Slasher's coffee beans

Jozi, Jozi. It was that old bubonic plague nursery rhyme, that all fall down one. US futures had been awful at the start of our session and Asian markets had been absolutely carried out. We were not so bad, in fact tat the end of the session we were down 216 points, 26808 was the level on the Jozi all share.

This morning there has been a lot more clarity, but the wounds are open already. The fact that the announcement was made before a long weekend as the important Muslim holiday of Eid al-Adha was taking place and a big American holiday in thanksgiving suggests ill timing on the part of the Dubai World execs. I read in the FT that Thursday a conference call had been called by Dubai World as their debt holders were anxious.

As far as I understand the article from the FT, the telephone systems taking the conference call fell over as there was a deluge of calls. You will probably find that this was setup quickly and that alone tells me that the panic was warranted. The debt associated with the standstill was trading at 109 cents in the Dollar Wednesday, Friday it was 40 cents, which tells me that the debt holders were blind sided here.

In fact a WSJ article from yesterday suggests that even at the higher echelons of Dubai World, there had not been sufficient warning on the fact that the company would have to resolve their cash position. Hmm.. governance issues here for me.

The Dubai bourse first opened around 6 percent lower at the get go, down 7 percent at the moment, Abu Dhabi next door down nearly 8 percent, yech. Remember that those markets have missed all the sessions since Wednesday, so there is catch up here. Asian markets have bounced sharply with the central bank of UAE saying that they will make funding available for local banks, if needs be. But little clarity on Dubai specifically.

Just to recap here, Dubai world, assets around 100 billion Dollars, total debt of 59 billion Dollars, so the value of the assets is greater than the levels of debt. Unlike, yes, unlike many subprime mortgages and now prime mortgages in the US. That is worth noting, although if there were to be a fire sale in the coming months, then you would have to expect a lower price for those assets.

OK, so who is impacted here? Well, another great chapter (but not really) in the British banking sector history. Which has been jaded and the British authorities are looking to place a the most strict bankers bonus rules. Good luck, the world is global, I have no doubt that the best talent will gravitate to other parts of the world.

Back to those who are exposed though, the WSJ reports over the weekend that entire exposure to Dubai debt by European banks is 83.7 billion Dollars. UK banks have just shy of 50 billion Dollars worth of that, French and German banks have 11.3 and 10.2 billion respectively, so again a little more circumspect. Or perhaps that is not fair, the UK has a much bigger banking system as a whole, and is in a sense a lot more global.

That is the entire debt associated with Dubai, for Dubai world, which is just shy of 60 billion Rands, around half of that debt is with European banks, including the UK. Because they are part of Europe when they want to be. But around 75 percent of the real estate in Dubai is owned by foreigners. Apparently RBS is most involved in Dubai, HSBC the biggest exposure to the region. Local institutions too, like the Abu Dhabi Commercial Bank is owed 1.9 billion Dollars by Dubai World. Yech.

The only good thing to come out of all of this is people globally can understand in more detail the situation in Dubai, plus some other countries where there are concerns. Turkey, Greece and Hungary. Credit Default Swaps (the insurance for bond holders against default) have soared, so in short, if someone is looking to take on debt of an emerging market in the region, or governments are looking to raise money, quite crudely, it is going to be more expensive.

An interesting Bloomberg graph put matters into perspective the level of the Dubai sovereign debt credit default swap is trading 50 percent lower than the worst levels of the year, which was back in January. So, notwithstanding this disaster, to put it into perspective, insurance against default from the country is cheaper after this disaster than at the beginning of the year. What does that mean? Is this whole incident overplayed?

What do you make of the appointment of two fellows as advisors to Gill Marcus, the South African Reserve Bank governor, Dr Monde Mnyande and Mr Brian Kahn. As far as I can understand it, nothing too sinister. Dr. Mnyande seems to have been at the Reserve Bank since 1995, and currently is the Senior Deputy Chief Economist & Head: Research Department of the SA Reserve Bank. Internal. Brian Kahn is an old time Economics professor at UCT that has played a bigger role at the SARB, and has been a member of the MPC since 1999.

This looks like it might have been a Gill Marcus move rather than outside interference. My first impression was to worry, on closer reflection it seems that there is more of a participatory role from long time internal sources. Both fellows look well heeled and an elevation as advisors overdue. Gill Marcus’ new touch.

New York, New York. A half day trading day on the NYSE, trade closed at 1 pm New York time, the session shortened because of the Thanksgiving holiday. Whilst you would have expected much of the focus to be on Black Friday, the start of the traditional shopping season, everyone was wringing their hands around the Dubai debt situation. Session end the Dow closed 154 points lower to 10309, the S&P 500 down 19 to 1091, whilst the nerds of NASDAQ lost 37 to 2138.

The oil price has bounced back to 76.75 Dollars per barrel, the copper price last at 313 US cents per pound. The gold price has railed back to 1175 Dollars per fine ounce. The platinum price has also bounced back to 1450 Dollars per fine ounce. The currency is firmer as the Dollar loses ground again, 7.38 to the US Dollar, 11.11 to the Euro and lastly 12.23 to the Pound Sterling.

OK, so a big bounce back in Asia, US futures higher, our market delayed in opening, JSE having technical problems. Last thing, when do you remember there being so late a push in Christmas advertising? Tells in the credit numbers this morning. The consumer is still repairing the leaks in the ship.

Sasha Naryshkine
sasha@vestact.com
www.twitter.com/sashanaryshkine
011 022 5440

Jozi, Jozi. All about a place that was supposed to be the great new financial centre of the world. Dubai. Or have I got that wrong, that was supposed to be Qatar. Well, they are close, but very different. The first obvious difference is that Qatar is not one of the Emirates kingdoms. Dubai is the largest city amongst the Emirates, although Abu Dhabi is the capital and dwarves the other six Emirates.

Yesterday however nobody cared about the place, the size, the scale, the only thing that folks were worried about was the debt levels of the one Emirate, Dubai. Nothing that anyone can do in the Middle East, the Islamic holiday of Eid al-Adha is being celebrated, plus the Americans were away for the day celebrating Thanksgiving. And to top that all off the London LSE markets experienced a technical glitch and went down. So if you want to talk about floating boat taking water without a rudder, you had it right there.

The consequence was an emerging and developed world market sell-off, I saw that Greece, hardly an emerging market, one of the ancient world powers, sold off heavily as a result of heavy banking slides, an Iceland type scenario building in Greece. So, a year on from some awful times for the global economy there are some real structural problems that still exist.

As a result we sold off here, the currency weakened, the Jozi all share index closed down at 27025, down 463 points. Eish. Construction stocks down three percent, By global standards that was pretty mild though. The FTSE sold off over three percent, the CAC40 nearly three and a half percent. The Nikkei in Japan down three and a quarter percent.

Felix Salmon pretty much summed it up. Check out the complicated structure there guys, phew. Felix makes a great point, even though the Dubai sovereign wealth fund has hundreds of Dollars they are unlikely to bail out the government parastatal. You are probably going to see a fire sale of assets, the portfolio has been valued by different types, but the number is somewhere around 100 billion Dollars. Debt of 59 billion Dollars.

Dubai’s debt is now seen as riskier than Iceland or Lithuania is what Bloomberg is reporting. In 1998 the Russians looked to follow a similar path and defaulted on their debt, which was as a direct result of the Asian financial crisis of the same year, which was led by the Thai Baht being freely floated after a long Dollar peg. OK, and at the bottom of it all was a housing problem. Surprise……

Are we getting overexcited and worried about realistically a tough situation, but as someone put in a tweet, apologies in advance: “It’s $59 billion which in 2008-speak is a fart”. Meaning obviously not thunder. If the credit environment was better perhaps the folks in Dubai could roll their short term debt over. This dents their short term credibility, construction companies who have been placed on hold and work at a standstill are looking for answers. And for the time being, over the next few days, don’t expect anything over Eid al-Adha. Monday.

Yesterday some of my piece was lost and meshed with the BHP Billiton story, so I am going to republish that BHP piece, because it was somehow lost in my posting. So here goes again:

The BHP Billiton AGM was today in Brisbane. Do you think that they all moseyed on down to the cricket after that at the Gabba? Perhaps. But don’t let me say anything about it, watch it, great new world we live in. Exactly like 1938 when they had morse code and wireless radio.

BHP make the point that the demand from China was often the only source of demand for commodities in 2009. Kloppers, the CEO, said that Chinese steel industry continues to surprise, and the first evidence of restocking in the developed world is emerging. Marius Kloppers remains cautious about the short to medium term, but the long term looks nothing short of very good. Listen to this. It is great, even if sometimes Kloppers sounds vaguely like Nataniël. Sis.

Did you read a piece on the ever increasing turkey weight and the ever expanding American male? No? Well, here it is from a piece in the Economist. http://ow.ly/164vvn

Why is this important to you and I at all? Because I think that inside this story is growing momentum for two things specifically, one is that governments globally are going to start embarking on specific lifestyle type projects that will see either overweight folks in some way pay an extra tax, or thinner folks pay less tax.

Incentivize people to live healthier. Remember that the healthier that you are, the less of a burden you are on the healthcare sector as a whole. And as such you are more productive, your contribution is greater to the economy. Efficiency needs to be rewarded in a human context, machines of the same ilk are just well built.

The second theme I think is going to be the advent of a whole class of how big business handles obesity problems. There are currently solutions in the market place that help, but have side effects. This is so tricky, because the Japanese have managed to implement this pretty well, but the truth is, only three percent and a bit of their population is obese. In the US it is over 30 percent. The UK it is 23 percent. Australia, the great outdoors, 21 percent. France, less than 10 percent.

Like alternative energy, because governments are spending a lot of time and energy on reforming healthcare, I think this will be a great theme of our time. How do you tell that to 30 odd percent of the US population, those folks are voters too you know. Not much detail on the web, but here are some of the obesity numbers I managed to come up with, don’t read the comments below the data unless you want to be offended.

The oil price is trading much lower at 74.53 Dollars per barrel, the copper price is also lower at 305 cents per pound. The gold price is soaring in this crisis, no wait, no, it is lower at 1171 Dollars per fine ounce. The platinum price is also under pressure at 1441 Dollars per fine ounce. The Rand is much weaker at 7.55 to the US Dollar, 12.36 to the Pound Sterling and 11.26 to the Euro.

My instinct tells me that there has been an over-reaction. It is not like the Dubai property problems are new. I have read stories months ago where luxury 4×4′s are abandoned in the street as folks head for the hills back home. Wow, how one event can suddenly change the way people think again, how stupid. Inside of that there lies an opportunity. Markets should sell off heavily this morning.

Sasha Naryshkine
sasha@vestact.com
www.twitter.com/sashanaryshkine
011 022 5440

Jozi, Jozi. A good day for equity markets yesterday, we started on some upbeat commodity prices and later on in the session benefitted from improving US markets, which on balance saw better data emerge. I was thinking earlier in the day that trade might be subdued and that we could see lower markets, but that was not to be, a pre US holiday surprise, late in the session we gave up ground to end up, but at the lows of the day, the Jozi all share index closed at 27489, up 111 (nelson).

And talking surprises, the CPI range came back into the bracket, 5.9 percent. Gautengers, I am really disappointed for you for overpaying, here on the highveld we are running at 6 percent CPI, just ahead of the national average of 5.9 percent. For the month of October, that is more like it Stats SA, I want to see fresh news. Mpumalanga, you are way ahead of the average, please go stand in the corner and think about it, come out when you feel that you are ready to discuss. OK?

As the Statistician General points out, this is the first time that we have been in the band for 31 months. 31 months? Phew that is a long time to be outside of a band if your main goal is to fight inflation. But people forget that when the oil price spiked inflation ran into double digits and was threatening to scupper the years of good work done before. Download the full release here.

One point about the CPI numbers from November, those will be released mid December. If only the same urgency to release statistical numbers was maintained for all months and not just a big push before Christmas. Can we have that every month please?

OK, so Massmart Chairman’s statement yesterday said that conditions were still tough out there. The consumer was still bruised. I guess Christmas and the World Cup could not arrive at a better time. I can’t remember Christmas adverts being so absent with less than a month to go until the event? I am wrong, or have you only seen a few?

Syd Vianello, perhaps South Africa’s best retail analyst summed it up pretty well this morning on the box, on CNBC, saying that Massmart normally convey the message pretty well, with several updates. And quite simply the conditions out there are deteriorating, not actually getting better. Yech.

Cosatu has a new economic plan. I saw an interview with General Secretary of the Congress of South African Trade Unions, Zwelinzima Vavi, who is a well spoken guy and normally we would be friends if we were not on the other side of the political spectrum. As you can imagine. Vavi suggests that this is nothing new, this does stem from the Polokwane conference where Thabo Mbeki ordered a Polokwane surprise (ZANEWS).

This also includes devaluing the currency at 10 to the US Dollar. I might be completely off target here, but has Mr. Vavi not seen that the Us Dollar is trading at a 14 year low to the Yen? As my quality street (get it, favourite, favourite) market commentator chap, Rick Santelli said after watching an interview with a fellow called Mr. Yen, all he was worried about was that the Yen had gone under 87 to the US Dollar. Mr. Yen, aka Eisuke Sakakibara. Who is a former finance minister of Japan.

OK, but perhaps Mr. Vavi knows that, he knows that it is the Dollar that has weakened as money tries to find better yielding assets. And that is what is happening here with the ZAR. But you can’t just take steps to weaken the currency, recently the fellows over in Vietnam needed to devalue their currency and reign in inflation, so, they raised rates. Is that not a little counter intuitive, raising rates to weaken the currency? Or am I not understanding it right, are there two different dynamics here?

I think the notion that don’t worry how markets view this, just do it, being put forward by Cosatu are again showing a certain immaturity. The world does care. You can’t want to be part of the global economy and not care. It is almost like a protectionist attitude rather than look for our edge. As Jim Owens (going to say it again) of Caterpillar said, three out of the four top manufacturers globally have high paid labour. They are just more productive than our labour force, largely due to the fact that the workforce in the developed world is more skilful.

What I struggle to understand is why Cosatu want the currency weaker just so that seemingly imports are not as competitive with the local products in Rands. Is that the basis? I cant find any sound presentation which all quarters can look at and then debate. With a little more vigour, perhaps I can email Patrick Craven, his email address – patrick@cosatu.org.za – is there for all to see on the Cosatu website. And if you need to get hold of him, hey, it is all there. I think I shall try that.

The BHP Billiton AGM was today in Brisbane. Do you think that they all moseyed on down to the cricket after that at the Gabba? Perhaps. But don’t let me say anything about it, watch it, great new world we live in. Exactly like 1938 when they had morse code and wireless radio. BHP make the point that the demand from China was often the only source of demand for commodities in 2009. Kloppers, the CEO, said that Chinese steel industry continues to surprise, and the first evidence of restocking in the developed world is emerging. Marius Kloppers remains cautious about the short to medium term, but the long term looks nothing short of very good. Listen to this. It is great, even if sometimes Kloppers sounds vaguely like Nataniël. Sis.

Who are Dubai World? Well they are an investment company that serves one of the seven emirates that make up the UAE, Dubai of course. As their website states, the sun never sets on Dubai world. It seems however that the ratings agencies and the heavy debt have not just set, but sat on Dubai World.

Dubai World excerpt from their website: “Dubai World owns and invests in companies that are the driving force behind World-class projects such as ‘The Palm’, ‘The World’ and DP World which is the 3rd largest marine terminal operator in the world. It is a class leader in many markets and industries”.

The sad truth is that there are 59 billion Dollars worth of liabilities associated with the company, the company has basically asked for a six month reprieve from their creditors. As you can imagine their Credit Default Swaps are soaring. There debt rating has been cut to junk status.

And according to a detailed Bloomberg article the fact that there is little clarity on how the company (I guess as a Government entity, by default the Government) will pay their 9 billion Dollars worth of debt that falls dues before March next year. Yech. Read the whole Bloomberg story here.

And according to a detailed Bloomberg article the fact that there is little clarity on how the company (I guess as a Government entity, by default the Government) will pay their 9 billion Dollars worth of debt that falls dues before March next year. Yech.

The end of that World? Ha. Hardly. For me Dubai is obviously a place that if people in string vests with wooden houses on the banks of the Mississippi river had not been in a triple A wrapped product sold to some Swedish village municipality, then they would have been right. Right now it is ugly, but inside of that lies an opportunity for someone. I suspect that like flying of the first models of the airplane, Dubai will emerge all the smarter for this, just very bruised. And people never forget.

Talking Dubai, Murray & Roberts out with a trading update that suggested that matters are not really great, strong Rand, Eskom project delays, no further Gautrain project recognition plus no real recognition of matters yech in the middle East. That rattled the sector. And that is why the stocks look cheap, because earnings future are not wobbling.

And I said, what about, diamonds from Tiffany’s, She said, “I think I remember the place, And as I recall, I think, we both kinda liked it. Talking about the numbers from Tiffany’s yesterday. Luxury goods in the US, cant be doing too well then I hear you say. And you are right, sales have been poor, but Tiffany’s stuck to their guns, no big sales and it has paid off. Better than expected. And this gave a boost to the broader luxury goods sector.

New York, New York. Better jobless claims number, better consumer spend offset lower durable goods orders, and it seemed as if there was a relieved holiday feel to the equity markets. Happy, feeling good. Session end the Dow Jones Industrial Average closed at 10464, up 30 points, the nerds of NASDAQ better by 6.87 to 2176, the broader market S&P 500 up nearly five at 1110.

The oil price is 77.04 Dollars per barrel, the gold price on a tear again, a little lower from the 1192 highs, but last at 1186 Dollars per fine ounce. The copper price is last at 316 US cents per pound. These are close to year highs. The platinum price is lower at 1458 Dollars per fine ounce. The Rand is firmer at 7.37 to the US Dollar, 12.23 to the Pound Sterling and lastly 11.12 to the Euro.

Lower here today. US holiday. Volumes lighter. Don’t like the Americans going on holiday. Good thing they only have ten days leave a year. That is right folks, a nation of workers.

Jozi, Jozi. We waited for the local and US GDP reads and were always going to take both in the broader context of improving markets globally during the day. But it was most pleasing to see the local GDP read come in comfortably above expectations at 0.9 percent. The US read a little later in the day, mid afternoon saw the second Q3 read come bang in line with expectations of 2.8 percent, comfortably below the first read, but the revisions widely expected.

Equity markets reacted well on the local front, the SA inc stocks added some and the currency firmed up. We managed to squeak into the green around the same time as US GDP data, but slipped in the last half an hour as Wall Street opened lower so we headed in that direction too. Session end the Jozi all share index had lost 45 points to 27377.

A rebound in manufacturing in the third quarter, largely led by the steel and metal manufacturing, as well as the petroleum manufacturing sector and food. General Government activity also contributed as well as the construction sector. Leading lower was agriculture, mining and quarrying and the wholesale and retail trade, hotels and restaurants, as well as finance, real estate and business services.

The fact that the overall number was positive sees the headlines read, South Africa exits recession, which for me is more important than it is probably given credit for. There was an interesting graphic inside of the release which showed me that manufacturing over the last decade and a half has become less important inside of the overall number as Finance, real estate and business services is now the single biggest contributor to ZA GDP.

That is the single biggest swing in the long term numbers, the fact that as an overall percentage, manufacturing has dropped and that financial, real estate and business services have gained significantly. So are we becoming more of a services oriented economy rather than a manufacturing one? Check out this graphic.

And another point related to that, although away from the GDP number. Jim Owens, the CEO of Caterpillar made the most obvious but underscored statement I heard all day. In between a whole host of other data. He said, and listen up here, out of the top four manufacturing nations on the planet, three in four had expensive labour. He was referring to Japan, Germany and the USA. The fourth being China.

Good point. I guess it matters what you are manufacturing, if you are manufacturing high end vehicles and high end electronics, of complicated telecommunications equipment, or even involved in jewellery manufacturing, there is a certain amount of skill that goes into all of that. The skill that needs to go towards making sure that the consumer, be they in Shanghai, Mumbai, Rio, Paris, Dubai, Johannesburg or New York, they can trust the quality of the brand.

Caterpillar, Cisco, Toyota, Sony, BMW or Siemens, you can know and trust these brands. But we tried to beat out the top Chinese manufacturing brands, it did not roll off the tongue as easily as the Americans, the Japanese and the Germans. CAM, Lenovo and Geely were the obvious ones, I am sure that there are many others, but the point is, the Chinese are in a position that the South Koreans found themselves twenty years ago, when Hyundai, LG and Samsung were cheapish brands that were frowned on.

Think about it now, nobody has any problem with these brands. Huawei and Hisense, watch those brands over the coming years, Hisense you would have seen already. Trusted motor brands and electronics, that takes the consumer an age to sort out.

OK, back to our GDP numbers yesterday released for the third Quarter, almost at the end of November. Not that we are an exception to the rule, many countries in the developed world have only released their data over the last fortnight. Too slow all of you.

Some of the dark spots inside of the GDP read were picked up as far afield as the WSJ blog platform, which left me to chuckle a little: “Maybe the country should consider counting people who work in illegal activities to bring down its unemployment rate”.

New York, New York. GDP data was inline, a bit disappointing at first glance, but big company efficiencies. Facebook made an interesting step towards a full IPO by setting up another class of stock. Consumer confidence and housing data was better than anticipated, some parts of the Us are starting to get better, stabilize is perhaps a better way of describing it.

Session end as transportation stocks and materials were the losers, healthcare and utilities were the winners, the broader market S&P 500 down 0.6 of a point to 1105, whilst the Dow Jones Industrial closed at 10433, down 17. The nerds of NASDAQ up nearly 7 to 2169.

The oil price is 76.43 Dollars per barrel, the gold price at 1165 Dollars per fine ounce. The copper price is last at 311 Us cents per pound. The platinum price is last at 1463 Dollars per fine ounce. The Rand is last at firmer levels, 7.39 to the US Dollar, 12.34 to the Pound Sterling and lastly 11.12 to the Euro.

I thought we could have started lower here today. Not to be, a strong start here, a deluge of data later in the day plus some position squaring ahead of the great turkey gobbling. Nearly 50 million turkeys with nothing to be thankful about.

Sasha Naryshkine
sasha@vestact.com
www.twitter.com/sashanaryshkine
011 022 5440

Jozi, Jozi. A big tick up at the end of the day as US markets opened put the cherry on the top of a very good day already. The bullish sentiment spread across the globe and we were helped with better commodity prices and a dollar that took more tap again, indicating that risk appetite had returned. Rick Santelli, one of the CNBC employees in the US said something telling, the US Dollar is at the epicentre of everything.

What is telling about that comment is that at current levels money is very cheap in the US. Even Warren Buffett is taking the view that if he can borrow around 8 billion Dollars as bridging finance for the recent transaction that he has done, the Burlington railway transaction at 100 basis points above Libor, which is around a quarter of a percent, then he can perhaps delay selling some assets for a while. Which also tells me that he thinks he can get better exits for some of the positions that he is selling.

Platinum miners made the biggest impact, up three and a half percent, I was reading yesterday that Chinese brides are preferring platinum jewellery as it is newer, gold is older and more traditional. And as Chinese brides move to a more western dress style, the white precious metal goes better with the white dresses. Long may that continue. Session end yesterday the Jozi all share index closed at 27432, up 494 points.

OK, so today is the day that we hear from the Statistician General on whether or not South Africa has emerged from probably the worst recession in nearly a generation. In fact one could safely say that if you entered the workforce in 1994, with the change to democracy in South Africa, the operating environment was probably never quite this bad.

To me a positive read is vital. It really is, for the economy on the ground to start feeling confident again. Don’t discount the power of a headline that reads “South Africa exits recession” or “A return to growth for the local economy.” There is a mixed bag of thoughts out there from the very bullish in Standard Bank to a few economists who are expecting a negative read.

Most reads for the third quarter suggest that it will be touch and go, big contributors, manufacturing and retail were poor, the swing could come from the swing could come from the agricultural sector, which is only a ten percent or so contributor. Consensus is for 0.2 percent growth in the South African economy for the third quarter. Crazy. I wait on the edge of my chair.

Some fresh data sent to me by the brains trust down at Greenfields Farm, just off the N1 at Mooi River sees the Mooi River index flat year on year in the month of October. But most interestingly the highest read for the year. For those of you who do not know what the Mooi River index is, it is a read of all five axle (or more) traffic backwards and forwards through the Mooi river toll plaza on the N1, the bloodline of our country in terms of goods transported.

So these are big trucks transporting bulk down to the coast from the highveld and equally goods of a retail nature finding their way back up here to the highveld. Out of Durban and into Durban basically is what we are measuring here. Interestingly when I had a look at South African ports activity in October, it was a little more revealing, total volume shipped out was 11 percent better than the previous October, whilst volume in was flat.

Righto, did anyone see those results from Telkom. Take the once off write down of Multi Links aside and you see flat revenue and lower margins. Plus lower volumes on their core business, minutes overall decreased 7 percent on their networks. The stock ended the day over a percent lower.

OK, so what is the problem with Telkom? They own the infrastructure and are still by far and away the most dominant participant, they own the majority. Data has been surging, but in that space specifically, that is where the growth is going to come from. That is exactly the areas that both Vodacom and MTN are attacking, as the traditional mobile participants look to roll out their infrastructure in the coming half a decade.

Plus your risks to Telkom are that poor management execution could lead to the war chest being depleted. That is why I see the stock trading at a big discount to its peers. Even though the yields look quite juicy. In short the investment community will look for clarity on short term strategy, some are still bullish on the companies ability to embark on a cost cutting exercise effectively, I fear the opposite may be closer to the truth.

Tiger Brands released results for the full year to September this morning, revenue around 8 percent better, which I guess suggests that they just kept up with food inflation. I was saying to someone this morning that this company has a sound history of not disappointing very often.

I suspect that most of the growth for Tiger will come from opportunities in Africa, if you can find the right channels, the margins are very good. Recent acquisitions in Cameroon and Kenya suggest that at last South African companies are starting to realise that there are many opportunities on their door step. Parting shot, demand for Jungle Oats very strong. Both my father and father in law will be pleased with that development, oats for them is the best way to start the day.

New York, New York. Some dovish comments on the outlook for rates in the short term from the Chicago Fed suggested that rates are going to stay on hold for the foreseeable future. But you knew that already I guess. Bill Gross on the other hand is quite bullish on the outlook for the US fixed income market and again stressing that new normal of Pimco. His bond holdings hit a five year high, I guess partly due to the fact that some folks are just parking the money for the time being.

As one of my favourite bloggers pointed out, all that cash has to go somewhere, and away from the Dollar it has been going. Again back to the statement, the US dollar is at the epicentre of everything. You can borrow money at next to nothing and buy South African bonds for a seven point two five percent yield on the government long bond, the R207. Interest on that is paid twice a year, January and July 15.

Back to Wall Street, another big session for equity markets in the US, session end the Dow Jones Industrial Average closed at 10450, up 132 points, but near the lowest point of the session. Inside of the first hour stocks found themselves up nearly two percent. The nerds of NASDAQ closed at 2176, up nearly 30 points, whilst the broader market S&P 500 closed up shop at 1106, up 14.86 points.

The oil price is lower at 77.37 Dollars per barrel, the gold price is also lower at 1164 Dollars per fine ounce after having reached a Dollar all time high yesterday around 1175 Dollars per fine ounce. The copper price is last at 3.13 Dollars per pound. The platinum price is lower at 1449 Dollars per fine ounce. The Rand is weaker this morning, 7.53 to the US Dollar, 12.47 to the Pound Sterling and 11.24 to the Euro.

Lower Asian markets have spread through to our time zone, so expect a lower start. If the GDP numbers come out inline with expectations it is going to make me mad if a headline reads lower markets on the GDP numbers.

Sasha Naryshkine
sasha@vestact.com
www.twitter.com/sashanaryshkine
011 022 5440

Jozi, Jozi. The best part of the day was the last part of the day for equity markets, still cool in the city for the week, I found myself wearing a jersey. Last night was a magnificent evening, weather-wise that was, watched the sun go down with my daughters and we watched outside for bats, swallows and even as the sun set for stars. Normal weather patterns back here. Western Capers brace for hot, hot, hot. OK, weather aside, equity markets closed lower Friday, but around 100 points off their lows of the session. The Jozi all share closed at 26929, down 129 points.

African Bank released results this morning for the full year to September 2009. When else? Righto, overall headline earnings flat, more shares share in issue translates to a headline earnings per share fall of 11 percent to 225 cents. Second half dividend 100 cents per share brining for the full year to 185 cents, which is 12 percent lower than last year.

In a tough environment the banking segment did well, the furniture division did not. And that is what African Bank is now, a core lending bank with a furniture division. The full retail spectrum in one company I guess, I often point out that if you own this stock and our other retail stock, Massmart, you don’t need a geared retail stock. You have it already.

OK, so the overall headline earnings number is 1.8 billion Rands, 1.525 billion Rands is from African Bank, up 6 percent from last year, the balance the furniture division, which saw an earnings decline of 23 percent. So 85 percent the bank, 15 percent the furniture, as far as the earnings spread is concerned. So, the furniture division is still sucking wind.

One interesting note operationally is that the managing director of the African Bank business unit, a fellow by the name of Dave Woolam, has asked for personal reasons to step aside in that role and have a more focused role as per the SENS announcement: will focus his efforts on strategic finance issues, capital and liability management as well as working closely with Gordon Schachat (Executive Deputy Chairman) on new growth opportunities.

Chief of the group, Leon Kirkinis steps back into that role, and is now heading up the group and the bank division, whilst Toni Fourie remains as chief of the furniture business. So that is the past, what about the future? Ellerines has undergone a restructuring phase where there has been management shuffles and brand consolidation. Consumer demand is starting to return.

The core business is set to be steady as she goes, growing their customer base and keeping costs low and looking for cheaper funding. All in all in a tough environment an OK set of numbers. I like this management team, they are committed and quality, Leon Kirkinis owns just over two percent of the business, which does not sound like a lot, but that is over 16 million shares. Imagine that dividend cheque!

OK, whilst the African Bank pref shares yield around ten percent at these prices, three month bills are yielding nothing. Well, 0.005 percent, so as close to nothing as you could get. So, the last inflation read was 0.3 percent headline CPI in the US, why would you buy something that in real terms you basically lose one percent? Is this a result of confused short term money or what? Equities on the other hand have enjoyed comfortable growth, the Dollar has had a torrid time.

I saw a Bloomberg article that suggested that the last time that there was such a large divergence in Treasury bills versus the equity markets was back in 1938. Post the great FDR plans that bore fruit. As well as a whole lot of infrastructure. But that is nonsense, how can you compare what happened in the aftermath of 1938? World War number two probably did not bode well for world trade. And as governments became very stretched on the spend front, why would you have wanted to own government debt. Be careful when you compare historical times in history to present.

1938. That was a year before the first fixed wing transatlantic passenger service. Long before the world as we know it today, mobile phones, broadband, the internet, email, satellite TV. Take those things away for a day and you tell me how the world feels from an information dissemination point of view. Forget global flight.

The gold price hit another record high in Dollar terms, up and around 1164 Dollars per fine ounce. In Euros the price trades at 773 Euros per fine ounce. In Yen, 102268 Yen per fine ounce. A whole bucket of yen for your 31 grams of shiny metal. In euro terms we are nearing the all time highs reached earlier this year. 781 Euros per fine ounce. Less than 10 Euros an ounce away. The Yen, well that all time high is close too, 103207 reached in the middle of last year.

In Aussie Dollars the pattern is similar to ours, the all time high was reached in the first quarter of this year, 1546 Aussie Dollars per fine ounce, today that is at 1253 Dollars (Aussie) per fine ounce. So, be careful when you say, the gold price is trading at an all time high, in Dollar terms, the most quoted currency out there.

New York, New York. The worries still persist, not quite the worries of the great turkey population of the US, who must be thinking if they can make it past Wednesday then at least there is Christmas to aim for. You see, the Thanksgiving holiday on Thursday. Expect a quiet second half to the week, the first half will be jam packed with a second look at Q3 GDP, Home data, durable goods, income and spending, all this before Thursday. Excellent.

So quiet markets Friday translated to slightly lower markets, but a long way off the worst levels. The Dow closed at 10318, down 14, the nerds of NASDAQ lost 10 and three quarters to 2146 whilst the broader market S&P 500, the top 500 American stocks by market capitalisation, down three and a half points to 1091.

The oil price is trading at 78.46 Dollars per barrel. A barrel of oil is around 159 litres. 49 US cents per litre of oil. Sounds pretty cheap when you put it like that, 3.70 Rands a litre of oil. Much less than milk, coca-cola, and to think that the refined product is only twice the price, it almost seems laughable. Considering that the refining process plus transportation costs around the world to your neighbourhood pump sees the finished product only costing twice the price that it comes out of the ground at. More or less.

The copper price is last at 310 US cents per pound. The gold price, we spoke about that earlier, last at 1164 Dollars per fine ounce. The platinum price is last at 1464 Dollars per fine ounce. The Rand is firmer as the Dollar loses a little ground at 7.51 to the US Dollar, 12.44 to the Pound Sterling, 11.24 to the Euro.

We should start the week really well.

Sasha Naryshkine
sasha@vestact.com
www.twitter.com/sashanaryshkine
011 022 5440

Jozi, Jozi. Not up. Down. Left to right. Sectors under pressure, the broader resources sector, the US Dollar gaining back some lost momentum and that was impacting on the resource sector. Lower metal prices, plus selling of the commodity stocks. Session end the Jozi all share index closed down 151 points to 27059.

Eskom. The saga is playing out like a soapie, now it seems that parliament is putting the energy giant under pressure to request a much smaller increase from the National Energy regulator, I saw the number being thrown around which could see the consumer suck up 23 percent. I see that Eskom are saying right, sorry chaps, no Kusile for the time being, those plans are on hold.

As far as I understand it, work on Kusile is a year on already. Yesterday Eskom said sorry, all the contracts have been put on hold. No work will be done until Eskom establish their revenue flows. Although the official line is we are not waiting for Nersa to decide what rate we are going to get, you can imagine the push back will be hard. So for the time being no 2013 for Kusile.

Medupi obviously is still on track, Eskom’s short term needs are 30 billion Rands. What about listing the power utility and diluting governments stake, but still, holding a large portion. What do you think a business of that size would be worth?

Eskom nominal capacity as per their 2008 annual report (found it) is around 43 Giga watts. American Electric Power, or AEP, provides power to Arkansas, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Tennessee, Texas, Virginia, and West Virginia. As per their website. Their capacity is 38 Giga watts. 5 million energy sucking clients in these 11 states. So, similar types of capacities between AEP and Eskom. AEP has a market capitalisation of nearly 15 billion Dollars. 66 percent of their production coal based. AEP has 9 power stations.

My count from the 2008 annual report sees Eskom with 12 Coal fired power stations, 1 nuclear, 4 gas and 4 hydro electric power stations.

Check out these “key facts” from the Eskom annual report:
Is one of the top 13 utilities in the world by generation capacity
Is among the top 9 by sales
Generates approximately 95% of electricity used in South Africa
Generates approximately 45% of electricity used in Africa
Total assets: R171 181 million
Electricity customers: 4,152,312
Electricity sales: 224 366GWh
Nominal capacity: 43 037MW
Net maximum capacity: 38 744MW

In their 2008 annual report, Eskom says that they need 300 billion Rands. 40 billion Rands in the next five years to produce another 16 Giga watts of power. According to the report, Eskom in value is sandwiched between Duke and Eletrobras. For the record before we move off to those other two AEP has in excess of 50 percent gearing. Heavily indebted, but comfortable.

Eletrobras has a capacity of 40 Giga watts and provides Brazil with 60 percent of their power. The government owns 52 percent of the stock. I am starting to like this idea. Since 2001 they have had 7 CEO’s. Not a good sign. The stock is listed on the Bovespa, it also trades in New York. Margins over the years have been crimped to single digits, but at the same time gearing is somewhere in the region of 33 percent. Financially speaking, Eletrobras has their house in order, at first glance.

What are the options? List the business and raise funds. But I wonder what investors would think of this company? If you have time over the weekend, go over the annual report and tell me what sort of market cap this company should have. Relative to their peers internationally. Remember, no competition. Perhaps that should be the one thing that should change.

I don’t understand. At all. Tell me I am stupid, I have a thick skin, I don’t mind. Gold demand in tonnage dropped 34 percent for the third quarter. That is straight from the World Gold Council not some conspiracy theory. Those gold bugs are so sensitive man. At the same time they have a thick skin, like me.

OK, so in the third quarter demand is down sharply, because the traditional buyers, Indian housewives and jewellery demand, that falls 30 percent from the same quarter last year. The price, that is up ten percent over the same time period. The biggest change this year has been the demand from physical demand, folks buying coins, folks buying ETF’s and other forms of gold.

Admittedly the 3rd quarter last year saw massive purchases of gold, largely jumps in the very same demand change here. 800 tonnes of gold bought in the entire third quarter when compared to the 1205 thousand tonnes bought in the same quarter in 2008. Interestingly up from the 724 thousand tonnes bought in Q2 this year.

For the whole of 2007 there was 3551 tonnes of demand for gold, that figure jumped to 3804 tonnes in 2008. The rolling number for 2009 so far is just over 2600 tonnes. So, unless there is the best quarter in three years, demand for 2009 will be much lower than in the two previous years. Yet the price is at an all time high in Dollar terms.

Recently the central bank of India waded in with a serious purchase, much was made of little Mauritius making a purchase and it was noted that Sri Lanka were operating in the open market.

Don’t confuse demand with real price, specifically not with the gold price, separate them please. The demand for gold from the investors in instruments, the speculators, has largely been driven by a fear of inflation, Dollar weakness and excess money supply. Inflation, well the jury is still out, an earlier read this week showed that there are signs that this might happen. Still too far away.

Remember we had earlier in the week discussed that paper written by Chris Hartnady, which suggested that the land on which we live each day has seen its gold reserves exhausted. 95 percent mined out. Tell me something that I don’t know, but the new thing is the extent that we are told. We are told that the reserves reported are probably wrong.

Now if this is true…….. this is a supply issue not so? A lack thereof. Now that should have an impact on the price not so? Does Chris Hartnady know how many bugs will feast on this? Worst part though is that if some of the local gold companies are being priced (valued in the open market) on the basis that the reserve base bigger than we think, what does that mean? Time will tell, but I don’t think that this story is going away.

New York, New York. A long way off the worst levels of the day which looked really ugly, a downgrading of chip stocks saw a sell off of the heavy weight numbers in that sector. Markets closed near their best levels of the day, but the reading thereof does not look pretty. The Dow Jones closed 93 points lower to 10332, the nerds of NASDAQ ended 36 points lower to 2156, whilst the broader market S&P 500 closed nearly 15 down to 1094.

The oil price is 77.55 Dollars per barrel, lower. The copper price is also lower at 307 US cents per pound. The gold price is hanging around at 1143 Dollars per fine ounce. 1437 Dollars per fine ounce is where the platinum price traded at last. The Rand, mixed, a little firmer at 7.51 to the US Dollar, 12.47 to the Pound Sterling and lastly 11.20 to the Euro.

A mildly worse start expected here. Later in the day, well almost anything could happen.

Sasha Naryshkine
sasha@vestact.com
www.twitter.com/sashanaryshkine
011 022 5440

Jozi, Jozi. It was going well, it looked like another day of gains for the Jozi all share index, which has had an unbelievable run. Local markets hardly blinked as retail sales came in worse than anticipated, once again it was data from the US that rocked the boat, not the local data. Housing starts, this is the first time that there has been worries about a tax credit and the US housing markets, and it showed. Into the afternoon we struggled to hang onto the gains and the markets fell away, the Jozi all share index closed 35 points lower at 27210.

Those retail sales, South Africans are still reluctant to spend, notwithstanding some serious cuts in the lending rate and some bargains out there, deleverage is still very much at the forefront of consumers minds. Hundreds of thousands of jobs have been lost this year, folks are reluctant to spend.

Remember that these retails sales are for September, we are nearly 50 days on from those, as much as I like stats, these are a little old already. Expectations had a minus 4 in them, the actual number showed a minus 5.1 percent change when compared to last September. And for the trailing quarter, July to September, no better at minus 5.2 percent. Most of the pain is being felt at the hardware, glass and paint retailers, down nearly 20 percent, that ties into the housing market.

The biggest weighting in the overall retail sales, for a grouping, are the general dealers category, which account for just over 38 percent of overall sales. Next on the list are the clothing, footwear, textile and leather goods with an 18 percent weighting to overall sales. What you would think would be the traditional sales areas, shoes and handbags.

Retails sales in absolute Rands amounts are roughly at June 2006 levels, on a monthly basis South Africa did around 39 billion Rands for the month of September. April 2008 was where the retail sales peaked at 42 billion Rands per month, so we are about 3 billion Rands less in retail sales from the highs. 8 percent less from the highs. But just to put it into perspective, in 2002 the overall sales number is just above 20 billion Rands.

Over that time period, 2002 to 2008, for the full year, retail sales have doubled. That is right, doubled. It would be a tough stretch to suggest that we should or could double it again from 2008 to 2014, but imagine if that could be the case? If you want to read the entire retail sales September Stats SA release, then here goes.

Fallen giants. I remember at the beginning of this decade, when you spoke about the markets broadly, Dimension Data was thrown in there somewhere where I remember days where they would command around one third of the overall volumes. One third guys. Granted in those days three billion Rands worth of trade was a lot. Nowadays anything over 12 billion Rands is average, it is very rare if any company does more than 2 billion Rands worth of trade, there would be some deal related activity. And then it could only be one of around 6 or 7 stocks.

Dimension Data released results yesterday for the full year to September 2009. Revenue lower, operating profits higher, earnings per share higher at 7.9 US cents per share. So that works out at current exchange rates to just a little less than 60 cents.

So at 10 bucks is it cheap? Not exactly whopping margins, that is my only worry. I said to Paul, OK, ignore what the company does and just look at the numbers. And they look compelling, the company has made great strides to convince everyone that they were not part of an era that many would rather forget. But their post profit margins compare to that of a retailer.

But, having said all of that, the company is still an alternative entry point into IT services into some parts of the world that you normally would not have access to. They have compelling growth services business in a pretty crowded Asian environment. On balance worth a relook, even at these levels. Margins just too low.

Naspers out with a trading update yesterday. Now you must remember that this is a company that owns stakes in other business from South America to China, and the implied valuation plus the earnings from their core operational businesses are reflected inside of their share price. So, some great part ownership of some fast growing media (social and main stream) assets in emerging markets, plus the bulk of the earnings coming from media here, mostly DSTV.

Yesterday the company gave a head up of where you could expect earnings for the six months to September to be 30 to 40 percent higher than the 476 cents last year. So, in the middle of that range at around 638 cents for the half year. It is the valuation of the other businesses that is the tricky part. Koos Becker is no slouch, he is considered by many in a South African business context as a genius. We will have to wait and see results in the next week or so to have a closer look.

Did anyone get wind of Marius Kloppers the CEO of BHP Billiton was saying in a gala dinner where he was the key speaker? He kind of intimated that in the short to medium term that demand still looks a little ropey for commodities, but in the long term demand is going to be huge. Clever guy from the West Rand here and now heads up the worlds premier mining company. I have a lot of time for him, even though there is a certain mono tone that is a little insipid at times. But I get what he is saying, the super cycle is here to stay, we have just hit a speed bump at this juncture.

Radio 702 are broadcasting this morning from soccer city, a name synonymous with football in this country. The stadium is nearly complete, some of the team are there and Aki, you know, the traffic and tech guy, a self confessed geek, took this picture this morning. Breathtaking and by his own admission on the wireless his throat caught a lump and his eyes welled up. Beautiful, aint it?

New York, New York. At the beginning of the session the markets had already seen some rather ordinary looking housing starts, in part because the tax credit had expired, it has since been re-introduced. So down sharply versus the expectations and mumblings coming through that the stimulus and packages associated with growth will have to be kept in place for a little longer.

Stocks ended the session well off the low points mid session when broadly speaking the markets were down over half a percent. The Dow closed 11 points adrift to 10426, the nerds of NASDAQ were 10 down, half a percent to 2193, whilst the broader market S&P 500 closed up shop at 1109, down half a point.

The gold price was last at 1143 Dollars per fine ounce, there was a brief flurry to 1150 last night. The oil price was last at 79.31 Dollars per barrel, again a brief flurry through the 80 bucks a barrel mark sparked some excitement. Or disappointment, depending on who you are. The copper price was last at 310 US cents per pound. So roughly speaking 682 US cents per kilogram. 51.25 Rands per kg of copper. 31.1 grams in a troy ounce. Roughly 32.15 troy ounces in a kg. 159 ZA cents per ounce of copper. Is that right? Seems right.

The platinum price is lower at 1437 Dollars per fine ounce. Around 10777 Rands per ounce. Around 346 thousand Rands per kg. Good thing that we don’t rely of platinum cables, they would have to be guarded with tanks. OK, the Rand is weaker at 7.53 to the US Dollar, 12.54 to the Pound Sterling and 11.19 to the Euro.

A little mixed at the start, perhaps expect a little consolidation at these levels as participants wait for further confirmation of where we are at.

Sasha Naryshkine
sasha@vestact.com
www.twitter.com/sashanaryshkine
011 022 5440

Jozi, Jozi. It was a fairly quiet day in the city founded on ever dwindling gold reserves, shall explain that later, mostly waiting for the MPC decision, but for the majority of the day the market was higher and drifting. Session end the Jozi all share index closed at 27246, up 142 points.

I cant believe that not one person has a question to ask us that will be answered on a series of video clips, email them to us here at the office and then we can discuss. Otherwise we will have to make it up and say stuff like, Stewart writes in from Port Nolloth with a question about PPC, where is it going in the short to medium term and do we believe that the stock still offers value at these levels. That kind of stuff.

Or, Susan writes in from Durban and said, does the current economic cluster of the government leave you feeling confident with the future of South Africa from a business point of view? Come on guys, send in your questions and make them tough ones, don’t be shy.

MPC meeting, I was tweeting whilst watching, here is a breakdown of how I saw the meeting:

Gill Marcus starts…..introduces rest of committee. Change already.

Marcus – “1 in a 100 year credit crunch”. Because widespread credit is new, could say only one on record.

Right, it is official, Marcus is the business, IMO. Officially IMO?!? (IMO is in my opinion)

Rate unchanged!!! Not a twist.

No December meeting for the MPC. Cameras. How refreshing. “Inflation risks balanced”. (Fed) Speak for could get better or worse, who knows.

Vernon Wessels (Bloomberg) to Marcus – is the door open to rate cuts and was this decision unanimous?

Marcus to Wessels – Decision was unanimous. Can’t answer the other. Next question – SARB does not intervene in currency.

If you want to read the whole MPC statement.

There were some parties afterwards who were disappointing, but to be perfectly honest put yourself in her shoes. One week on the job and pressure from all quarters. The inflationary risks are unknown, we need to know whether or not Eskom are going to be granted that big hike and then Marcus and her team can make a decision based on that. But she seems great, talks with great authority on matters monetary and she comes with great credentials. Good start and job well done.

OK, so what was I going on about that ever dwindling gold reserves and Jozi. Well, actually simple, I was tuned in Chris Gibbons show on 702 on Monday and heard him interviewing a fellow called Dr. Chris Hartnady who had written a paper on South African gold reserves. Every day Chris interviews a person on markets and there is a podcast on the Fin24 website, Wednesday is my day. I asked him about this paper and he emailed me the link, check it out.

Although the conclusion is fairly short on this piece anyhow, don’t take this from me, take this from this fellow. He basically is saying that reserves are being over reported. Which could actually have a positive impact on Gold prices if that were the case. And ironically make the local mines more profitable. The gold miners have had a very patchy record.

Did you see that Johnson Matthey report on platinum? Now remember that they are in a way geared to the fortunes of the platinum group metals, so of course they are going to be bullish in a way, they manufacture auto catalysts, they would like to think this is a positive outcome that the auto market is improving.

Whatever their motives are, the industry widely sees their reports as a solid enough outlook for the platinum market. JM expect the auto market to bounce back and production will fall behind. As such the market will go from a comfortable surplus to a wider more worrying deficit. The most interesting factor for me was a massive demand and increase in Chinese jewellery consumption. That could become an unknown factor looking ahead.

Did you see that yesterday an Italian newspaper was reporting that chocolatier Ferrero was thinking about an offer of an alliance from Cadbury’s. This in an attempt from Cadbury’s to give a more hostile Kraft the bird (can you say that?). Phew. Ferrero, they make Nutella spread and of course those heavenly hazelnut chocolate balls. Yum.

And Tic-Tacs. It is still a family owned business, and has a great history, amazing. Sales in excess of 6.2 billion Euros, so around 70 billion Rands. That is more in sales than many, many of our listed companies, including the likes of Shoprite and Vodacom.

Not too sure what Cadbury’s are looking to do with an alliance of seemingly premium brands and not too sure what the official line would be from Ferrero, but if a business tie up meant shares for the Ferrero family, perhaps a clean exit could be on the cards for them. Grandad and brothers started the business post world war two, it is now time to cash in and live comfortably.

New York, New York. A quiet day on equity markets, but quite a big turnaround from the lowest points in the mid morning, to end nearly a percent better from there. Goldman and Warren Buffett have teamed up to provide a life line of credit to small American businesses, perhaps Goldman feeling some social conscience, Buffett, well he has always been committed to humanity. Perhaps that is not fair, as someone once pointed out, Goldman donate a lot of shareholder funds to charity. And no doubt lots of the execs do too.

Session end the Dow closed 30 points better to 10437, the nerds of NASDAQ added nearly six to 2203, whilst the broader market S&P 500 managed to tack on a solitary point to close at 1110. Excellent.

The oil price is trading higher at 79.66 Dollars per barrel. The copper price seems to have found a new level at 311 US cents per pound. The gold price is slightly weaker at 1136 Dollars per fine ounce, whilst the platinum price has ticked up to 1461 Dollars per fine ounce. The Rand is weaker at 7.45 Dollars to the US Dollar, 12.53 to the Pound Sterling and lastly 11.10 to the Euro.

A mildly better day expected here.

Sasha Naryshkine
sasha@vestact.com
www.twitter.com/sashanaryshkine
011 022 5440

Jozi, Jozi. Lift off. 2009 highs for the local equity markets as global markets reached similar highs. Session end we were trading near the highs, with the Jozi all share index at 27104, up 409 points. Platinum, gold and the broader resources market leading the charge, all those indices up two and a half percent better.

OK, we have done a few video clips, they have been well received. We have been a bit quiet on that front, but lets have a Q and A session, you send in your questions and we will answer them in a series of video clips. So send them into either Paul or myself and we will answer it inside of those video clips.

OK, so today will be the first delivery of the MPC meeting outcome by new Reserve Bank Governor Gill Marcus. Most folks out there are expecting the Repo rate to stay on hold at 7 percent. Prime 350 basis points above that. So you have to admit, we do have rather high borrowing rates, relative to many other places around the world.

But the risks are too much for Gill Marcus at this stage to raise rates. I thought that a one and done policy might be worthwhile, one last stab at rates and then hit the sidelines, but who would want to be wrong at your first meeting, when you look back six months from now. I don’t even know what a red herring looks like, a dried smoked kipper, which the smell threw dogs off, hence the expression, but the Eskom looming power hike is the kipper in all of this.

More clarity on the Eskom price hike when the national energy regulator meets to say nay or yay to Eskom, could give us a better understanding of where to from here for rates in the short to medium term. I suspect that until employment starts to show signs of improvement in the developed world, expect lower rates in the US, UK and Europe.

Did you see that crazy story about the fellow who spent hours (just over half a 24 hour day) in a queue with his fiancé as they queued for a deep discounted sale at H&M in the UK, specifically for Jimmy Choo shoes. Which were specially made for the store, a cheap luxury item. Not that I feel for the folks in the line, with their umbrellas and flasks in November in the UK, but there was a point in there somewhere.

Young people and luxury goods, who are a lot more brand conscious than their parents. Not really me, I could not care a less what label my pants have, but in my group of peers and friends, I am in the minority. More folks like nice things and prefer to shop up. And with more folks joining the global middle classes over the coming decades, it all points to increased spend in the luxury goods space.

And the entrepreneurs who had eventually got their pair (one per size per customer) sold the stock on eBay for as much as a 50 percent profit. Not that around 100 pounds is great for 14 hours standing in the cold, but if you are a student, 100 quid is good money for standing around nattering. I would never stand 14 hours in a queue for anything. Not even Jonny Mellencamp last show tickets.

Did you see that Cisco have upped their price to the fellows over at Tandberg, the Swedish teleconferencing crowd. Well, the guys at Cisco who initially saw their bid rejected by the board, lumped on some more and the board said that they like this 11 percent premium. If the deal does happen, it would be the first purchase of a listed company outside of the US.

So what is the most important two points to come out of the Asian tour that US president Barrack Obama has undertaken. Not that Tokyo is still an important trading partner. Not that China must engage with the Dalai Lama and spiritual leaders exiled from Tibet.

Rather as the FT points out, in his prepared speech in Tokyo that the US consumer and Asian exports are all too important to the specific parties. Don’t rely on exports and don’t rely on our consumer. That will come though, more internal consumption and less reliance on US consumers.

Nothing on the currencies, talk about strengthening ties, more student swapping, keeping nuclear weapons from spreading, promoting world peace. All in all advancing their ties and it is pleasing that the two big economies of the world are agreeing. Or from the outside. Obama is the business, Hu, I don’t know, but he seems like a solid fellow. Don’t ask my mom, she sees the Chinese as those bad people who have overrun Tibet and displaced the Dalai Lama.

Mauritius. A favourite getaway for locals here, but not a favourite Dollar destination it seems, the tiny island has decided to buy 2 tons of metric gold. Perhaps they should mint the gold and sell to the strong Indian and Chinese population. But another sign that everybody is seriously thinking about Dollar diversification. But Gold? Hmmmm…I would have been more comfortable if the island had bought some Rupees. But time will tell. Island style.

He has real money. And I am referring to that Paulson fellow, the hedge fund billionaire in New York who announced that he had bought a whole host of Citi shares. Remember he recently bought a whole lot of AngloGold Ashanti. Whether or not he still holds them, who knows. But as one fellow pointed out shortly after Meredith Whitney (right place, right time) gave a very bearish overview of the financials, who would you rather back? Paulson or Whitney, he went with the guy who actually had money.

New York, New York. Retail sales, not bad. The previous month revised lower. Manufacturing, lower than anticipated. Business inventories were better. Gee, if you focus too much on this data you might get caught up not knowing which way too look. If you focus on who is buying what where, then you will see that Warren Buffett is still bullish on US recovery, he has been buying Exxon Mobil, Wal Mart and Nestle. So should I care what Whitney and Paulson do, when their time frames are months and not years? Yes or no, what do you think?

Session end the Dow Jones Industrial Average added 136 points to close at 10406, a bit of a wobble around a quarter to three in the afternoon when those Whitney comments were made, but recovering some of those losses. Any body remember the same double dip ice cream terms used last week by Roubini and his outlook on the unemployment rate rising? Thought not, these guys are losing momentum as prices move against them. The nerds of NASDAQ added nearly 30 points to 2197, whilst the broader market S&P 500 added nearly 16 points to 1109.

The oil price is lower at 78.73 Dollars per barrel, the copper price has stretched away at 310 US cents per pound. The gold price is higher at 1138 Dollars per fine ounce. The platinum price, 1439 Dollars per fine ounce. The exchange rate, slightly weaker at 7.39 to the US Dollar, 11.05 to the Euro and 12.45 to the Pound Sterling.

We could start a bit better here this morning.

Sasha Naryshkine
sasha@vestact.com
www.twitter.com/sashanaryshkine
011 022 5440