THE CADRES MARATHON

The new cabinet are about to traipse off to a lekgotla. This appears to be an ethnic term for an upmarket “off-site”. It will undoubtedly be a source of screeds of socialist solutions. Now the principal beneficiaries of an off-site are the hospitality, motivational and training industries. I hope that they regularly remember and revere whoever it was that first thought it would be a good idea to take the staff away from the distractions of coping with customers and clients to a restrained yet hopefully decadent location for anything between an hour and a week. Threats of excitements such as team building, brain storming, staff training and break-out sessions (my personal favourite) will be made. Naturally the actual reason that anyone attends these things is the promise of opportunities for feeding, drinking and flirting at someone else’s expense. Attendees of an offsite at best hope to return to the office with no more than a shred of dignity and with luck, juicy gossip about someone else. Any work-related outcomes are swiftly ignored. For all our sakes lets hope this lekgotla will be on form.

Next week the first quarter GDP growth numbers will be published. People who are likely to have had a sneak preview are warning that they will confirm what most of us already feel. “Things ain’t like they used to be.” Commentators will wring their hands and wail. But then just two days later the Reserve Bank will announce their interest rate decision, which seems likely to be a further cut. Cue shouts of joy from same commentators. It is all as hard to keep track of as the IPL tournament.

 Pretty well anyone with a view on the market and the economy here on the southern tip seems to believe that the worst is surely over. The All Share index appears to feel comfortable above 22 000. One harbinger of economic recovery that even I can agree with is that the yield curve has recently turned normal and quite steeply so. Can it really be that the decline of the USA as the world’s leading engine of growth will have so little lasting effect on the rest of us? The USD is showing signs of resuming what I believe is an inevitable and long  weakening phase.

My fears that the tax consumers would respond to declining incomes by increasing tax rates are coming true. Tariffs are being adjusted upwards everywhere. The electricity supplier has come up with 34% as a nice price increase to be going on with and metropolitan councils are entering into budget season with a warm calculator and the “rich” suburbs in focus. In the meantime, workers, a class of people who are not in line for R1m sports cars as a thank you present for doing their job (correctly and laudably declined by the politician in question – are you watching in Westminster?) are getting restive. They have little interest in letting the new government have a 100 day warm up period. Strikes are becoming common. Lots of things are going to be made ungovernable.  The struggle continues.

I think that winter may have reached Port Natal. I saw a fellow wearing a jersey, but on the other hand he was still in shorts. No one down here has yet openly declared any support for the Loftus home side tomorrow. It seems they are all still smarting about last week’s loss. And then a whole lot of comrades are going to take part in the annual ritual of protesting the dire state of intercity transport in KZN by running from one to the other. Once again my invitation to watch the Monaco GP from the poop deck of a gin palace failed to arrive, so on Sunday it will just be a cold Castle in front of the TV. Actually that’s great too.

James Greener

22^nd May 2009.

JOBS FOR PALS (AND THEIR PALS ALSO)

It has been decided in the US and in Europe that citizens need to spend themselves out of recession and to borrow their way out of debt. Their governments will lead the way in this endeavour by spending and borrowing lots more than anyone else. The thesis is that this program will gain momentum and accelerate to the stage where sufficient real actual wealth will be created to discharge the debts and absorb the new money that has been minted.  Scouts have been posted to signal the appearance of so-called green shoots of recovery that are confidently expected to result from this clever plan. So far they have reported house prices falling slower than before, fewer people losing their jobs and discount stores reporting higher revenues. Dead and falling leaves are ignored. Thanks to the generosity of the taxpayers, bankers have received bonuses and car manufacturers have staved off bankruptcy for at least a month. Even the stock market is perky.

However, numbers released this week suggest that the US government will, over the next few years, spend twice as much money as they expect to collect through tax. They will borrow the difference. And it is a very very big difference. Long bond rates world wide (including here) are tending upwards as lenders edge for the exits. What happens if they disappear altogether? Then watch for the best stunt of all. The government instructs the central bank to print more cash in return for hurriedly scribbled IOUs. Where is the large notice warning that these tricks could be bad for your wealth and ought not to be tried at home?

A kind reader alerted me to the fact that our new government has immediately tackled the matter of job creation. The hugely enlarged cabinet will provide gainful employment for dozens of folk who would otherwise battle to find work. Already busy and happy office furniture suppliers are preparing workplaces for all these newcomers and their staff and families. The gleaming new laptops are set to link immediately to the webpage detailing the methods revealed by the British politicians for fiddling expenses claims. It is rumoured that moats are already being dug around several homes in some of Pretoria’s leafier suburbs.

 Governor Mboweni has been wagging his finger at the local banks for lending money at 12% when the repo rate is just 8.5%. This spread, he implies, is too wide, and presumably therefore too profitable. The banks tap into the Reserve Bank’s repo facility only as a last resort and always first try to raise most of their cash requirements at even lower interest rates from you and me. Their profitability is perhaps therefore much greater than he suspects. The market has clearly failed to appreciate this great piece of financial analysis and bank shares are priced quite modestly. Alternatively, investors are alarmed at the Governor’s grumbles and wonder if he is about to offer some less than friendly advice about how banks should run their businesses. After all, elsewhere in the world governments are getting really involved in their banking industries and we would not like to be seen as laggards in following international trends. However, this threat does not yet deter those brave foreigners who are fleeing their own near zero yields to send their money south for the summer. The rand remains pretty robust.

The kingdom is buzzing this week with debate about the strategy for the encounter with the Bulls. Unless they wish to be treated with the same suspicions about match fixing that has made the IPL suddenly so forgettable, local rugby will be best served if the Sharks win. After all aren’t two away semi-finals better than a single one at home?

James Greener

15^th May 2009

THE TSHWANE SHINDIG – NOT ANOTHER IPL TEAM

The market has celebrated its first full length working week in ages by dragging itself back to levels that were ruling at the beginning of the year. There is a growing belief that the first quarter plunge was just a nasty moment and that the bear has been sent packing. The JSE is now about 20% above the low point that was attained at that time. In fact, our excursion to what seemed like the depths of misery was one of the shallowest among the world’s markets. The Russian index has nearly doubled in the past three months and even the London Footsie is up a third. We got off quite lightly.

Nevertheless I can’t ignore the news of economic woe, hardship and slowdown that deluge the screens unceasingly. There is definitely a decline in the level of achievement and expectation appearing in company reports and locally even one of the big banks muttered a bit about how hard it is to run their business these days. Investing bulls claim that the impact of this undeniable downturn is already well known and completely accounted for in the market and that one ought to be looking for the recovery situations. I think I’ll wait a bit thanks.

In the US, the authorities are congratulating themselves that they have now arrived at the number of dollars that the banking system requires in order to be declared wholesome again. It is a very large number and the banks have been sent off to find it. Apparently this is not a difficult task because hordes of shareholders are alleged to be delighted with the opportunity to hand yet more loot over to institutions with atrocious track records in looking after the stuff. “Trust us, we are bankers”, goes the cry.

The European Central Bank set another lethal example for our own team by slicing interest rates again and the cost of cash in most places is now virtually zero. Bureaucrats and politicians with steady incomes and fat pension plans remain puzzled however, at how ungrateful their citizens are for this bounty. They make threatening noises at the banks who they suspect are not trying hard enough to foist more loans onto people who have decided that they already have sufficient debt and, even better, that they will stop paying any of it back now that they no longer have a job. I note with interest the complaint from one mortgage lender that business is being hampered by the requirement that home buyers come up with a sizable deposit before borrowing the rest.

I think that spending R75m on tomorrow’s party to install the country’s first Zulu president is a good and quick way of distributing state money to people in the catering business. Outraged suggestions that it should be spent on the poor fail to grasp that by the time a relatively small sum like that has passed down the long corridors of government, the poor would still receive nothing. The shorter and swifter the chain linking taxpayer to beneficiary, the better; in fact, why not omit the government altogether and let us all spend our own money? Cut my tax and I’ll have an extra Castle and another foot of wors on my own celebration braai tomorrow.

It will be fun to see if Formula 1’s return to the European tracks will revive the reputations of the big names. Ross Brawn is a fly fisherman and deserves his triumphs. May I quietly point out that the Lions have the same number of Super 14 points and have lost just as many games as the Stormers? Fewer wisecracks from the shadow of The Mountain would be in order.

James Greener

8^th May 2009.

UNAPPEALING ACTION

Everyone has been certain for so long that Governor Mboweni would lop another 100bp off the repo rate today, that when he actually did so, nothing much happened in the markets. Another certainty for me is that central bank actions almost never have desired results. For example now that interest rates are being cranked down again are we to gather that inflation is under control and back in the target range – which for some unfathomable reason is not simply zero. There are quite a few folk who would dispute this idea, starting with some angry trade unionists who say that the food companies are making too much profit. If this is the case then instead of making a fuss they should rather be having a quiet word with whoever is running their pension fund portfolio to top up on Spar and Pioneer and Tiger Brands and share in these profits.

On the topic of inflation did you see that the one rand hike in the cost of buying a lottery ticket helped to raise the inflation rate via the category of “recreation and culture”? Leaving aside the question of just how so small a sum can have any impact on the overall cost of living for the man in the street (does Mr Average buy 100 tickets a week?) I would be interested to know if having a stock broking account is also classified as either recreation or culture.

The current craze among real economists is to spot the “green shoots’ of recovery that signal that the recession is over. There have been several of these sightings recently, but we bears are not impressed by the excitement that was caused when the “second derivative” of US house prices turned positive. I think this is easily outweighed by the idea that Chrysler is probably bust and that US shoppers are staying at home. The report that in 2009 the world will use 15% less steel than last year is yet another statistic that passes through the screens but it is quite a horrifying decline.

The first results of the so called stress testing of the US banks were sort of published in a way that was supposed not to alarm anyone. Nevertheless they reveal that several of these establishments have insufficient cash truthfully to call themselves banks in future. Concern and embarrassment all round until some compliant and gullible donors can be located. Taxpayers are always a good first call.

Almost as terrifying was the idea to strafe Manhattan with Air Force One in order to get good photos of President Obama’s new wings. Understandably they are pretty jumpy about low flying airplanes down there. The organisers of our very own presidential inauguration party are phoning around for prices on a spectacular fly-past over Pretoria at some suitable moment in the proceedings. However, given the length of the guest list and the banquet menu there may not be much money left for more than a microlight and a small flag painted on the pilot’s forehead.

The strength of the rand continues to amaze almost everyone except for exporters who are complaining that it is making life difficult. The best the government can do for them is to point out that the textbooks say that lower interest rates should weaken the currency and that the MPC are sure to smack them down again when they next meet after the IPL final. In the meantime perhaps we all should be turning out supporter’s kit to flog to the amazing crowds who are pitching up to watch the circus.

Am I alone in wondering what our old nemesis Umpire Darryl Hair would make of  the rubbish that is being passed off as legal bowling action at this tournament? The sub-continent already got the rule book edited a few years ago to admit some pretty dodgy stuff, now it seems that the whole chapter on bowling has been scrapped.

James Greener

30^th April 2009.

THE GOVERNMENT IS INVITED TO FOLLOW ON

I am becoming increasingly lonely. Not, let me hasten to say because I am all alone at my desk with a harbour master’s view of the shipping approaching Durban harbour. But because my views and opinions these days seem to locate me firmly in opposition to most prevailing trends.

For example I am still quite sure that the bear is not yet finished with the world’s equity markets despite the rather exciting bounce that most exchanges have enjoyed since the multi-year lows recorded just two months ago. Perhaps the fact that the JSE has achieved about the smallest recovery of any, may be because it was waiting for the outcome of the election. But the rand has been suffering no such doubts. It is now at a three year high versus sterling. I have noted before that money must be flowing onto the country. Can the World Cup be having an effect already? Here in the kingdom we are not hosting any Confederations Cup matches so maybe the excitement is passing me by.

Politically I have never been anywhere other than in opposition to the governing party. I believe that only the threat of losing their seat on the gravy train has any influence on those in power. This week’s election result has revealed the disturbing fact that the smallest ever proportion of voters is dissatisfied with what the current clutch of politicians are providing in the way of government. By the time of the next election in five years the present regime will have been in charge for almost half as long as the previous bunch but I am sure that we will still hear the legacy word being trotted out when blame needs to be laid. Mere improbability has never stopped a politician from claiming anything.

Two more public holidays and long weekends are upon us and I would guess that not a great deal will happen in the last three days of the month. What the bureaucrats can quite rightly claim, however, is that at least two of the holidays in April were not of their making. In fact they predate most regimes around the world. It has been a dreadful month for those who need to cover the overheads but reportedly retail activity has not been seriously disrupted by all these breaks. Unlike many years ago the pubs and bottle stores were thankfully open on polling day and a roaring trade was recorded. The victors had some serious partying to attend to.

Only a few companies are reporting lower earnings and reduced dividends. There is little evidence to prompt anyone to join me out on the lonely limb of concern that we are in for a long and deep recession. In the UK the government has responded to declining revenues with a budget notable for some fierce tax increases, some of which were disguised as punishment for cheeky bankers. Considerably more folk than the allegedly greedy City types are going to feel the pain of keeping civil servants in employment, tea and biscuits. As one press report noted, the fashion a few years ago of taking one’s company off to London for a listing may be turning out to be less beneficial than anticipated for the executives.

My grasp of Indian geography has been improved by the presence of the IPL on our cricket pitches. I am also fascinated by the market anomalies that are showing up where player performance is not being matched by their pre-tournament pricing. And have you watched some of the team owners juggling several cell phones at once presumably trying to keep in touch with the bookies?

James Greener

24^th April 2009.

TAXES AND RANSOMS

It is now about six weeks since most stock markets were setting multi-year lows and the bears were riding high. The recovery since then has been almost as sharp as the decline and the price charts are displaying a fine example of a V shaped pattern. Excitable analysts are citing this as evidence for a similar recovery for the world economies and that the recession will be equally short lived. I don’t think so. Unlike the immediacy of share market prices, all the measures of economic activity take absolute ages to be collected, massaged and published. Officially determined slowdowns will be declared only long after those of us in the real world are trying to cope with the absence of credit, customers and clients. There are precious few signs that any of those are surging back yet. V shaped it is not.

I was fascinated to see that Goldman Sachs, that incubator of many of the US government’s economic brains, managed to sell $5bn worth of brand new shares. Apparently they located investors who are eager to participate in the anticipated wonderful profits of that will flow from that business once it uses the newly raised cash to pay off the state loan that it needed a couple of months ago to keep solvent. The new investors may have failed to notice the remark that the bank wished to resume its practice of paying breathtaking bonuses to the “talent” and that it could not do so until it repaid the government bail-out. I trust the talent will send suitable thank you notes to the new shareholders in due course.

Two of the more prominent issues on the globe these days are piracy and toxic assets. I am amused and delighted by the suggestion that there might be a joint solution to both scourges. That is to load a suitable vessel with not only these probably worthless pieces of paper but then to put aboard the originators and ratings agencies that once believed otherwise. Tow this tempting prize to the Horn of Africa and await developments. The ransom negotiations will take years.

Even 18 working days this month is too many and I am off to the ‘berg for a long weekend. The next edition of Tidemarks will be published under a new political regime here on the southern tip. Pre-election promises and manifestos are usually discarded as soon as the last ballot box is sealed so we have no idea what awaits us. Our likely new president is a jolly man much given to singing and dancing and I don’t recall any pictures of him sitting at a desk, writing or signing stuff. In this way his public appearances are much more entertaining than the rather metronomic side-to-side head movements of President Obama as he reads yet another beautifully crafted speech from the autocues. I do suspect, however, that even without the polished delivery, our new man is also strongly socialist and is confident that his plans for distributing money are far superior to the ideas of those who actually earn it. In other words expect to pay more tax.

The rand has been one of the strongest performing currencies in the last 6 months or so. This can only be because money is flowing into the country. Are we seeing the effect of people returning home after being forced to leave the rapidly slowing previous growth nodes like Dubai? Curious.

Sports pages carry a picture of a Bollywood personage soliciting my support for his team in the forthcoming IPL because they are “the best looking”. That pretty well sums up the dilemma I have with franchise sport. And there are Australians in most of the teams. Yes I know. There is an American playing for the Lions.

James Greener

16^th April 2009.

WHAT NEXT? ONE MAN ONE PASSPORT?

Now that is simply amazing. The main men and women of the world got together in London this week and came up with the number of $175.00. This is the amount, which if given to each and every living soul on this planet, will make the world’s financial problems disappear. I haven’t yet got to the part in the news story about where this money will come from, but I did note that Treasury Secretary Geithner warns that “progress is going to be uneven”. By this I suppose he means that the million million dollars will be handed largely to cronies and crooks who have already confirmed a cavalier and careless conduct when caring for cash. Those of us with savings and a tax number should probably not be watching for a cheque in the post. Rather we should prepare for ever more evil methods to use the latter to white-ant the former.

London was also the venue for anyone with a cause, a silly face mask and time on their hands to run about the streets of the City looking for golden geese to slay. I think that it is something of a duty to society for those with time between lectures, which the public have helped to pay for, to raise awareness about issues that someone else is trying to deny or obscure.   For example, Deputy Finance Minister Nene has told us that he was met by a limo and cold champagne on his recent visit to our northern neighbour. A placard or two drawing his attention to the plight of the Zim refugees ought to remind him that his lavish welcome in Harare was definitely unusual and not unrelated to the possibility that he was arriving with a sack of real money.

Nonetheless the sight of the great and greedy greeting each other so warmly and nodding at each other’s speeches sent the bear into hiding. The JSE along with most exchanges enjoyed a spectacular week with some excellent volumes and excitable analysts declaring that the bottom is passed. The frightening facts however, continue to accumulate. Businesses are shutting down; jobs are disappearing and about the only consuming taking place is of borrowers by their debts. The bear will certainly return.

Despite an upbeat announcement from National Treasury, the raw and simple numbers show that government revenue collections are slowing down very quickly while expenditure is accelerating. The price of votes these days is terrible. The demand for bond finance is going to surge (Anglo American bagged $2bn in the US this week) and I think that means that long bond yields will have to rise. If you have money, be wary about lending it to anyone long-term.

Inexplicably but gratifyingly for some, the rand is very near 6 month highs against most currencies. As a result, rand hedge shares have been particularly disappointing and mostly failed to participate in the current euphoria. Those who believe this strength will be reversed by the election of a president with such finely tuned race detectors that he can tell how many passports each citizen owns, should investigate the New Rand exchange traded fund.

The IPL cricket circus to be held here in SA might be a good time to run an economics experiment and to offer the various prize winners gold coins instead of US dollars. The sub-continent’s citizens are famous for their interest in the metal. A gold mining company used to offer a krugerrand to batsman who smacked a ball directly into their advertising board at the Wanderers. Sounds a whole lot more attractive than a thousand sheets of Mr Bernanke’s newly printed paper.

James Greener

3^rd April 2009.