HOW MUCH IS THAT JOB IN THE WINDOW?

The task of finding value in the share market has been made a lot harder by the understandably desperate but significantly above range wage settlement offered by the beleaguered Lonmin mining house this week. Undoubtedly the operations of this company are going to be severely affected by this settlement and hardships will likely follow. Workers elsewhere and not just in the mining industry have noted the 22% figure and expectations are surely being reset. Living costs feel as if they have surged far more than the rather benign 5%pa suggested by the CPI.. Investors are nervous about what a settlement like this will do for earnings. It is not a good time to bet the farm.

The worthies attending the Monetary Policy Committee meeting in Pretoria this week were apparently about to consider reducing the price of money by 50 basis points (i.e. cutting the repo rate by half a percent) when the tea lady appeared with an extra packet of chocolate digestives. In a flash, while someone was tearing off cellophane, it was agreed to leave the rate unchanged, downgrade the estimate of GDP growth for this year and next and send. Governor Marcus out to tell the press. She retuned to an empty committee room and crumbs.

All over the world low administered interest rates do not seem to be having the desired effect of encouraging people to borrow money and spend it. Rather, individuals and even businesses appear still to be focussed on reducing their debt. This sort of behaviour is unfamiliar to bureaucrats and officials for whom the economy means spending other people’s money and then borrowing more to support their habit. The sad and ironic part of this situation is the reluctance of everyone to recognise that more of what got us into this mess is unlikely to get us out of it.

We bears wonder, when or indeed if, there will be a time when the absurd overvaluation of intangible entities such as fiat currencies, intellectual capital and counterproductive bureaucracies will be recognised. Certainly the dignity of manual labour is a filthy myth but it would be interesting to see what would happen if supply and demand could be allowed to find the level of remuneration for tasks such as doing some one’s ironing or running a near-monopoly fixed-line telecoms company into the ground. In term of value to customers those two pay scales ought to be nearly equal. While many of the current reams of labour legislation need to be scrapped there is also a crying need for the meaning of the phrase “performance bonus” to be defined and enforced.

It was announced that the president’s basic salary will now be R218 546 per month. Not only is this a rather odd number but after tax it must be a real struggle to keep the uxorial entourage in dresses and lipsticks No wonder we are unable to attract any real managerial skills into applying for the job and it looks as if the Bloemfontein conference will have no choice but to grant JZ a second term. After all, one of the possible alternative candidates was spotted paying around R18m for a buffalo recently – that’s not going to be easy on a presidential salary. Unless of course he can work something out with the so-called “spousal support unit”.

Finance Minster Gordhan and his investment industry regulators are rightly concerned about “rogue investment advice”. While I definitely agree that advising people to put their hard earned savings into black holes is despicable I would suggest that the regulators are naïve to expect to see marketing material which contains many hard facts mainly because this is a business that is pretty short of those sorts of things when it comes to what is going to happen. About the only certainty for savers is that any profits, gains or income they might score will definitely attract the attention of Mr Gordhan’s tax collectors.

The mood at the bowling club will be tense this evening as tomorrow’s Currie Cup fixture between the Golden Lions and Sharks looms. The result is obvious.

James Greener

Vernal Equinox  2012

BULL POWER

Take that! This morning the bull put on one of his all time best ever displays of leaping and towed the All Share index over 36 000 in a single bound. This has been caused almost entirely by a heroic recovery of the mining sector shares as investors apparently realise that their earlier fears for that industry were utterly misplaced. Many analysts are attributing the change of heart to the launch in the US yesterday of the good ship QE3. This was the announcement by Governor Bernanke of a third (actually fourth) round of sending other people’s money to areas of the economy which, some very wise people have decided, are in need of more cash.  It is once again disappointing to watch as the world’s leading capitalist economies insist that central planning will work better than markets at allocating resources. But hey, we are getting one hell of a powerful bull market out of it.

In fact Public Enterprises Minister Gigaba seems to be justified in his confidence that investors are not in the least concerned with developments on the nation’s mines. This, he claims, is because it is well known that the country has a “very solid” Constitution and a proven record of conflict resolution and that further “…investors are confident that we have the necessary leadership with requisite skills and experience to rein in the situation.” Sadly any sign of these skills are not evident as the strike seems to escalating to all types of mines all over the country.  As always, the specifics of the demands are complex and it is difficult for outsiders to put amounts like R12 500 into context. However a restaurant in Cape Town is willing to offer R5500 to suitably experienced Chinese Cuisine Chefs. It certainly feels as if one of these numbers is out of line.

For several years now the JSE has believed it wields a mighty weapon over the newspaper industry in that it had the power to reduce significantly the demand for advertising space that arises from the JSE rule that requires every listed company to publish its half-yearly results in the press. That rule is about to be rescinded on the reasonable assumption that there are no significant shareholders (and presumably not a single company) without access to the internet. The fact that so many companies currently publish their results in lavish multi-colour spreads far more detailed than they are obliged to, shows that they view this six-monthly exercise as important for their communications strategy and general public awareness. They will very likely continue this practice well after the rule disappears and the newspapers may breathe a little easier. Websites and emails in fact are cumbersome tools for capturing attention and presenting financial information. Analysts always prefer to use the newspaper versions. The JSE should, however, be concerned about the companies that will be only too keen to vanish from the press. These are the firms that will issue only the occasional impenetrable slab of words and numbers via SENS – the official electronic channel – and which may well have something to hide. The small private investors will be the most likely victim of the resulting opacity since analysts and journalists will also not bother to dig around in the murk.

Patrick Lambie must have been on the line to his mom several times in the last few weeks asking her to check the family tree to see if there is any way he could claim citizenship of another country and offer them his services on the international rugby field. Warming the bench as we accept yet another hiding from the likes of the Wallabies and the Pumas is not entertaining and he is undoubtedly very frustrated. Fortunately I have been invited to a breakfast to watch tomorrow’s game against the All Blacks and so I intend to bury my nose in a large helping of scrambled eggs and attempt to avoid the TV screen. I will be well clear of the plate by the time of the Cheetahs Lions match however.

James Greener

14^th September 2012

THIS TIME THE PLAN WILL WORK. PROMISE

 European Central Bank president Mario Draghi delivered a speech yesterday that seems to have convinced some folk that he knew exactly how to cure the euro zone currency woes. The plan goes like this. Any government in the zone that is short of cash either because it is spending too much or not collecting enough tax (and usually both) simply prints up some bonds (IOUs) and good ol’ Mario will buy them with actual euros and bingo, the cash shortage vanishes. Where the fresh new euros would come from was not explained but presumably a call to German Chancellor Angela Merkel may be required. The flaw in the plan, however, is the presumption that between now and the time when the IOUs become due (up to three years away) the nearly bankrupt governments and their citizen will adopt polices and attitudes quite different from the ones they currently have, and which got them into this mess in the first place. This seems very unlikely since everyone’s experience is that each absolutely last and final bail-out is seamlessly followed by another and no change in policy or attitude is necessary. The game goes on until the Germans no longer answer their phone.

Not everyone, however, is sure that it will all turn out OK and demand for gold pushed its price over $1700 an ounce for a spell. Until the rand clawed back a bit of ground, this caused the rand price of the metal to sniff out the high ground and both Krugerrands and the Newgold ETF enjoyed a fun week. The All Share also displayed a substantial bounce and re-establishing its assault on 36 000. Mind you, just because an index level contains a lot of zeros the market is utterly unconcerned and there’s no telling what it will do thereafter.

There is, it seems, a housing crisis in our royal household. The king’s sixth wife is being forced to share digs with another queen and this, all agree, is unsatisfactory. Fortunately a solution has been identified but it will require tax payers to stump up a further R18m. Palaces are not cheap. In addition to this unbudgeted item, officials responsible for the royal moolah note that the family holds customary functions which can not be planned for and which also have a devastating effect on the budget. Presumably this means they have big parties. Officials have been busy establishing “best practice in other parts of the world” (I’ll bet) and are toying with the idea of opening the palaces to tourists. What a splendid idea. Mind you at even R100 a head it is going to take a very big number of tourists trekking up to Zululand to rubberneck around the king’s quarters before they can comfortably call in the architects.

Those who braved the rain and drove to Durban docks to visit the Rainbow Warrior – the vessel operated by the environmental pressure group Greenpeace – were startled when harbour security insisted that the driver take a breathalyser test. Now these brave greenies have had some very unpleasant incidents previously with contra radicals attacking them and their boat, but why they felt safer in the knowledge that each driver (no passengers were tested) was sober was not explained. The activists told visitors that their target in South Africa is to oppose the plan to build and operate more nuclear fuelled power stations. Now that the triviality, inefficiency and negative environmental impact of wind power is belatedly being recognised and discussed and coal is such a big no no, does Greenpeace want us to return to the dark ages?

The ‘bok rubber hits the road tomorrow morning when they meet the Wallabies in Perth. People of a nervous disposition should maybe not watch. And the Lions look as if they are going to get to the Currie Cup the long way round. That partnership between Amla and AB at Trent Bridge to square the ODI series was pure magic. It would have been lots better if had been to win the series though.

James Greener

7^th September 2012.

AT LEAST THE SPRING BLOSSOMS ARE GROWING

Now why has the JSE All Share backed off from its assault on that 36 000 level?  The talking heads are never afraid to offer a reason for every move in any market.  Some of us are less certain but the spells of quite marked rand weakness might indicate that some overseas players have abandoned the ship. Mainly it has been the mining shares which continue to be battered. Here and there some banks are also being sold off. Presumably there is a concern that the “unsecured lending growth” story is once again grabbing headlines. It is hard to believe that after all the bad publicity about poor lending policies all over the world that our local fellows are not keeping a beady eye on the loan portfolio. Of course the politicians and hotheads are always bouncing around demanding that “the poor” be given stuff – this week it was the smart houses in Cape Town – but on the whole one has to hope that most folk acknowledge that debts have to be repaid.

More worrying is the rather unexpected second quarter GDP growth of 3.2%pa that was published this week. While still a disappointing number, it was unexpectedly high. However, careful reading of the fine print revealed a clearly maverick result for the mining sector that was grievously distorting the overall result upwards.. True growth was obviously well below the published number and the vital manufacturing sector continues to contract. Like the nation’s savers, the founders and operators of small businesses are wondering why government seems unwilling to leave them alone. There was in fact scant reason to be cheered by the GDP numbers and share market bears can find plenty to feed their prejudices.

Reasons are also in good supply from the US where all kinds of stuff is happening. In particular there is interest about what the Fed Governor Bernanke may or may not say in his quaintly named Jackson Hole address. Will he resume his policy of printing money for the government to spend? And then there has been the contest between a storm named Isaac and a politician named Mitt who wants to be the next US president, for who could generate the most publicity. By the way, Mitt has a running mate, Paul, who has drawn up a list things he thinks the government ought not be paying for. This rather unusually forthright view from someone seeking election has caused a great deal of anger amongst those who have become used to spending other people’s money. The “American Way” is one of the forecast casualties of such an idea.  This election might be quite entertaining after all.

How’s this for a wonderful example of bureaucratic disdain for mere citizens. It is a job advertisement for a Director of Economic Regulation (and there are a whole host of alarm bells right there) in Abu Dhabi. The second line promises an “attractive six figure tax free salary”. But there is no mention of what currency this might be paid in! Somehow I doubt that 100 000 in SA Rands is the figure in mind. Even tax free that won’t buy you much in Abu Dhabi

 Working for a global wealth consultancy sounds like a fun job. The latest publication claims to identify the nation’s multi-millionaires and where they live. Durban allegedly has the second highest number of people in the land worth more than R240m.The fellows at the bowling club this evening will be looking round the bar and wondering! Apparently this information will be used to “inform brands and companies globally where to open businesses if they want to target the richest of the rich”. Doubtless the nation’s tax collectors and other thieves will also be looking for copies of this useful work.

The ‘bokke are in trouble and the Lions are on top of the log. The rugby bosses see nothing wrong.

James Greener

31^st August 2012

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