The 8% lost by the JSE All Share index is
a good start and already there are some who are impatient to be buying again.
Be wary though. This bear is probably not nearly finished with us yet. For the
JSE market to return to the sort of valuation levels last observed in 2008 or
even 2003, the All Share needs to shed at least a further 30% or so, which
would take the index to below 35 000. Bears with longer memories can dredge up
even harsher events. The market collapse in the mid 1960s took more than a
decade to regain the former levels. That these days the markets are so very
different is true but not, of course, a guarantee that the unthinkable could
not reoccur.
The US Federal Reserve's program of
injecting freshly minted cash into the American economy is drawing to a close.
Those who managed to reap the biggest benefits from this process (principally
the banks) are naturally downcast. However, the individual consumer in the
shopping mall and worker in the office or factory hasn’t enjoyed anywhere near
all the upside that the keen promoters of this program had predicted. Wal-Mart,
that nation’s biggest employer and shopping chain with a turnover that rivals
the SA GDP, was this week busy curtailing employee benefits. The technology revolution
is conferring prosperity on far fewer people than expected and for most of the
planet, living standards are not improving as the politicians and their
economic advisors promised. The declining oil price is a very interesting
development, which draws attention to the falling demand for many commodities
and the resulting price weaknesses. This isn’t at all what was supposed to
happen. Expect more and more strident cries for governments to do something. Unfortunately
they probably will.
A group of concerned South Africans feel that
Number One is doing a really good job and ought not to be pestered with mundane
and trivial issues like arranging payment for the multimillion Rand upgrades to
his personal home. Accordingly they are going to make the payment for him. National
Treasury must be delighted by this news. Firstly, if the muttering of the
uncharitable curmudgeons is true, then a possible source of this largesse could
be from the earlier overpayments by the state to gravy train passengers. Secondly,
monetary gifts to JZ, or indeed anybody, in excess of R100 000 per annum will
attract donations tax at a rate of 20%. The national revenue fund is a winner
twice over.
A number of people, including deputy
president Ramaphosa, who really should know better, have been talking about
starting a “State Bank” which will finance projects and people that they, the
politicians, think are worthy causes. This is necessary, they say, because the
usual lenders, the banks, are reluctant to take on clients selected by
politicians in search of a vote. Most of us, including even the fabulously
wealthy deputy president have a preference for getting our money back and we
are perfectly entitled not to share his view of who or what represents a worthy
cause and a good credit risk. Therefore in order to fund itself before lending
to its clients, the proposed State Bank will probably have to resort to
extracting money with menaces (i.e. taxation). The major benefit of this
technique is that it complexly removes all the messy business of managing a
liability portfolio and the obligation to pay anything back to depositors and
share and bond holders.
It's just as well I ignored medical
advice and watched the bokke beat the All Blacks last weekend. The result of
that glorious game was undoubtedly superior medicine. As usual the forthcoming
final weekend of scheduled Currie Cup games is always prefaced with a blizzard
of conditional clauses. Only those skilled in logic can detail the conditions
precedent for a Sharks home semi-final. I think they should have just simply
lost fewer games earlier in the competition.
James Greener
Friday 10th October 2014.
