Slasher's coffee beans

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