WHERE THE HELL ARE WE?

The JSE All Share index has improved by more than 20% since August. The last 7% of that gain has happened in the first few weeks of this year. So what’s going on? Firstly note that compared to almost all other equity markets the Joburg recovery is among the smaller ones. Several markets will be in double digits for their January performance.  It appears that investors have decided, probably wisely, to ignore the gloomy data and forecasts and instead to insist that economic growth is about to reappear or at least if it doesn’t not to let that get in the way of them buying shares. Certainly, almost all this week’s local company announcements about sales, revenue and earnings have contained reasonable and in some cases exciting positive numbers. Turnover is happening and profits are being made, despite warnings that house prices are 25% too high and global growth will be a mere 3.3% this year.

People have lost interest in the Eurozone’s ceaseless and ineffectual efforts to get its affairs in order. Debt rescheduling is going to be an ongoing sport that will possibly apply for Olympic status before long. By the time it does all blow up – if it ever does – investors will long have forgotten the analysts crying wolf and urging people to take cover in sensible assets and currencies. Mind you the fact that gold also has been moving upwards in these first hectic weeks of 2012 shows that there are a few scaredy-cats who like the idea of owning something that governments cant easily track down and tax or confiscate.

This week I made use of SARS’ online payment scheme for the first time. My one-man campaign to use only the postal services to communicate with our tax man in an effort to highlight the deteriorating service levels of that business has collapsed. SARS simply don’t care that letters are not delivered and would seem to have decided that sufficient tax-payers are compliant, obedient and computer-savvy for their collection rate to be satisfactory. The speed and efficiency with which my payment was siphoned off to the state coffers was terrifying. Imagine what it would be like if a similar efficiency existed when requesting an ID book or an “unabridged” copy of your mother’s death certificate (my personal nemesis at the moment). One big story this week was the huge and frustrating backlog at the outfit that maintains the register of businesses (CIPRO). Tax payers ought to be compelled to withhold all taxes due until outstanding requests to the state are fulfilled.

My new “smart phone” boasts a truly amazing suite of mapping and navigation applications. Sadly, however, the elves in Finland who compiled the map of SA must have been in touch with a particularly reactionary and confrontational lackey at the SA government’s Place Names Department. I am now truly a stranger in my own land as there are huge swathes of country where not one place name is familiar. My Eastern Cape homeland is unrecognisable. Grahamstown, Port Elizabeth and East London have vanished. Even Umtata is now called King Sabata Dalindyebo. A recent call for tenders in the local newspaper listed a dozen municipalities not one of which I recognised. Maybe that’s why the Posts Office has given up delivering mail. They have no idea where to go.

A very puzzling official statistic has been released that suggests that the volume of food being sold is as much as 5% less than a year ago. That seems unlikely and is probably yet another indication that the data being collected and processed by the bureaucrats is getting ever more dodgy. Perhaps this explains why the bulls are not in the least worried by GDP and similar allegedly bearish parameters. They are simply wrong.

Reportedly very few companies are clamouring to be associated with SA cricket and offering to sponsor the various series. The domestic T20 competition is presently without a sponsor despite the great popularity of the tip and run form of the game. Maybe the sober suited banks don’t wish to be associated with scantily clad dancers who gyrate on floodlit stages after each boundary is scored. Or are they just worried that the money seems to vanish into a hole?

James Greener

27^th January 2012

THE BULL HAS A VICTORY DANCE

Once again after clearing up two days worth of tea cups and biscuit crumbs, the Monetary Policy Committee sent Governor Marcus into the front room to say that interest rates were just perfect and that not enough has happened in more than a year that was worth reacting to with a change in the price of money. Fair enough, but it is true that consumer inflation has popped out of the target range on the upside, the JSE All Share index is setting 4 year highs and most companies directly exposed to consumer spending are reporting tidy sales growth. Frankly, with that sort of data, it is hard to decide what to do with the repo rate, so to let the sleeping dog lie seems sensible. Just check him for a pulse from time to time.

This year the Davos jamboree for analysts and politicians clashes with my timeshare week at St Lucia. So even if I had cracked the nod, I would have turned it down.  No contest: warm sea, empty beaches, cold Castles, hundreds of hippos and thousands of crocs versus acres feet of snow, far too many overdressed people, hot chocolate and many million words. It is not as if anyone in Davos will explain why despite all the advice that was offered there last year, the world still spent 2011 lurching closer to another recession and Greece is even less able or likely to repay its debts. And now there are some doubts about lending money even to France. The fact is that borrowing in a currency that you don’t control and can’t print when repayment time comes around, can cause embarrassment.

Mind you it is difficult to embarrass anyone who holds high office. Someone in the presidency claimed with a straight face that having a back-up plane shadowing the one with the Prez on board is standard procedure “in case it suffered mechanical failure.” This raises several questions including one about transferring the rather bulky (but nimble on his feet) JZ between aircraft if the first one began to splutter a bit over the ocean. Far better for us all if we just upgrade him to First Class on SAA. He might even meet his next wife on board.

The executive placement business must also be doing well. At times it seems that the sole news in the money pages is about executives departing or arriving the corner office. Public sector posts seem to be the most volatile. Shortly before having to answer cheeky questions about where the money has gone, departing incumbents frequently choose to use the side door on their way to begin a spell of suspension on full pay But recently the private sector revolving doors have also been whirring. Undoubtedly the pressures of meeting both shareholder expectations and government directives must take its toll.

For example it seems that there are new and complicated rules about how to measure turnover. Reportedly this development has been missed by many businesses with other things on their mind. Even in a sophisticated first world economy these regulations must seem often pointless and nitpicking. Generally all one tries to do is to provide goods and services of sufficient quality and value that customers and clients will surge through the door waving money. Enough of those unlikely beings and you can then consider hiring more employees and so on in a happy upward spiral. The bookkeeping must simply be accurate and capable of quickly identifying fraud and impressing bankers and shareholders. Recently the Post Office’s own banking arm was scammed for millions. The government’s FICA requirements did nothing to stop or identify the crooks. Simply, the managers were not paying attention.  Perhaps they were swotting up on the turnover rules.

Soon we might learn who the new ‘bok coach is, what happened to Cricket SA’s money, and how much time soccer players spend rehearsing their goal scoring dance routines. Expect great heights of choreography at the upcoming continental championships.

James Greener

20^th January 2011

BULLS AWAY

Already confusion and dismay is trickling into the press and websites about the change in the way that dividends will be taxed from April Fool’s Day. The key fact to which I cling is that the change should be pretty much neutral for the fiscus. That is they should collect about the same amount of money with the new withholding tax as they did with the old STC. Therefore, provided the companies play ball, shareholder’s net income ought to be unaffected. This means of course that declared and payable dividend amounts will need to be greater (excluding any growth of course) than they were, so that after the10% tax deduction, the shareholder’s portion remains the same. One definite victim of the changeover will be the calculation of dividend yields and growth rates. It will be important not to compare apples with pears! The market may take fright until it all settles down. In the meantime the bull is back and raring to go.

South Africa now chairs the United Nations Security Council. Whichever suit from Pretoria actually gets to sit in the top spot, he or she is welcome to it, as the agenda for that body is always packed with nearly insoluble squabbles between deeply divided parties. Already our Prez has complained to the Council that the United Nations does not treat the African Union with enough respect. But career diplomats are never going to jeopardize their expense accounts by acknowledging that the problem there lies in the total misuse of the words United and Union. Hopefully though, the chairman will introduce the other members to the great South African tradition of leaping to one’s feet to sway rhythmically while chanting an impromptu ditty that encapsulates the moment. Frequent and lengthy refreshment breaks are also traditional.

The National Treasury was very excited to announce that they had this week borrowed $1.5 bn in the overseas markets with little difficulty. It was pretty cheap too; just 270 bps over US treasuries, way cheaper than nations like Spain or Ireland can manage. The trick here of course is that since both the interest and the principal will have to be repaid in US dollars, misery and hardship looms if the rand weakens. Only old bears like me remember the country’s notorious “debt standstill” 30 years ago caused by rand weakness. The next day SAB Miller proved the attraction of beer over government by borrowing more than four times as much in the same markets. Unlike the nation, which has raised the money mainly to pay off older debts, SAB are using their cash to buy another brewery. In Australia.  Next time the Aussies beat the ‘bokke in anything we can take comfort in the fact that they will have to celebrate with an SA owned pint!

We still do not yet have even the simplest result from last year’s census. This is because all the forms are still sealed in 135 000 steel boxes while over 1000 people are being trained how to count the 64 billion characters of data on the 235 million loose pages waiting inside those boxes. Sadly, while impressive and even precise,  these are not the numbers we are expecting and we will have to wait until November to find out how many of us there were last October. I trust the fish moths have not found their way into the boxes and there will not be shouts of dismay when they are unlocked and thrown open.  This has not been an efficient exercise.

The delightfully named Russian satellite Phobos-Grunt is falling to Earth. Once again the owner of this piece of valuable scientific instrument turned heavy junk is airily dismissive of the consequences that might arise if bits of it fail to burn up on re-entry and land in someone’s back garden or worse. You will hear quite a lot more than mere grunting if it does.

With yet another cricket spot-fixer identified and other sports officials looking shifty I am worried that perhaps even the women’s beach volley-ball might be rigged. Mind you, I never know who is winning anyway.

James Greener

Friday the 13^th January,

FANCY THAT

The current ruling party was founded 100 years ago in Bloemfontein of all places. A fitting centenary celebration party has been planned. Those of us who declined the invitation to attend or in fact never received one will have to be content with paying for some of it. Intriguingly, for an organisation with working class appeal, the opening event this weekend is to be a golf tournament. Very egalitarian.  Thereafter, however, things will tend to follow the usual program of political gatherings with gales of talk and prodigious sluicing and browsing. Singing and dancing will certainly occur. Perhaps even fisticuffs. . Even the railways are attempting to cash in on the occasion by offering just 84 tickets on a dedicated luxury train from Joburg to Bloemfontein return for a mere R2020. (Meals and bedding included). That seems like a bargain. But then who cares about value for money? Not politicians.

As has already been pointed out ad nauseam, last year the JSE was a really volatile place with not a sign of any trend taking hold. Even a bearish trend is at least useful since it signals that somewhere ahead buying opportunities will present themselves. In just the first four trading days of 2012 there has been more of the same, with daily moves of far more than 1% in market indices, currencies and commodities.  The most interesting story is perhaps the strength of the US dollar and Wall Street. Presumably we are witnessing demand for alleged safe haven assets, as it appears that fixing their currency crisis was not among the European New Year resolutions.

 For 14 months there has been one very solid trend in SA and that has been the price at which the Reserve Bank claims to lend money to the banks. The repo rate has been unchanged at 5.5% and regular meetings of the brains trust in Pretoria have reached the conclusion that this price is perfect and needs no adjustment. The policy of letting sleeping dogs lie is widespread amongst central banks and tweaks to their base rates have been few and tiny. Unfortunately this has failed to trigger any buying sprees among their citizenry and debt-fuelled consumption-led economic recovery remains on the endangered species list.

It is interesting to conjecture that previously financially illiterate and unaware people are now able to discuss these matters with their peers via the internet and change their behaviour accordingly. Learning about the perils and pitfalls of compound interest and the venal practices of the money lending community from a Facebook Friend might have more impact than any pamphlet from the bank.

During December those smartly uniformed folk at the immigration desks processed 3.7m people as they either arrived in or left the country. Every time these figures are published it surprises me how large they are. 2.5 m of the border crossings were by foreigners and occasionally some talking head boasts that the country is attracting more than a million tourists each month.  Presumably a large proportion of these visitors have merely popped over from a neighbouring country for a spot of Christmas shopping. Undoubtedly this is a very important source of customers for shops close to the various border posts and it would be interesting to compare their total spending with that of the type of visitors which are more commonly thought of as tourists. That is the milky-skinned poor souls clad in creaky fresh khaki shorts and sealed into a rented car piled high with carved wooden goods, whose eyes grow wider as the elephant ambles even closer.

Cricket in the kingdom is in as big a mess as our national soccer side The Dolphins are bottom of the log and the Proteas were flummoxed by the Kingsmead pitch. Fortunately amends were made at Newlands and the series win against Sri Lanka is satisfying. Bafana’s international fixtures have been downgraded to kick-abouts and their hosts in Equatorial Guinea this week forgot to book them hotel rooms.

Happy New Year

James Greener

6^th January 2012