Slasher's coffee beans

Jozi, Jozi. As US markets opened the drill sergeant barked about turn. Too afraid to disagree, we turned and marched in the direction with the bulls nearby. And it was just about the time when the storm that had been brewing for the afternoon decided that a serious downpour was in order and we were ready for the first real highveld storm. Marvellous stuff I tell you.

Anyhow, the scoreboard at the end of the day did not clearly reveal what the day had actually been like, the last hour and fifteen minutes going against the trend of the day. The Jozi all share index closed at 24994, up 49 points.

Righto, CNBC-TV18 in India are reporting that an extension of the Bharti slash MTN deal is unlikely. Their sources tell them that the deal structure is in place, handshakes all around. SingTel are key you see, Bharti and themselves are undergoing a separate set of talks. Take a listen to the CNBC-TV18 Indian feed. Can India make the semi finals after yesterdays washout?

Nigeria. And oil. And guess what, now China. Well, that is also a pet hate, China is a country, not a company with endless resources. Much of the company ownership is with the state, but the companies I dare say operate at arms length, with the state issues (as a shareholder) top of the agenda.

CNOOC will look to acquire six billion barrels of reserves from the Nigerian government, in what could turn out to be a deal worth 30 billion Dollars. Ah, that should help. But the report goes back to the FT, which is being questioned by many a party. CNOOC has said no comment. Nigerian sources say that the size of the deal might not be that size, but reiterated the need keep your friends close.

Who cares whether or not Gordon Brown is on pain killers and/or anti depressants. I don’t. Should I? Whether I worry or not about it matters not. Alistair Darling, oh he of bushy eyebrow fame, defended the PM and said something along the lines that history would show that the PM managed to steer the UK out of a great depression.

Good, enough about the PM and his health issues. By the middle of next year we will know whether labour have done enough to be re-elected. Many say not. Well, many being the Conservative folks, who have been waiting for this opportunity for a while.

ECB president Jean Claude Trichet said hey guys, now is not the time to exit our stimulus packages. Not now, sorry guys. And as ever, no insight into what we can expect rates to do in Europe.

What is that about British Airways launching a brand new business class service only between London and New York. A premier service that takes off at a steep click from London City airport (close to the city of course) and will refuel at Shannon airport in Ireland, processing passengers through US immigration and of course saving time in New York. I think it will work.

No distractions, only business class passengers, internet, use your mobile as much as you want, Blackberry away. Do what you must chaps. One question, if you have a cabin full of chattering suits, how can you keep focused? Clearly if you are working on something sensitive, you would have to just be texting, emailing. But then again, you have enough time across the Atlantic.

OK I am officially mad with COSATU. I heard an interview with Alisha Seckham of CNBCAfrica at lunchtime with Sdumo Dlamini. CNBCAfrica called Dlamini in Durban. Now Sdumo speaks well, but it seems to me that he has his little red book at hand at all times.

Two comments struck me between the eyes, firstly the one where comrade Dlamini said that the Chinese could be used as an example where extreme socialism had worked well. If I had the chance, right there I would have pointed out that labour in China asks and expects no quarter given. Period.

And then comrade Dlamini’s passing shot was that communism was the end goal here. And don’t try pointing out that communism had failed elsewhere, don’t even try that line, because the comeback will be, well we need a South African version. And state enterprise run badly, no worries, our plan is a much better one.

I have an idea. Send comrade Dlamini to North Korea, immediately at once. He will find that he has the only cell phone in North Korea. Yes, this is not meant to be kind, extreme socialism and communism does not work, go and see for yourself. When you get a chance, read the Times online interview that Chris Barron did with comrade Sdumo Dlamini.

Oh yes and whilst you are at it Sdumo, I mean comrade Dlamini, have a look at the wonderful results that SAA just released it. I cant quite figure out how they managed to dupe anyone that they made a profit, take this out, that out, and there you go. I actually want to see the financial statements. Anyone got a copy there? Send it onwards. We can post it.

New York, New York. What a ripper. A big heads up for Cisco, up nearly five percent, Barclays gave the Cisco disco an upgrade. Dance floor and disco ball time, flared pants and bad glasses, here we come. Xerox not so lucky, announcing a deal, and as the acquirer the stock plunged 16 percent. Right, tells you what those folks thought of the deal. Deals, deals and more deals starting to emerge, that is a good sign folks.

Session end the Dow Jones Industrial Average closed 124 points to the good at 9789, the nerds of NASDAQ added nearly forty points to 2130, whilst the broader market S&P 500 at the bell had added 18 and a bit points to 1062.

The oil price is better at 66.97 Dollars per barrel. The copper price is lower after a better session last night, 2.71 Dollars per pound. The Gold price is flat at 993 Dollars per fine ounce. The platinum price is also flat at 1275 Dollars per fine ounce. Flat and steady. And the Rand, where do I see that going? No idea. But last trading at 7.38 to the US Dollar, 11.72 to the Pound Sterling and 10.78 to the Euro.

The currency is strong, that could hold us back, but the momentum is back with the bulls. And maybe, even the ones from north of the Jukskei.

Best wishes

Sasha Naryshkine
sasha@vestact.com
011 022 5440

Jozi, Jozi. A beautiful weekend on the weather front, the cricket, unless you are a crowing pom, then I don’t want to talk about it. OK, got that out of the way. Friday was a sell down day, and that could all be attributed to weaker a resources complex, top stocks dragged the all share down, the Jozi all share ended at 24944, down 418 points. Ouch.

MTN and Bharti are near a compromise says the Wall Street Journal, citing their favourite folks, people familiar with the situation. The article suggests that a cash deal is close, with the idea of dual listing structure being parked for the time being, as that would require Indian law to be rewritten.

Over the weekend in Pittsburgh, Indian PM Manmohan Singh said he supported the deal. Yes, like I support the Proteas, I really do. One that seems to have gone unnoticed was that last week Indian regulators last week announced that companies taking more than 15 percent stakes in another, would be required to make an open offer for another 20 percent. 35 in total, remember than MTN would want to see their stake at 36 percent of Bharti.

But the article goes on to suggest that the deal might see some nimble footwork that the deal might happen sooner, but perhaps another roll over of the time is to be expected. The FT over the weekend suggested that Indian PM, Manmohan Singh had a word with our president Jacob Zuma over the weekend, raising issues that too many rumblings from government concerned him. Me too, with you on that one PM Singh.

Don’t like Jacob Zuma’s visit to Venezuela. Don’t like to be friendly with people who have no regard for business and look to nationalize key assets of national importance. Sorry, those stars on the flag look like an upside down smile, and this visit is the same, at least to me.

Inflation runs quite hot in Venezuela, 20 odd percent (historically about the norm), the economy is largely dominated by the oil and gas sector, accounting for around one third of the economy and the bulk of exports. According to Wiki: World Economic Forum ranked Venezuela as 82 out of 102 countries on a measure of how favourable investment is for financial institutions.

Here is the part I dislike, a lot, 400 basic food stuffs prices are controlled. This in an effort to keep inflation under control and protect the impoverished, politics no doubt played a key part in these decisions. Funnily enough the Gini coefficient, a measure of the wealth gap, is quite high in Venezuela, much like here. Just for the record, don’t like mixing with Venezuela as it stands right now.

The most recent nationalization was that of the coffee industry, that is still coming. And the attempt to stem inflation by nationalizing, not working. Because government is not better than business, think about it carefully, from a productivity and accountability point of view. That is all that I have to say about that. Check out a recent Forbes piece.

And then Standard Bank announcing that they have completed their tie up with that Russian investment bank, Troika Dialog, one of the top dogs in the Russian space. In short Standard Bank have injected their operations into Troika, plus there is a cash element, in return for a one third stake in the investment bank. Standard Bank certainly are positioning themselves as an emerging market bank over the last decade.

So it seems that Angela Merkel is on track to win a second term in Germany, whilst most world leaders were in the G20 afterglow, Merkel had a fight on her hands. I was also thinking about the days that elections take place. On a Sunday.

Don’t declare a public holiday like our local tradition, but rather every four years, if you want to exercise your democratic right, then do so. Japan also had elections on a weekend, also a Sunday. In the US, it is not a public holiday, but rather go and take your time to vote, lunch hour, after work, before work. These are productive economies with much lower unemployment than ourselves, but choose to vote on a working day, or a weekend.

A lesson indeed, because we should be looking to eke out every last working minute in order to strengthen the economy, not take a holiday in the middle of the week to exercise a democratic right. Anyhow, back to the German elections, Angela Merkel is set to win a second term, no mean feat having driven her way through an economic tornado.

The outcome will be that the alliance between her party, the Christian Democratic Union and the Free Democratic Party, better known as the FDP, as well as the CDU sister party, the Christian Social Union of Bavaria, have enough to see them through another four year. My favourite is the German Pirate party, I kid you not, who got 46 thousand votes. They have less to do with pirates than with protection of information dissemination as one of their principles, but I like the name.

So the outcome suggests that this is good for business, modest tax cuts are on the cards and labour reforms. Excellent, moving in the right direction there is my guess. Plus, delays on some financial reforms are set now to take centre stage. What do you think when you hear the word Germany?

There are a couple of really good pictures that I wanted to share, have a look, they are posted by a conservationist that I follow on Twitter, her name is Paula Kahumbu. Check out these two pictures that she posted: Corruption and NSE. Clearly the second one is not the exchange, but the first one needs one to read the commentary lower down.

New York, New York. Drifting wood. Err, drift wood. Tech and transportation dragging on the overall market, healthcare doing alright. Session end the Dow Jones Industrial Average closed at 9665, down 42 points. The nerds of NASDAQ fell 16 points to 2090. The broader market S&P 500 lost 6 and a bit points to 1044.

Righto, the oil market is looking soft, same old concerns, lower demand worries that should see prices lower. I don’t know, it trades where it trades. 65.76 Dollars per barrel. The copper price is also much lower at 2.67 Dollars per pound. The gold price has also sold off to 990 Dollars per fine ounce. Lastly, the platinum price has also sold off to 1275 Dollars per fine ounce.

The Rand is trading at 7.45 to the US Dollar, 10.90 to the Euro and lastly 11.83 to the Pound Sterling. Expect a sell off to start with.

Best wishes

Sasha Naryshkine
sasha@vestact.com
011 022 5440

Jozi, Jozi. Last check in as far as markets were concerned was Wednesday, yesterday was a holiday here. Heritage day. Not a big braai person, I can make one and cook well on it, but my variety of foods to cook on a grid are smaller than most people.

That is right folks, I am a vegetarian. Recently I added fish to the menu (veggies of the sea), so if you know of any good fish braais on the highveld, let me know. Instead to celebrate Heritage day I wore my bafana-bafana jersey, they need all the help we can give them, even if it just means wearing your jersey. Of your favourite international soccer team, not allowed another one are you?

Away from braais and back to the action Wednesday, we slipped in the last part of trade to end the day down 0.37 percent on the Jozi all share index, closing up shop at 25363. Resources were flat. Completely flat.

Liberty International raising some more money, by running an accelerated book build exercise. Around ten percent of their issued share capital opened for subscription. The price ended up being around 11 percent discount to the closing price in London Tuesday.

The price bottomed out at the price that the issue was got away, 500 pence, the market always knows you see. Proceeds of the sale will goto restarting investing in regional shopping centres. By some measures this is a good outcome, raising monies through the market is easier and even though there was a discount, it was done. Many folks still worried about commercial property and finance issues, particularly in the US.

A Jamboree of leaders from the worlds big economies are looking for some sort of coordinated economic crisis rules I guess you could call it. Well the FT called it a Jamboree of the UN and now the G20. UN from New York, and G20 from Pittsburgh. It’s the pits could be seen as a good thing, at least for this meeting of the G20.

And the G20 will replace the G8. Who are the members? Check out this page, we are there. Gill Marcus will be the new central bank representative, Pravin Gordhan and then of course President Jacob Zuma. Who will be giving a better account of himself to CNN than the honourable Robert Gabriel Mugabe did yesterday. Let’s just say that President Jacob Zuma is likeable and Bob Mugabe is, well, how do you say this nicely, not…

I was watching bits and pieces yesterday, and came to the conclusion that these global talk shops are difficult to find a common ground if only for one reason. And that is continuity. Every time that there is a new election and a change of power in a specific state, now 19 of them plus the Euro zone, then it makes it difficult to always be on the same page. How are you ever supposed to coordinate that many powers to have the same agenda, even between meetings.

The FT and the WSJ have different takes but the same conclusion, whether China likes it or not, they have been thrust to the front of the queue. Thanks to a fast growing economy. I guess leadership helps too. Also the IMF comes under scrutiny, perhaps more voting rights from emerging nations, in their say of how the fund is run.

I must be honest and this is a pretty narrow view, but the more you contribute, the more of a say you have. If China can contribute more, then they must have more of a say. Whether or not the Chinese want to contribute more, whether or not the Indians want to contribute more, that is another question. I was pretty shocked to see that Venezuela find themselves quite high up on the list, in terms of the quota. Perhaps this is a function of the past, post world war two.

China has outwardly stated that they think this is a good thing, more economic say. It is ultimately about recognising that the economic shift has come and are here to stay. One of the few things that I agree with about those bearish types on the Dollar, Faber and Rogers, these economies are becoming bigger participants.

New York, New York. Markets on Wall Street slipped as housing data was not as favourable as the expectation was. That I guess is the whole thing about having expectations and forecasting data for the short term. A poor number will see stocks in the sector and related services to that sector sell off. Todays price is a reflection of what the future holds.

Session end the Dow Jones Industrial Average closed at 9707, down 41 points. The S&P 500 ended the session off 10 points to 1050, whilst the nerds of NASDAQ closed down 23 points to 2107. Energy, materials, even financials selling off, across the board. On housing news. Got that? Perhaps that is too simplistic.

The oil price was last at 66.19 Dollars per barrel, going backwards fast as inventories rose more than expected, as well as the Dollar recouping some losses. The gold price is also lower at 997 Dollars per fine ounce, with the copper price lower at 2.71 Dollars per pound. The platinum price is also trading lower at 1297 Dollars per fine ounce. The Rand is weaker, again as the Dollar gains some traction, 7.48 to the US dollar, 11.98 to the Pound Sterling and 10.98 to the Euro.

A lower start here as we catch up. Some important data out of the Us later in the day will no doubt see where we end up.

Best wishes

Sasha Naryshkine
sasha@vestact.com
011 022 5440

Jozi, Jozi. A good day, which could have been a very good if the currency had not firmed and New York markets had not been at their worst levels of the day around when we were closing. The MPC conclusion was a non event really, there were a few that thought there could be a chance of a rate cut, but it was not to be.

The CPI read came in at 6.4 percent, so inflation certainly abating, and I suspect the firmer currency could see us sink into the band as early as the current month. Session end, we saw around half a percent better on the Jozi all share index, up 115 points to 25456.

Climate change. The debate is certainly growing and those who five years ago thought that this does not affect them, well there are more people in the camp that believe that we have to do something to curb emissions. I often think that the movement to a greener earth gathered momentum from a very bad hurricane season in 2004.

Pictures from the Beijing Olympics and the extraordinary measures that the Chinese officials took to clear the air was again another reminder that we need to do more. Polar bears drowning because the distance between floating masses of ice, just got further and further. And of course the Al Gore movie. He might not have got the top job, but he certainly raised awareness.

Former US president Bill Clinton was on CNBC yesterday talking about this, he is absolutely captivating. We sat and watched the entire interview without the usual commentary, normally from talk too much me. Bill Clinton implied that he was embarrassed that the Chinese authorities were doing more to curb emissions and move to a greener world. One where the steady warming comes under control.

All this at the UN in New York yesterday, US president Barack Obama urged all the big culprits in emissions to act together on the issues of pollution. The big meeting will be in Copenhagen at the end of the year.

Perhaps the warmest ever Copenhagen for that time of the year, average high in Copenhagen over December is 4 degrees Celsius. Wonderful, wonderful Copenhagen said Danny Kaye, I remember as a kid listening to this on long play, Danny Kaye. Perhaps that will be the theme song, listen up.

At the same time whilst the Americans were trying to build momentum going into the meeting, the Chinese failed to deliver what Bill Clinton had talked about earlier in the day. Chinese President Hu Jintao delivered a commitment without putting a figure on where he wanted to be by 2020. I guess for the time being the developing nations, who need cheap energy, will be trying to defer this for as long as possible.

Often the argument that comes from India and China is one that, alright, so you pollute and polluted like crazy when developing, but you want us to subscribe to much more expensive forms of energy, that are much greener? Yes?

But we (China, India and all the other developing nations) still need to drag ourselves out of the same place you were when you starting to developing. And now the rules have changed. If you think healthcare is a tough one, I think getting folks who are completely marginal to think about climate change is even tougher.

To put it into context, you must now appreciate that the eyes are on China, they now emit more CO2 than the Americans. But have over four times the people. Another card often that emerging markets play is that they bear the consequences of the angrier planet, whilst the Western world still pumps away, an realise that they are onto a bad thing here.

I agree with Jeff Immelt here, the chief of GE. The green theme is perhaps the single biggest agenda facing the world. Because it is real. I often think that a simplistic approach of planting more trees than you know how can help, but that is way simplistic. The trees planted should supply shade during the summer months. Studies show that in California, electricity bills in the summer can be reduced by 30 percent, by planting shade trees on the Western side of a house. The sunny side. Turn down the aircon guys……

So where are the opportunities for us down here, from an investment point of view? It might only be platinum for the time being. With emissions controls and alternative energy spaces set to grow in importance, I think that the idea of owning a green stock in your portfolio is a lot more important now than ever before.

Sadly access here is limited, but in New York it is boundless, alternative energy. Solar, wind, tidal, there are now funds completely focused to the investment themes of the future. Fad or the floor (the start), time will tell. Personally, I think it is here to stay, fossil fuels will only last as long as we can use them.

It takes a while to turn dead organisms into fossil fuels. Millions of years you see. We have less than 50 years worth of oil left at current consumption rates. And lets not forget, the stones did not run out when the stone age ended.

New York, New York. Goldman Sachs was reported to have taken a stake in Geely Automotive, by buying convertible bonds and warrants. Another sign that the future of auto makers lies to the east or west, depending on which way you look at it. 14 hours 48 minutes travel time, nearly 12 thousand kilometres. 12827 kilometres from here (Jozi) to New York. Takes a little longer than 15 hours, around 18 hours flight. So Shanghai is closer to New York.

But that does not explain markets in New York, that enjoyed a fairly good day. Energy and materials clusters did well as commodity prices rebounded. The Fed FOMC meeting concludes today and some folks are looking for specifics around exit strategy from the extraordinary measure, the state of the economy, are matters improving, just the general tone of the speech.

Session end the Dow closed at 9829, bring back those Dow 10000 caps, up 51 points, whilst the nerds of NASDAQ added eight and a quarter to 2146. The broader market S&P 500 notched up seven points exactly to 1071.

The oil price is trading flat on the session at 71.69 Dollars per barrel, the gold price is slightly firmer at 1017 Dollars per fine ounce, whilst the copper price is off a touch at 2.82 Dollars per pound. The platinum price last traded at 1331 Dollars per fine ounce, off the best levels of Hong Kong trade. The Rand is strong at 7.37 to the US Dollar, 12.09 to the Pound Sterling and lastly at 10.91 to the Euro.

Hmmmm…do you think we might be uncommitted at these levels. Or maybe the money managers long cash might turn the other way, tired of swimming against the tide. Perhaps.

Best wishes

Sasha Naryshkine
sasha@vestact.com

Jozi, Jozi. A down-down day in the city founded on gold, thanks in no part the resource stocks, down two and a half percent, sending the overall market down one and three quarters of a percent, or 451 points to 25341. In the green department were the retailers, perhaps expecting a surprise at today’s MPC meeting, the banks eked out a minute gain. Other than that the rest of the market had a bad time.

Everybody is talking about valuations. A little stretched. Earnings have to catch up. Don’t get me wrong, I really “dig” stock market history, but I don’t think that you can compare long periods and talk about long term means. And so on and so fifth as Victor Borge would say.

Paul and I were talking yesterday about the bad old days, in the mid eighties were finger wagging and don’t push me too far led to further international withdrawals. We reneged on our government debt payment obligations. We will have to explore this obsession about short term valuations, I promise.

Not just here. This morning the UK office of fair trade, our competitions authorities like, fined rigging companies in the UK, 103 of them in total, around 130 million pounds. For unfair business practices. So if you think that this is a problem that supposedly plagues our big companies think again.

I suspect that the competitions authorities here are putting pressure on business to steer clear of the practices of the past. Talking construction, check this beautiful picture I took this morning on the way to the CNBC studios.

For those of you who don’t know Sandton, that is going to be the Sandton location of the Gautrain, all of one block big. Talking Gautrain, I was on the telly this morning with an academic from UJ, a Dr Mostert, and we were talking about the BRT. He is clearly passionate about it, we had a conversation in the parking lot after the show, and he had some useful insight.

He uses public transport all the time. Had a whole host of BRT stubs in his pocket and was impressed in the short term. He pointed out off air lots of issues, and it all points to a slight apathetic approach from all parties and perhaps the coffers running dry. He pointed to my motor vehicle and said, keep driving that and subsidizing public transport. So there, if you think you are not doing your bit, you are wrong.

OK, so I think that we need to explore the COSATU issue and the impact on business. I was sitting here thinking about where labour is strong and where business attracts a hard time from labour, but still manages success. Because obviously if you can improve labour productivity, then you can up output, which means you might be pressed to meet demand from a growing wealth pool, leading to greater employment down the line.

All sounds rather simplistic, but often the old saying of employing someone with a great attitude leading to greater productivity most certainly hold true. Provided of course that you can do the job. At the moment we have an uneasy truce between business and labour. Labour is very outspoken, whilst calls for business to be a little more forthcoming have so far yielded very little.

COSATU took a big swipe at the Minister in the Presidency for Planning and last minister of Finance, Trevor Manuel. And now the official word is that COSATU are telling president Jacob Zuma that he should not take it for granted that their support will be forthcoming in 2012. Got that everybody? The way I see it is that COSATU cant go it alone, the communist party cant go it alone, if the two paired up, where would that leave them?

Ultimately it is all about that ANC ticket, I doubt that COSATU would back the communist party 100 percent. Well, I guess never say never. At the same time official data out this morning suggests that the second quarter saw job losses of 67 thousand folks. Those are less consumers in the system folks.

If you are looking for the entire piece, here goes.

A very useful, insightful look into the labour pool in South Africa. Total employed according to StatsSA, 8.259 million folks for the second quarter to June 2009. Nearly 200 thousand less in the official workforce two quarters ago, the only good news is that average earnings have increased 6.4 percent over the last year.

That is below the inflation rate, last read being 6.7 percent. It is the average that will be pulled up by big ticket increases, I think that some of these big salaries, specifically in the public sector, will pull the average up this quarter. Jacob Moroga of Eskom earns 4.960 million Rands for the current financial year. Ben Bernanke the Fed chair earns one third of what Tito Mboweni earns, which is 4.334 million Rands a year.

Bernanke makes 191 thousand Dollars a year, handsome yes, but think of the extreme stress the man is under. I think that some public servants need desperately to see government jobs not as remuneration drawings, but rather as serving voters. Who are no fools. There, some more food for thought on executive (public servants) compensation.

Perhaps the Ben Bernanke comparison is poor, he gave up a 300 thousand Dollar package at Princeton for the job of Fed governor. Alan Greenspan rakes in the bucks post the job, for his speech giving and insight activities. So park that salary comparison, but you know what I mean.

Some dude (by the name of Warner) was on CNBC yesterday afternoon here, live in Sydney talking to Mandy Drury. 23:45 Sydney time. Talking Asian markets. For the benefit of American viewers. Do the Australians see themselves as Asians in the same way that the Scots see themselves as part of Great Britain? Or is it more as the fellows from Quebec see themselves as Canadians? Or have I got this completely wrong? Is it the way that Europe sees the Russians as Europeans? I don’t know the answer to that.

And then I have to mention this, my wife reminded me this morning. My daughters best friend is a little girl called Hayley and she had a delayed birthday party over the weekend. I was sitting in the sand pit with them and saw the girls panning the sand through a sieve into a bucket. I said: “are you looking for gold?” to which she replied “yes”. I asked her (she turned four) “what do you use gold for?”

She thought for a while and I could see she was thinking for an answer, “Pirates use gold!” she shrieked with my delight, and finally the penny dropped. Those folks trading gold and gold companies, are they pirates? Perhaps, old school assets with a historical link, perhaps.

New York, New York. Well off the worst levels of the day and folks putting their Dow 10000 caps back in the drawers for the time being, ready for another day I guess. Where were you when the Dow crossed 10 thousand for the first time? 1999 March. So if you had the cap back then, it would be looking a little frayed now.

Said on the box this morning that it was 98, sorry, 99. Yesterday the Dow Jones Industrial Average closed at 9778, down 41 points. The broader market closed three and two thirds of a point lower at 1064. The nerds of NASDAQ actually added five points to 2138.

Right, the pirates gold is trading at 1015 Dollars per fine ounce, the oil price is last at 70.30 Dollars per barrel. The copper price is also higher, last at 2.84 Dollars per pound. The platinum price is higher at 1326 Dollars per fine ounce. The Rand is last at 12.11 to the Pound Sterling, 10.97 to the Euro and 7.44 to the US Dollar.

Expect an up day for starters. Long message. MPC announcement later, going to have to struggle to compete with the cricket coverage.

Best wishes

Sasha Naryshkine
sasha@vestact.com
011 022 5440

Jozi, Jozi. A hacksaw trading day on Friday, spent wallowing in the red for most of the day. Not helping and hindering any sort of advance were the resources, down one and a half percent, health stocks had a pretty good run too. Retailers were in the winners column too. Session end the Jozi all share index closed at 25792, down 128 points.

The first day of the Monetary Policy Committee starts today, suggestions are that the recent Rand strength might have opened the window to cut rates even further. On top of the last surprise cut in rates. Cut the repurchase rate below the inflation rate?

Not too sure what the credibility of the Reserve Bank will be, but this apparently is a no-no. So we wait and see, a firmer local until might see a more positive inflation read. Which is a good outcome. Because that could mean lower rates. Which is what those geniuses from COSATU want, not so? But COSATU don’t want a stronger Rand. Got that?

Apparently local treasury is on their way to India over the MTN and Bharti transactions. There have been mixed views on the mega deal, I was reading over the weekend that some folks (from an Indian perspective) thought it was a good idea, some thought it was a bad idea. Some seemingly had no idea. Why should MTN be seen as a national asset? I know that the South African business is the cream, but the cup is getting bigger and the coffee portion more important.

MTN is a company that was built by initial shareholders and stakeholders taking risks. Calculated risks. Transet (pension fund or Telco assets, not too sure) were part of the initial consortium that was in the MTN stable that bid for the licence. And that was built with state money. But the fellows who ran the company took big risks that paid off, on behalf of shareholders.

But COSATU being opposed to it, I think that has too much from a headlines point of view. Well, that is if you are in my camp, I am by no means rubbishing labour, but they seem to be opposed to all deals. Vodacom and Vodafone springs to mind. Hey guys, these inflows mean that people like operating here, and that means that they have thought long and hard about labour too. Perhaps a bigger company ultimately might mean more jobs and not less.

I just want to know on what basis do COSATU want to reject the merger of the Indian and South African company? Job losses? MTN is a publically listed company answerable to shareholders. Are MTN employees even unionized? Or are the unions worried that MTN will become more efficient and eat away at Telkom. Stupid suggestion. Cant see the merit in opposing the deal. Sorry guys, think of something else.

I honestly don’t think that the pay issue is going to meet any middle road. I am talking about the financial and banking services space, excessive executive compensation, unchecked loan officer compensation, too many risks taken by commission based folks chasing the buck. Because all these folks with pay caps are going to feel aggrieved, practices of the past disappearing.

They are necessary though, the risks that all financial institutions, especially the bigger ones have in the bigger picture, when strung into the financial web. It seems that the least regulated areas were the ones that caused problems. Exotic insurance products. I must admit, I don’t think that credit default swaps are the problem, perhaps they just need a platform to trade on.

Insurance against default is in the interests of the bond holders, not so? Like going short on a companies stock and facing the consequences thereafter if you are wrong, surely the same applies to credit default swaps? If speculators and punters start betting that a company is facing a bad time, real life scenario General Electric last quarter of 2008, and they turn out to be wrong, then surely they stand to lose in real terms.

Unless of course they were bond holders and just looking to be neutral for a while, so for those trading and not covering themselves from an insurance point of view, you take your chances. The problem is creating the perception that there is something wrong with the company that leads to real life scenarios that credit lines get withdrawn. Those are the real life consequences of perception.

New York, New York. Markets off their highs on Friday, losing around half of the gains in the last half an hour, although if you have a look at a graphical representation of the trade up to midday, markets were worse off than where they finished. Session end the Dow closed at 9820, up 36 points, the nerds of NASDAQ added 6 to 2132, whilst the broader market S&P 500 added 2.8 points to close at 1068.

The Rand is trading at 7.50 this morning to the US Dollar, 11 exactly to the Euro, 12.14 to the Pound Sterling. The oil price is slightly worse on the session, but comfortably this side of 70, last at 71.36 Dollars per barrel on NYMEX. The gold price was last at 1003.8 Dollars per fine ounce. The copper price is last at 2.82 Dollars per pound. The platinum price has dipped to 1317 Dollars per fine ounce.

Expect a lower start today, that is the theme seeping through the futures markets and through from Asia.

Best wishes

Sasha Naryshkine
sasha@vestact.com
011 022 5440

Jozi, Jozi. With the reserve bank governor worried about the levels of the currency, the local unit weakened up a little, helping us on a very strong volumes day. The volume could be put down to futures closeout, thanks for that chaps.

As I pointed out to a peer, it only happens four times a year, and if you add up all the time allocated to futures closeout, it is less than one trading day a year. 22 billion Rands worth of trade on the day, it was like Richtersveld rain. Richtersveld. Have to get there one day when the flowers are blooming.

The Jozi all share index up 342 points to close at 25920, up 20 percent for the year now. Banks on a tear, up 3.8 percent. Construction powering ahead, 4.7 percent. Gold miners and health stocks not winning. Nor the platinum stocks, precious metal prices falling a touch.

Barclays capital downgraded Anglo American yesterday from overweight to equal weight. Now that would sound like a good thing if you are getting ready for the beach, but this has to do with the price run up and valuations. Actually, the reason was different, Barclays reason was that it was increasingly likely that Xstrata will walk away from their nil premium merger of equals. I could have told you that.

Wow, I don’t believe it. Paul got a call yesterday who was randomly dialling numbers saying that he was calling from the JSE. Lots of noise in the background. There was a great opportunity to make around 25 percent every six months. There were a few laughs and the guy was told that he was speaking nonsense. Let me know if you have got this call before, and if so, where to send the money. This is one for the FSB.

This is going too far. In my opinion, because this is an opinion piece, right? Right, so as long as you know where it is coming from. I know that an overhaul for the financial machine should happen and a careful look should be given to the unregulated areas, but this latest proposal on pay curbs stops short of ridiculous.

With the upcoming G20 summit in the US, French President Nicolas Sarkozy has already fired a salvo across the bow, threatening to walk out of the meeting if the issue of bank bonuses are not met. But how do European Union leaders planning to threaten sanction against countries with excessive bank pay, help. How will that help.

I am thinking that excessive pay in sport should be tackled front and centre. To think that some of these sportsman and woman get paid to do that for much more than financial types who are equally talented. I know what is going to happen here. People are going to move from financial institutions governed by these laws to somewhere else, more accommodating. Watch.

I personally think that folks getting crazy pay packages is simply out of whack. Incentive based packages whereby the employees interests are aligned with that of shareholders, that is the right way. I agree with Lloyd Blankfein, top management must be locked in. Oh, and just in case that you think Blankfein was handed his job, nope, his dad worked for the postal service in Manhattan. So he worked hard for his money.

Blankfein was first hired in the commodities space, working for the Goldman Sachs commodity arm, and he excelled. He was so good that he progressed over a quarter of a decade to the top vampire squid, through all the channels. So, arguably Blankfein is chief of the worlds best investment bank. And in 2006 his overall package was 54 million Dollars. Around there.

How different is that to someone like Cristiano Ronaldo, who as an eighteen year old was signed for over 12 million Dollars by Sir Alex, to join Man U. Recently Real Madrid snapped him up for 132 million US Dollars. He is 24 years old and extremely talented. Blankfein is 54 and extremely talented too. And arguably works a lot harder. Just a thought.

Staying with Friday nonsense. My next best (worst) line is as follows, “the next quarters earnings will be so very important for me”. What? You need more convincing I see. “I am looking for top line growth”. OK, so am I, but in the interim companies are becoming more efficient, because even though they miss on the top line, they beat on the bottom line. “We are watching the data for signs of improvement”, yip, guess what, me too. This all sounds like some folks missed out.

New York, New York. Flat on the Dow, marginally off on the others. Stock breather. Stocks taking stock of where we are. Stock take. Off the lows of the session the Dow Jones Industrial average closed at 9783, down 7, the nerds of NASDAQ down 6 to 2126, whilst the broader market S&P 500 ended down on the day at 1065, down 3 and a quarter.

The oil price is lower at 71.95 Dollars per barrel, that is NYMEX sweet crude. Lower levels of sulphur. Sour crude contains higher levels of sulphur. Brent crude is the London measure, also priced in Dollars. In fact London Brent accounts for two thirds of the worlds pricing. African, European and Middle Eastern oil is priced in this manner.

The gold price is last at 1011 Dollars per fine ounce, the copper price is last trading at 2.86 Dollars per pound. That is the NYMEX price, the LME price is 6302 Dollars per ton. Somehow easier to quantify a pound, even if it is not quite metric old chap. The platinum price is also a little weaker at 1326 Dollars per fine ounce. The Rand is weaker at 7.44 to the US Dollar, 12.18 to the Pound Sterling and 10.95 to the Euro.

Expect a lower start. For the time being. Things change. No US data today.

Best wishes

Sasha Naryshkine
sasha@vestact.com
011 022 5440

Jozi, Jozi. Up and away yesterday. We had a great time here, the commodity stocks led the charge, the gold miners were in the pound seat. Session end the Jozi all share index closed at 25579, up 361 points.

If I am missing something let me know here, but second quarter gold production in South Africa fell nine percent, the Rand gold price has fallen from around 10000 Rands per ounce to just under 7400 Dollars per ounce. Plus costs are higher in the form of recent labour negotiations and higher electricity tariffs.

The same is true for any mining company in South Africa, higher costs, lower Rand price. Since the beginning of this month, September, the Rand gold price is about flat, but the gold miners have added some serious weight, over 15 percent. Harmony up around 16 percent. Gold Fields up around the same amount. So what is this about then?

Why would the gold companies far outperform the Rand gold price? I think as ever the move northwards reflects a certain positive view on the commodity going forward and a general thinking that perhaps the move stronger by the local unit is way overdone at 7.30 to the US dollar. Hey man, it is what it is. The Dollar interestingly at a 11 month low.

A point that we make and perhaps don’t make enough is that the US still controls the flows, in terms of where the investable assets end up. The Us makes up around 24 percent of world GDP, by themselves, together with the whole Euro zone that comes out to around fifty percent. So the output still comes from the developed world.

But the interesting part for me is the wealth. The investable assets. Where the money made lives. That still belongs to the US. According to Capgemini, who produced a recent report, High net worth individuals (HNWI) are around 8.6 million strong globally and have combined assets of 32.8 trillion Dollars. As you can imagine this number has decreased dramatically over the last year, down 19.5 percent.

The US still has the largest number of HNWI globally, nearly 29 percent. The report says that the following three countries, the US, Japan and Germany account for 54 percent of all the worlds HNWI’s. The China mainland HNWI’s fall into fourth place, overtaking the United Kingdom in the year of 2008.

China’s HNWI population surpassed that of the U.K. to become the fourth largest in the world. The fellows next door in Hong Kong suffered more than any market around the world. We know the top five, the US, Japan, Germany, China and the UK. Making up some of the next placings are France, Canada, Switzerland, Italy, Brazil, Australia and Spain.

My point still remains that more Americans have more of the worlds wealth, so what they decide to do with the flows ultimately see where the values ultimately end up. In the days of trust nobody post Lehman, assets globally were sold for treasuries, sell all other markets and buy, guess what, Dollars. That is why the Dollar was the big winner in the sell down.

That is why there was an attraction for owning treasuries, it was not about chasing yield, but going with what you know. And now the reverse is true, as we emerge from what people were terming financial Armageddon, those investable assets are sent to far flung investment destinations again. So, sell Dollars. Got that? Very simplistic, but you get the gist.

And the other thing that I always find fascinating is that there is this fixation about Chinese US treasury holdings. The single biggest owner of US government debt. One of the top three owners of US government debt are actually US households. No sense of what they think about it. No anxiety, correct me if I am wrong. So, the big three owners of US debt are China, Japan and US households.

New York, New York. Up, up and away. Again. Another day like yesterday. Slow start and strong finish. It almost seems like all the soul searching done during the summer break suggests to me at least that folks are believing the recovery, but are they believing the levels. Two distinct types waiting for the market to get cheaper, because it has gone up a lot since the line drawn in the sand, in March.

And then there are those who have a longer time frame, that old guy and top class king of value investing, Warren Buffett reckons that you can make money in equity markets by buying at this juncture. Yes, thanks for that Warren. Session end the Dow closed 108 points better to 9791, the nerds of NASDAQ added 30 to 2133, whilst the broader market S&P 500 closed 16 points higher to 1068.

The oil price costs 72.34 Dollars a barrel. And the gold price last traded 1021 Dollars per fine ounce, yesterday I said barrel, sorry about that. The copper price last traded at 2.92 Dollars per pound. The platinum price last at 1341 Dollars per fine ounce. The Rand, firmer at 7.33 to the US dollar, 12.12 to the Pound Sterling and 10.80 to the Euro.

Green on the screen. Again. That currency is power, inflation figures for this month should look really good though.

Best wishes

Sasha Naryshkine
sasha@vestact.com
011 022 5440

Jozi, Jozi. It ended up fine, the day started getting better and better as the day progressed. Session end industrials, retailers, platinum miners found themselves in the winners column. Session end the Jozi all share index closed at 25217, up 53 points.

There has been a lot of debate around the issues of oil and what is a fair price. What is a fair price? Is it as simple as saying that it is as simple as finding the supply demand mean and going from there. Demand is a lot weaker now than it was 18 months ago.

But with that comes risks, risks that the supply side does not continue to develop. And coupled with lower oil prices and much credit lines drying up, exploration has probably been a lot lower than when oil prices were higher.

So if the prices at the moment for a barrel of oil do not reflect where the supply demand fundamentals should actually be. There are no mainstream alternatives to oil right now, there will be a lot more users of refined product when the global economy bounces back stronger.

Paul Kedrosky made a good point, or pointed out something useful: Despite world-class discoveries coming one after another, the massive subsalt plays in the deepwater and ultra deepwater areas of the Gulf of Mexico, Brazil, and elsewhere remain somewhat enigmatic, with a host of technical challenges one British executive likened to “putting somebody on the moon.”

That is the point that I was trying to make, cheap oil is finished. Until we find real alternatives, and hybrid vehicles are touted around at car shows. For the time being they are pretty expensive, but will become the norm.

At the same time as the developed world changes their patterns the emerging world arrives with more motorcycles, motor vehicles, bigger industry, more power needs and greater consumption of fossil fuels. All this happening whilst the developed world finds themselves committed to alternative energy. Which, for the time being is expensive to produce and only recently economically viable.

Another thing making me mad is still a year on from the Lehman collapse some of the employees are mad at government for not bailing them out. Why was there no government back stop, some are saying. Well, I might be cruel here, but boo-hoo, extraordinary gains were privatised, why should the ills be socialised.

Which leads me to another point, an interview done yesterday by CNBC Africa’s Eleni Giokos interviewed the chief of FirstRand, Paul Harris. Listen to the podcast, the part that makes me mad is the trading element of the business, perhaps we allocated too much capital to it, and everyone was doing it, and everyone got cleaned up.

I am sorry, but when you are trading with shareholder funds in that manner we are going to steer clear of this one. Listen up and let me know if you have the same feeling as me.

Paul was on the ENews channel this morning with all of these interesting points about Lehman and he even threw is FirstRand, making the same points that I was above. You can’t expect to take great risks and not be responsible ultimately for your own downfall, and then when the excessive risk taking does not turn out the way you plan, then look for a parachute.

New York, New York. Up. Ben Bernanke said that the recession is probably over. Thanks Ben, this is the guy who got everyone excited with the green shoots talk in March, which essentially sparked the rally. The Obama and Haines bottom in March. Haines is news anchor for a business channel at the NYSE, Obama, well he is one of the most recognizable faces on the planet.

Some of the stuff that Bernanke said was kind of run of the mill stuff. It is still going to feel weak, job recovery is going to take longer and so on. Session end the Dow Jones Industrial Average added 56 points to 9683, the broader market added three point three to 1052, whilst the nerds of NASDAQ closed nearly 11 better to 2102.

The oil price is much better at 70.97 Dollars per barrel, the gold price at 1017 Dollars per barrel, rushing ahead, whilst the copper price has also had some renewed interest, last at 2.87 Dollars per pound. The platinum price is last at 1333 Dollars per fine ounce. The Rand is strong across a board, 10.81 to the Euro, 7.36 to the US Dollar and 12.14 to the Pound Sterling. Phew, good from an inflationary point of view, imported inflation lower.

We should start better. As ever it matters what the Americans wake up and think.

Best wishes

Sasha Naryshkine
sasha@vestact.com
011 022 5440

Jozi, Jozi. Down, down and more down. Although, the down at the end was not as bad as the down in the middle. i.e. what they (those people) call less bad. The Bureau for Economic Research showed that South Africa is having a better time from a confidence point of view. Session end the Jozi all share closed at 25164, down 403 points. Not good: construction, financials, retailers. Good: beverages, aka SABMiller. Distell is worth 12 billion Rands, but that pales into insignificance when compared to SABMiller.

Paul tweeted this morning (on his hands free Twitter client?) “Just passed Phuthuma Nhleko (MTN CEO) in the traffic on Jan Smuts Ave. He was driving with one hand, and talking on his cellphone”. Come chief Nhleko, get a hands free kit. Angelo Coppola agrees. Simon Fillmore reckons Paul’s skills with twitter in traffic are good. Not just in traffic.

MTN and Bharti, these talks still continue and now ICASA suggests that they should have a look see at the deal. Where have they been? Bozo springs to mind, even my eldest daughter knows that, bad me. And then the listing of the entities in each others domain a talking point. Too much red tape for the both of them is my guess.

Yesterday it was Lehman this, Lehman that and today it will be the same. A time to sit back and reflect on the events a year ago today. I remember writing that Monday and noting with astonishment that there was just so much going on. The murky world of CDO’s emerged for all to see, counterparty risk came to the fore. Here are a few extracts from that crazy Monday, 15 September 2008:

“Lehman in talks with Barclays who emerged as the main contender with the outcome the worst one for Lehman shareholders. Thanks but no thanks said the fellows headquartered over the sea in London.. “

“..Lehman are going to file for bankruptcy. In fact they just did. Get that, 158 or so years worth of fine (not all the time) history has evaporated as cash reserves hit the wall. Shareholders have had more than just a wind down, they have been ejected viciously”.

And it continues:

“The Fed were tough on the funding issue, yes to Freddie and Fannie this time last week, no thanks to Lehman. A normally quiet Sunday (all relative) turned into a feeding frenzy as folks rushed to their desks to try and cut their trading positions with Lehman. An extraordinary trading session was opened for the credit default swaps market, where holders of the instruments could place them with other institutions”.

“As if the Lehman Brothers disintegration was not enough news on one Sunday, one of the potential buyers of Lehman, Bank of America, turned their attention to Merrill Lynch. BofA has made an offer to buy Merrill’s for 50 billion Dollars in total”.

You want more?

“And still there was more to come. If the failure of Lehman and the sale of Merrill’s was not enough for you, then AIG, are desperate to raise cash, desperate to shore up funds to stay safe. They are considering selling some assets in order to raise around 40 billion Dollars. These numbers are huge all around, the only real winner here will be BofA, they are probably picking up an asset real cheap. If you were looking for the next shoe to drop, this looks like a herd of clogs”.

End. A herd of clogs. Not the end and only the beginning. I guess in the fullness of time the Merrill Lynch and Countrywide financial purchases by Bank of America might prove to be good ones, but the liquidity issues still remain. AIG still looks messy. Only the best vampire squid has emerged from the mess, intact, even if the image is still tainted.

All very interesting, if not the fascination of Lehman is seemingly a little too much. Alexis Glick (business news anchor) tweeted something that I guess makes it worthwhile following up time and again: “Good Morning! Big focus this mrng on 1 year after Lehman Bros. collapse. Remember 4th largest Investment Bank. Why did Lehman fail?”

Excessive risks, leverage levels that Albie Morkel would be proud of, overpaid staffers, bailed out. Profits privatised, losses socialised. If you think that banking and financial institution “saving” are new matters, think again.

Perhaps the overhaul of banks and financial institutions is well overdue, but at the risk of being a bully to further your political career, don’t corner the banks. Don’t make reserves and capital adequacy ratios too much too bear. Because then they won’t oil the machine of capitalism. So you want banks to lend more, but you also want to regulate them more. Joseph Heller wrote a book about this situation.

Did you see this massive project called Gorgon? It is huge, off the West coast of Australia. 40 thousand billion cubic feet of natural gas. 40 trillion cubic feet of gas. Is that a lot? The short answer is yes, it is not quite the Russian giants inside of the Arctic circle, but it is big. Chevron will shell out (har-har) 37 billion Dollars to develop Gorgon. It is expected to generate around 250 billion Dollars worth of gas exports over time. It is gorgon-tuous.

This was way funny – “Harmony And DRDGold Settle Their Excessive Pricing Case With Arcelormittal”, that is what the SENS said. I peered over the desk and said to Byron, What about the excessive valuations of Harmony and DRDGold? Harmony trades over thirty times earnings, DRDGold closer to 20 times. One persons prime steak is another persons’ steak tartare.

In pursuit of happiness and higher GDP reads. Yip, the two can now go side by side in the same sentence if the French president Nicolas Sarkozy and hired hand economist Joseph Stiglitz have anything to do with it. What do you think? I often maintain that you cant measure the human spirit in numbers, and wellbeing has a lot to do with productivity. But if you are very happy, often that means that matters around you are better than before. The opposite is also true.

New York, New York. More Lehman this and that, a day for reflecting on a years event. Even Nouriel Roubini was called up. Bearish Roubini. Still, I guess the end result was a good one, markets eked out a gain, the Dow up 21 to 9626, the nerds of NASDAQ up nearly 11 to 2091 whilst the broader market S&P 500 added 6.6 points to 1049.

The oil price is slightly lower at 68.73 Dollars per barrel. The gold price is also slightly lower at 998 Dollars per fine ounce, with the copper price following the same trend, lower at 2.80 Dollars per pound. Lastly in the commodities complex, the platinum price is at 1307 Dollars per fine ounce.

Flat. Flat. And more flat. For starters, some important US data out later.

Best wishes

Sasha Naryshkine
sasha@vestact.com
011 022 5440