dispossessed.

The Metro police closed off large numbers of roads and ramps last Sunday to allow a bike race to take place. This is not uncommon as the kingdom is full of folk who frequently feel the need to travel large distances on foot, bike and even canoe. Motorists are somewhat used to being redirected to allow these poor souls to complete their mission. However, this time the cops somehow forgot that they had done this before and even while witnessing the gigantic traffic chaos develop they declined to offer and indicate alternative routes. When challenged about this, their boss denied the shambles and invited motorists to write to him with suggestions about what they should do next time! My guess is that most motorists will want to cancel the races.

The Telkom story is a deep and sorry mess and is surely now a case study for the impact of government interference. With a market capitalisation of just R8bn (when listed in 2009 it was R30bn) it is about to fall out of the top 100 shares on the JSE. Undaunted by the en masse resignation of directors and executives, the state as major shareholder claims that there are plenty of candidates  with the skills and experience to fill the vacancies. Can that be true? After all it took Telkom more than a week to find someone to come and investigate why my phone line was crackling. And that was after I endured a hectoring lecture on what it would cost me if, woe betide, the techie found that the noise was my fault! At Telkom, the customer is a darned nuisance.

As expected by the end of the late kick off test in Dublin last week everyone was all over the bar, shouting. It was dreadfully close so let’s hope for a smoother win from the ‘bokke over Scotland tomorrow.

James Greener

16^th November 2012

UNCLE SAM MEETS FISCAL CLIFF

The JSE All Share index set a new high on US Election Day. Whether it was disappointed in the outcome of that contest we can’t say but it has been dribbling away from that peak ever since. Nothing as sharp as Wall Street itself, mind you, from where confident sightings of a huge bear are being recorded. Also the senior suits in the euro zone have talking tough this week but the euro would appear to be losing the courage and strength it conjured up during its summer hols. That drama is going to be an annoying background hum for the world’s financial markets for a long time.

Reporting season is hotting up, with about three dozen companies either releasing results or issuing so-called trading statements that are supposed to warn investors of larger than normal earnings changes. Fewer than ten of these announcements have been disappointing which unsurprisingly include gold and platinum miners who have been experiencing torrid labour issues. Here and there are grumbles about how slow and difficult the government infrastructural spending program is becoming but oddly not every company in the affected sectors have that complaint. Mostly, however, while acknowledging that business conditions are tough, management teams are finding ways to keep earnings growing and dividends flowing. Many are looking outside the borders for new customers and even new offices and bases. As the saying goes, the boere are making plans.

The fellow who came up with the phrase Fiscal Cliff to describe the latest crisis in the US economy must be delighted with the way it has caught on. Opponents of President Obama are giving him no time to savour his election victory and are pushing him to the edge of the precipice as hard as possible. But whatever the name it’s the same old story told for centuries. No good can come from spending more than you earn, year after year. The problem is that while increasing income by raising taxes always yields less than expected, (folk are very adept at discovering loopholes), decreasing spending is really really unpopular with just about everyone. Not least, are the elderly, ill and indigent who have become totally reliant on the government paying the bills. And then there are government employees, and the politicians themselves, who have little appetite for taking a pay cut or perhaps being fired. No newly elected politician has ever been brave enough to start his or her regime by slashing expenditure in the hope that memories will have faded by the time the victims next enter a polling booth.

Here on the southern tip our tax collector has embarked on a program of sending banal and emotion-filled messages to taxpayers thanking them for funding tax eaters. TV ads, phone text messages and a website provide heart-warming stories of people who, because of the government’s allegedly wise and effective provision of education, health services and other nice goodies, were able to fulfil their hopes and achievements. Fine, but note that it is also the hope of every taxpayer that they can achieve invisibility. Which is not something the new bank notes can claim; their colouring is rather aggressive.

The inflation rate plays a large part in our lives, with so many things compared against it as a bench mark. That it is an very poorly understood statistic was highlighted this week when a new set of weights for its calculation was released. One has to trust the skills and accuracy of the compilers of this data but various oddities do come to light. For example the average consumer spends more on tobacco than on health services! We spend less on paying for education than we do on buying clothes, and our booze bill is greater than our electricity bill. Our spending on recreational equipment is greater than what we need for dairy products. The average SA consumer sounds like a smartly dressed party animal dancing in the dark.

The cricket in Brisbane has started slowly but satisfactorily. However, the ‘bokke test against Ireland starts so late tomorrow that many of the Natal faithful may not be in fit shape to notice that their baa lamb is in the starting line up.

James Greener

9^th November 2012

COUNTING GROWS

It has all gone ominously quiet – except here on the southern tip where the All Share marches on and upwards. Investors obviously can see no reason why earnings should not keep improving and anyway cash these days is definitely not king but pauper!  Already the bold are sniffing out recovery situations among the miners where the high wage settlements are starting to be followed by the inevitable and tragic retrenchments. The platinum sector gained over 6% in October. Banks, on the other hand, were eschewed.

One cause of the reigning peace was of course the closure of markets and near closure of everything else on the eastern seaboard of the US where cyclone Sandy demonstrated that not even presidential candidates have as much power as nature. In Europe the squabbling about who should pay for whom to do what has subsided for the moment as well. But not for long I suspect. There are some deep and heart-felt bitterness’s dying for an airing.

Overseas players have slowed their rush for the exits. The rand has settled down, although at weaker levels. Most people are getting resigned to the near inevitability of having Jacob Zuma staying on as president. There really doesn’t seem to be a candidate brave enough to mount a challenge. And anyone slightly competent chooses to feed at the trough from outside the sty.

The Statistician-General – in reality a just a mid ranking government employee with a preposterously grand title  – but much respected  for being one of the few in government who is able to do sums, got to wear his dubious yellow suit again and handed over a lavish tome of Census results to anyone within reach. As well as generating the usual froth of disbelief and criticism it seemed to tell us nothing that hadn’t already been guessed. Within a day, however, the pres. started to fret about accusations that his government had failed to reduce wealth disparity but seemed unable to find any numbers in the great work to contradict the charges. Odd that.

 The government is now spending at an average rate of more than R2.5bn a day – including weekends. That’s a great deal of money and furthermore is R400 million a day more than the taxes it collects. Now I know that the borrowing requirement is OK and the deficit is within manageable proportions but it is still worrying to this old bear to think that every morning the nation wakes to find its debt has increased by nearly half a billion compared to yesterday. Some talking head in government has suggested that bankers need to take sociology courses. He believes that this will make them realise the callousness and dangers of lending money to poor people. The bankers should agree but only if he first attends courses on economics and finance so that he can realise the callousness and dangers of talking nonsense.

That bankers are indeed heartless fiends was demonstrated vividly by the way that one outfit in the City simply deactivated the key cards of a number of employees overnight so that they first discovered that they were unemployed only when they were unable to get in the front door of their offices the following day. Can you just imagine arriving at work to see your colleagues milling about outside and having to try your own key in the slot? They were not even afforded the opportunity to fetch the photo of the kids from their desk, sneak a copy of the client phone list or leave rude messages on the internal email system. Bang. Thanks for coming. Have a nice day.

I am delighted that Sebastian Vettel is looking set to retain his world championship in Formula 1. It provides a sporting topic which is not rugby. You won’t believe how many Province supporters have appeared from the readership of this column to jeer at my trashed claim about the deserved new home for the Currie Cup.

James Greener

2^nd November 2012

EXCEPT FOR THE SHARKS – PRETTY GLOOMY

If dividends are included, the JSE All Share index is standing on a year to date performance of 20%. Of course it is like the parson’s egg where some sectors have been excellent performers but others have been stinking. The index itself  seems content to lurk around the 37 000 level at present  but assuredly some news whether good or bad will happen along in due course and probably push things up some more,  This week it was revealed that consumer inflation had climbed a bit and so the attraction of keeping cash in the bank diminished again.

Unlike the USA, it is not really company reporting season here but some very pleasing numbers have been released. The smart and nimble are still finding customers and clients who need their goods and services and, importantly, are actually paying for them.

How they are paying came back into the spotlight as it seems that many consumers are faced with the dreadful need to have to borrow to put food on the table. There is an enormous socio-economic catastrophe brewing up here, and if and when the government tries to do something about it, their likely recourse will be to grow their programs of redistribution. However, as revealed yesterday, there is a problem with that plan. The goose’s golden eggs are shrinking and revenue is not flowing in as strongly as hoped. Capacity and interest in funding the increasingly corrupt and inept state is on the wane.

During the so-called medium term budget Minister Gordhan rearranged the departmental money allocations and revealed some interesting trends. Losers included Trade and Industry, Human Settlements and Public Works. These last two presumably are surely where the “massive” infrastructural spend is supposed to be coming from, so that’s a puzzle. Biggest winner proportionally was Sport and Recreation who obviously had been round at National Treasury with a very good story about why government should help fund a tournament for the continent’s football players. Failure by the sportsmen to sell enough tickets or squeeze sufficient from their sponsors seems like a poor reason to cosh the taxpayers  The Department of Transport was assigned an extra R820m and without reading the fine print I wonder if this might have something to do with the ongoing Gauteng toll road debacle. That one seems to be reaching some sort of resolution as the trade unions are backing off, but still the mini-bus taxis appear to be exempt.

Alarmingly, the government believes that the number of cases deserving social grants will grow by nearly half a million a year for the next several years. By 2015 over 17 million hands will be outstretched towards the 5 million odd taxpayers. It’s notable that this is the item of government expenditure that Gordhan believes will grow the fastest. Also growing fast are the numbers of state employees, many of whom, except for the size of their monthly stipends, are largely indistinguishable from the grantees. Wouldn’t it be wonderful if governments stopped trying to do everything for everyone and just let us all get on with our lives.

The pleasure of the internet as a source of information is that one can filter out all views counter to ones own prejudices and revel in reading the ranting of like-minded cynics. This week I was able to unearth a really powerful and substantiated analysis of the US share market. Much of the document concerned the quality and reliability of the data we use to make our decisions – a very dear topic of my own. Things, the writer concluded, are not as all-fired wonderful as the populists would have us believe and there are still massive financial tensions in the USA which Federal Reserve rescue programs like the current QE3 only disguise but don’t cure. Ultimately buyers of shares will realise that the future streams of income they hope to be buying into are turning out to be far less than they were told to expect and asset prices will fall.

Now that the Lions have fallen ignominiously from the SA rugby scene until who knows when, it is necessary to inform readers that the Currie Cup like me is moving to Durban.

James Greener

26^th October 2012

WHAT IF THE BALLOON SHOULD POP?

One should be grateful for all the people who happily buy and consume the egregiously expensive Red Bull drink. The obviously fantastic profits generated from selling this brilliantly marketed so-called energy drink are used to support a large number of people who are eager to do dangerous but very entertaining things. The world would be a much duller place without Red Bull sponsoring Grand Prix teams, and assorted crazies on bicycles, boards and balloons. Last Sunday a fearless fellow called Felix stepped out of a capsule floating under a helium balloon nearly 40 km up.  He whistled back to earth, setting all kinds of records some of which will stand until this bull market finally expires and the bear pulls on his pressure suit and also steps into space.

This particular display has again been delayed by some heroic meddling and a great deal of hard work with the Thesaurus. It is really all very simple A group of worthies – some of whom get awarded Nobel Prizes for this sort of thinking – observe that  there are people, businesses, institutions and governments who have spent (or have promised to spend) far more than they ever will have or collect.  The worthies then point out that in their opinion certain of these deadbeats and their clients and creditors don’t deserve to find out where or how this particular business model might end and so should therefore either be lent or given (the distinction often emerges only much later) some money to tide them over what is almost certainly (!) merely a temporary embarrassment that will disappear when “things get better”. This is where the creativity comes in, as words like bust, bail-out, and rescue are considered way too direct and even offensive for the parties concerned. The sole certainty in this piece of theatre is that the source of the funds for these exercises will be those citizens (both living and yet to be born) who conduct their lives in such a way that they have savings and, simply put, spend less than they earn. Be aware of course that there can be many acts and scenes in the show and the bear may never get on stage while you are watching.

These sleights of hand are taking place all over Euro Land and in celebration of calamity postponed globally most investors are enthusiastically pushing equity prices higher. In the US the quarterly results season is in full swing with more companies than ever beating earnings expectations. This expected versus actual is another cute piece of theatre which can be put to very good effect if required to disguise reality. Interestingly, this time it seems to be largely genuine. The US may actually be growing a little, although it seems possible that its days of leading the global economy back to health may be nearly over. Increasingly the rest of us are taking our cues from China but the real problem there is credibility. Who knows what is actually happening there? Our own lefty cabinet ministers have no doubts, however, and are letting agreements with traditional western trading partners’ lapse in favour of expectations of great things from our new best friends.

Sadly the labour crises back home are definitely genuine with management resorting to desperate measures to try and keep mines open and businesses ticking over. Next week we get to hear one of those odd second tier budget speeches from Minister Gordhan and the main interest there must be whether he will be brave enough again to point out that the government is not delivering anything other than a deeply divided nation of tax payers and tax eaters. Not to mention the growing third force of people who are tax invisibles.

As a fellow survivor of the cancer and treatment that Lance Armstrong conquered and endured I have always fervently believed that he would have avoided any other interventions from the pharmaceutical industry. The current news is devastating and confirms that I will never need to enter a bike race to prove my own remission. Instead I can anticipate the terrors of the Lions playing an away final in the Shark Tank.

James Greener

19^th October 2012

LOTS OF QUESTIONS. NO ANSWERS

No wonder I stopped trying to be an analyst all those years ago. Against the background of a  growing appreciation that in the name of socialism and transformation, our political leaders are intent on crafting a business- and employment- unfriendly environment, there are violent strikes in critical sectors of the economy. The rand has taken a battering and is as much as 10% off recent levels against all the major currencies. The rating agencies are still doling out report cards full of Fs. Many important industrial companies are mumbling about earnings downgrades and what is the All Share doing? Very nicely thank you. It has been consolidating above the 36 000 level without seemingly a care in the world. And still the “Buy” recommendations roll off the research assembly lines. Reportedly a survey has also discovered that banking confidence is at a record high. Very strange stuff. Is this a case of ABC investing? Anything But Cash.

A growing share of the country’s business is being conducted in sectors that are hard to  observe and measure directly and which are dominated by cash transactions. There is a glorious common misconception that anyone conducting a cash business is exempt from registering for tax! Reports coming out of Limpopo about tender corruption reveal how easy it is to obtain a meaningless and false tax compliance certificate. Sadly of course the source of increasingly more of this money is corrupt government contracts where the business model allows for immediate, frequent and large dividend payments to everyone awarding and winning the tender, which leaves nothing left for hiring someone to do the actual job. Presumably this model figures large in the “economic freedom” plan being touted by certain politicians. As we have presumed before, the sole good news is that, unlike earlier regimes, little of the stolen money is yet being sent to homes in Switzerland and Lichtenstein, instead it is bolstering the domestic consumer economy. Here in KZN it is very common to see all building activity on a new house or renovation cease for several months. The explanation is that the owner is building up his cash pile before recalling the artisans and launching the next phase.

Our government has embarked on a program of insulting its citizens. This is a whole lot easier than actually operating an administration that delivers services. We have been told that although it looks as if things are falling apart at SAA, in fact things are NOT falling apart and actually the sudden departure of a dozen board members and top executives is a good thing for the airline as it makes space for people who really know how to run an airline. Again. We have been told that the cost and motivation for a nice new road in the heart of Zululand has absolutely nothing to do with us and we may enquire no further. And also the huge Zuma family compound that has blossomed at the end of that road is vital for the well being and security of the president and therefore the country. Reportedly the pres himself paid for much of it. Really? We have already discussed the relatively meagre presidential salary and it sure doesn’t extend to helipads, clinics, underground bunkers and tunnels. We citizens are certainly being kept in the dark about how powerful are enemies are.

A sign of how cowed we are by the state’s relentless interference in our commercial activities was the hailing as a victory a court’s decision to reduce to just R200m (from R500m) the contribution (fine) Wal-Mart has to pay in order to complete its linkup with Massmart. The money is to be used to “assist existing and potential South African suppliers to Massmart”. Very courteously Wal-Mart / Massmart have refrained from pointing out that these suppliers can quite easily use this assistance in also supplying the competition.

There is absolutely nothing to say about rugby this week.

James Greener

12^th October 2012.

QUIET BEFORE THE STORM?

Interestingly, even though labour unrest continues to swirl around the country, politicians in general have mostly kept their heads down and their mouths shut. Similarly there has been scant official reaction the slew of credit rating downgrades that Moody’s have been dealing out to numerous local institutions and businesses. What has happened? Has the pres issued an instruction to government people not to comment on things they don’t understand?  Even this morning’s anticipated announcement about the way the state will toll motorists for using the splendid new roads around Joburg has been politely delayed until a noisy and cross labour organisation has had its say. All very restrained and statesmanlike. Maybe it has to do with keeping everyone under control until the much feared party congress in Bloemfontein takes place in a few weeks time.

Reported earnings of the 30 companies that comprise the JSE’s top Financial and Industrial Index are 14% higher than a year ago. This is rather good given the poor performance of the wider economy both here and abroad. The index itself, however, has outpaced this growth by a factor of almost two and this has propelled at least one measure of value into very unappealing territory. The index historic pe ratio is above 17 times.  Optimists of course see this as the market merely discounting an improvement in earnings to a growth rate of 20% or better. Bears and pragmatists have their doubts and would prefer to let other people do the buying here.

Remember that an index represents a sort of average which means that there are always individual shares which lie either below or above that average. Insistent buyers (or indeed sellers) should perhaps look for those counters which occasionally and momentarily stray far from that average. There are no particularly obvious candidates for that category at present. Over in the resources though there are a great number of shares bumping along at multi-year lows. Buyers will need great courage and also perhaps a sign that the government has stopped giving the miners a hard time.

Cash returns after tax and inflation are negative so that area too is best avoided. Now that the mess created by the drop in repo rate taking place so shortly after the introduction of a dividend withholding tax is starting to clear, the variable dividend pref share market is coming back into focus. Pre-tax dividend yields above 7% (and even 8% if you think micro lending is a great business) are available. Remember of course that there is no possibility of capital growth from these preference shares because the prices remain in a band roughly 10-12% wide.

Normally SARS are depressingly on top of their game. But their ruling that taxpayers my keep electronic records of their affairs provided they are in a place physically inside SA is rather quaint. What happens if they are on a flash stick in my pocket which I take along when I go fishing in Mozambique? And the famous “cloud” where so much electronic stuff is now sent to spend its days. Where is that? Oh dear no SARS, this idea is not going to work.

Last weeks ‘bok home win over the Wallabies has calmed the din of complaints from the 10 million unofficial selectors to a soft rumble. If they manage the same against the All Blacks tomorrow it will be very satisfactory. The Protea’s ignominious departure from the T20 World Cup with not a single win in the second round of the tournament was disgraceful. It seems our cricket players are not very good at doing the division sums required for understanding run rate. Is cricket another victim of the crumbling school system?

This is the 400^th Tidemarks I have published. That’s a quarter of a million words. And I still type with just two fingers.

James Greener

5^th October 2012

WEEKEND ESSAY TOPIC

Despite having just four working days, this week handed out quite a lot for investors to think about. The All Share Index backed off from its tentative foray above 36 000 quite sharply but then appeared to think better of its timidity. Another development is that the daily value of shares traded, is now regularly well above R15bn, A month ago days that busy were rare. Have the dreaded High Frequency Traders at last put in their threatened appearance?

 Another of the supposedly omniscient and all-powerful ratings agency last night smacked SA down a notch for its estimated credit-worthiness. Moody’s made the not unreasonable observation that the government is not actually showing any ability to control and improve the economic situation even if they can talk eloquently about what they plan to do. The timing of the downgrade is interesting. The local bond market is about to make an (infinitesimal) debut in a world index. Bond markets are more interesting than they look!

It is now well over a year since the census happened and as yet I don’t think a single result has been published. This delay speaks volumes about the process as the head-counters are obviously encountering some pretty thorny problems with their raw data. Much the same has happened over at SAA, the national state owned airline, where they are reluctant to publish the financial results for a 12 month period that began in April last year!  Most of the board have now stormed off in a huff complaining that the shareholder doesn’t care about them. On the contrary the shareholder is appalled that they have managed to lose so much money that they are not even sure how much of a bail-out they need. “Between R4bn and R6bn” is the rumoured amount. A 50% variance suggests a total lack of control of where the money is going. The shareholder must be desperately wondering who will take this very sick albatross off their hands. Noticeably, any government official who thinks they are important enough chooses a VIP charter over a seat on SAA.

Its is a great shame that the prosecutors appear to have missed most of the targets that were presented by Julius Malema’s mysterious and meteoric amassing of massive moolah. Mere money laundering is now the sole charge against the man and any politician worth the name feels that this sort of activity is a résumé requirement and not a crime. Similarly it looks as if losing one’s firearm is a necessary event before any policeman can feel part of the squad. 1200 police weapons have gone missing in the last 18 months  which somewhat highlights the near irrelevancy of  imposing ever stricter controls on those who have actually paid to own a gun and are obviously far more focussed on keeping it safe.

Not even the most optimistic and naïve believer in the notion that political institutions are a force for good can have survived the United Nations’ appointment of our president Jacob Zuma as champion of education. This supremely perverse decision indicates nothing less than stupidity and also disrespect for the people of this country who are desperate to achieve some learning. Maybe actually not having too much education should not be a barrier to such an appointment, though it is hard to argue this position. But choosing a man who represents a government that has so swiftly dragged the country to the foot of almost every global league table of literacy and numeracy is definitely wrong. We citizens should demand that every appointee to this dubious position be required to write, unaided and in their own hand an essay  of not less than 500 words on the subject:” Why I am a Champion of Education.” Marks for neatness AND spelling will be awarded.

Lions supporters are torn between the obvious need that the ‘bokke have for talented players and the difficulty of defending the top spot in the Currie Cup log without some stars. Nevertheless it has been fun up to now. Who thought the monsoon season was a good time for a cricket tournament in Sri Lanka? What sense does an innings of just seven overs make?

James Greener

28^th September 2012

HOW MUCH IS THAT JOB IN THE WINDOW?

The task of finding value in the share market has been made a lot harder by the understandably desperate but significantly above range wage settlement offered by the beleaguered Lonmin mining house this week. Undoubtedly the operations of this company are going to be severely affected by this settlement and hardships will likely follow. Workers elsewhere and not just in the mining industry have noted the 22% figure and expectations are surely being reset. Living costs feel as if they have surged far more than the rather benign 5%pa suggested by the CPI.. Investors are nervous about what a settlement like this will do for earnings. It is not a good time to bet the farm.

The worthies attending the Monetary Policy Committee meeting in Pretoria this week were apparently about to consider reducing the price of money by 50 basis points (i.e. cutting the repo rate by half a percent) when the tea lady appeared with an extra packet of chocolate digestives. In a flash, while someone was tearing off cellophane, it was agreed to leave the rate unchanged, downgrade the estimate of GDP growth for this year and next and send. Governor Marcus out to tell the press. She retuned to an empty committee room and crumbs.

All over the world low administered interest rates do not seem to be having the desired effect of encouraging people to borrow money and spend it. Rather, individuals and even businesses appear still to be focussed on reducing their debt. This sort of behaviour is unfamiliar to bureaucrats and officials for whom the economy means spending other people’s money and then borrowing more to support their habit. The sad and ironic part of this situation is the reluctance of everyone to recognise that more of what got us into this mess is unlikely to get us out of it.

We bears wonder, when or indeed if, there will be a time when the absurd overvaluation of intangible entities such as fiat currencies, intellectual capital and counterproductive bureaucracies will be recognised. Certainly the dignity of manual labour is a filthy myth but it would be interesting to see what would happen if supply and demand could be allowed to find the level of remuneration for tasks such as doing some one’s ironing or running a near-monopoly fixed-line telecoms company into the ground. In term of value to customers those two pay scales ought to be nearly equal. While many of the current reams of labour legislation need to be scrapped there is also a crying need for the meaning of the phrase “performance bonus” to be defined and enforced.

It was announced that the president’s basic salary will now be R218 546 per month. Not only is this a rather odd number but after tax it must be a real struggle to keep the uxorial entourage in dresses and lipsticks No wonder we are unable to attract any real managerial skills into applying for the job and it looks as if the Bloemfontein conference will have no choice but to grant JZ a second term. After all, one of the possible alternative candidates was spotted paying around R18m for a buffalo recently – that’s not going to be easy on a presidential salary. Unless of course he can work something out with the so-called “spousal support unit”.

Finance Minster Gordhan and his investment industry regulators are rightly concerned about “rogue investment advice”. While I definitely agree that advising people to put their hard earned savings into black holes is despicable I would suggest that the regulators are naïve to expect to see marketing material which contains many hard facts mainly because this is a business that is pretty short of those sorts of things when it comes to what is going to happen. About the only certainty for savers is that any profits, gains or income they might score will definitely attract the attention of Mr Gordhan’s tax collectors.

The mood at the bowling club will be tense this evening as tomorrow’s Currie Cup fixture between the Golden Lions and Sharks looms. The result is obvious.

James Greener

Vernal Equinox  2012

BULL POWER

Take that! This morning the bull put on one of his all time best ever displays of leaping and towed the All Share index over 36 000 in a single bound. This has been caused almost entirely by a heroic recovery of the mining sector shares as investors apparently realise that their earlier fears for that industry were utterly misplaced. Many analysts are attributing the change of heart to the launch in the US yesterday of the good ship QE3. This was the announcement by Governor Bernanke of a third (actually fourth) round of sending other people’s money to areas of the economy which, some very wise people have decided, are in need of more cash.  It is once again disappointing to watch as the world’s leading capitalist economies insist that central planning will work better than markets at allocating resources. But hey, we are getting one hell of a powerful bull market out of it.

In fact Public Enterprises Minister Gigaba seems to be justified in his confidence that investors are not in the least concerned with developments on the nation’s mines. This, he claims, is because it is well known that the country has a “very solid” Constitution and a proven record of conflict resolution and that further “…investors are confident that we have the necessary leadership with requisite skills and experience to rein in the situation.” Sadly any sign of these skills are not evident as the strike seems to escalating to all types of mines all over the country.  As always, the specifics of the demands are complex and it is difficult for outsiders to put amounts like R12 500 into context. However a restaurant in Cape Town is willing to offer R5500 to suitably experienced Chinese Cuisine Chefs. It certainly feels as if one of these numbers is out of line.

For several years now the JSE has believed it wields a mighty weapon over the newspaper industry in that it had the power to reduce significantly the demand for advertising space that arises from the JSE rule that requires every listed company to publish its half-yearly results in the press. That rule is about to be rescinded on the reasonable assumption that there are no significant shareholders (and presumably not a single company) without access to the internet. The fact that so many companies currently publish their results in lavish multi-colour spreads far more detailed than they are obliged to, shows that they view this six-monthly exercise as important for their communications strategy and general public awareness. They will very likely continue this practice well after the rule disappears and the newspapers may breathe a little easier. Websites and emails in fact are cumbersome tools for capturing attention and presenting financial information. Analysts always prefer to use the newspaper versions. The JSE should, however, be concerned about the companies that will be only too keen to vanish from the press. These are the firms that will issue only the occasional impenetrable slab of words and numbers via SENS – the official electronic channel – and which may well have something to hide. The small private investors will be the most likely victim of the resulting opacity since analysts and journalists will also not bother to dig around in the murk.

Patrick Lambie must have been on the line to his mom several times in the last few weeks asking her to check the family tree to see if there is any way he could claim citizenship of another country and offer them his services on the international rugby field. Warming the bench as we accept yet another hiding from the likes of the Wallabies and the Pumas is not entertaining and he is undoubtedly very frustrated. Fortunately I have been invited to a breakfast to watch tomorrow’s game against the All Blacks and so I intend to bury my nose in a large helping of scrambled eggs and attempt to avoid the TV screen. I will be well clear of the plate by the time of the Cheetahs Lions match however.

James Greener

14^th September 2012

THIS TIME THE PLAN WILL WORK. PROMISE

 European Central Bank president Mario Draghi delivered a speech yesterday that seems to have convinced some folk that he knew exactly how to cure the euro zone currency woes. The plan goes like this. Any government in the zone that is short of cash either because it is spending too much or not collecting enough tax (and usually both) simply prints up some bonds (IOUs) and good ol’ Mario will buy them with actual euros and bingo, the cash shortage vanishes. Where the fresh new euros would come from was not explained but presumably a call to German Chancellor Angela Merkel may be required. The flaw in the plan, however, is the presumption that between now and the time when the IOUs become due (up to three years away) the nearly bankrupt governments and their citizen will adopt polices and attitudes quite different from the ones they currently have, and which got them into this mess in the first place. This seems very unlikely since everyone’s experience is that each absolutely last and final bail-out is seamlessly followed by another and no change in policy or attitude is necessary. The game goes on until the Germans no longer answer their phone.

Not everyone, however, is sure that it will all turn out OK and demand for gold pushed its price over $1700 an ounce for a spell. Until the rand clawed back a bit of ground, this caused the rand price of the metal to sniff out the high ground and both Krugerrands and the Newgold ETF enjoyed a fun week. The All Share also displayed a substantial bounce and re-establishing its assault on 36 000. Mind you, just because an index level contains a lot of zeros the market is utterly unconcerned and there’s no telling what it will do thereafter.

There is, it seems, a housing crisis in our royal household. The king’s sixth wife is being forced to share digs with another queen and this, all agree, is unsatisfactory. Fortunately a solution has been identified but it will require tax payers to stump up a further R18m. Palaces are not cheap. In addition to this unbudgeted item, officials responsible for the royal moolah note that the family holds customary functions which can not be planned for and which also have a devastating effect on the budget. Presumably this means they have big parties. Officials have been busy establishing “best practice in other parts of the world” (I’ll bet) and are toying with the idea of opening the palaces to tourists. What a splendid idea. Mind you at even R100 a head it is going to take a very big number of tourists trekking up to Zululand to rubberneck around the king’s quarters before they can comfortably call in the architects.

Those who braved the rain and drove to Durban docks to visit the Rainbow Warrior – the vessel operated by the environmental pressure group Greenpeace – were startled when harbour security insisted that the driver take a breathalyser test. Now these brave greenies have had some very unpleasant incidents previously with contra radicals attacking them and their boat, but why they felt safer in the knowledge that each driver (no passengers were tested) was sober was not explained. The activists told visitors that their target in South Africa is to oppose the plan to build and operate more nuclear fuelled power stations. Now that the triviality, inefficiency and negative environmental impact of wind power is belatedly being recognised and discussed and coal is such a big no no, does Greenpeace want us to return to the dark ages?

The ‘bok rubber hits the road tomorrow morning when they meet the Wallabies in Perth. People of a nervous disposition should maybe not watch. And the Lions look as if they are going to get to the Currie Cup the long way round. That partnership between Amla and AB at Trent Bridge to square the ODI series was pure magic. It would have been lots better if had been to win the series though.

James Greener

7^th September 2012.

AT LEAST THE SPRING BLOSSOMS ARE GROWING

Now why has the JSE All Share backed off from its assault on that 36 000 level?  The talking heads are never afraid to offer a reason for every move in any market.  Some of us are less certain but the spells of quite marked rand weakness might indicate that some overseas players have abandoned the ship. Mainly it has been the mining shares which continue to be battered. Here and there some banks are also being sold off. Presumably there is a concern that the “unsecured lending growth” story is once again grabbing headlines. It is hard to believe that after all the bad publicity about poor lending policies all over the world that our local fellows are not keeping a beady eye on the loan portfolio. Of course the politicians and hotheads are always bouncing around demanding that “the poor” be given stuff – this week it was the smart houses in Cape Town – but on the whole one has to hope that most folk acknowledge that debts have to be repaid.

More worrying is the rather unexpected second quarter GDP growth of 3.2%pa that was published this week. While still a disappointing number, it was unexpectedly high. However, careful reading of the fine print revealed a clearly maverick result for the mining sector that was grievously distorting the overall result upwards.. True growth was obviously well below the published number and the vital manufacturing sector continues to contract. Like the nation’s savers, the founders and operators of small businesses are wondering why government seems unwilling to leave them alone. There was in fact scant reason to be cheered by the GDP numbers and share market bears can find plenty to feed their prejudices.

Reasons are also in good supply from the US where all kinds of stuff is happening. In particular there is interest about what the Fed Governor Bernanke may or may not say in his quaintly named Jackson Hole address. Will he resume his policy of printing money for the government to spend? And then there has been the contest between a storm named Isaac and a politician named Mitt who wants to be the next US president, for who could generate the most publicity. By the way, Mitt has a running mate, Paul, who has drawn up a list things he thinks the government ought not be paying for. This rather unusually forthright view from someone seeking election has caused a great deal of anger amongst those who have become used to spending other people’s money. The “American Way” is one of the forecast casualties of such an idea.  This election might be quite entertaining after all.

How’s this for a wonderful example of bureaucratic disdain for mere citizens. It is a job advertisement for a Director of Economic Regulation (and there are a whole host of alarm bells right there) in Abu Dhabi. The second line promises an “attractive six figure tax free salary”. But there is no mention of what currency this might be paid in! Somehow I doubt that 100 000 in SA Rands is the figure in mind. Even tax free that won’t buy you much in Abu Dhabi

 Working for a global wealth consultancy sounds like a fun job. The latest publication claims to identify the nation’s multi-millionaires and where they live. Durban allegedly has the second highest number of people in the land worth more than R240m.The fellows at the bowling club this evening will be looking round the bar and wondering! Apparently this information will be used to “inform brands and companies globally where to open businesses if they want to target the richest of the rich”. Doubtless the nation’s tax collectors and other thieves will also be looking for copies of this useful work.

The ‘bokke are in trouble and the Lions are on top of the log. The rugby bosses see nothing wrong.

James Greener

31^st August 2012