ANOTHER ONE BITES THE DUST

The JSE’s share market bull is decked all about in boughs of holly, strands of tinsel and a torn and melting paper hat. But clutching a flute of something chilled and bubbly he is positively scampering towards year end. He is, however, unlikely to set a new high in the few trading days left to us in 2013.

But, after a year like we have enjoyed no one is concerned with these last pirouettes and sensible folk will be celebrating as well. Only the most committed of bears is watching for the fatal misstep that will herald the collapse in share prices so confidently predicted for so long.

Similarly there will be scant concern at present for the news that the US 10 year bond yield is edging up towards the 3% level again. Or that the dollar gold price has declined by almost a third in 2013. Here in SA, the faltering rand has protected us from much of that particular bear.

Our currency weakness, however, may turn out to be one of the more significant financial indicators from the past year. Demand for our little currency continues to be exceeded by supply. To what extent this reflects political concerns rather than economic developments is impossible to separate but undoubtedly unless this trend ceases soon, inflation will increase.

Now, with the Proteas playing an away game at Kingsmead, the humidity in the 90s and the condensation running down the Castle bottle there is no need to delay any further wishing all the readers of Tidemarks a really very happy and healthy 2014 and to thank you for your comments and interest through what has been a fascinating year.

James Greener

27^th December 2013.

BARELY ANY RANDS REQUIRED

The markets were quick to see that the Federal Reserve’s planned reduction in the rate of cash injection into the system was actually so small as to pose absolutely no threat to the continuing binge. The taper was a tiddler. And so the share price bull trots onward and upward even here on the southern tip. The currency, however, is experiencing a quiet but very severe mauling from the bear. The rand will now buy just 80% as much foreign currency as it did a year ago. It is superfluous to say this is alarming. People clearly no longer want or need rands.

This development has prompted brought the rating agencies to threaten or even hand out downgrades. Just to remind ourselves, these agencies are commercial businesses often paid by the very institutions they are rating. In general they have access to no more data about the financial health of that institution than you and I could find with a bit of effort. Their track record and integrity are not spotless and they have a weird multipoint scale to forecast what is actually a simple yes or no event, i.e.: Will the institution be able to repay the capital and interest on loans made to it?  That said, it is probably true that the financial landscape ahead is getting rather rocky. Particularly for public institutions whose customers (ratepayers and utilities consumers) are becoming really bad about paying their bills. To what extent this is a result of that well worn phrase “culture of entitlement” or is a simple consequence of the reality that costs are outstripping incomes is not easy to determine. The amount of the outstanding payments to municipalities is very large and there is no hope of it ever being collected.

Already the pre-election political squabbling has begun and no one is putting forward any plans about getting the country onto an economic growth path involving a far smaller government and a cherished and supported private sector. So far the differences seem to be about the fine details of equally ruinous and stupid policies of confiscation, retribution and distribution. Even those who should be capable of doing the simple sums involving wealth, population and number of taxpayers are choosing to ignore the facts.

In this atmosphere there is scant chance that the excellent recommendations of the Independent Commission for the Remuneration of Public Office Bearers will get adopted. The Commission feel that any public employee earning above a million rand per year should not receive an annual increase. What they should have added was that any minister or mayor objecting to this would be welcome to exercise their economic freedom and seek a private sector employer able and prepared to pay them what they believe they are worth.  There might be some terrible surprises in store.

Those dreaded gantries looming over the roads in Gauteng must be spewing out gigabytes of data. Reportedly it is possible to interrogate a website and for any registration number get a report of gantries passed and tolls incurred. If so, this must be providing very interesting information for anyone wanting to check up on who has been where and when. So far, however, the comments about the operation are mainly that some travellers are getting legal threats to pay before even receiving an invoice. And when will some revenue-hungry traffic department realise that the system can easily be used also to calculate average speeds and target motorists for that as well?

Main item for discussion at the bowling club this evening will surely be the report that the Sharks are thinking about adding fellow Eastern Cape native Luke Watson to their squad. Those who have already proudly paid for their season tickets to Kings Park might be rethinking their purchase. Hopefully by this evening as well the scenes from Wanderers on the TV in the bar will be more optimistic. Five wickets for 16 runs is not what one expects of the world’s top test side. The Aussies must be licking their lips. 

James Greener

Friday 20^th December 2013

WHAT’S THE SIGNING FOR A WEARY BULL MARKET?

It’s been 4 weeks since the last edition of Tidemarks and a careful study of what has happened in the markets in that time reveals little to write home about. Perhaps in the last few days the JSE has taken on some of the sadness that the rest of the country is feeling after the death of ex-president Mandela. The currency in particular is rather weak and against the pound sterling and the euro it is now lower than it was even in the 2008 crisis. What that means is that those of us still living in this dangerous but excitingly beautiful place will soon be getting emails from hitherto dismissive relatives demanding  to be met at the airport and ferried to a place where they can watch lions and elephants while ordering beer at less than a quid a pint!

Nevertheless despite this holiday time softening, the All Share index will still come in with a total return for the year of almost 20% which just about its long term average. Strip out the mining shares and it’s way better than that. The market’s industrial sector is growing earnings and share prices at a much faster rate than the GDP figure released a few weeks ago would like you to believe. Those of us who spent most of the year warily expecting the wheels to come off this bull market are totally discredited. Even without any especially good news about stable educated workforce, predictable business-friendly political climate and growing domestic and export markets, investors could not refrain from paying more and more for shares of companies battling with the converse of all those things. Being invested in the JSE has proved a so much better place for money than languishing in a bank account.

There fad of appointing directors and even executives with little or no knowledge and more importantly experience of the industry into which they are parachuted is not always a success. Champions of this practice are probably found mostly not running big successful businesses. The government is also very keen to see people in jobs where their reward far exceeds their contribution. The JSE has long embraced the practice and even in the days before its de-mutualisation there were non stock brokers  on the Committee. Most of these “external members” pitched up only on the day of the official photograph. Today the JSE is itself listed on its own boards and profitability for shareholders obviously comes before service to members. That this is true is shown by the appointment of a chairman who offers many skills, attributes and experience but unfortunately none of them appear to have been acquired in stock broking. Of course we all wish Ms Nonkululeko Nyembezi-Heita the very best in her new appointment but ask that she does take great care of our old and fragile exchange which is in great danger of being crushed by regulation and unimaginative bureaucracy. Watch the share price.

All this fuss over an interpreter who translated politician-speak into gibberish seems overdone. Just look what the poor man is usually required to translate at party rallies and government gatherings. The computer world has long had an acronym for it.  GIGO: Garbage in, garbage out.

Is anyone else uneasy with the outcome of some of international cricket matches played against teams from the sub-continent? There are frequently some amazing swings in form from one game to the next.  The press dutifully repeat the breathless warnings about the strength and potential of this or that team about to face the Proteas, but not long after the toss, the threats disappear. Or is it simply that our boys are just so very good?

James Greener

Friday the thirteenth. December 2013

DON’T MENTION THE WIND

Whatever it was that panicked the market in the middle of the week has now been forgotten and the All Share index is striving upwards again. This bull is not easily discouraged and the weakness of the rand suggests that it is not non-resident money that has been coming in to push things along. However resources company Glencore did arrive from London for a secondary listing on the JSE this week and has rearranged matters a bit amongst the heavyweights. Glencore has a market cap of around R700bn and is now the third largest share on the JSE behind British American Tobacco and SAB Miller. Traditionalists might be shocked to learn that Anglo is today only half the size of the newcomer and is just the ninth largest share on the JSE. Naspers, at R400bn, is our largest truly South African listing at present. Likely you could win a few bar bets with that fact.

The European Central bank cut its benchmark rate from 0.5% to 0.25% and this has spawned a blizzard of comment mostly saying it’s a good idea and it ought to have the desired effect of raising both inflation and economic activity in the area. Many proper economists believe that a little inflation is a good idea. They cite the Japanese example where that nation has suffered deflation and a never ending recession. The concerning thing for those of us who think free markets are best able to set the price of most things is that the committee of suits who make these decisions is the same one  whose earlier decisions led to this situation.

We already all know what we ought to see in the Public Protector’s report on Nkandla.  That a great deal of unauthorised spending of taxpayers money went into making sure that No1’s little country cottage in Zululand is comfortable and safe. However, the report takes almost 360 pages to say this, so obviously there must be quite a bit more there than we suspected. It certainly prompted some rather rattled behaviour from a cluster (what a lovely evocative word) of cabinet ministers who are of the view that the report might reveal things about the president’s home that the public doesn’t need to know. What ever could that be?

Legislation is pouring out of parliament at a terrifying rate and none of it appears to be lessening the burden of regulation and red tape in which we are drowning. The law that can be used to put you in prison if you dare to suggest that severe weather is on the way has reached the statute books. While hoaxes can undoubtedly be annoying and even costly for the gullible, this does seem an extreme use of state powers. In this internet age many of us now use weather forecasts generated by overseas services so what will the weather police do if Wind-Guru warns the kite-surfers to expect gales and all they get is a gentle zephyr?

Last year 91 public entities wasted an average of R3bn each of public money in “unauthorised, irregular, fruitless and wasteful expenditure”. There is outrage that as yet not a single civil servant has reportedly been fired for fraud or incompetence. This indeed is a great deal of money but it is less than 3% of the state’s total annual expenditure of about R1 trillion. Most of us probably fritter away at least that sort of proportion of our own spending every time we go to the shops. Just start with the tip for the car guards. Nevertheless they really ought to be a lot more careful with our money. Another comparative amount is that the tax man has so far this year refunded R21bn in overpaid taxes. That’s also a great deal of money,

Sachin Tendulkar must have been very pleased not to have emulated Sir Donald Bradman and scored a duck in his final innings. That is what he nearly did score in the world cup final at Wanderers in 2003 when I went to watch him for the first time. The Little Master managed a mere 4 runs. People who had travelled much further than I were incensed and shouted for his return to the crease. 

It is going to feel odd watching test rugby on a Sunday evening. But then I don’t have to go to work the next day.

James Greener

15^th November 2013.

GANTRY GANTRY BURNING BRIGHT

Buyers on the JSE have demonstrated their belief that companies are around 15% (after allowing for about 5% inflation) more valuable than they were when the year began. The All Share Index has tested the waters above the 46 000 level. But it is now very tempting to suggest that the bull has now run out of steam. An important downside factor that feeds us bears is the government’s seemingly deliberate and concerted attempt destabilise the business operating environment. For foreign participants particularly, the ground rules are being changed at a startling rate. Only Minister “Red” Rob Davies can see how the scrapping of bilateral treaties with major trading nations will comfort investors. Fresh from this disaster he is terribly excited by the plan to “cleanse” credit histories and so deny lenders some potentially useful and pertinent information about borrowers. This is very foolish when already many parties on both sides of that transaction are in difficulties. So-called unsecured credit providers are reporting an ever growing pile of bad debts while deeply indebted borrowers are also struggling. So much so that Minister Trevor Manuel pointed out that this was a factor fuelling labour unrest. Don’t these guys ever talk to each other?

Does anyone in charge even read? It is very frustrating to watch how in the face of all evidence and prior examples the government still insists that South Africa will be converted into a socialist utopia.  Of course the powerful glitterati have scant time for anything except for whizzing about attending meetings and ceremonies that are invariably followed by lavish catering. An amusing example of this apparently deliberate indifference to information includes President JZ claiming that he had no knowledge that his nickname amongst his staff is “Number One” and so the Number One who allegedly facilitated the landing of a friend’s private plane at a military airbase was not him.

The picture of a burning toll gantry proved that the southern tip is not alone in having aggrieved citizens. The green and forested countryside next to the highway turned out to be in France where a few furious farmers were demonstrating their disappointment with their government’s attitude. Reportedly, however this act of arson caused them to change it!

There was huge excitement at the New York stock exchange this week when a new listing nearly doubled in price on its first day. The company concerned was Twitter; one of these Internet based so-called social media sites. At the peak it was being valued at around R300bn which is bigger than Standard Bank. Now that I have a bit more time on my hands I signed on with Twitter a few weeks ago.  After discovering that one can filter out all messages from the hundreds of millions of bored teenagers, and also from anyone who wants to send you a picture of their lunch, it turns out to be a rather interesting way of wasting incredible amounts of time. The point, however, is that so far it has cost me exactly nothing to participate and so it’s quite hard to see where all that value in the company lies. Sell Twitter buy SAB.

Hopefully the fellows at AECI who have just sold 1600 hectares next to their dynamite factory in Modderfontein to a Chinese developer, have checked that no one buried a rejected batch of product on the site. An unexpected bang could quite ruin the developer’s plans to spend R80bn and build the “New York of Africa”. This would be a bargain price for not even one run-down block in the Big Apple so something’s not adding up. Nevertheless the artist’s drawings show that that style and grace are not part of the design brief so Sandton might just be facing a challenge.

History and form are on the ‘bokke’s side in their match against Wales tomorrow. Pity the match will overlap the Proteas perhaps clinching the ODIs.

James Greener

8^th November 2013

WHO’S AFRAID OF THE GREAT BIG BEAR?

Halloween marked the end of a four month period during which the JSE All Share index has gained around 20%. This is heroic stuff but in theory, unlikely to continue, as it has hoisted all the usual valuation measures into equally heady territory. It is definitely no longer glass half full or half empty stuff but glass brimming over and “last orders” taken.

Most analysts are confident with the view that these bull markets are largely due to the US Federal Reserve pumping USD85billion a month into the US system via its infamous Quantitative Easing program. The explanation warns that when that program comes to an end, or even just slows down – the infamous taper – then the bear will strike. However, there is satisfaction that the track record of Janet Chellan, the new Governess-elect, suggests that she is only too pleased to tell markets what prices are appropriate. Some of this might be true but since securities prices are set by mutual agreement of buyers and sellers it seems unlikely that slowing down or shutting off the money pump could be the sole reason for prices to fall.

Once again our socialist government has arrogantly and patronisingly decided that we all need to be further controlled.  Without offering any evidence that a ban on liquor advertising could have an impact on reducing alcohol abuse state officials now express surprise and disappointment at the vehement defence and reaction from those whose industry they are about to destroy.

The nation’s accelerating slide towards increasingly violent behaviour and utter contempt for the law is terrifying. What we need is immediate and pitiless enforcement of existing legislation, regardless of the alleged status and apparent influence of the perpetrators. No suspension on full pay for state employees. That ought to create pressure for speedy resolutions. No prison parole, especially for undiagnosed terminal illnesses. No lengthy and expensive appeals resting on spurious and dubious claims.

The never ending saga about how to fund the (exorbitantly) expensive but fine roads around Joburg drags on and has now become an electioneering topic. It is unlikely that many of Julius Malema’s supporters yet own cars (if they did, they would be at work paying them off not dancing in the streets) and their opposition to an impost they are not in danger of being asked to pay is puzzling.  Aside from the problem of ring fencing the proceeds at National Treasury, no one has yet produced a credible piece of simple arithmetic that shows why a modest increase in the fuel levy is insufficient. In the meantime the fellows in Austria who supplied the fancy equipment to read number plates and calculate tolls must be wishing they’d never heard of Gauteng!

To what extent the woes of the textile and clothing industry over the past decade have been caused by management ineptitude, labour intransigence and government incompetence will provide wonderful material for dozens of studies by future students of industrial relations. However, the sad fact is that the Made in South Africa label is an endangered species and many businesses in this sector have moved elsewhere or are for sale. Seardel, the listed company, has managed to sell its clothing manufacturing business for R105m only by first lending the buyer R77m. The interesting part of this deal is that the buyer is the union that represents most of the workers in that business. This is an amazing and unusual departure for a body which is normally so critical of how the industry is run. Everyone will wish them well with this venture and hope that not only do they save the 2000 jobs at risk but also manage to restore growth to this ailing sector.

It just as well the Currie Cup final was not held at Kings Park last weekend. Not only was it incredibly wet but Province supporters would not have been allowed to leave before the end as they did at Newlands. They would have been expected to behave politely and congratulate the Sharks when they lifted the trophy.

James Greener

All Hallows 2013

WE WILL WE WILL REGULATE YOU (F Mercury)

And still the markets surge northwards. Unless company results or news are really shocking, investors appear happy to support share price growth that is far greater than earnings growth. Buyers are tempting sellers to part with their shares by bidding a price higher than the previous trade. The JSE in particular has seen almost no new large companies apply for listings for several years and so the total number of listed shares on the market has been fairly constant. This also must be contributing to the price rises. At some point, however, something will trigger a widespread concern about the disconnect between price and value and a critical number of sellers will offer their shares at the last record high price and the buyers will stand politely back. Matters could then easily turn ugly.

The restrictions on ministers spending public money for personal items are very welcome but the effect is more cosmetic and vote-catching than financial. Remember that the government now whistles through well over one trillion rand a year (that’s a thousand billion), so savings of a few million show up only in the seventh decimal place!  The state’s real budgetary problems are numerous and elsewhere. Not least is the fact that they appear to be running out of people and businesses to tax.  The sponge has been squeezed dry. There are probably now few significant tax evaders and there is not much capacity left to increase the take from those who are irrevocably entered into SARS’s little black book of names. A lot of faith is being placed on the misguided forthcoming Carbon Tax. Please don’t anyone tell the politicians that Oxygen is also very common and dangerous and needs to be controlled.

National Treasury’s now customary praiseworthy and amazing transparency about their planning also reveals worrying developments arising from spending more than they collect. This year the expenditure on State Debt is R100bn. In three years time it is forecast to be R135bn which is annualised growth of more than 10%pa. Not much else in this country is growing at that rate. Except for regulatory authorities. Minister Gordhan squeezed in the news that two new ones for the financial sector are coming soon. Oh dear.

A delightful frostiness is developing around the world as it turns out that President Obama’s spooks have been listening into the phone calls of national leaders who they decided were significant. Firstly there is indignation about their implied minnow status from those who weren’t bugged. Probably Obama had scant interest in JZ’s calls to Nkandla to alert the clan about which wife he would dine with that night. Then there is the outrage from those who were spied on at the arrogance and effrontery of such an unethical and despicable breach of trust. Identical charges made against Mr Snowdon, the alleged US whistleblower who revealed what the spooks were up to, should now be seen in a rather different context.

Even or own leader’s minders failed to steer him away from making a speech about how we should discard our African attitudes and learn to accept the costs of living in a vibrant and exciting world-class city. In particular his comparison between the undeniably fine freeways around Joburg and the supposedly inferior roads in Malawi has gone down very badly. Particularly in Malawi. Pleasingly, however, the gaffe caused the reappearance of presidential spokesman Mac to tell us what JZ really wanted to say. These explanations are always great fun. It seems, however, that JZ meant exactly what he said.

Why won’t the International Cricket Council grasp the concept that test cricket rubbers need to comprise an odd number of matches? Also annoying is their hypocrisy of allowing a country with an unsavoury political regime to host home matches in a third country. The pair of tests being played out against Pakistan by the Proteas at venues around the Persian Gulf is nearly meaningless. Without the ground staff and players’ families, the crowds would number in single figures. Also pretty unsavoury are the people at the ICC responsible for tampering with the test match calendar for matches between SA and India.

James Greener

25^th October 2013

THAT WAS FUN. LET’S DO IT AGAIN SOON

No one really doubted that the American leaders would in the end take the easy option and raise the debt ceiling. The alternative route of reducing the debt by cutting spending and increasing taxes was never going to catch on.  

The ability of governments to spend more than they earn is legendary. No more so than in the case of the fellows in Washington.  So, to cover the deficit between what goes out and what comes in they borrow money to pay the wages, meet the bills and quite importantly to service the debt. Any nation that does not scrupulously attend to this last item gets dealt with harshly by the all-powerful ratings agencies that quickly mark you down from AAA to AA and so on until the dreaded “junk” status. Most national treasuries would feel obliged to take the view that having to borrow too much is a bad thing. The common standpoint is that deficits are merely temporary and that just as soon as the economy improves then tax inflows will surge sufficiently not only to meet the spending requirements but also to have a bit extra to pay off some debt. In the US their commitment to this belief manifests itself as a political act of setting a prudent upper limit (the ceiling) to the total debt. Needless to say reality overtakes hope and before long another opportunity for political grandstanding and brinkmanship is created. Some estimates have suggested that the next ceiling resetting event may arrive no later than February

Only the smartest analysts are able to understand how the policy of spending more than you earn and accumulating ever more debt is wise and sensible. And since markets are steaming ahead on the news it must be concluded that investors are all definitely smart analysts too.

So far the county's newest political party’s biggest impact will have been on the suppliers of those fetching red berets that the leader and his supporters wear. Although the origin of this natty headgear is undoubtedly Eurocentric, presumably they are entirely local in manufacture and so are deemed acceptable and appropriately revolutionary. Speaking at the launch party, Mr. Malema unsurprisingly made promises and demands that delighted his supporters but puzzled some crusty old tax payers. Figuring large among these was the charge that all privately owned land was stolen (from whom is unclear) and must immediately be returned to state ownership. Naturally no one present asked if local governments would interpret this sudden hiatus in rates income as a welcome aspect of Economic Freedom. The country’s mayors would immediately have to scale back on the number of trigger-happy body guards they seem to need when speeding down the freeway to another meeting.

Another threat to government income could emerge from the ban on all liquor advertising. The full ramifications of this asinine “we know what’s best for you” legislation have clearly not been thought through. What about the huge sums of money that the booze industry would no longer be allowed to spend on sponsorship, promotion and advertising? Would they return it to shareholders in which case both SAB and Distillers might be a screaming buy on the JSE. Or alternatively would they slash their product prices so that we could all buy much more. Either way, the jobs and taxes lost from the cutback in those advertising industries will hurt many people. And it is very unlikely that there will be any discernable change among us citizens in those habits and behaviours for which the state has now taken responsibility to modify.

I need both the Golden Lions and the Sharks to win their semi-finals tomorrow so that the Currie Cup will be won by a team I support. Fortunately there is no space left to discuss test cricket.

James Greener

World Vasectomy Day 2013 (truly!)

POSTPONED PAYDAYS PROVING PAINFUL

So what changed? The JSE, which looked as if was just as spooked as Wall Street by the prospect of a US government shutdown suddenly and sharply bounced and the All Share index will end the week near the levels it was at last Friday. That might well go down as one of history’s nastier little bear traps. There has been scant good news in the financial pages. Most concerning is that the politicians’ squabble over the US government’s debt is starting to be sorely felt by the largely blameless wage earners on the federal payroll. Despite the rather astonishing promise that the government will pay them in full once this debacle is over (so how does the “shutdown” save money?) in the meantime workers aren’t getting paid. And that of course immediately affects the retailers and bankers who in turn will not get paid. Wowee. 

Next week there are some critical dates in the US debt calendar when loans and interest need to be repaid to those who lent money to that nation. No one seriously believes the US will renege on its obligations but it is going to be fascinating to see how it works out. This is a great spectacle for economics voyeurs.

With trade union leaders screaming “blackmail” and dismissing severely damaging striker action as “normal” our country is lurching into a damaging phase of failed labour relations. The most dramatic example of this was the decision by BMW not to expand their existing South African plant to produce a new model. Marxist Minister Davies hurried round to the luxury carmaker for a chat but failed to change their mind. They politely pointed out that there are other places in the world they can make their cars where the workers are less truculent and more productive. It’s both tragic and criminal how our leaders still place ideology above reality.

US commentators are getting a bit overexcited about the prospect of having a female governor of their central bank (The Federal Reserve). We've had one for years and she has done a good job changing interest rates down once and criticising the government for ineptitude a few times. It would be fun to be a fly on the wall when they get to meet each other.  Probably there will be high fives just as soon as they are in private. Before long they will be swapping stories about how to tease investors with “forward looking statements”.

The Winter Olympics kicks off in five months time and already the rather tacky and boring business of transporting the Olympic flame from Olympia to Sochi in Russia has begun. The problem is that the darn thing keeps blowing out so alongside every grinning and waving athletic torch bearer there is a podgy man in a suit bearing a very unofficial Bic lighter. Furthermore, its route includes an excursion to the International Space Station, where presumably naked flames are not all that welcome and so the Lighter Bearer will just have to kick his heels out on the rocket landing zone until the torch is returned to earth.

It must be seriously annoying to see your name in one those articles about the world’s rich people.  This week a fellow old Rhodian was revealed as one of Africa’s wealthiest. He will not be pleased. Not only does such exposure demolish any privacy that the more reclusive billionaires might crave but almost certainly the reported value of your nest egg will be way too low or too high and there’s nothing you can do about it.  Now not only do the mendicants and tax men learn where you live but if you have dropped a few billion since last time, you will also have to suffer the sniggers and pity of the others on the list. Shame.

Contrary to popular assumption I am right behind the Sharks in their match with Province at Kings Park tomorrow. I have even snared a ticket and will go along to witness the big men of SA rugby face off. And Sebastian Vettel ought to just about wrap up the F1 championship in Japan on Sunday.

James Greener

11^th October 2013

THIS WAS NATIONAL OLDER PERSONS WEEK

The first page to open on my computer every day is a wonderful “picture of the day” from NASA. Since Tuesday that website has been off line because Washington has decided that it can best save money by sending home all the government employees who actually do something useful and helpful. How about closing down instead those sections of government which made the decisions that landed the country in this mess? Those folk must be among the highest paid on the payroll and on current form are pretty useless at their jobs. Try a year or so without the legislators and see if anyone misses them.

We could use that idea here as well. Send the whole parliamentary circus off on a one year unpaid sabbatical and just leave someone behind to switch the lights on and off and feed the official cat. Is there a single piece of legislation and regulation in the pipeline that would actually make the country work better? Unfortunately, already through the mill, is an act that allows the state to have a lottery license. Clearly the politicians have become jealous of all that lovely lolly going to trivial good causes and charities. Ominous.

The effect on the markets of the US government shutdown is not yet particularly marked. This must be mostly because no one believes it will last. If it did it would mean that the largest borrower on earth would be unable to borrow any more money (except for replacing maturing loans) and that would surely be very good for interest rates in the US at least. In this instance good means won't go up.

The American computer company Apple has $146 bn cash in the bank. That’s enough money to run the entire South African government for a year and leave a lot left over to pay off some of its debt. Isn’t it astonishing what private enterprise can do. Predictably this cash pile has the socialists drooling and whining that life is unfair and they should be given that money to help the poor. Meanwhile Twitter, another “social media” site hopes to raise $1bn in a listing. Might that be the pin that meets the bubble?

In a rather low key announcement Pres Zuma lowered the age for the state pension to 60.  That's a pretty generous move, given that elsewhere in the world the trend is to raise the starting age in order to try and reduce the cost of the benefit. Did he run this idea past the National Treasury? It will cost a fair bit. Mind you they are saving money by for example not having anyone on the defence force staff who can tell them how many working aircraft the nation has. Other economies in the defence force include cutting down on training paratroops. A board of inquiry has reportedly determined that on their eighth jump, paratroopers should be trained to such a standard that they should be able to identify a torn parachute and deploy their reserve ‘chutes successfully. Any one who thinks it would be good to have those skills even before jump 1 is obviously a sissy.

The call for tenders to supply something called Nkandla VIP Sanitation is rather alarming. What are they using now behind that million rand fence?

Hopefully the All Blacks will be deeply intimidated by the Ellis Park venue tomorrow. They ought to be carrying deep institutional memory scars of previous defeats at this ground. Perhaps if I can keep writing like this right up to kick off tomorrow I will steady my nerves and convince myself that it is all going to end well.  Go bokke.

James Greener

National Teachers Day (I believe)

THE SKY IS FALLING

Once again that strange architectural structure called the debt ceiling has appeared in the corridors of power in the USA. Supposedly it sets an upper limit to how much money the government can borrow in order to cover the shortfall between its prodigious spending activity and the less than expected tax receipts. Inevitably of course there is scant political will  to cut spending or raise taxes and so the debt increases and the ceiling gets closer and requires remodelling. This performance of “raising of the debt ceiling” has taken on a near ritualistic nature. Opposing politicians debate and haggle and blame and skirmish right down to the last moments before they take the inevitable decision to borrow “just a wee bit more to tide us over ‘til pay day”. The nation heaves a sigh of relief and nothing changes. The ceiling is way up there out of sight. Until it isn’t.

Those of us who were brought up on the saying “neither a borrower nor a lender be” might wonder why anyone still feels inclined to lend to this nation which is the greatest debtor on the planet. The simple answer is that so far absolutely no nation has the courage or actually the need to call America’s bluff just as long as the US dollar is worth something. Despite being created and distributed by the Federal Reserve through its quaintly named “Quantitative Easing” program at a blistering pace the dollar remains most the world’s preferred currency for international trading and benchmarking.

The pe ratio of the JSE’s Financial and Industrial index (that is, it leaves out those pesky hard-to-understand mining shares) has been loitering around the 18 level for the last six months and it is starting to feel “normal”. However valuations as rich as this are infrequent and historically are not times to buy. A plausible suggestion is that equity markets in general have been the destination of some of the money created by that QE program in the US and that is why panic ensues whenever there is any suggestion that it might be terminated or tapered. The puzzling part of that theory for the JSE is that for any of those dollars to come here they would need first to be converted to rands. But the ZAR has been one of the globe’s weakest currencies this year.

That tax-payer funded outfit, the National Empowerment Fund, that lends money to folk with a good business idea and even better family contacts, seems surprised with having to announce that it will have to write off R290m in non-performing loans. And over at the National Youth Development Agency they cheerfully admit that they have lent R212m to youths who also are not likely to repay any of it. Here are some ideas. Leave the lending of money to the commercial banks who, after all, are quite good at it. Close down all these tax-payer funded entities who give away cash, thereby saving huge sums of money which can be left in the community by reducing the VAT rate or something.

The collective noun for nuclear power stations is a fleet. This emerges from the report of the announcement of this nation’s most expensive investment program. Some bright spark at the department of energy must have had to search a bit to find that word when preparing the minister’s speech announcing that SA is going to build a bunch of these things. Rather clever really.

Sadly South Africa was not one of the 170 countries able to watch the Americas Cup yacht racing live from Los Angeles on TV. The spectacle of sailing boats (?) going at 80 kph in winds of less than half that speed is awe inspiring, No wonder the crews wear crash helmets. Do the Kiwi team do the haka before each race? It will, I suppose, be some time before SA again finds the time and money to mount a challenge for this trophy.

James Greener

Golden Lions vs Sharks at Ellis Park Day

GENTLEMEN and ladies LIGHT YOUR FIRES

 It probably didn't have anything to do with it being full moon but on the same day the committees of experts both here and in the USA both reached the conclusion their current policies were just exactly right for restoring economic growth in their respective countries. Here on the southern tip the banks can continue to borrow money from the Reserve Bank at 5% and lend it to us much higher up. And in the US, the Federal Reserve will not tamper with its program of injecting huge sums of money into the system. This postponement of the dreaded “taper” utterly delighted investors almost all over the world and share prices soared mightily. The JSE All Share is in new territory above the 44 000 mark. Allegedly, USA investors, now freed from concerns about rising interest rates at home, can return to shopping for higher yields in emerging markets like ours. Those of us worried about all this liquidity one day showing up as inflation are a discredited minority.

Only the wilfully deluded could claim that the government’s attempt to deny market forces by imposing a program of political allocation of resources has achieved its objectives.  No matter how sympathetic and well intentioned the often hideously complex deals and schemes might be, many of them seem to collapse simply because value is lost rather than gained through the deal. Sometimes in order to satisfy all parties a company may resort to an action which looks rather suspect when not seen through the lens of “transformation”. Goldfields, a company that is also listed in New York has been asked by that market’s regulator why a transfer of a parcel of shares to a politically influential individual should not be called a bribe. This may end badly.

As did the recent trip made by Khulubuse Zuma (the president’s nephew) to what he called darkest Africa. Clearly hoping to dupe ignorant tribesman up there, Khulubuse jetted in with a plane load of money and returned with a cargo of what he had been assured by the Central Bank of Guinea were bars of pure gold. Unfortunately the bars later turned out to be copper and zinc.  Interestingly, despite his intimidating bulk and impeccable contacts, Mr Zuma has not returned to seek compensation and reportedly has written the venture off as the price of doing business in Africa. Well, yes, sadly.

Another story from darkest Africa concerns the construction of an airport in Somerset East. When I last saw that dorpie it barely ran to two filling stations and tarred main street. Things must have blossomed there, though it hasn't yet been revealed just which airline will offer a service into this tourist magnet. Now the sunsets are magnificent, rain is infrequent and a flock of sheep clustered around the trough at the foot of the windmill is an iconic sight which is never forgotten, but beyond that, this is all rather puzzling. Perhaps someone’s uncle needed a contract.

Apparently the section on tackling was omitted from the French translation of the Laws of Rugby. So that clears up that issue. More importantly, however, the provincial department of sport and recreation is calling for nominations to honour sporting champions here in KZN. As an indicator of how a bureaucrat’s mind works, the 16 categories include the province’s best administrator, best federation and best recreation body. Nominations in a Posthumous Category are also expected.

Remember that in effect this is a long weekend with many of us seamlessly sliding Monday into Tuesday’s public holiday in celebration of the braaivleis.

James Greener

Vernal equinox (nearly) 2013

MIDAS TOUCH

A much respected colleague once pointed out that it was so much more fun being a bull and being able just to buy at anytime without too many concerns. Bears on the other hand have very few occasions when they feel that prices have plunged far enough to warrant buying and even then they still fret that things ought really to go a little lower. Here we are, just half way into the month, and already the All Share is nearly 5% up and setting new highs. Bond yields are down and the bears there are being thrashed. We have these concerns about Russia outmanoeuvring the US over Syria, consumers piling up debts, strikes in support of huge wage increases and shares prices at more than 20 year’s worth of earnings. We can’t bring ourselves to buy and yet tomorrow everything is more expensive. It’s not easy.

What is easy, however, is to write a speech for Public Enterprises minister Gigaba that explains yet another turnaround strategy (the ninth in probably as many years?) for SAA. Simply empty the cliché phrase book into the word processor and off you go with sweating assets, complex legal processes,  optimised operational efficiencies, turnaround strategy custodians, growing revenues and of course all of this in the face of the headwinds which are out there. The Minister should have tossed that back to the scribes in embarrassment. The sole thing he didn’t say was how much the taxpayers are in for this year. It is truly time for the government to sell this asset whether sweaty or not. But would the new owner remember to reserve the front seats in business class for VIPs?

Yet another state owned entity was all over the news celebrating 20 years of operating what might be the most expensive airports in the world. Among the fawning advertisements placed by grateful suppliers there was one missing. That should have been from the association of luggage handlers and looters. With two decades of experience ACSA have not yet been able to introduce a system that eliminates the opportunities for the thieves and crooks that work on their premises to open and steal from passenger’s luggage. Astonishing.  Mind you, ACSA are to the thanked for their sponsorship of those brave people who play wheelchair tennis. In particular Lucas Sithole who last weekend won the US Open, wheelchair quad division. What an achievement by this really severely disabled young man

There’s a local government official in Gauteng who is so delighted with her own record and abilities that she claims to be able to turn any post she is given into gold. Exactly what this means is a tad unclear and it may even refer to her ability to extract large sums of money from the public purse. Allegedly this extravagant claim is deliberately targeted at catching the eye of president Zuma when he next has a national cabinet post to fill. Goodness knows there are already plenty of ministers who are already hard at work lining their pockets with gold while turning their posts into dross.

 Just to remind investors that there are securities listed on the JSE that enable an investor to buy what in effect is the value of various market indices. Not just South African indices like the Top 40 or the Resources 20 but also the US, UK, Japanese and European market overall indices. These last are converted to and priced in rands so one gets the double exposure (not always welcome) to a combination of a market move and a currency shift. For some reason the USA one has been particularly popular recently. Buyers are hoping for a simultaneous stronger rand and an improving US share market.

Next week hopefully we can open Tidemarks with the sports section. Today we can do no more than panic and trust that Heyneke Meyer and the lads do the business against the All Blacks tomorrow morning.

James Greener

Friday the Thirteenth

While I am slowly extracting myself from the sharp end of the stock broking business, my fascination about how hard it is consistently to buy cheap and sell expensive will keep me reading and writing for a long time still. “Tidemarks” is a more or less weekly result of that self-indulgence.

Quiet neat really. If the voters are complaining that they can't borrow any money because the records show that they didn't pay back the last amount they borrowed simply tell the banks to erase the records. Happy voters. The numbers here are alarming. 9.5 m consumers currently are having problems with their debts but 1.6 m would be eligible for having. Heir records erased.

At an average price of Rr355 a liter (R.   266 aA bottle) its little wonder mthat the recent Nederburg auction was deemed a success

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It  is notable that the taxman cheerfully accepts that the revenue legislation in t his country is fiendishly complex by insisting that anyone offering tax advice services must belong to a recognized professional  body. Why not just simplify the tax codes so that taxpayers can easily do their own?

SURELY WE ARE IMPORTANT

Just hang on a minute. Can this be real? The BRICS have set up a $100bn currency stabilisation fund (i.e. a buyer of last resort) and little old us have pledged $5bn towards it. Leaving aside the near hopelessness of  trying to take on global currency markets, what is going to be  the local public reaction when this news becomes more widely known? How long will it be before that amount gets expressed in numbers of houses for the homeless, school books for the unlearned or even fuel for the air force?  What actual benefits excepting foreign travel opportunities for politicians do we receive from pretending that we can play in this league? Rather tellingly the Economist newspaper’s recent articles about the BRICS never even mentioned us as members.

Similarly the news that President Zuma jetted off to Russia for the G20 meeting promising that he was going to tell them to do something about emerging market currency volatility is a tad embarrassing. Despite his undoubted bulk and presence I doubt anyone there is going to pay much attention. Much more concerning for delegates there, is the division of the globe into two camps on the topic of whether to do anything about Syria and if so, what. The woes of the rand are trivial compared to that.

Because the last one was asked quietly to leave, the nation is now seeking a new commissioner for the South African Revenue Service. Interestingly the job advertisement nowhere mentions explicitly that experience and qualification in tax, accounting or finance would be useful. Competence in leveraging diversity is required. Whatever does that mean? An interesting aside to emerge from the land ownership audit is that it is not possible to provide a breakdown of ownership by race because the home affairs data base no longer carries such a classification. So how then is it possible to calculate BEE scores and all the other insulting racist categorisations we voted to remove 20 years ago?

One of the few certainties of SA is that wherever you go it is possible to find a Castle lager, usually chilled to perfection. And yet the bureaucrats over at the competition commission are still convinced that there is something not right with SAB’s distribution system and want to dismantle it. In fact rather than condemn it perhaps they should be employing its undoubted strengths and efficiencies to distribute school books, social grants and other government services that government officials seem unable to organise.

It’s always fun when market prices set a new high. This week saw a 100million euro fee paid to transfer a soccer player named Gareth Bale from one club to another. A good chunk of that fee should quickly be recovered by his new club selling replicas of his numbered team shirt to fans. It is reported that the fellow himself will be paid in the region of R400 a second whether he is on the field hoofing a ball, asleep in bed or hoisting a pint down at the pub. This contrasts starkly with the report about a league for young children in Ontario which, in the interest of safety, now plays “ball less” soccer. The kids need to imagine where the ball might be and race after it. Seriously?

I do hope the ‘bokke in Brisbane tomorrow know exactly where the ball is at all times by hanging on to it and carrying it over the try line several times. Despite on paper having a really good side and a bench packed with superb replacements this trip down under is still very worrying.

James Greener

6^th September 2013

STATUES OF LIMITATIONS

 Minister Rob Davies has been very busy these last few months alarming as many people as possible with his severely misplaced policies and views. Before even the recent public expression of delight at the weakening rand he had been annoying our very important European investment and trading partners with threats to rewrite the treaties unilaterally. Despite spending this week apparently running around backtracking and putting out fires it is clear that there are now considerably more sellers of rands than buyers. The currency has been dribbling away steadily and its difficulties are the dominant theme for local investors. Inflation is chugging steadily upwards and the chances of Governor Marcus and her team ever cutting the repo rate have now all but evaporated.

With the notable exceptions of Rainbow Chickens and Impala Platinum most companies reporting this week were coming in with growth around 15%. This is both quite acceptable and also far ahead of the country as a whole where second quarter GDP growth was reported at 3%.  Nonetheless the All Share seems to have shelved its plan to keep on climbing and the markets have gone a little quiet.

The unspeakably tragic conflagration that is blazing ever more strongly at the eastern end of the Mediterranean Sea is now also being offered as a cause for the bull’s slight slow down in global stock markets. Even our own recently capped Honorary Doctor Jacob Zuma seems to have found the time to notice that things have turned nasty there and offered some advice on what to do.

So the ENatis database of drivers and vehicles is flawed and nearly useless? I'll bet it is. The only halfway reasonable records will relate to those of us who have been brought up to respect and obey authority, to fill in forms diligently and accurately and who have stayed at the same address for years and years. Unfortunately for us it is in our culture to do these things and that is as good as having a bull’s eye tattooed on our forehead and wearing a T-shirt bearing the message: “Taxpayer”

There may not have been a sardine run here in the kingdom this year, but there is a rash of statues for people to gaze upon. A double life-size image of reigning King Goodwill Zwelithini has been completed and awaits positioning and unveiling. The Zululand district mayor feels sure that she will find a place in Ulundi "where visitors will see it and where it (will) inspire tourists to stop and appreciate it.” The problem is that earlier this week another statue was unveiled in the town. Apparently the same authorities decided that a sculpture of local politician Mangosuthu Buthelezi to mark his 85th birthday would also be money well spent. Reportedly there are already several other statues of assorted worthies dotted around the town, so sites are getting scarce. At the new Durban airport, however, a location for the also newly completed replacement statue of Goodwill’s great grandfather, Shaka, is ready and waiting. The original art work placed there when the airport opened a few years ago was condemned and dragged away. Apparently it failed to convey the man’s warrior-like spirit. I hope the new image doesn’t scare the tourists.

The ‘bokke didn’t look too clever in their second outing against the Pumas at home  and the Wallabies and All Blacks are looking daunting again. I expect warm words of thanks from the chaps at the bowling club tonight for the lesson the Lions gave last week on how to deal with the Blue Bulls. Their team, the Sharks, have been battling to look convincing so far this Currie Cup.

James Greener

30^th August 2013

WILL CHINA REMEMBER US?

Browsing through the charts and numbers this week, one gets the feel of something is stirring. Among the more impressive movers are those depicting the weakness of the rand and local bond market. Both have taken a hammering and one could conclude that foreigners are departing from the latter The JSE All Share, on the other hand seems to have calmed down at the 43000 point level where, in contrast to many developed markets, it is exploring all time highs. It is also the sole member of the BRICS club with a market that is up for the year to date. There has been some sort of BRICS knees-up on our wintry shores this week, with photo opportunities and appropriately themed catered events all round. Now at least India and Brazil are each suffering similar difficulties to us with their currencies. So it is not certain, when the talking began behind closed doors, just who was shaking the biggest slotted tin and offering the brightest buttonhole. Our guys might have been quite startled to learn that joint means every one putting up the money when called upon.

Meanwhile anyone who thinks that international economics and finance is boring should take a look at the delightful squabble that has broken out about whether or not China is in trouble and if so what it means to the rest of us. The starting point for the full enjoyment of this spectacle is to realise that just about all economic data is imperfect, massaged and misleading. The Chinese (like much of the rest of the world) are keen to focus everyone’s attention only on the numbers which tell the better story. Anyone reaching a conclusion drawn from their interpretation of the data is in the end standing on the same very shaky foundation as their opponent. Each claims that specialist local knowledge bolsters their position. However it is rare for any particularly dogmatic and eye-catching forecast to survive the onslaught of subsequent data releases – especially when they are accompanied by substantial revisions to what has come before. If treated properly it is high comedy but makes share selection tricky.

The promise to hold a land ownership audit sadly reveals that we are still not in the position where the nation’s existing land registries can provide that sort of data at the click of a mouse. And as Hernando de Soto, the Peruvian economist notes, people with title, even to the meanest plot on which their shack stands, can borrow money and upgrade their homes. That way lies growth and job creation. Just think what 20 million new DIY market entrants could do.

A special local weather pattern announces itself with a steady and large fall in the barometer accompanied by unseasonable heat throughout the day. Then, suddenly after a brief spell of utter calm at about the time of the first beer of the evening, a ferocious wind squall blasts through from the south west, scattering the prematurely deployed garden furniture and slamming doors left open. The phenomenon is known as a Busta and that's pretty apt. It also strikes me as a fair model for what might be happening in the share market. Does anyone else feel the calm?

Even if tennis star Maria Sharapova fails in her wonderfully cunning stunt to take on the name of her newly launched confectionary brand for the duration of the US Open, already the publicity has been magnificent. Which man on this planet is not keen to unwrap a Sugarpova and pop the red kissing lips themed sweetie into his mouth?

The Lions are going about reclaiming the Currie Cup the very hard way aren’t they. While the ‘bokke are raising what I trust are not inflated hopes.

James Greener

The start of my August long weekend.