DON’T MENTION THE WIND

Whatever it was that panicked the market in the middle of the week has now been forgotten and the All Share index is striving upwards again. This bull is not easily discouraged and the weakness of the rand suggests that it is not non-resident money that has been coming in to push things along. However resources company Glencore did arrive from London for a secondary listing on the JSE this week and has rearranged matters a bit amongst the heavyweights. Glencore has a market cap of around R700bn and is now the third largest share on the JSE behind British American Tobacco and SAB Miller. Traditionalists might be shocked to learn that Anglo is today only half the size of the newcomer and is just the ninth largest share on the JSE. Naspers, at R400bn, is our largest truly South African listing at present. Likely you could win a few bar bets with that fact.

The European Central bank cut its benchmark rate from 0.5% to 0.25% and this has spawned a blizzard of comment mostly saying it’s a good idea and it ought to have the desired effect of raising both inflation and economic activity in the area. Many proper economists believe that a little inflation is a good idea. They cite the Japanese example where that nation has suffered deflation and a never ending recession. The concerning thing for those of us who think free markets are best able to set the price of most things is that the committee of suits who make these decisions is the same one  whose earlier decisions led to this situation.

We already all know what we ought to see in the Public Protector’s report on Nkandla.  That a great deal of unauthorised spending of taxpayers money went into making sure that No1’s little country cottage in Zululand is comfortable and safe. However, the report takes almost 360 pages to say this, so obviously there must be quite a bit more there than we suspected. It certainly prompted some rather rattled behaviour from a cluster (what a lovely evocative word) of cabinet ministers who are of the view that the report might reveal things about the president’s home that the public doesn’t need to know. What ever could that be?

Legislation is pouring out of parliament at a terrifying rate and none of it appears to be lessening the burden of regulation and red tape in which we are drowning. The law that can be used to put you in prison if you dare to suggest that severe weather is on the way has reached the statute books. While hoaxes can undoubtedly be annoying and even costly for the gullible, this does seem an extreme use of state powers. In this internet age many of us now use weather forecasts generated by overseas services so what will the weather police do if Wind-Guru warns the kite-surfers to expect gales and all they get is a gentle zephyr?

Last year 91 public entities wasted an average of R3bn each of public money in “unauthorised, irregular, fruitless and wasteful expenditure”. There is outrage that as yet not a single civil servant has reportedly been fired for fraud or incompetence. This indeed is a great deal of money but it is less than 3% of the state’s total annual expenditure of about R1 trillion. Most of us probably fritter away at least that sort of proportion of our own spending every time we go to the shops. Just start with the tip for the car guards. Nevertheless they really ought to be a lot more careful with our money. Another comparative amount is that the tax man has so far this year refunded R21bn in overpaid taxes. That’s also a great deal of money,

Sachin Tendulkar must have been very pleased not to have emulated Sir Donald Bradman and scored a duck in his final innings. That is what he nearly did score in the world cup final at Wanderers in 2003 when I went to watch him for the first time. The Little Master managed a mere 4 runs. People who had travelled much further than I were incensed and shouted for his return to the crease. 

It is going to feel odd watching test rugby on a Sunday evening. But then I don’t have to go to work the next day.

James Greener

15^th November 2013.

GANTRY GANTRY BURNING BRIGHT

Buyers on the JSE have demonstrated their belief that companies are around 15% (after allowing for about 5% inflation) more valuable than they were when the year began. The All Share Index has tested the waters above the 46 000 level. But it is now very tempting to suggest that the bull has now run out of steam. An important downside factor that feeds us bears is the government’s seemingly deliberate and concerted attempt destabilise the business operating environment. For foreign participants particularly, the ground rules are being changed at a startling rate. Only Minister “Red” Rob Davies can see how the scrapping of bilateral treaties with major trading nations will comfort investors. Fresh from this disaster he is terribly excited by the plan to “cleanse” credit histories and so deny lenders some potentially useful and pertinent information about borrowers. This is very foolish when already many parties on both sides of that transaction are in difficulties. So-called unsecured credit providers are reporting an ever growing pile of bad debts while deeply indebted borrowers are also struggling. So much so that Minister Trevor Manuel pointed out that this was a factor fuelling labour unrest. Don’t these guys ever talk to each other?

Does anyone in charge even read? It is very frustrating to watch how in the face of all evidence and prior examples the government still insists that South Africa will be converted into a socialist utopia.  Of course the powerful glitterati have scant time for anything except for whizzing about attending meetings and ceremonies that are invariably followed by lavish catering. An amusing example of this apparently deliberate indifference to information includes President JZ claiming that he had no knowledge that his nickname amongst his staff is “Number One” and so the Number One who allegedly facilitated the landing of a friend’s private plane at a military airbase was not him.

The picture of a burning toll gantry proved that the southern tip is not alone in having aggrieved citizens. The green and forested countryside next to the highway turned out to be in France where a few furious farmers were demonstrating their disappointment with their government’s attitude. Reportedly, however this act of arson caused them to change it!

There was huge excitement at the New York stock exchange this week when a new listing nearly doubled in price on its first day. The company concerned was Twitter; one of these Internet based so-called social media sites. At the peak it was being valued at around R300bn which is bigger than Standard Bank. Now that I have a bit more time on my hands I signed on with Twitter a few weeks ago.  After discovering that one can filter out all messages from the hundreds of millions of bored teenagers, and also from anyone who wants to send you a picture of their lunch, it turns out to be a rather interesting way of wasting incredible amounts of time. The point, however, is that so far it has cost me exactly nothing to participate and so it’s quite hard to see where all that value in the company lies. Sell Twitter buy SAB.

Hopefully the fellows at AECI who have just sold 1600 hectares next to their dynamite factory in Modderfontein to a Chinese developer, have checked that no one buried a rejected batch of product on the site. An unexpected bang could quite ruin the developer’s plans to spend R80bn and build the “New York of Africa”. This would be a bargain price for not even one run-down block in the Big Apple so something’s not adding up. Nevertheless the artist’s drawings show that that style and grace are not part of the design brief so Sandton might just be facing a challenge.

History and form are on the ‘bokke’s side in their match against Wales tomorrow. Pity the match will overlap the Proteas perhaps clinching the ODIs.

James Greener

8^th November 2013

WHO’S AFRAID OF THE GREAT BIG BEAR?

Halloween marked the end of a four month period during which the JSE All Share index has gained around 20%. This is heroic stuff but in theory, unlikely to continue, as it has hoisted all the usual valuation measures into equally heady territory. It is definitely no longer glass half full or half empty stuff but glass brimming over and “last orders” taken.

Most analysts are confident with the view that these bull markets are largely due to the US Federal Reserve pumping USD85billion a month into the US system via its infamous Quantitative Easing program. The explanation warns that when that program comes to an end, or even just slows down – the infamous taper – then the bear will strike. However, there is satisfaction that the track record of Janet Chellan, the new Governess-elect, suggests that she is only too pleased to tell markets what prices are appropriate. Some of this might be true but since securities prices are set by mutual agreement of buyers and sellers it seems unlikely that slowing down or shutting off the money pump could be the sole reason for prices to fall.

Once again our socialist government has arrogantly and patronisingly decided that we all need to be further controlled.  Without offering any evidence that a ban on liquor advertising could have an impact on reducing alcohol abuse state officials now express surprise and disappointment at the vehement defence and reaction from those whose industry they are about to destroy.

The nation’s accelerating slide towards increasingly violent behaviour and utter contempt for the law is terrifying. What we need is immediate and pitiless enforcement of existing legislation, regardless of the alleged status and apparent influence of the perpetrators. No suspension on full pay for state employees. That ought to create pressure for speedy resolutions. No prison parole, especially for undiagnosed terminal illnesses. No lengthy and expensive appeals resting on spurious and dubious claims.

The never ending saga about how to fund the (exorbitantly) expensive but fine roads around Joburg drags on and has now become an electioneering topic. It is unlikely that many of Julius Malema’s supporters yet own cars (if they did, they would be at work paying them off not dancing in the streets) and their opposition to an impost they are not in danger of being asked to pay is puzzling.  Aside from the problem of ring fencing the proceeds at National Treasury, no one has yet produced a credible piece of simple arithmetic that shows why a modest increase in the fuel levy is insufficient. In the meantime the fellows in Austria who supplied the fancy equipment to read number plates and calculate tolls must be wishing they’d never heard of Gauteng!

To what extent the woes of the textile and clothing industry over the past decade have been caused by management ineptitude, labour intransigence and government incompetence will provide wonderful material for dozens of studies by future students of industrial relations. However, the sad fact is that the Made in South Africa label is an endangered species and many businesses in this sector have moved elsewhere or are for sale. Seardel, the listed company, has managed to sell its clothing manufacturing business for R105m only by first lending the buyer R77m. The interesting part of this deal is that the buyer is the union that represents most of the workers in that business. This is an amazing and unusual departure for a body which is normally so critical of how the industry is run. Everyone will wish them well with this venture and hope that not only do they save the 2000 jobs at risk but also manage to restore growth to this ailing sector.

It just as well the Currie Cup final was not held at Kings Park last weekend. Not only was it incredibly wet but Province supporters would not have been allowed to leave before the end as they did at Newlands. They would have been expected to behave politely and congratulate the Sharks when they lifted the trophy.

James Greener

All Hallows 2013

WE WILL WE WILL REGULATE YOU (F Mercury)

And still the markets surge northwards. Unless company results or news are really shocking, investors appear happy to support share price growth that is far greater than earnings growth. Buyers are tempting sellers to part with their shares by bidding a price higher than the previous trade. The JSE in particular has seen almost no new large companies apply for listings for several years and so the total number of listed shares on the market has been fairly constant. This also must be contributing to the price rises. At some point, however, something will trigger a widespread concern about the disconnect between price and value and a critical number of sellers will offer their shares at the last record high price and the buyers will stand politely back. Matters could then easily turn ugly.

The restrictions on ministers spending public money for personal items are very welcome but the effect is more cosmetic and vote-catching than financial. Remember that the government now whistles through well over one trillion rand a year (that’s a thousand billion), so savings of a few million show up only in the seventh decimal place!  The state’s real budgetary problems are numerous and elsewhere. Not least is the fact that they appear to be running out of people and businesses to tax.  The sponge has been squeezed dry. There are probably now few significant tax evaders and there is not much capacity left to increase the take from those who are irrevocably entered into SARS’s little black book of names. A lot of faith is being placed on the misguided forthcoming Carbon Tax. Please don’t anyone tell the politicians that Oxygen is also very common and dangerous and needs to be controlled.

National Treasury’s now customary praiseworthy and amazing transparency about their planning also reveals worrying developments arising from spending more than they collect. This year the expenditure on State Debt is R100bn. In three years time it is forecast to be R135bn which is annualised growth of more than 10%pa. Not much else in this country is growing at that rate. Except for regulatory authorities. Minister Gordhan squeezed in the news that two new ones for the financial sector are coming soon. Oh dear.

A delightful frostiness is developing around the world as it turns out that President Obama’s spooks have been listening into the phone calls of national leaders who they decided were significant. Firstly there is indignation about their implied minnow status from those who weren’t bugged. Probably Obama had scant interest in JZ’s calls to Nkandla to alert the clan about which wife he would dine with that night. Then there is the outrage from those who were spied on at the arrogance and effrontery of such an unethical and despicable breach of trust. Identical charges made against Mr Snowdon, the alleged US whistleblower who revealed what the spooks were up to, should now be seen in a rather different context.

Even or own leader’s minders failed to steer him away from making a speech about how we should discard our African attitudes and learn to accept the costs of living in a vibrant and exciting world-class city. In particular his comparison between the undeniably fine freeways around Joburg and the supposedly inferior roads in Malawi has gone down very badly. Particularly in Malawi. Pleasingly, however, the gaffe caused the reappearance of presidential spokesman Mac to tell us what JZ really wanted to say. These explanations are always great fun. It seems, however, that JZ meant exactly what he said.

Why won’t the International Cricket Council grasp the concept that test cricket rubbers need to comprise an odd number of matches? Also annoying is their hypocrisy of allowing a country with an unsavoury political regime to host home matches in a third country. The pair of tests being played out against Pakistan by the Proteas at venues around the Persian Gulf is nearly meaningless. Without the ground staff and players’ families, the crowds would number in single figures. Also pretty unsavoury are the people at the ICC responsible for tampering with the test match calendar for matches between SA and India.

James Greener

25^th October 2013

THAT WAS FUN. LET’S DO IT AGAIN SOON

No one really doubted that the American leaders would in the end take the easy option and raise the debt ceiling. The alternative route of reducing the debt by cutting spending and increasing taxes was never going to catch on.  

The ability of governments to spend more than they earn is legendary. No more so than in the case of the fellows in Washington.  So, to cover the deficit between what goes out and what comes in they borrow money to pay the wages, meet the bills and quite importantly to service the debt. Any nation that does not scrupulously attend to this last item gets dealt with harshly by the all-powerful ratings agencies that quickly mark you down from AAA to AA and so on until the dreaded “junk” status. Most national treasuries would feel obliged to take the view that having to borrow too much is a bad thing. The common standpoint is that deficits are merely temporary and that just as soon as the economy improves then tax inflows will surge sufficiently not only to meet the spending requirements but also to have a bit extra to pay off some debt. In the US their commitment to this belief manifests itself as a political act of setting a prudent upper limit (the ceiling) to the total debt. Needless to say reality overtakes hope and before long another opportunity for political grandstanding and brinkmanship is created. Some estimates have suggested that the next ceiling resetting event may arrive no later than February

Only the smartest analysts are able to understand how the policy of spending more than you earn and accumulating ever more debt is wise and sensible. And since markets are steaming ahead on the news it must be concluded that investors are all definitely smart analysts too.

So far the county's newest political party’s biggest impact will have been on the suppliers of those fetching red berets that the leader and his supporters wear. Although the origin of this natty headgear is undoubtedly Eurocentric, presumably they are entirely local in manufacture and so are deemed acceptable and appropriately revolutionary. Speaking at the launch party, Mr. Malema unsurprisingly made promises and demands that delighted his supporters but puzzled some crusty old tax payers. Figuring large among these was the charge that all privately owned land was stolen (from whom is unclear) and must immediately be returned to state ownership. Naturally no one present asked if local governments would interpret this sudden hiatus in rates income as a welcome aspect of Economic Freedom. The country’s mayors would immediately have to scale back on the number of trigger-happy body guards they seem to need when speeding down the freeway to another meeting.

Another threat to government income could emerge from the ban on all liquor advertising. The full ramifications of this asinine “we know what’s best for you” legislation have clearly not been thought through. What about the huge sums of money that the booze industry would no longer be allowed to spend on sponsorship, promotion and advertising? Would they return it to shareholders in which case both SAB and Distillers might be a screaming buy on the JSE. Or alternatively would they slash their product prices so that we could all buy much more. Either way, the jobs and taxes lost from the cutback in those advertising industries will hurt many people. And it is very unlikely that there will be any discernable change among us citizens in those habits and behaviours for which the state has now taken responsibility to modify.

I need both the Golden Lions and the Sharks to win their semi-finals tomorrow so that the Currie Cup will be won by a team I support. Fortunately there is no space left to discuss test cricket.

James Greener

World Vasectomy Day 2013 (truly!)

POSTPONED PAYDAYS PROVING PAINFUL

So what changed? The JSE, which looked as if was just as spooked as Wall Street by the prospect of a US government shutdown suddenly and sharply bounced and the All Share index will end the week near the levels it was at last Friday. That might well go down as one of history’s nastier little bear traps. There has been scant good news in the financial pages. Most concerning is that the politicians’ squabble over the US government’s debt is starting to be sorely felt by the largely blameless wage earners on the federal payroll. Despite the rather astonishing promise that the government will pay them in full once this debacle is over (so how does the “shutdown” save money?) in the meantime workers aren’t getting paid. And that of course immediately affects the retailers and bankers who in turn will not get paid. Wowee. 

Next week there are some critical dates in the US debt calendar when loans and interest need to be repaid to those who lent money to that nation. No one seriously believes the US will renege on its obligations but it is going to be fascinating to see how it works out. This is a great spectacle for economics voyeurs.

With trade union leaders screaming “blackmail” and dismissing severely damaging striker action as “normal” our country is lurching into a damaging phase of failed labour relations. The most dramatic example of this was the decision by BMW not to expand their existing South African plant to produce a new model. Marxist Minister Davies hurried round to the luxury carmaker for a chat but failed to change their mind. They politely pointed out that there are other places in the world they can make their cars where the workers are less truculent and more productive. It’s both tragic and criminal how our leaders still place ideology above reality.

US commentators are getting a bit overexcited about the prospect of having a female governor of their central bank (The Federal Reserve). We've had one for years and she has done a good job changing interest rates down once and criticising the government for ineptitude a few times. It would be fun to be a fly on the wall when they get to meet each other.  Probably there will be high fives just as soon as they are in private. Before long they will be swapping stories about how to tease investors with “forward looking statements”.

The Winter Olympics kicks off in five months time and already the rather tacky and boring business of transporting the Olympic flame from Olympia to Sochi in Russia has begun. The problem is that the darn thing keeps blowing out so alongside every grinning and waving athletic torch bearer there is a podgy man in a suit bearing a very unofficial Bic lighter. Furthermore, its route includes an excursion to the International Space Station, where presumably naked flames are not all that welcome and so the Lighter Bearer will just have to kick his heels out on the rocket landing zone until the torch is returned to earth.

It must be seriously annoying to see your name in one those articles about the world’s rich people.  This week a fellow old Rhodian was revealed as one of Africa’s wealthiest. He will not be pleased. Not only does such exposure demolish any privacy that the more reclusive billionaires might crave but almost certainly the reported value of your nest egg will be way too low or too high and there’s nothing you can do about it.  Now not only do the mendicants and tax men learn where you live but if you have dropped a few billion since last time, you will also have to suffer the sniggers and pity of the others on the list. Shame.

Contrary to popular assumption I am right behind the Sharks in their match with Province at Kings Park tomorrow. I have even snared a ticket and will go along to witness the big men of SA rugby face off. And Sebastian Vettel ought to just about wrap up the F1 championship in Japan on Sunday.

James Greener

11^th October 2013

THIS WAS NATIONAL OLDER PERSONS WEEK

The first page to open on my computer every day is a wonderful “picture of the day” from NASA. Since Tuesday that website has been off line because Washington has decided that it can best save money by sending home all the government employees who actually do something useful and helpful. How about closing down instead those sections of government which made the decisions that landed the country in this mess? Those folk must be among the highest paid on the payroll and on current form are pretty useless at their jobs. Try a year or so without the legislators and see if anyone misses them.

We could use that idea here as well. Send the whole parliamentary circus off on a one year unpaid sabbatical and just leave someone behind to switch the lights on and off and feed the official cat. Is there a single piece of legislation and regulation in the pipeline that would actually make the country work better? Unfortunately, already through the mill, is an act that allows the state to have a lottery license. Clearly the politicians have become jealous of all that lovely lolly going to trivial good causes and charities. Ominous.

The effect on the markets of the US government shutdown is not yet particularly marked. This must be mostly because no one believes it will last. If it did it would mean that the largest borrower on earth would be unable to borrow any more money (except for replacing maturing loans) and that would surely be very good for interest rates in the US at least. In this instance good means won't go up.

The American computer company Apple has $146 bn cash in the bank. That’s enough money to run the entire South African government for a year and leave a lot left over to pay off some of its debt. Isn’t it astonishing what private enterprise can do. Predictably this cash pile has the socialists drooling and whining that life is unfair and they should be given that money to help the poor. Meanwhile Twitter, another “social media” site hopes to raise $1bn in a listing. Might that be the pin that meets the bubble?

In a rather low key announcement Pres Zuma lowered the age for the state pension to 60.  That's a pretty generous move, given that elsewhere in the world the trend is to raise the starting age in order to try and reduce the cost of the benefit. Did he run this idea past the National Treasury? It will cost a fair bit. Mind you they are saving money by for example not having anyone on the defence force staff who can tell them how many working aircraft the nation has. Other economies in the defence force include cutting down on training paratroops. A board of inquiry has reportedly determined that on their eighth jump, paratroopers should be trained to such a standard that they should be able to identify a torn parachute and deploy their reserve ‘chutes successfully. Any one who thinks it would be good to have those skills even before jump 1 is obviously a sissy.

The call for tenders to supply something called Nkandla VIP Sanitation is rather alarming. What are they using now behind that million rand fence?

Hopefully the All Blacks will be deeply intimidated by the Ellis Park venue tomorrow. They ought to be carrying deep institutional memory scars of previous defeats at this ground. Perhaps if I can keep writing like this right up to kick off tomorrow I will steady my nerves and convince myself that it is all going to end well.  Go bokke.

James Greener

National Teachers Day (I believe)