THE REAL NATURE OF TAX

As the reporting season for December year-end companies draws to a close, those firms who have postponed revealing that things have been rather tough for them are mumbling quietly and publishing the smallest possible so-called short-form announcements. While this could be a reason for the All Share index postponing another attack on the 41 000 level, undoubtedly the rash of public holidays is diverting attention from the markets.

As feared, the roads here in Durban have become infested with cavalcades of BRICS bigwigs. Suppliers of blue lights and sirens are enjoying a bumper season. One convoy I counted had 28 vehicles speeding through the traffic lights. He or she must have been really late for breakfast.

An interesting lesson in market values has been delivered by this conference. During both the World Cup three years ago and the continental kick-about last month, when there were matches here in Durban, a war ship (sometimes even a submarine) would appear in the bay protecting the players and fans. Just what threat was expected from offshore was never explained but clearly someone was nervous about having so many highly priced hoofers of the round ball playing so close to the shore. So far, however, the BRICS leaders and their entourages have merited not even a man with a big stick in a leaky rowboat out there in the briny. Just shows what value we attach to those guys and girls. Or is it just that we don’t have any spare warships right now?

Most of the proceedings of the BRICS knees-up are far too dreary to follow but the subject of forming a development bank is interesting. Where on earth would SA come up with a capital contribution in line with our “partners” in such a venture? The old story of using one horse and one rabbit when making horse and rabbit stew comes to mind. In this case it would be one horse, three asses and a gerbil. Obviously we see ourselves as the borrower in this plan, not the lender.

It’s also pretty hard to understand the Cyprus saga other than getting the idea that yet again there’s a situation developing which could hasten the end of the euro currency. The breathtaking aspect of it all is that nation’s leaders who were responsible for steering the ship right onto well-charted rocks are now confident that they are the only ones capable of getting it off before she sinks. The captains surged up into the crow’s nest and scanned their island for someone else’s loot with which to plug the hole. They quickly spotted the large cash balances lying in the country’s banks and set about deciding how to steal it without actually using that word. Allegedly much of the money they are eyeing may already be stolen as it was deposited by large men with strange accents using dodgy documents. Seemingly this may render the proposed “tax” more acceptable! However, guiltless Cypriots whose savings accounts would also be targeted for the nation’s “bail-out” were not keen on the idea and everything is being rethought. The seed, however, has been planted and bureaucrats, finance ministries and venal administrations world- wide are getting a glint in their eye and thumbing through their own banking records.

It is likely that the US stock market is benefiting from inflows of money from European citizens throughout the continent worried about how this may all turn out. The gold price is probably also healthier as a result.

As the Sharks’ try drought intensified I received requests to reconsider my decision to support them while the Lions suffer their undeserved relegation.  Last Saturday when I was unable to get near a TV and shout for the black and whites, that drought was well and truly broken. I expect this utter coincidence may nevertheless strengthen the cause of my detractors.

Please enjoy a mellow and safe Easter weekend

James Greener

Maundy Thursday 2013

RELUCTANTLY HIBERNATING BEAR

There is absolutely no sign anywhere that investors have the slightest doubt that they want to own shares and are prepared to keep paying more and more to do so. While company fortunes and profits are mostly improving they are certainly not doing so at the rate at which their valuations are increasing and the elastic is getting very stretched. Us bears are cowering behind our spreadsheets waiting for the huge twang we think should happen. These are difficult times to be dubious about the market.

A quite delightful scrap is developing in England about where to re-bury the recently discovered bones of one of their previous kings. For several hundred years he has lain beneath a car park in Leicester. Surprisingly no beaming car guard has pitched up to claim a tip for ensuring that he was safe all this time although his horse was definitely missing and may have been nicked.

The auditor general’s report about how few state-owned and operated entities have a fair grasp of how to run their money is alarming. Equally disturbing is the fact that there are 536 of these organisations. Presumably each one of them has an executive team of worthies all of whom require a corner office, fancy wheels, fact-finding jaunts and programs to launch with appropriate catering arrangements. One of these organisations is a newish government department that claims that their job is “to make the(ir) lives (of former soldiers) much better  after they have ended their careers as ‘soldiers’ rather than force them to choose a life of being dogs of war and missionaries (sic)….” This does nothing to indicate what that department intends to do with the R300m it was granted in the budget. It reckons its beneficiary client base of military veterans could be as many as 56 000 although over at the social grants department the claimants in this category are numbered in hundreds. The sole idea published so far is to erect monuments to those who sadly never got to be veterans.

 It seems that the rooms where they store the firearm licences are these days so rat infested that no one wants to work there. Now all we have to do is to get those rats over to the tax collector’s offices. Maybe we can send some of the ex-servicemen along to shoot a few. Rats that is.

For reasons of demographics and a paucity of taxpayers the central government hand-out to the kingdom was far less than hoped for and cost saving measures are being discussed. The one that grabbed the biggest headline locally was the suggestion that councillors should give up drinking bottled water and, like their constituents, rely on what comes out of the tap. While they are about it how about using public transport to travel to work, use public schools and hospitals, cancel their security contracts and put their retirement funds into only local bonds, shares and property. That is, they ought to lead the way by showing that the services they provide and organise are quite capable of supporting everyone’s needs and aspirations.

The yellow-billed kites have departed, the red-winged starlings are calling ceaselessly and the F1 season is about to start. These are sure signs that autumn has arrived. Another is that we are about to enjoy a succession of holidays that tend to develop into 3 day weeks. Productivity gets a hammering. It is unlikely that there will be a “Tidemarks” next week.

James Greener

Ides of March 2013

IS THERE A REASON FOR EVERYTHING?

The story goes that the US and the UK governments’ are creating fresh money (instead of borrowing it) to pay their bills and salaries, and that some of that extra cash is appearing in the share markets where it is driving up prices. This is offered as a reason why our share prices are going up.  There is also a story going around explaining why everyone is selling gold bullion (in both the metal and the ETF form). Apparently the global situation is not as uncertain as it was before. Really?

The poor old runt is getting mauled. No one seems to need or want even the shiny new Mandela notes and so it is collapsing in value relative to the US dollar and even the euro. Presumably these two currencies are the principal ones used by foreign investors, who, it is alleged, have been scared off from SA by our recent outstanding examples of inept government. 

Because of the collapsing currency, the magnitude of the disaffection with bullion has been muted here in SA and both Krugerrands and NewGold are not that far off their all-time highs. The real reason for any market price moves is probably unknowable as they are the outcome of millions of individual decisions, some of which may indeed have a foundation in the phenomena and sentiments mentioned. Personally I am too convinced of the veniality and corruption of governments to not own some gold as insurance. As far as share prices are concerned, the investment decision as always remains trying to estimate whether the likely future cash flows of income and possible sale proceeds are sufficient to warrant the purchase at the current price. Undoubtedly the many of the shares on the JSE today fail that criterion.

It is results season again and of the two dozen or so reports released this week only three might be classified as disappointing. Despite the rafts of regulation and state interference, most of corporate SA seems to be moving along OK. Unfortunately this is not being converted into jobs as it would seem that installing machines is preferable to dealing with staff who are told by self-serving union officials that their labour is worth more than it is. The nation really is in a sorry space at the moment in this regard but still no one in charge seems able to spot the correlation with increasing the rules and regulations. In this industry, the fairly effective method of “know your client” is being supplanted by a blizzard of box ticking and paper trails which frankly still doesn’t seem to catch the determined crooks either. SA seems to have a particular weakness for Ponzi schemes and it is astonishing how large they can grow before the regulators look up from their paper shuffling long enough to spot them.

Among the most important announcements of the week is that Tiger Brands has acquired Mrs Balls Chutney business from Unilever. South Africans worldwide will be pleased that ownership of their favourite relish has been wrested away from a foreigner and is now home again. No word yet on whether Tiger Brands will move its head office to KingWilliamstown to complete the circle.

Apparently the great and good from the BRICS nations are pitching up soon here on the edge of the Indian Ocean for a spot of surfing, game viewing, and sluicing and browsing between bouts of chin wag. Press reports warn that ratepayers are looking at a sizable bill for the privilege of avoiding convoys of wailing blue-light flashing cars speeding through the city. Surely if the countries concerned feel these meetings are worth attending they should be picking up the bar bills that their delegates will run up. Our own mob can use the train to come down from Pretoria and bring packed lunches from home. I hope someone warns the supplicants and salesmen at each traffic light cluster that they are about to get tidied away.

So this weekend we get to se if the Kings really are rugby side or merely a collection of  mercenaries gathered under a flag of convenience in the company of a man who would rather puke on than wear the national jersey.

James Greener

8^th March 2013

COUNTING THE PENNIES

The bears were just about to start celebrating their prescience as the All Share looked set to plunge through 39 000 without pause, when suddenly, with the start of a new month, everything is alright again. The index is 1000 points up and the furry ones are left to wonder what is going on.

Despite being a short month, February certainly delivered a lot to think about. The All Share total return was a dismal -2% but that was due almost entirely to all the mining sectors taking a severe hammering. Banks were lousy as well and the grandly named Fixed-Line index (just Telkom in disguise) destroyed more than 8% of shareholder wealth. With a few exceptions the industrials board had a good month. Are they taking a cue from the US numbers which are starting to show that nation climbing out of recession?

Numbers geeks have had plenty to play with. Principally of course was the Budget, which is a lot more than a speech for the parliamentarians to sleep through. Behind the words are several telephone-book sized documents stuffed with figures. Also there was the quarterly release of GDP data which spawns half a dozen schedules crammed with numbers. And just recently was the monthly trade data, not to mention the various inflation figures (one of which has been delayed for the astonishing reason that Stats SA believes that the Budget will distract us from giving sufficient care and attention to their lovingly prepared statistic!)

Before going on to unpick and carp about some of the developments revealed in this avalanche of data and promises, it is worth remarking how astonishingly open, transparent and efficient this country is at publishing most of its financial data. Within seconds of Minister Pravin trotting up to the microphone, the National Treasury website opens its doors and everything is there, from the text of the entire speech to the colour pamphlets in several languages. All the data are available in friendly instantly downloadable formats for us to ferret through. It is a commendable and praiseworthy aspect of our government and grievously at odds with all the secrecy that shrouds so much else that the state feels too embarrassed to tell its citizens.

The number that has caused the greatest reaction was the trade data which confirmed that our demand for imported goods far outweighs anything we can find to sell to foreigners. This news has given the currency a hiding which will just make all fuel and fripperies we want even more costly. The GDP growth number was unsurprisingly disappointing but still no one will point out that this comes despite the ever growing heap of supervision, guidance and regulation that the largely clueless bureaucracy pile on top of the wealth and job creators. Why don’t they just try not telling people what to do and how to do it and see what happens?

The budget was welcome in that no boats were rocked except for the lefties who as we speak must be throwing darts at the minister’s picture. His virtually unavoidable slowdown in the “rob-the-rich” tactic will infuriate the socialists who insist that government will always spend money more wisely than the people who earned it.  Not only are they wrong but also annoying is their inability to grasp how few really rich folk there are compared to the numbers who believe their government owes them a living. There has been no shortage of grave analysis of the announcements to which I have little to add beyond wondering why the price of Scotch in the “duty-free” doesn’t seem to reflect the fact that the duty on a bottle is now almost R40. I also think the Minister is in cloud-cuckoo land if he thinks that because the civil servants last year agreed to multi-year wage settlements that there won’t be any fuss this strike season.

Scepticism and embarrassment are the main emotions caused by the Kings’ fine victory in the Super 15 opening match which placed them at the top of the local conference log. Disappointment follows the news that the world-beating Proteas will not have another test match for eight month. Something wrong with that calendar.

James Greener

St David’s Day 2013