THE BEAUTIFUL SHAME

The All Share index performance in May is going to come out around -3%. This is not good news.  The bear is definitely stirring. Only the really brave or very well informed are going to claim that this drop in share prices is exposing bargains. Company presentations to investors are full of hand waving and hyperbolic spin avoiding the bad numbers in the penultimate slide. Even Statistician-general (what a grand title) Lehola could not find any lipstick that would stay on the 1.5% GDP growth pig. The daily trading ranges of prices in the rand and bond markets are particularly wide. This is a sign of confusion and indecision as speculators try to profit from intraday volatility rather than ride longer term trends. Winter may have arrived here at last.

One of the big market stories of the moment is that the regulators are pretty sure they can smell the stench of traders fixing prices in the foreign exchange markets. Indeed every now and then one of their quarry breaks cover and proffers money in exchange for being left alone. For some reason these payments are not expressly referred to as fines or admission of guilt forfeits but pretty much that is exactly what they are.

The thing about trying to manipulate markets is that your competition usually detects it long before the regulators do. And the nature of the game is that they will seek a way to exploit that suspicion and to profit from it before it gets truly exposed and blows up or is shut down. The real “crime” in these affairs is usually the reluctance of the mangers and supervisors to delve too deeply too soon into why a particular trading desk is doing so incredibly well. Some traders are just very good – for a while. But inevitably the gaps and profits will get too wide and too high to conceal and then, as the saying goes: “The money runs out before the paper runs out”. And then the compliance crews arrive and concoct another round of controls to make it ever harder to buy cheap and sell expensive and in due course this industry too will get regulated to death on the grounds of “safety and fairness.” But life is neither of these things.

The high pitched whirring noise that started a few days ago has a number of sources. Firstly it’s the spinning of a web of total nonsense about why the taxpayers should pay for a great many improvements and features at Number 1’s private home. Then it’s the din of paper shredders and track covering devices at the homes and offices of anyone involved in securing the 2010 Soccer World Cup for South Africa. And finally there’s the giggling waffle from President Zuma himself as he sugar-coats the latest set of dreadful economic numbers.

Actually the one encouraging item that we can take from the terrier-like display by the US lawyers on FIFA’s case, is the report that no way could be found to extract the USD10m bribe money from the National Treasury and it had to be redirected from FIFA’s own funds. The sad thing is the astonishing similarity of denial and innocence displayed by presidents Sceptic Blather of FIFA and JZ of South Africa. Assuredly both are fully aware of and implicated in their respective pits of corruption and malfeasance and both are displaying that same impeccable mien of puzzlement and hurt.

In the next few days a man will fly a flimsy but huge plane across the Pacific. The aircraft carries no fuel and the flight could last 5 days.  It is powered entirely by electricity stored in batteries and charged by sunlight collected by photo voltaic panels draped along the wings.  Clearly there is a critical balance of sunlight, battery capacity and sleep deprivation. Rather similar to South Africans coping with load shedding. It’s a wonderful project that celebrates and demonstrates human ingenuity and skill. Quite unlike government activity in South Africa.

Early on Sunday morning the biannual migration of Comrades runners from Durban will take place. Almost as momentous will be departure of Bismarck and Jannie (du Plessis) from the Sharks. It’s going to get rather emotional and damp eyed at Kings Park these next couple of weeks.

James Greener

British National Biscuit Day (how could one not mention this?)

ANOTHER CUP OF TEA GOVERNOR?

It’s obviously been a tough month for many people. Beverages, tobacco and pharmaceutical shares have been amongst the better performers in the last few weeks. Investors would appear to be banking on demands for seeking chemical help. With the unbundling by Billiton of a number of assets into a new listed entity named South 32, there is now no mining share in the top three on the JSE ranked by market cap. Naspers joins SAB and British American Tobacco on the podium. These are historic and significant events in the commercial development of our country. Sad too.

Fanatical equity bulls will not be impressed with the news that actually in the past 12 months the level of the All Share index has more or less been matched by the price of Krugerrands. Only the dividend flows has distinguished shares as the better asset since this time last year. And here we were thinking we were still enjoying a bull market. Be careful out there, it’s getting very slippery.

A few weeks ago when the government’s fiscal year-end numbers were announced, there was a modicum of back slapping and self congratulation about how well they were doing. It is indeed true that the figures reveal that government income (from tax and such like) is growing at a rate just over 10% pa, compared to expenditure growth of 8%pa. In the highly unlikely situation that these trajectories were maintained it would take about half a dozen years to reach a balanced budget. However, the state is now spending just over R3bn per day, half a billion of which is not covered by income and needs to be borrowed. This must be a powerful incentive for National Treasury to make the occasional call to the Reserve Bank to urge them not to be in a hurry to raise interest rates. And so apart from the demolition of several packets of Romany Creams the Monetary Policy Committee left the repo rate untouched at their meeting this week.  Governor Kganyago did ramble on with the obligatory jargon about risks and stances and hinted that if (when?) Eskom get permission to punish us with another huge increase in the price of electricity then that  might also be a good time to increase the cost of credit.

The Department of Home Affairs has launched a “premium” centre for senior executives to apply for visas and permits. Apparently available only in Sandton, the application process takes no more than 10 minutes and the wait for the visa or permit has been slashed to only four months! Apparently junior executives have to wait eight months or more. How our bureaucrats distinguish between senior and junior is not explained although presumably money comes into it. Outrageous. Do they do this stuff by hand in the dark? Oh wait yes perhaps they do.

Once again waves of foolishness washed across our country.  A very expensive permit is required to fly a model aeroplane but only if it’s called a drone. If you lie to the government about your qualifications when applying for a job you can be put in prison. A soccer boss was made the mayor of a city who never voted for him but claims that he can do both tasks without any detriment to either. Our totally insolvent national airline pledges to spend money it doesn’t have on buying stuff from companies that don’t sell it. And Durban was in turn embarrassed when it failed to provide a blue light escort for a VIP and delighted when a far more famous overweight hotel cat returned after an unexplained short absence. Africa is not for sissies or for those without a sense of humour.

I rather hoped to be able to boast that this edition of tidemarks was being composed on the after deck of the yacht moored in Monte Carlo harbour overlooking the Formula 1 practice sessions. However, the weather in Monaco is too rainy to be outside and anyway I’m still in Durban fuming over Eskom’s “ideological path” which shed my load and prevented me from watching a rare Sharks victory this afternoon

James Greener

Friday 22^nd May 2015

ALLOWING FOR INTELLIGENCE

Some figures released recently highlighted the very disturbing growth in the number of people who work for the state. And an even greater worry is the cost of this overmanned and inefficient work force. But deep in the list of civil servants there is a post which at first sounds likes the easiest job in the world. Parliament is advertising for someone to fill the vacancy of Inspector General of Intelligence. In fact it is a re-advertisement, because obviously no one has yet applied, believing this to be a joke. Closer reading however, reveals that the successful candidate will not spend their days searching the corridors of power for signs of sentient life. Rather he or she will be the South African equivalent of “M” the fictional British spy boss. There is a very high possibility that M will figure among the initials of the appointee – so that’s all good then.

It feels as if our poor nation is suffering another big upward leap in the level of socialist stupidity and obstinacy. This week a full-colour four page pamphlet has been published by the Department of Labour. In poorly written and seemingly unedited bureaucratic jargon it boasts  about the Department’s achievements in hampering any employer who might be so bold as to create and offer a job. It lists the numerous Acts, Boards, Institutes and Commissions that have been created to regulate, advise and punish the already worst performing market in South Africa.  It is a very disturbing document.

Next the government has said it intends to investigate if there is fairness in the retail sector. Don’t those clowns ever go shopping themselves? Not even natural selection is as pitiless as a consumer when it comes to boycotting and trashing a retailer they believe is ripping them off. There’s no need for a government, who on present evidence runs nothing at all either well or fairly, to spend our money to find this out.

But the most foolish piece of state-sponsored nonsense must surely be the 2015 Student Spending Report which revealed that “the average student in SA continues to prioritise instant gratification over saving”! Well how about that? Whoever commissioned this asinine research needs to be fired. Unless of course they can show that they never went near a bar and saved all their allowances when they were a student. In which case, they need to be fired for being boring.

As matters appear to be are getting ever worse at Eskom, the internet has lit up with reports and opinions that support and pander to our prejudices and suspicions. There have been a number of commentaries about the impossibly poor arguments and figures being used by the utility to support its claim for a 25% electricity price rise which will surely deliver a killer blow to many already struggling enterprises. This is the same outfit which reportedly has apologised to Soweto to cutting off its power for 10 hours as a reminder that they have paid for only a fifth of the power they have used. Allegedly almost R100bn is owed by various entities and people for utilities and services. This is a seriously big number – well beyond the capacity of most of us to grasp and certainly too hard for our president to say. It is doubtful if any of this debt will ever get paid and so it’s little wonder that estimates of the nation’s growth and creditworthiness get pushed down.

Those large and pesky Fijians really rained on out Blitzbokke parade in Glasgow last weekend. It will take some serious heroics as well as some luck if our lads are to win the Series. In the meantime all the Sharks team can offer their fans is the faintly silly reminder that the Stormers beat the Waratahs at home. Enough said.

James Greener

Friday 15^th May 2015

RUNNING AGROUND

There was a great deal of chat and even mild panic about the sight of bond market interest rates shifting upwards quite sharply this week. It is of course inevitable that one day – perhaps even soon – people are going to spot what a bad idea it is to lend money to governments for ten or more years at very low yields. But the latest up-tick has not yet even set a high for the year and in the US the ten year rate is still a derisory (and terrifyingly low) 2.3%. Our own rate (in rands of course) is almost 600 basis points greater than this, which might not even be enough. The dip in bond prices has tempted the shares bears out for a sniff of the winter air but perhaps the largely unpredicted clear majority win in the British general election may be the cause of their hesitation going into the weekend. That election result, by the way, is another wonderful example of the perils of prediction of events which are the outcome of the behaviour of crowds. Just like the markets.

Deputy Minister Mkhize has impressive academic credentials with a raft of degrees in psychology and social work. She even uses the title Professor. However she is way out of her depth in the department of Telecommunications and Postal Service and is very hazy on what constitutes a luxury or good governance. She has described the fact that the board of the SA Post Office is totally vacant as a luxury that the nation can no longer afford. Good Call! Another luxury that we definitely do not want to afford, is the very costly royal household here in KZN whose king has discovered that the government is unconcerned with any unwise or inflammatory declarations he might choose to make. It’s time these tax eaters were used for something useful, like sorting and delivering letters.

News from Durban is that the runaway Russian satellite named Progress 59 streaked through the sky just offshore in the early hours of this morning. Sadly this stricken craft made no progress at all with the task of taking 3 tons of supplies to the International Space Station and has now incinerated somewhere above the Pacific. However, the crew of the space station are now in much the same position as South Africa’s citizens – awaiting more progress to deliver the goodies.

Good news though is that the port people have thoughtfully placed a red buoy on the shallow sand bar which has formed in the mouth of the harbour. A few ships have “bottomed out” but apparently the port has exceeded its dredging targets for the year (really?) and in any case the dredger is out of order awaiting a part from Europe. Hopefully it’s not in the post.

The faintly hysterical report about the R12.5bn “cash injection” to be administered by government into SANRAL’s tender rump needs to be compared to the R56bn that the state will be collecting this year from the fuel levy. It is high-time that levy was ring-fenced for sole use on road construction and maintenance and not used to buy Mercs for queens.

The Sharks CEO, John Smit, has written an open letter urging patience and loyalty. The response from fans has been a call for entertaining and winning rugby preferably with rising local talent.  At last the Grand Prix season has moved to the familiar European circuits and Sunday 2pm start time. That the incidents always happen when you nip out to fetch a beer or turn the boerie on the braai is part of the tradition.

James Greener

Friday 8^th May 2015