SET A COP TO CATCH A COP?

One day in the future, the astonishing and very tragic story of how a government  destroyed this country’s mining industry will be analysed to provide cases studies and research topics for students yet unborn. The fine details of whether it was by deliberate design and malevolent intervention or by incompetence and a failure to understand the business will be argued for years. However, in the present we are witnesses to wealth and community destruction on an unprecedented scale interleaved with shocking and disastrous human suffering. The state and its agents have in just a few days been responsible for many more deaths than any alleged mining management indifference has caused over far longer periods. And the whole sorry mess is now being used as a backdrop for cynical and vicious electioneering. The hypocritical but amusing sight of super luxury cars carrying painted messages celebrating the ruling party’s “100 years of selfless struggle” is now deeply distasteful. Ordering that flags be lowered to half-mast for a week simply exemplifies the unwillingness or even incapacity of the national leaders to respond appropriately to the severity of the situation.

Here in Durban we are being treated to the sight of the municipal police force so frustrated with a lack of management response to their grievances that the lawmen themselves have become lawless. The city fathers have done nothing but splutter that they know who is responsible and if they don’t stop it immediately then there will be trouble. Wow. Now that’s a serious threat. Understandably even the national police are reluctant to confront their armed fellow “peace-officers”.

 Even if there are financial and economic consequences from these social and political  events only the currency market has shown a weakness while the All Share index made another assault on the 36 000 level.  Companies with June half-year ends are now reporting and relatively few are announcing shocking numbers. The exceptions with big hits to earnings of course include miners like Billiton and Impala with Basil Read – a construction company – still finding life very hard. Gratifyingly it seems that some companies are adjusting dividend payments upwards in response to the abolition of the 10% Secondary Tax on Companies. This in part mitigates the effect of the new 15% Withholding Tax on dividends payable by shareholders. Nevertheless there are no compelling or obvious value situations and the main reason for investment remains choosing an alternative to cash. The variable dividend preference shares are back on the radar screens for the especially risk averse. The unexpected and unfathomable fall in consumer inflation was insufficient to cool my interest in the index linked bond ETF.

The national broadcaster’s call for tenders for someone to come and restructure and optimise their balance sheet is both puzzling and worrying. There can be little doubt that the business is insolvent with liabilities way exceeding assets and any rejigging of the numbers to prove otherwise would surely be both illegal and misleading. The state as the sole shareholder in that enterprise seems content to pour taxpayer’s money into the abyss in return for having access to the eyes and ears of the public. It will be interesting to see who submits tenders and on what basis the winner will be selected. Sadly we shall probably never know.

For a short but terrifying moment it looked as if the Proteas had lost their way at Lords last weekend. But now we are number one test playing nation and about time too. Matters are far less certain in the rugby camp, however, with the ‘bokke conceding turnover to the Pumas far too often. Tomorrow night’s return match is very concerning. And the injured Lions don’t seem to be as dangerous as forecast.

James Greener

24^th August 2012

KINGMAKERS DESTROY THE PRIDE

It is probably impossible for outsiders to understand all of the forces at work in the tragic events unfolding at some of the platinum mines. But it is possible to see that there is a total lack of useful and sensible responses from the national leaders who almost seem to be content merely to watch as this industry tears itself and the case for SA as an investment destination to shreds. Folk ought to be outraged by scenes of policemen shooting people dead over what we are told are merely wage disputes

However, investors seemingly have not been repelled by this appalling development and the JSE has gained almost 5% in the last few weeks with the All Share index setting new highs and approaching 36 000. Of course the heavy lifting here has been done mainly by the industrial sector counters with the financials snapping at their heels. All the poor old resources sector can do is dream about the longer term value they are starting to offer.

That inept and clueless officialdom is unable or unwilling to make tough choices is not just a local phenomenon. As the holiday season in Europe draws to a close it turns out that pretty much no one has done anything they said they would do more closely to match their government’s incomes to expenditure. In particular they have failed to convince those of their citizens who have shown heroic and historic aversion to tax payments that it is not just Angela Merkel who is responsible for alleviating the plight of their compatriots who are finding it hard to break their addiction to living on government paycheques and handouts. When the relatively few rich and prudent savers of the Euro zone get back to their desks they will find their IN boxes overflowing with pleas for more money. That will quickly erase the holiday mood.

It is a great pity that the new police chief chose such a grisly topic to demonstrate her breathtaking administrative skills. Without even pausing to consult notes she announced that in the first 60 days of her taking office, some 6 policeman had been killed on duty and “statistically that means that one is killed every 10 days.”  Shocking.

Now this is a sorry mess. The team (Lions) that won the Currie Cap last year and which has also frequently trounced the sole S A side (Sharks) in this year’s Super 15 final (and which will of course do so again tomorrow) has been booted from the Super 15 to be replaced by an outfit whose sole claim to selection seems to be a management team who speak fluent politics. The display of deceit, stupidity and calumny by the rugby chiefs who fibbed about just about everything leaves me with a pretty clean Lions supporters cap and a hard question about my future as a fan.

Despite their unimaginative and misleading name, the Southern Kings do indeed hail from the land of my roots known for perfect beaches, prickly pears and premier places of education. My heart is clear on what I have to do, but supporting a team who will likely spend most of next season thoroughly exploring the bottom of the Super 15 log is getting boring. Maybe, just maybe, I will one day need to acknowledge that I now live east of the Ermelo meridian.

The most important thing about the ‘bokke’s test against Argentina tomorrow (as well) is that the players avoid injury as the real tests against the old enemies follow closely thereafter. In the meantime let’s hope that the Proteas at Lords complete the job they went to England to do. Unfortunately like the Olympic gold medals did, a number one world ranking in Test Cricket will lure the talking suits out in front of the cameras to claim their utterly undeserved share of the glory and any cocktail snacks that are on offer.

James Greener

17^th August 2012

SHORT AND NOT SWEET

Production of Tidemarks recently has been curtailed by firstly a planned trip to the bush and secondly by a definitely unplanned bout with a bacteria. Then there has been this four- (or most likely,  three-) day week, non-stop Olympics action on the TV, cruel and unusual weather and the usual quota of stupid and incompetent displays of  leadership and officialdom, all of which have affected my involvement in the markets.

The most exciting event for me, however, has been the successful landing of the US space craft Curiosity on Mars. It has been such fun to watch the shirt-sleeved informality of the obviously ferociously skilled and bright engineers who shepherded the craft through its complex landing rituals. It was a very nostalgic moment for anyone who was learning their science in the 60s and 70s from American text books and envying the US achievements and attitude. Sadly and tragically a very far cry from our own nation today that can’t even deliver text books let alone read them.

No one seems to be scared of anything when it comes to investing. The All Share index has cleared 35 000 and had a few no-jumps at the 36 000 level. Even, it is suggested, Telkom has been battered so much that it must now offer value. (No thanks). It is way too soon to see if the rate cut has any of the effects that Reserve Bank wished for but obviously simply holding cash is unappealing and must be one of the causes for the demand for shares.

The big issues, however, continue to be the euro currency and the ability of the major economies to avoid a lengthy slowdown. There is certainly no clarity or bankable trends emerging for either of these indicators yet. The August holiday season In Europe seems to have been eagerly embraced by all the exhausted players and probably only next month will the squabbling crank up again.

Exhausted players pretty much sums up the Sharks disappointing display at the Super 15 Final and now it’s Currie Cup season. The suits who control this game are definitely not making good decisions about tournament schedules. Similarly I wonder at the sense of running dozens of ads on all the Olympics TV channels for a beer that is sold only in Nigeria. Even if it does have no sugar.

James Greener

10^th August 2012

SAVING UP TROUBLE

Pretty much out of the blue – although some smarty pants folk did guess right – the Monetary Policy Committee sent Governor Gill out to the microphones and cameras in the front room to announce that money in South Africa was too expensive. And so therefore they had decided to make it cheaper by 50 basis points. Apparently this rate cut will shield SA from a global economic downturn. A dubious contention.

Ironically, the longer the official rate remained unchanged the more transactions were arranged at levels which more reflected the actual supply and demand situation for cash. Hence it might take a while before any discernable or attributable reactions to the announcement become visible. It is reported that “business” is sitting on a cash pile of several hundred billion rands already and have no need to borrow much anyway. What they are waiting for is not finance but an opportunity or venture that will not immediately attract hordes of interfering bureaucrats, politicians and trade unionists all eager to find reasons to derail the project. This week we heard that the state blocked the Telkom deal with the potential Korean partners because the company did not need the money. That is quite simply, nuts.

The fellows over at the South African Savings Institute must be wondering if their message that July was National Savings Month ever reached the Reserve Bank. Our government taxes interest, dividends, rents and capital gains and now reduces interest rates. Who has any appetite for saving in the face of those barriers? All those grave speeches about the need and desirability of  saving delivered by the suits and frocks three weeks ago were just hot air.

It took the efficient and knowledgeable teller more than 15 minutes to follow the newly imposed government protocols required to replace an expiring credit card. Despite having held this card issued by this bank for dozens of years I was obliged to listen to a explanation about the mechanism of compound interest  as it applied to the specific credit limit and interest rates pertaining to my card. The chain-tethered pen ran dry after the tenth signature on the phone book-sized contract I was offered to read and sign. All I hope is that I don’t have to go back for another lecture now that the interest rates have been changed. No wonder the banks are being overwhelmed by costs. It’s a dreadful business to be in at the moment.

It’s a pity that the air force VIP transportation unit don’t award air miles to loyal and frequent fliers. Our pres JZ would have bucket loads of them by now and might be able to take all the wives along on his jaunts instead of having to chose just one each time. This week he went off to China to bow very low to their President Hu Jintao before renewing the invitation for them to attend our forthcoming R3.2 trillion infrastructure program.  BYOC (bring your own cash). Apparently the official view is that the presence of a Chinese supermarket in every country village selling plastic bowls and t-shirts is a “good sort” of foreign presence, compared to the previous invaders during the past 400 years who merely brought development.

The sporting scene is getting ridiculous. Four or five channels all carrying good live stuff. Mind you, the first day of the test match from The Oval was just as dire as the SA Olympic team send off ceremony. All the boys and girls needed were a firm handshake and a good umbrella before despatching them to London. The excited speeches should perhaps wait until they return.  

There will be no Tidemarks next Friday.

James Greener

20^th July 2012

HOUSEY-HOUSEY

It seems to have gone all quiet in Europe for the moment. There have been no promises to “fix” economies, no bailouts worth mentioning, just the steady background hum of bankers fixing things and leaving.  Have the problems all dried up? Has everyone, especially in the warmer regions of the continent, agreed to work harder, retire later, save more, borrow less and pay their taxes?  Very unlikely. Perhaps it’s the holiday season taking hold. There is still plenty of unease knocking about. Yields on short term German bonds are now negative. That means that investors are so relieved to find somewhere safe for their money that they are now actually paying a government to use it. It is in fact ominously peaceful on the markets worldwide. In the US a volatility measure is way down.

We bears are sure that it will soon become more widely recognised that most of the planet is slipping back into a slowdown where activity levels will be lower than they were a year previously. And those levels were not all that high to begin with anyway. The excited headlines about local construction companies starting to see light at the end of the tunnel may simply mean they are digging the tunnel rather than being paid to do so. Outrageously a large construction company went bust this week, sunk by unpaid bills owed by the government.

On the JSE we are still learning about the new dividend tax and how discouraging it is especially for small savers. Our tax regime can’t be far off from loading the last straw onto the back of the camel.

You can’t get decent service anywhere. Even if you own a Maserati, the number plates just keep falling off. Don’t you hate it when that happens? And then the cops stop you and discover that you are a politician with a history of pricy car problems and the press gets hold of the story and now everyone wants to know how you can afford to drive a set of wheels like that. As if it’s any of their business. I mean how else do you deliver services to your constituents if you don’t have transport? 

Banking is obviously a really difficult business. No one who is not a banker seems to understand how hard it is to take deposits and lend money. On the one side there are  depositors who believe that, if they put their cash into the care of a bank, it will be there when they want it back again  And the other side is a matter of making folk understand that if they borrow money, they must at some stage pay it back. Keeping both sides of this deal happy is a nightmare. Just this week Minister Nzimande told the banks that they should invest in low cost housing. Why he picked on the banks is unclear. He probably does not understand either banks or investing. Few depositors would be keen to see their bank using their savings to build or buy cheap houses. While putting roofs over the heads of poor people is a noble project, it is not often seen as an investment. Investing normally suggests that a return will be available. Those unfortunate folk who are in need of low cost housing are rarely able to offer much in the way of what might be called an acceptable return. That is why governments step in and use taxpayer’s money to placate voters who need shelter. Where, I wonder, does Comrade Nzimande keep his own spondulicks and what would he say when his bank explained that his cash had been invested and now was all gone? Perhaps as a Communist he would set us all a good example and say that housing people was an excellent investment. He would have a point.

There’s nearly 12 hours of back to back Super rugby tomorrow. Die-hards have plumped up the cushions on the couch and laid in stocks of refreshment and healing unguents for bruised buttocks. My own interest is diluted by the realisation that not even complex arithmetic using imaginary numbers can help the Lions now. So go Sharks.

James Greener

Friday 13^th July 2012

CURRENCY FOUNDERING BOSON FOUND

Most of the market’s first half performance of about 7% was established in just the first few weeks of the year. Since then it has been range trading either side of a pretty steady mean, although of late the ranges have expanded a bit. This has triggered excited talk of a “break-out” with bulls naturally opting for the upside kind, citing the ever lengthening spell of negative real rates of return for cash and the need to be invested in shares.

 It is now clear, however, that the euro will not survive. The experiment is drawing to a close, derailed by impurities in the ingredients that were shaken up together in the test tube. The experimental procedure does not describe what to do under these circumstances and the proposal of adding more and more of the strongest one has foundered because the lid of that jar is now screwed on very tightly. The most vocal supporters of the euro now are probably only those whose careers, pensions and reputation are embedded in the founding principles and institutions of the countryless currency, and anyone who has recently converted their dollars, pounds, yen or even rands into euros. The end will perhaps be swift and unexpected but certainly messy and painful – especially for the weak and vulnerable. Powerful and rich entities will even now be planning and engineering graceful strategies to preserve their wealth and positions. In due course the euro will be no more than a deep pile of data to be mined by graduate students of the dismal science in search of a doctorate.

Similarly the story of how a determinedly ideological and wilfully vindictive government regime managed to destroy a national minerals industry will also one day be read with astonishment. Hopefully, here and there, hidden from view, there are actually some areas and enterprises where our state is indeed helping citizens risk their own money and time to extract minerals from the ground. But out in the open air of public knowledge there is very little evidence to suggest that the leadership is able to accept that the mining business is about extracting, processing and marketing their products in a way that simultaneously maximises both client demand and their own profits. In the process they create jobs and pay taxes and royalties. Sadly our leaders can’t accept that almost any intervention in such a system developed over centuries is very likely to break it.

So now we might have the reason why the authorities in Limpopo are reluctant to deliver those textbooks to the schools. They are waiting to see if the nanosecond long blip of energy announced this week by the propeller-heads at CERN is the right boson. After all, Professor Hawking has lost his bet so the education department does not wish also to be labelled a bozo for supplying the wrong information to the pupils in their tender care. They are awaiting Dr Higgs and The Quantum Mechanics to confirm that The Standard Model is secure and may be shared with the eager young minds of the Northern Province. The rest of us meanwhile can marvel that so many people are needed to make large hadrons collide. Here in the kingdom, large trucks collide with each other and just about anything else at a worrying and tragic rate and no one seems to learn anything.

Durban is jam packed with punters who have travelled far in order to bring their money for a nice seaside sojourn. The Durban July horse race tomorrow will ensure that most of that money will remain here after the visitors leave and no one seems to be complaining. There is however, widespread unhappiness about the disjointed feel of the resumed Super 15 competition. This break in the competition is not a successful idea and even the staunchest Sharks fan is bleak about the Bulls match tonight. Add in the Wimbledon finals, stages of le Tour and the Silverstone Grand Prix and it is clear that the old couch and remote is in for a beating this weekend.

James Greener

6^th July 2012

BANKING ON A BAIL-OUT

Why is it that just about anyone who shuffles large sums of money around for a living is either very foolish or devious or tragically, both? The share prices of banks got hammered this week when firstly local outfit ABSA admitted that more of their customers are finding that they have less money than month and so are skipping the mortgage payment. ABSA as the nation’s largest mortgage lender is suffering from rocketing bad debts. Meanwhile, its parent Barclays in London admitted that their traders had found ways to buy cheap and sell expensive that might not be entirely legitimate or fair. Additionally, JP Morgan Chase (remember the London Whale?) think that their spell of inattention might have torched $9bn and not the trivial $2bn first announced. Presumably many others took the opportunity of this heavy smoke screen to release their own unpleasant snippets

It is human nature to believe that bad news if kept hidden will get better before it has to be revealed. Unfortunately the very efficiency and transparency of free markets that most of us praise and call for ensures that mistakes and malfeasance does not remain hidden for long. However, the bear which was released by these dribbles of news was eager to return to hibernation and his savagery has been limited.

Not even the reckless and foolish pronouncements from the ruling party’s current policy conference about the roads to economic freedom are causing much market damage so far. Threats of socialism and interference are always near the surface. Public Enterprises Minister Malusi Gigaba, urged State Owned Enterprises (SOEs) to “invest beyond what their balance sheets afford so that we can stimulate economic activity through the investments of the SOE's”. Only the Honourable Minister knows what this means but it is likely to be bad news for tax payers who by definition are the equity shareholders of all SOEs. This arrant nonsense comes hard on the heels of muttering that savers in future might be compelled to place some of their money with the state. The idea is not new and when last implemented was known as “prescribed assets”. This was deeply unpopular with fund managers but oddly was not actually a total disaster in terms of performance. However, today yields are at generational lows rather than at the highs which were occasionally available way back then and which often rescued the more gung ho managers from their penchant for dodgy equities.

But none of these ideas for getting the unemployment down and growth up compare with the far simpler one of scrapping the statutes and regulations about the allocation of resources, all of which are predicated on the utterly flawed assumption that there is always someone in charge who knows what is best for you and your money. Sadly even the much admired Finance Minister Gordhan claims to have spotted places in the economy where the markets “won’t go” and so thinks it is sensible to send taxpayer funded expeditions to explore these obviously dark and unprofitable areas.

There has been a big show-down at the OK Corral (aka Tombstone Tshwane) and both the United Sheriffs’ Society and the SA Institute of Sheriffs have been closed down. The survivors have founded the SA Sheriffs Society. Big hats, dusty boots silver stars and hot lead? I hope some one caught it on camera.

A very clever friend has suggested that instead of resorting to a very unsatisfactory penalty shoot out to find a winner after 2 hours of result free and often score less football, the shoot-out should be held first. That score would remain on the board until the first real goal is netted in normal play or used it to resolve a draw at the final whistle. Think about it while you watch the Lions stage their late season surge against the Stormers this weekend. Le Tour is about to start and at Wimbledon it’s like standing under a baobab tree. Big seeds falling.

James Greener

29^th June 2012