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