“SOMEBODY BET ON THE BAY”

This time next week, weary workers are going to be willing the clock to move faster. It will be the end of the first full five-day week in ages and folk just aren’t used to that sort of strain. This week of course there was a general election and while not only was polling day a public holiday, the amount of nervous energy the event has generated has been substantial. The psephologists can now slice and dice the results endlessly – making allowance of course for the discarded ballots in favour of the opposition which have been found in a number of unlikely places. The bond and currency markets are seemingly very pleased with the way in which 18 million odd votes were cast. Interest rates have nudged down quite strongly and the rand is stronger than at any other time this year. The share market seems disinterested in political developments, however, and the All Share has lurked around the 49 000 level for almost 2 weeks now. Us bears are puzzled that the prospect of at least another five years of a communist government implementing socialist redistributive polices are not a cause for even a little concern. But the attitude seems to be: “Well what else can we do with the money?” For which, we admittedly, have scant answers.

Meanwhile, life goes on. National Treasury right on schedule released the government’s revenue and expenditure numbers for March, which closed off the nation’s fiscal year. The state is now spending R1.054 trillion per annum. Tax and other government income, however amounted to just R0.876 trillion which means that for every rand spent, 17 cents needs to be borrowed. When compared to other nations and various reference marks like the size of the economy and so on these 17 cents are apparently no big deal. But those of us with a Scottish ancestry and suspicion and fear of indebtedness are less sure. Borrowing for capital projects is fine but the government hands a great deal of its cash to indolent and unproductive people - and that’s just its employees. The case for the subsistence grants paid to 16 million of our fellow citizens is much harder to criticise, but surely there are very many fraudsters among both the recipients and the administrators of this pile of cash. This situation of course comprises an appealing status quo for very many people, which unsurprisingly is reflected in the election result. Voters are not sure if any opposition would continue with the largesse if they gained power. However, as noted already, investors world wide have been keen to come up with so many multiples of those 17 cents that the government has been able to reduce the amount of interest it will pay those lenders. It’s a funny old world.

Despite spotting the unknown transactions on my bank statement within 24 hours of the fraud, it seems that I shall have to wait “10 to 15 working days” before the money is restored to my account. The thing that amazed me during the 90 minute visit to the bank branch to report my suspicions is how little access to both information and power is granted to the local staff. They too end up calling and holding on for some distant and mysterious call centre named “Frauds” who obviously are very busy. It took some work to persuade them that despite a total absence of prior similar withdrawals I had not wielded my debit card with zeal at a casino yesterday.

 The upside of the Sharks, and of course the Lions, now playing over there is that one can sneak over to the fridge for a bottle or two of a cheering ale long before the sun makes any attempt to get over the yard arm. In other words one can open a beer at breakfast time (or shortly thereafter) Despite most of the local teams finding themselves with all sorts of problems if they wish to get to the playoffs it is still mostly great fun to watch each week as the drama unfolds. Chief downside of these early games is of course the antipodean commentators who in my entirely neutral and unbiased opinion are utterly one-eyed. Yes there is a F1 Grand Prix this weekend but the Mercedes domination is for me as underwhelming as the 1600cc motors.

Must go off to the casino oops no, bowling club now

James Greener

9^th May 2014

ICONIC INCIDENT

One of the drawbacks of being almost perpetually bearish and waiting for “a better time to buy” is that one is wrong for far longer than one is right. Even if these record setting highs are simply the climax of a huge bubble which is due to burst, just about everyone’s portfolio is currently looking smarter than ever before.

Among the many gauges, indices and benchmarks compiled by analysts attempting to condense and interpret reams of data there is a Consumer Credit Health indicator. The latest number supports the anecdotal view that citizens here in South Africa are still battling to service loans. The economy is, however, a huge and many headed beast and one can usually find news that will suit and support whatever one’s personal prejudice and position of the moment might be. Nevertheless some of the calculations which try to quantify the financial damage of the seemingly unending platinum miner’s strike are very worrying and it seems likely that the scars of this event will be deep and lasting.

The tagline on the very lengthy fine print advertisement for the positions of Chief Executive Officer and Chief Financial Officer for the SABC is that the state broadcaster is the “employer of choice”. The copywriter has omitted the words “… for just as long as it takes to negotiate a large departure bonus”. It seems that these posts carry demands and responsibilities that no normal person can fulfil and the list of people who have come and gone might rival an average voter’s roll in length. Is it the ceaseless calls from His Master Voice telling you what to do that becomes wearisome?

No sooner had the newest Mandela statue been unveiled in Cape Town than a police van managed to reverse into it and cause some damage. Many folk claim that this is a bad omen and the forthcoming election result will cause even more damage to the man’s legacy. By the way, I trust the ear of this bust has been checked for small rabbits. Remember what happened in Pretoria?

Without begrudging the celebrations to mark 20 years since the first universal franchise elections in South Africa, it must be pointed out that the country was formed in May 1910. We may therefore cut cakes, blow out candles and sing happy 104^th birthday only at the end of this month.

 Governments around the world are delighted to have been handed something that they can tax while claiming that it is all in a good cause. National Treasury have reportedly arrived at a figure of R120 per ton for a tax on emitted carbon dioxide. Anyone familiar with Avogadro and his number can probably swiftly calculate how many kilos of this terrible noxious compound each of us exhales per day. Especially after strenuous exercise the total could soon grow quite large.  Presumably, like eToll invoices, the carbon dioxide emission tax bills will one day pitch up in the letter box. What if we refuse to pay? Certainly the windbag motor-mouth politicians will quickly arrange exemptions for themselves.

Only the truly keen will have waded through the lengthy description of the proposed Super 18 format that may be coming in a year or so. With more conferences than an ANC caucus, it looks at first glance to be fiendishly involved.  In my view the increase in the number of teams, players and matches will cause a dilution of the concept that the Series is a prestige and premier event envied by all the excluded nations. If this question were on Wednesday’s ballot paper I would vote to return to a Super 12 format which would be completed before the winter Tests start.

James Greener

2^nd May 2014

RETIREES DON’T GET PUBLIC HOLIDAYS

So that’s 49 000, done and dusted for the All Share index. Once again it is soaring upwards at a stupendous rate. This index should return close to 3% for April. Looking a little deeper for the shares responsible for this run, quite a few of the Real Estate Investment Trusts (REITS) scored rather well suggesting that investors are still seeking income from the higher dividend yields that this sector tends to offer. The smaller “niche” banks and financial service companies also got a good push. Another performer to catch the eye is Telkom, a company that is hard to trust or like. At the other end of the scale Net1UEPS Technology is getting hammered for the dishonourable mentions it received for its role in the state benefits payout systems. There has also been some weakness in the rand and the bond markets recently. These two frequently move in tandem as foreigners enjoy the considerable liquidity of the latter when gaining or shedding South African exposure.

“We are in need of an equity injection” sounds so much more sophisticated than “Give us money.” Eskom is using the first of these phrases to hide the fact that they have almost no control over the rate at which they spend. Their expenditure appears to show no appreciation of their income. What a calamity for this massive utility which once upon a time delivered the cheapest electricity on the planet. Way back then Eskom was rarely in the news except to boast of yet another innovation or milestone in the methodology of using fairly low grade coal to generate a nearly uninterrupted supply of electricity. Today the behemoth is constantly in the headlines with tales of woe quite often involving mysteriously missing money, management and morals. But the biggest tragedy is the impact that the relentless rise in price and fall in supply reliability of Eskom’s product has made on industry. If any branch of government is responsible for keeping a scorecard of curtailed and cancelled operations arising from these developments, they are wisely keeping it very quiet. But probably no one in the litter strewn-corridors of power is all that concerned

As has been repeatedly pointed out, the price gap between the cost of a live rhino and the street value of the horn on the end of its nose  is so large as to ensure that poaching will be almost impossible to stamp out. The recent theft from an official strong room of all the recovered and naturally harvested horns shows the level of corruption and temptation. So too does the arrest of a Parks employee found wandering in the Kruger allegedly looking for cattle. I have often wondered if it would be possible to engineer the genetics of the poor beast to render the horn toxic, but in the meantime the traumatic and undignified process of injecting poison into prong seems to have some success.

Forget about SA catching up with Nigeria. Pretty soon our GDP level will be on a par with Pitcairn Island. After a pair of back to back four day weeks, there are merely three official work days next week. Education, one of this country’s least successful industries has, however, decided to close for the whole of the week and send the children home. Naturally this opportunity has been seized gleefully by their parents and the kingdom is rapidly filling up with holiday makers. Let’s hope our accommodation and leisure industries will make up the shortfall in business. The poor ill-educated masses are going to need waiter and chamber maid jobs one day.  But that’s not all. The following week some genius has plunked the General Election into the Wednesday, triggering another public holiday and of course sending the kids home again while their school halls get used as polling stations.

I suppose the sponsors deserve their opportunity to show off their brands and make a big event out of the new Springbok rugby jersey. No ordinary jerseys though! They are “made with ‘motion dry’ technology which allows the players […] natural freedom of movement and temperature management.”  And that’s not all. “The seams are reinforced to mitigate tear risk and the jerseys use ‘gripper’ technology in the chest area to enable players to get a better hold of the ball”. I beg your pardon?

James Greener

Malaria Awareness Day 2014

SPOLIT Xs

Is there just the slightest discomfort and doubt starting to seep into the mind of the bulls? The rand looked uneasy when it was below 10.5 to the USD and is trying to edge back over that level. The All Share index may have given up trying to reach 49 000 at this stage. Bond yields are edging upwards. Is it merely the arrival of the first rather cold days of the year or are the sellers becoming more relaxed about the prices they will accept? After all, just about every trade at current prices up here will deliver a useful profit for the seller.

Why does an organisation that enjoys a total monopoly of its industry and has a proud history stretching back well into the 19^th century believe that it needs to reinvent itself as a brand. Just how this will generate more business is never explained or tested. This time the waffle rambled on about accessible and African. Reportedly it took a year for the design and approval of the new logo which comprises the three letters by which the organisation has been known for decades. Yes this is about the JSE. Take a look and see what you think. Does it make you want to invest? In my time the bourse had a go at renaming itself and launched the idea with a party where a pair of silver-clad lads on a podium arranged their persons into some startling poses. It was afterwards explained to the indifferent but convivial assembly that the tableau was themed around the letter X; standing for Exchange presumably – very droll. The whole idea was, however, soon forgotten. But I do hope there was a launch party this time too. Without the contortionists in lycra.

So the government believes that the nation desperately needs a ministry of small and medium enterprises. Aside from the many reasons why this is an extraordinarily poor idea, is the question about who and how the cut-off between medium and large will be established. Imagine the embarrassment of being invited to drink at the fountains of knowledge at the ministry because one’s enterprise shrunk a bit. One outfit that really ought to know better has hailed the idea because they say “it could help SA regain its position as Africa’s largest economy from Nigeria.”  If that really was a sensible and proper target there are far better ways to do that by getting the big industries like the platinum mines back into production.

It would be interesting to hear if those people who are investing all their efforts, capital and skills into getting and keeping their enterprises a going concern, would welcome a clueless bureaucrat with a sheaf of forms swaddled in red tape, arriving for a chat and a cup of tea. Tell you what. Offer the official a job at the same pay and conditions that the founder enjoys and watch him or her vanish in a flash.

 The sound of previously fiercely political supporters of democracy promoting spoilt votes as a method of expressing disappointment and displeasure with the ruling party is both alarming and amusing. At the last election fewer than half the registered electors voted for the winning party and yet they received almost nine million more votes than the party coming second. There were 239 237 spoilt papers so next month even a massive increase in this number, all deducted from the winner’s tally, would not affect the overall balance of power. It would of course deprive the opposition parties of the opportunity to increase their presence in parliament which is of course the reason for the campaign. How sad that these one time freedom fighters for democracy now feel threatened by the democracy of freedom.

Rather predictably the Sharks overwhelmed the Lions last week and the bar at the bowling club, not altogether convinced that my conversion to the cause is complete, smirked more than was necessary. I still think the Lions are making a great comeback and hope to see them do much better as the season progresses. What a pity the SA contingent fared so badly at The Masters. Its fun watching South Africans don a different green jacket.

James Greener

Thursday 17^th April 2014

NOT SO GROSS MARKETS

Naturally it was another week of record setting share market indices and prices rising faster than earnings. The rand has improved to where it was at the beginning of the year and bond yields have fallen as well. Bulls are delighted but us bears are terrified and wonder how this can ever end well. The explanation below doesn’t offer an answer to that question but it might be one of the more important reasons for us being where we are now.

Governments generally seem to believe that having a balanced budget (i.e. spending only what they collect) is a sign of weakness. Real governments run deficits and borrow money to buy the stuff they need (like votes). This is a topic analysts quarrel about ceaselessly. Currently the interesting bit of this discussion concerns the lenders of all this cash. Traditionally, because the borrower is the government and therefore allegedly the most reliable and trustworthy counterparty (!) in the marketplace, just about everyone is prepared to lend them money. This large supply tends to result in the price of that money (i.e. the rate of interest that lenders are prepared to accept from the government.) being about the lowest in the land. In the last half dozen years, the US government’s profligate spending programs have obliged it to seek so much money from the usual lenders that it became nervous of actually testing their ongoing generosity too far. Increasingly, therefore, it began to ask the US central bank (the Federal Reserve) to lend them the money they so badly needed. Now the Fed itself doesn’t have much cash lying about but it does have the sole licence to print the stuff and so to meet the government’s demands it has been rolling the presses as fast as the ink could flow and using these nice new notes to buy government bonds. The outcome of this program is that the USA is awash with money, much of which has flowed into stock markets both at home and abroad thereby supporting ever higher share prices. But it also means that the Federal Reserve now owns about 40% of the US government debt. That’s an extremely unhealthy proportion and commentators are wondering and worrying how the Fed can ever sell all or any of it. Indeed if the US bond market got the merest hint that such a potentially large seller was making enquiries, interest rates would probably soar skywards and threaten the very fragile recovery that many claim to be able to see taking place. It is on this simple knife edge that most of the world’s markets teeter. Fascinating.

The genius politician, who told an election meeting that only citizens who have voted for the ruling party should be eligible for government benefits, was too cowardly to complete the picture. That is, only citizens who vote for the ruling party should be required to pay tax. Sounds excellent to me. That would quickly shrink the size of government! And after all it follows on from Number 1’s philosophy of not paying for things that you don’t ask for.

The Gross Domestic Product of a country (GDP to its friends) is supposed to be a measure of the level of economic activity within that country during a certain period. It is understood in descending order of capacity by some analysts, very few journalists and almost no politicians. It is regularly tortured by anyone in need of a fact to support a silly claim or idea. This week the headlines wailed that Nigeria’s GDP had now surpassed that of our own beloved country and that therefore we were no longer the big man of the continent. It turns out that our West African competitor has crafted their new statistic by judicious application of long overdue rebasing and adjustments to their data  and indeed their economy may or may not have been the largest in Africa for some time. Exactly why this is going to be a problem has not been explained. Neither is it expected to be a sufficiently loud wake up call for the communists who run our country. They will not pause for a moment in their task of harassing and victimising private enterprise (aka job creator). And as for our GDP, well standby for a rebasing!

Perhaps the problem with soccer is their idea of friendly matches between national teams. Bafana are off to Australia and New Zealand for a pair of “friendlies”. They would gather so much more home support if they called their games Test Matches AND dished out two resounding thrashings. A rather special Super 15 game this weekend where I am satisfied, whoever wins. The guys at the bowling club do, however, object to my natty pairing of Sharks shirt with Lions cap. Funny that.

James Greener

Friday 11^th April 2014

FREE SPEECH

Depending on the outcome of the cricket this afternoon and if you live near the shadow of the e-toll gantries, you may or may not be disposed to shuffle along to the gala dinner being hosted by the ruling party. Neither the speaker (Comrade Gwede Mantashe) nor his – slightly worrying – topic (Africa Today – 20 years since the liberation of Africa’s Last Country) looks at all appealing but amazingly however, the event is free. And there are precious few free dinners these days.  I smell a rat. If you go along, make sure to sit near an exit so as to be at the front of the rush once they start to pass around the hat.

With the possible exceptions of major utilities, free markets are likely to be the best suppliers of all other goods and services. Governments, however, get elected on the promise that they are far better than markets at allocating resources or more crudely redistributing wealth. The idea of having a powerful protector capable of seizing stuff from others thought to be wealthier and luckier than oneself is always appealing. The flaws and difficulties here are numerous and include the processes by which the donors and beneficiaries are identified. And then of course there is there is the huge and apparently escalating problem that the protectors claim an ever increasing share of the spoils for themselves and neglect to attend to the distributing part of the deal.

Lionel October, the Director General of the department of Trade and Industry became very expansive the other day and promised that billions of rand would be pumped into manufacturing in order to make good the underinvestment in the past decade. The tacit implication here is that he and his staff have spotted customers who are demanding goods at prices which would enable manufacturers to make a profit after costs. This is very doubtful and the argument swiftly collapses into complaints that other countries are protecting and supporting their industries with public money so we need to do so too. If, however that is a good idea, then the process here in SA involves unspooling endless lengths of red tape  which somehow soon negates any supposed benefit that a helping hand from the public purse might provide.

Among the busiest of state agencies is the one searching for evidence of collusion and so-called anticompetitive activities within the private sector. After seeking things to tax the next most popular activity of government is seeking reasons to harass private enterprise where undeniably the idea of impeding one’s competitors is popular. But in the end, if the secret agreements really lead to excessively profitable businesses then, it will soon enough attract rivals and competitors whose appearance is far more effective in curbing excesses than a bus load of bureaucrats demanding to look at your books and then levying fines which oddly never go to the overpaying customers.

This week’s list of senior public servants whose moral judgement may have lapsed or whose ability to distinguish between personal and public monies has collapsed includes the acting CEO of Eskom, the Chief of the Electoral Commission, the Director General of the Department of Basic Education and the Mayor of Tlokwe (no I don’t know where this is either).  And add to this list of course our President. Why are we able, every week, to add at least half a dozen names to this rogues gallery? Are our leaders really so much more corrupt than others before them or elsewhere? Perhaps it is because we in South Africa actually now have an astonishingly permitted and encouraged climate of freedom and openness that exposes so many of the crooks. The system fails everyone though when it fails to press on and swiftly either clear or convict the accused. And in those cases where guilt is exposed the punishment is promotion and redeployment rather than dismissal. We need to work on that aspect next.

The Sharks have a bye, the Lions have a tough one and the Proteas by now will have shown their intent. Formula 1 has a GP in Bahrain, but suddenly I don’t much care. These new engines and rules are a ludicrous and misguided attempt to “green” a sport that needs to be the antithesis of that lifestyle.

James Greener

Friday 4^th April 2014

WHO REMEMBERS THE FAT CONTROLLER?

The Industrials and Financials indices are at new highs. It’s Resources that are preventing the All Share from a similar record. But it’s very close. The bears are deep in their lairs, paws over ears, whimpering. This demand for shares at any price is unceasing.

There were six Chinese executives assisting Brian Molefe, the Transnet CEO to sign a R50bn deal to buy 1064 locomotives from them. This big turnout on the sell side makes one suspect that the price was probably in their favour. Mind you at R47m per loco, that’s barely the price of a decent fire pool. Mr Molefe later explained that a benefit of the Chinese deal is that not only would the chaps at Transnet actually be involved in making “the frills” for the new engines but that the Chinese have agreed  to show them  how to build the difficult bits. So in due course maybe we could even make our own. Does he not know that Union Carriage in Nigel started producing fine locomotives in 1964? And that today there is a least one major local producer of locomotives which is listed on the JSE. (Grindrod).

The human tragedy in the communities affected by the ongoing platinum mine strike must now be surpassing the commercial and fiscal damages being sustained by the industry. And yet amazingly the labour leaders continue to attract support for demonstrations and marches. And the state appears to do nothing. Are the people who warm the seats in the Cabinet totally incapable of grasping the economic realities here? Union leaders who make utterly unrealistic promises to their members about what they can deliver, need to be reprimanded by at least a minister. If they don’t do so that means that government too believes that the wage demands could in fact be met by the employers without the destruction of the industry. Surely they don’t believe that do they? Or maybe they just can’t do the sums.

Very brave souls are starting to invest in the sector, convinced that one day a recovery is inevitable. A new mine listing is even on its way.

The government has hatched a plan to identify those teachers who show contempt and disrespect for their colleagues and pupils by failing to turn up for work. They want to install sophisticated electronic biometric clocking devices at schools to catch these culprits. The obscenity of even considering such a system when not every school yet has power, water and sewerage services leaves one breathless. Why not just give supervisors the power to dismiss instantly anyone not interested or capable? Knowing that your job is always at risk, changes behaviour enormously.

Except for some rather nice foreign travel for the president and his cronies there was never the slightest justification for pretending that we were in the same league as the four countries identified as the BRIC nations by a New York banker in a fit of analytical whimsy. Tagging ourselves and an S on to this lot was cheeky. The news that his good friend Putin had more or less seized Crimea must have had our man Zuma flipping through the atlas in the Nkandla library and wondering how to chide Vladimir for interfering in the internal affairs of another country. Perhaps it is time to forget that ill-starred friendship and start to worry about be labelled as one of “The Fragile Five”. (SA, Turkey, Brazil, Indonesia & India).

My DSTV decoder blew up at a critical moment on Saturday and so I am pleased to accept the Lions win over the Reds without having to wince about the referee. Sadly the decoder reset just in time to show the Sharks losing the plot and their game. Their injury list places the rest of their campaign in jeopardy somewhat but it does provide an opportunity for some unknown stars to shine. The Sevens Rugby is as nerve wracking to watch as the T20 cricket. One missed tackle or bad over and all seems lost and hopeless. These narrow victories are terrifying. Another Formula 1 GP this weekend or “economy run” as one critic puts it.

James Greener

28^th March 2014