THE COMPUTER SAYS SELL

The All Share index so very nearly reached 50 000 this week. It backed off with just points to spare. But it wasn’t a particularly convincing advance as it relied on the heroics of just a handful of shares which did all the work. Chief contributor was Naspers, which at a market cap of R470bn is these days the sixth largest company on the JSE. It has been a wonderful ride for the shareholders and there is really no way of forecasting where it might end as attempts to apply all the conventional valuation metrics to this company have long since been trashed. However, the fact that the advance by the index has no depth is worth noting.

There is definitely something stirring in the investment world. The US ten year bond yield plunged sharply back down to 2.5% this week. Numerous reasons have been offered for why investors feel that lending to the US government at this paper thin return is the best they can do with their money, one of which is that there has been a rash of predictions that Wall Street is on the point of collapse. No one knows, but remember to sell those speculative punts before they become unwanted long term investments.

For those who care, there are lists of the potentially market-moving events and announcements and the times when they are due. Among my favourites is the monthly US Housing Starts statistic, a surprisingly large number given that one would think that almost everyone in the US must have a home by now. To be useful it ought to be accompanied by a housing ends figure reflecting amongst other causes, those horrific tornados which demolish a house in seconds. (Why don’t they build brick houses in storm prone areas?). Anyway next week our own Reserve Bank Governor Marcus gets her few seconds of TV time when she will announce the Monetary Policy Committee decision on interest rates. Given that the majority of other recent announcements have pointed to an economy in trouble, the expectation is that she will not have much to say.

When the JSE rescinded its long-standing requirement that listed companies publish their results and notices in both an English and an Afrikaans daily newspaper, most companies happily stopped doing so. The reasons and motivation for this JSE decision deserve an article all its own, but it is interesting to see that several companies have returned to the print media. For all interested parties including even the most tech connected institutional analyst there is nothing to beat a well laid out set of financials on a newspaper page. This is a welcome development and all shareholders and analysts are surely very grateful to the companies that do so and are probably curiously suspicious of those that do not.

Maybe not as many folk as expected will accept their invitations to attend the R120m presidential inauguration bash next weekend. In this age of austerity the organizers have severely trimmed the list of thirst quenchers available to guests. Only Peroni water (what's that?), Black Label beer, Johnny Walker Black whisky and Lagavulin single malt will be available. Only South African wines will accompany the lunch and are to cost no more than R300 a bottle. No mention of Klipdrift brandy or Cane spirit for the old South Africans. It’s going to be tough especially for the 25 MPs belonging to the country’s newest political party. Their leader, Julius, has a well documented taste for the finer things in life. Although if he and his team turn up in hard hats and red overalls as they plan to do for parliament, they may be refused entry. Suddenly there’s a reason for watching the show on TV. Even the SABC couldn’t avoid filming a decent punch up. It’s hardly ever boring in South Africa.

In a further step in the deeply disturbing trend of making our possessions cleverer than we are comes the news of a smart tennis racquet which will offer analysis and criticism of your game. I can’t wait until someone fits a gizmo into Bismark’s shoulder pads which complains if he doesn’t scrum straight. Mind you, some of the refs need a pair of those smart Google glasses to help them spot a forward pass!

James Greener

16^th May 2014

“SOMEBODY BET ON THE BAY”

This time next week, weary workers are going to be willing the clock to move faster. It will be the end of the first full five-day week in ages and folk just aren’t used to that sort of strain. This week of course there was a general election and while not only was polling day a public holiday, the amount of nervous energy the event has generated has been substantial. The psephologists can now slice and dice the results endlessly – making allowance of course for the discarded ballots in favour of the opposition which have been found in a number of unlikely places. The bond and currency markets are seemingly very pleased with the way in which 18 million odd votes were cast. Interest rates have nudged down quite strongly and the rand is stronger than at any other time this year. The share market seems disinterested in political developments, however, and the All Share has lurked around the 49 000 level for almost 2 weeks now. Us bears are puzzled that the prospect of at least another five years of a communist government implementing socialist redistributive polices are not a cause for even a little concern. But the attitude seems to be: “Well what else can we do with the money?” For which, we admittedly, have scant answers.

Meanwhile, life goes on. National Treasury right on schedule released the government’s revenue and expenditure numbers for March, which closed off the nation’s fiscal year. The state is now spending R1.054 trillion per annum. Tax and other government income, however amounted to just R0.876 trillion which means that for every rand spent, 17 cents needs to be borrowed. When compared to other nations and various reference marks like the size of the economy and so on these 17 cents are apparently no big deal. But those of us with a Scottish ancestry and suspicion and fear of indebtedness are less sure. Borrowing for capital projects is fine but the government hands a great deal of its cash to indolent and unproductive people - and that’s just its employees. The case for the subsistence grants paid to 16 million of our fellow citizens is much harder to criticise, but surely there are very many fraudsters among both the recipients and the administrators of this pile of cash. This situation of course comprises an appealing status quo for very many people, which unsurprisingly is reflected in the election result. Voters are not sure if any opposition would continue with the largesse if they gained power. However, as noted already, investors world wide have been keen to come up with so many multiples of those 17 cents that the government has been able to reduce the amount of interest it will pay those lenders. It’s a funny old world.

Despite spotting the unknown transactions on my bank statement within 24 hours of the fraud, it seems that I shall have to wait “10 to 15 working days” before the money is restored to my account. The thing that amazed me during the 90 minute visit to the bank branch to report my suspicions is how little access to both information and power is granted to the local staff. They too end up calling and holding on for some distant and mysterious call centre named “Frauds” who obviously are very busy. It took some work to persuade them that despite a total absence of prior similar withdrawals I had not wielded my debit card with zeal at a casino yesterday.

 The upside of the Sharks, and of course the Lions, now playing over there is that one can sneak over to the fridge for a bottle or two of a cheering ale long before the sun makes any attempt to get over the yard arm. In other words one can open a beer at breakfast time (or shortly thereafter) Despite most of the local teams finding themselves with all sorts of problems if they wish to get to the playoffs it is still mostly great fun to watch each week as the drama unfolds. Chief downside of these early games is of course the antipodean commentators who in my entirely neutral and unbiased opinion are utterly one-eyed. Yes there is a F1 Grand Prix this weekend but the Mercedes domination is for me as underwhelming as the 1600cc motors.

Must go off to the casino oops no, bowling club now

James Greener

9^th May 2014

ICONIC INCIDENT

One of the drawbacks of being almost perpetually bearish and waiting for “a better time to buy” is that one is wrong for far longer than one is right. Even if these record setting highs are simply the climax of a huge bubble which is due to burst, just about everyone’s portfolio is currently looking smarter than ever before.

Among the many gauges, indices and benchmarks compiled by analysts attempting to condense and interpret reams of data there is a Consumer Credit Health indicator. The latest number supports the anecdotal view that citizens here in South Africa are still battling to service loans. The economy is, however, a huge and many headed beast and one can usually find news that will suit and support whatever one’s personal prejudice and position of the moment might be. Nevertheless some of the calculations which try to quantify the financial damage of the seemingly unending platinum miner’s strike are very worrying and it seems likely that the scars of this event will be deep and lasting.

The tagline on the very lengthy fine print advertisement for the positions of Chief Executive Officer and Chief Financial Officer for the SABC is that the state broadcaster is the “employer of choice”. The copywriter has omitted the words “… for just as long as it takes to negotiate a large departure bonus”. It seems that these posts carry demands and responsibilities that no normal person can fulfil and the list of people who have come and gone might rival an average voter’s roll in length. Is it the ceaseless calls from His Master Voice telling you what to do that becomes wearisome?

No sooner had the newest Mandela statue been unveiled in Cape Town than a police van managed to reverse into it and cause some damage. Many folk claim that this is a bad omen and the forthcoming election result will cause even more damage to the man’s legacy. By the way, I trust the ear of this bust has been checked for small rabbits. Remember what happened in Pretoria?

Without begrudging the celebrations to mark 20 years since the first universal franchise elections in South Africa, it must be pointed out that the country was formed in May 1910. We may therefore cut cakes, blow out candles and sing happy 104^th birthday only at the end of this month.

 Governments around the world are delighted to have been handed something that they can tax while claiming that it is all in a good cause. National Treasury have reportedly arrived at a figure of R120 per ton for a tax on emitted carbon dioxide. Anyone familiar with Avogadro and his number can probably swiftly calculate how many kilos of this terrible noxious compound each of us exhales per day. Especially after strenuous exercise the total could soon grow quite large.  Presumably, like eToll invoices, the carbon dioxide emission tax bills will one day pitch up in the letter box. What if we refuse to pay? Certainly the windbag motor-mouth politicians will quickly arrange exemptions for themselves.

Only the truly keen will have waded through the lengthy description of the proposed Super 18 format that may be coming in a year or so. With more conferences than an ANC caucus, it looks at first glance to be fiendishly involved.  In my view the increase in the number of teams, players and matches will cause a dilution of the concept that the Series is a prestige and premier event envied by all the excluded nations. If this question were on Wednesday’s ballot paper I would vote to return to a Super 12 format which would be completed before the winter Tests start.

James Greener

2^nd May 2014