A DELUGE OF DATA, DISCOUNTED

That was quite a week and not just because my old friends over at the Gauteng Enterprise Propeller (honestly) went into reverse thrust by going on strike. Workers there allege that the blades have been screwing themselves into ever higher pay scales while neglecting the cogs and shafts. The media and politicians worked themselves into a great state of excitement as several allegedly significant statistics were released. The market, however, was pretty much unmoved and the JSE All Share sailed on all week just north of the 22 000 mark, suggesting that none of GDP, CPI, PPI, repo rate or the rest are of much interest. Even the rand shimmying to below 8 per US dollar appears to have been expected. Market performance in May will still be in the region of an excellent 8% despite this rather flat week.

Governor Mboweni totally ignored the singing and dancing throng that pitched up at his bank demanding that he open the window and throw out folding money. Reportedly he did not even bother to send out a lackey to collect the demands and instead concentrated on getting just the right nuance to his forthcoming rate cut announcement. A further (and final?) stomp on the “Rates Down” pedal has lowered the price of money to below the level of inflation. The theory says that money this cheap encourages borrowing and that spending will ensue. We will see. A problem is that the Credit Act suggests that lenders deal only with borrowers who have a job. As the aforementioned throng wanted to point out, there are not of lot of jobs going.

The official measure of economic activity is a rather blunt and belated tool. When published just four times per year it reports on a three month period that ended almost two months previously and reveals things that anyone who actually works for a living already knows only too well. And this is that compared to a year ago far fewer customers and clients are buying goods and services. About all the official numbers actually do is to permit economists to shade in their calendars and label the period “Recession”. Officially. Nevertheless it is turning out to be an exceptionally harsh recession and probably did not end in March. Precious few company reports are remarking that the current business environment is looking better. Standard Bank has even seen fit to revise down a previous forecast of their results.

In the US, General Motors are also studying the calendar to choose a propitious date on which to declare themselves bust and let the shareholders (including every US taxpayer) kiss their investment goodbye. The smell of burnt fingers could match the aroma that will waft over Swaziland if the reported proposal to brand on the buttock everyone who is found to be HIV positive is carried out. Back home we have our own problems with identifying the fit from the sick. Apparently there might be a reason to think that an admission of guilt for fraud is a less serious barrier to public office than a conviction for the same offence. Nearly as offensive is the news that taxpayers support a Spousal Support Office in the Presidency. The new man’s current spousal complement of three is produced as a reason for the preservation and even growth of this astonishing office.

There is so much sport to follow at the moment that tomorrow I am in danger of tuning to the channel showing the British Lions facing the Chiefs at Roland Garros for the FA Cup. On Sunday, however it should be easier to find the action from Murrayfield as the mini ‘bokke nail the Sevens Series. Go Bulls.

James Greener

29^th May 2009.

THE CADRES MARATHON

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

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

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

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

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

James Greener

22^nd May 2009.

JOBS FOR PALS (AND THEIR PALS ALSO)

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

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

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

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

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

James Greener

15^th May 2009

THE TSHWANE SHINDIG – NOT ANOTHER IPL TEAM

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

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

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

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

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

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

James Greener

8^th May 2009.