Slasher's coffee beans

Jozi, Jozi. Earnings pushed us higher, but poor US economic data saw us nowhere for a while and then lower. Session end the Jozi all share closed near the worst part of the day, down nearly seven points to 26795. Resources down 1.3 percent the big laggards, in the winning column were the banks, up nearly 1.9 percent.

A production update from the fellows at Lonmin was hardly inspiring. I noted that all the explorers and smaller platinum producers all had a hog wild day, up sharply. The majors, not so great, I saw a downgrade for Impala yesterday, which was up comfortably and then closed much lower. OK, but back to Lonmin, the perpetual miss fellows on production, not all fair, that plagues most in the sector.

109,044 ounces were produced in the fourth quarter, sounds like a bit of a poor quarter to me, bearing in mind that the company reckons that they will get to 700 thousand ounces for the year. If I hear you scratch your head don’t worry, the reason why they could reach that last quarter was a problem with one of their furnaces. I have heard folks in our space laugh and say that their furnaces are held together with sticky tape. Right.

Exxaro yesterday with an announcement that they were going to export only around 60 percent of their Richards Bay capacity as a direct result of Transnet shortfalls. OK, so another long string of what Transnet are costing the country, instead of talking about nationalisation, why don’t we talk about fixing the capacity inside of the parastatal companies. Of which none are efficient. None. Let alone profitable. A complete waste of tax payers money in what looks like a jobs over efficiency.

I saw on ENews last night that they were in possession of an ANC Youth League document which was on nationalisation, not only of the mines, but also of financial institutions. I was listening with half of a bad ear, but it seemed that the suggestion was that no compensation would be paid for such stakes in the businesses.

Right. So I went to the ANCYL website to try and find such a document (which looked a little thin in substance as per the TV) and was greeted with smiling faces of the Youth. Or not really that youthful, I think age has to be under thirty five to be a member, at which time you are no longer youthful.

I laughed when I saw an Old Mutual savings advert, served via Google ads. The reason for the laugh is because if the ANCYL suggest no compensation for these stakes, then the value of the stakes inside of the Old Mutual savings mechanisms will be badly hurt, not so?

Ben Bernanke is back. Not overwhelmingly, but he secured the necessary congressional votes to have another term as the head of the Federal Reserve, 70 yeses and 30 nos. The closest vote since Volker was re-elected back in 1983 with a 83-17 count. And the most unpopular

The part that always fascinates me, and I was incensed yesterday (as I said previously, takes a lot) by some folks pointing out this and that and the past, and what you did there, and what you didn’t do, is that everyone is looking to correct the mistakes we made.

Rather, and of course this is not easy, rather than what potentially lies around the corner. I have heard people say this and that about what should have been done with Lehman, Bear Stearns, AIG, but have you heard one politician get really, really, really upset with each other about the state of US debt. Or perhaps I am not paying attention. Who cares what happened? It happened. Learn from it, ensure that it does not happen again. Don’t score cheap political points off the events.

What this slimmest of margins means however for Bernanke however is that lawmakers are placing increasing pressures on the Fed’s independence. I suspect that laws need changing when times change, and perhaps there were fellows who fell asleep at the wheel. Don’t know.

The total number of recalled vehicles by Toyota over the last three months, four million. Ouch. Apparently it has to do pedals, some getting stuck half way through, some getting just plain stuck. Here is the official press release. As you can imagine, that is not great if you are cruising down the highway. The top brass have been critical of the grow at all costs type strategy, that Toyota embarked on to become the number one seller globally.

Unfortunately some of the parts and weak factory practice have led to the quality of the worlds most reliable brand fall away. The closing of some of the factories in the US are costing the company 1.1 billion US Dollars. The last five trading sessions the stock is down 13 percent. Yech. Where there are losers, there are winners, Hyundai is the US are letting Toyota drivers trade their vehicles in, plus they get a thousand bucks if they buy a Hyundai. Cool.

I must admit, I have only ever owned VW’s and Hyundai’s, never had a problem with any of those. My dad has had his Toyota for donkeys years and he has never had a problem with it, in fact it goes like a dream. Perhaps that has something to do with the fact that he drives slower than most. And as such has passed that slow driving onto me. Finally, for Toyota it will mean repairing the brand, that will take who knows how long. If you do a Google search you will see that even rental company have sidelined their Toyota’s.

And then I had to admire the way that some businesses embrace technology and deal with the new issues. Check out the Toyota twitter page. There are dedicated folks in the US answering questions from desperate owners, and if you read all the posts you can see that they are fighting a battle here. Hyundai’s twitter page reveals a much more cheerful approach. GM, Ford, Chrysler, VW, they are all there.

New York, New York. Sis. All fall down. Poor initial claims numbers that were lower than expectations and some durable goods orders that were also below analyst estimates all lead to folks increasing their bearish tone. Again the materials sector under pressure. Transport and tech stocks under pressure. A massive jump from Nokia after releasing results comfortably above estimates. Up over eight percent in normal trade. Still question marks remain about their ability to keep pace with the smartphone market worldwide, but they are making progress with their Ovi platform.

Session end the Dow closed down 115 points to 10120, the nerds of NASDAQ down 42 to 2179 whilst the broader market S&P 500 dropped nearly 13 points to 1084. After hours Microsoft blew away expectations. Blasted them. After hours they are flat. So folks perhaps digging deeper into the prospects column. Stock not expensive, nor is it cheap. Analysts expect the company to make around 210 US cents for the full year, that sticks them on a forward multiple of 13 times, looking cheaper. Average target price, 35 bucks, that is around twenty percent above where they are trading now.

The oil price is trading at 73.98, higher on the session, but has had a bad time over the last two weeks. The gold price is trading lower at 1084 Dollars per fine ounce, the usual suspects calling a bubble in the gold price, who knows. Do I care, sort of, it is good for the country to have higher gold prices. The copper price is higher at 311 US Dollars per pound, took a whack yesterday. More than ten percent below the recent highs now, most of the commodity complex is about the same. The platinum price is higher at 1515 Dollars per fine ounce.

Nope, lower to start again. All about those GDP numbers out of the US later today.

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

Jozi, Jozi. Apart from a CPI read that went out of range, but was better than expected, most of the focus was to events happening later in the day. And there was so much that was going to happen a whole heap later (that is Asterix speak) that we did not notice that our market was trading much better than global markets. Session end we managed to add 150 points on the Jozi all share index, which finished at 28692.

That CPI band, three to six percent, lower than folks expected, but out of the band. But, economists are expecting it to return, only to have price pressures from the World Cup (you mean things are going to be more expensive?) and the big elephant in the room, Eskom. We will know the findings of the Nersa meetings sometime in the next few weeks.

Did you see yesterday a collective announcement from Treasury and the Reserve Bank that they were assessing the inflation targeting policy, and whether it was effective and adequate for a country like South Africa. That could mean a thousand things. Nothing on their respective websites, the Treasury talks about the media and the budget lock ups, whilst the Reserve Bank website has the last media release being the MPC outcome on Tuesday. And hey, after the CPI read yesterday they were right to keep rates on hold.

I am not too sure what this means, but the debate has been around for an absolute age, one of the local Bloomberg journo’s this morning was talking to the London office about perhaps wanting to close the gap on the yield and then make the spread less attractive. I guess that could be one way of going about it. Or perhaps raising the band. By 1.5 percent. But the debate is now completely open, and it is no coincidence that both the budget and the state of the nation address will be delivered by their respective speakers in a few weeks. If you are completely bored and looking for some high level economics, then check out this paper that discusses the merits of Inflation targeting.

If you’re going to San Francisco. Be sure to check out the hype around the new Apple device. Steve Jobs unveiling the new iPad, the latest in the innovation of personal devices. Or so it seems, because the iPad does what the Kindle and the Sony book reader does, but then it also does email, browsing, TV, movies and videos.

Could you believe that Bloomberg was covering Hank Paulson being quizzed by politicians, and my only form of information flow on the new product was from Twitter. And can you believe that was the same for most people, so much so that Twitter creaked under the pressure. You see, the world has changed. People want information, can’t get it from TV, get it from the internet. No need to stand at the fax machine.

What does Apple want to do? Well, of course they wanted to poo poo the netbook, you know the small laptops. Jobs implied that they had done nothing. Hey dude, they are smaller and more portable. The iPad plans to bridge the gap between the phone and the laptop. An entertainment device is what I thought it is. Don’t read my take on it, read what the very best have to say about it.

OK, so if you read that, you saw the cost. 499 US bucks for the small one (16G), 599 bucks for the medium one (32G) and the very big one, the 64Gig one, 699 US Dollars. Chuck on 25 percent import duty and translate that back to Rands to see what the local retail price will be. You see what iPaid for my iPad. More or less. Amazing product, one and a quarter centimetres thick. That is nothing, in terms of thickness.

First glance, looks like an oversized iPhone, second look, looks like a very cool replacement for the book, you can browse the web, check your email, read a book. Watch a movie. Watch TV. Gamebreaker? There are always naysayers, but Apple always seems to break the mould and come up with something amazing. Analysts predict that Apple’s revenue will be 45 billion Dollars this year, 2004 that was eight. So, if you think that is a big jump, wait. Because if Cisco’s predictions are by 2019 that 90 percent of internet traffic will be made up of video, we had better all watch out.

OK, the other jobs, the real ones, not the personality, was perhaps the main focus of US president’s state of the nation address in the wee hours of the morning. Do you want to read the whole speech, be my guest. Or your guest. It was a reminder on why the guy is so good, why he is our time JFK, Churchill.

OK, so should bankers be sitting back, rolling over and be tickled on their tummies, or should they partake, not just at the fringes? Interesting, I saw an interview with Bob Diamond in which he suggested that everyone wants the same outcome, a sound financial system. Yip, right. To not include the banking world, now Diamond thinks that is unfair.

Staying on that same tack, I don’t often get upset, it is rare, but last night I was watching the grilling of Geithner and Paulson by politicians who had their own agenda. Not only do I want a new financial system, I want new politicians who can say sorry when they are in charge of the laws that folks operate inside of. You know what I mean. Like Buffett said the other day, perhaps the senators should give their salaries back if this plan does not work. I like that, a clawback on politicians. Just imagine, nothing would ever get down.

I don’t like the fact that AIG was given multiple organ transplants, but I know that Treasury Secretary Geithner was operating under warlike conditions. And then you make decisions based on the loss of life. Because in their minds, because of the web that AIG had been allowed to spin, note allowed, it was all connected. With the benefit of hindsight, Lehman Brothers should have been warehoused and saved in some manner or other. Credit spreads would not have widened to crazy levels and the loss of trust and counterparty risk questions would never had been raised. Some were not too big too fail. Check out the WSJ take on it.

OK, not only did you have all this stuff happening, the iPad, the state of the union address (OK, that was later), the hearings in Washington, but would you also believe, an announcement from the Fed. I saw that too and there was one member, a fellow from the Kansas City Fed, Thomas Hoenig was not agreeing with the rest of the members of the FOMC. Now Hoenig has been around in these stables for two decades.

Hoenig wants rates higher sooner rather than later. So, you would say that he has been around and he has seen things. And as he points out, experience matters, and folks should start listening. As long as you have let everyone know. On the flip side, there are other Fed members who are of the opinion that the stimulus should remain in place until more serious signs of recovery are in full swing. The debate has started guys, inflation versus growth, you know what that means, the worst is far gone.

New York, New York. A late surge on Wall Street, to close the day higher, the Dow up 41 points to 10236, with the nerds of NASDAQ better in percentage terms as Apple reversed losses to end better on the day. The broader market S&P 500 added five and a third of a point to 1097. Again the broader commodities sector and energy fell, as their underpin, the prices traded, continued to have a poor show. Toyota had some more recalls, this image damage cannot be measured in dollars and cents.

Caterpillar out with earnings, that beat expectations quite handsomely, but their guidance for the full year was lower than previous guidance given. No mercy for stock prices on Wall Street, the stock down four and a third percent to 53.44, as you can see from this Reuters piece, it was the mixed guidance that spooked folks out.

73.88 Dollars per barrel is where the oil price last traded. The gold price was last quoted at 1088 Dollars per fine ounce, the platinum price is at 1516 Dollars per fine ounce. The copper price is lower at 321 US cents per pound. The Rand is firmer today at 7.56 to the US Dollar, 10.60 to the Euro and 12.27 to the Pound Sterling.

Expect a better start on account of a better Wall Street finish and a little more optimism around earnings season, which on balance has seen companies beat on the top line. That is what we were looking for not so?

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

Jozi, Jozi. Yech, another down day for the Jozi markets, again led lower by resources. The same worries on market participants minds (I am not going to call them investors), Bernanke reappointment, which seems like it is going to happen. The other worry being tightening from the fellows over in China. Inflation and a lack of growth in Britain, Greek debt fears allayed a little. Platinum stocks were thrashed, down three and a half percent, the broader resources market down two and a quarter percent, leaving the overall market down 1.58 percent, or 427 points to 26652.

OK, yesterday was the MPC announcement, Gill Marcus did another sterling job. The most refreshing part of what she did was in the Q&A part she deflected questions to the panels of MPC members, choosing not to go beyond her area of expertise. Which was great, teamwork you see. It was not unanimous though, there were some members who were calling for a cut. Read the full statement here.

CPI out today and this is expected to go out of the target band again, above six percent. That is the expectation, we will see where to from here, the biggest problem as you can no doubt see is the Eskom price hikes. So one gets the sense that until such a conclusion is reached, we are unlikely to see rates fall. Even if inflation moderates. I guess like the MPC, we are watching the same data.

BHP Billiton and Rio Tinto are perhaps expected to reach their record numbers again. Analyst recommendations suggested that for the financial year 2010 for Rio and 2011 for BHP Billiton, the two companies could beat their records set a couple of years back. BHP Billiton are expected to make 16 billion Dollars worth of profits, surpassing the 15.5 set back in 2008. The same analysts are expecting the next 12 months to reveal 10 to 15 percent price appreciation in the stocks.

OK, but these very same fellows six months ago. So methinks in twelve months time that there could be very different outcomes from the very same analysts. As the developed world repairs their battered economies. OK, well for the half year to December 2009 we are going to see the results released on the 10th of February, I must admit the longer I do this, the more excited I get about seeing company earnings and how they are digested. BHP Billiton down 2.3 percent in Sydney, Rio down

Staying in the space, Rusal debuted on the Hong Kong stock exchange today, with a poor show. A poor, poor show. Down around 9 percent at the get go. Sounds like only good for the company to have raised the funds at the higher level. Ordinary retail investors were barred from taking part, only the extremely wealthy.

The chief Oleg Deripaska is exceptionally wealthy, but seemingly downplays it, pointing out that the company is straddled with a lot of debt. And that it is. Read a bio on Oleg, less than twenty years ago he worked construction jobs just to feed himself. Yip. A remarkable rags to riches story. The IPO documentation was not 100 percent, there were mistakes in the 1000 page plus document.

OK, so Rusal might have debt coming out of their ears, but they have access to perhaps the cheapest power around, with their proximity to the Siberian Hydro power key. The company accounts for around one eighth of global aluminium production. They have been aggressive in acquiring assets, almost a big deal a year since 2002. Bad timing on the IPO though, eight down days in a row in Asia, amid concerns that the Chinese are tightening credit markets. Sees.

Do the Bartz-woman. And by that I am referring to the Yahoo CEO, Carol Bartz, who is not afraid to drop the f-bomb in an earnings call, oh yes she did. And in other places too. Let’s just say that she is not what you would call your ordinary CEO, but I guess in tech circles, anything goes, luckily for her. Yahoo! topped profit expectations, but fell short on revenue. Yahoo! chief Bartz has cut costs, staff have been shipped out the front door, in what she called perhaps the most difficult economic climates ever. And I guess history might prove her right, last year was more than tough, it was downright awful.

Today sees the launch of the next big Apple product. You got that, the iPad, the iSlate, the coolest gadget of the decade so far. You know, the competition to the Kindle, to the Sony eBook. Except this one is going to be very cool and perhaps have a lot more features than those ones, perhaps even a phone. I checked on the box a former Apple engineer explain that all these major projects are top secret, departments don’t mix. Although the secrecy of this one has not exactly been top drawer, there have been reviews and pictures leaked.

Davos, what a hoot. Or so I used to think. A talk shop. Nothing more than a place to be seen. I have changed my perceptions, perhaps something to do with a more mature me on these global events. Perhaps the cynic in me saying that sometimes these are talk, talk, talk and a reason to be friendly to other economic and political hot shots. Hey, how are you. And then turn the corner and say, that fellow is such a bear, or such a bull. Or neither.

Check out today’s program, holy smokes. I am glad that our president went to Davos, this is a great chance to see and speak to folks on a global stage about matters political and economic.

That is great. Our president is being interviewed by the Editor of Newsweek International, Fareed Zakaria in an open session tomorrow at 11 European central time. And then on the 29th there will be South Africa 2010 and beyond session, with folks like the IDC head, Geoffrey Qhena, minister of economic development, SABMiller chief, Graham Mackay and others. Should be fun. More fun will be Mark Fish and Lucas Radebe with a 15 minute session around South Africa and the world cup, that is on the 30th. Of course these are just the key to South Africa sessions, there are many others.

Chinese tightening policies continue, leading Asian markets lower for the eighth day running. Eighth session, lucky that the weekend saw a reprieve. OK, so what exactly are the Chinese authorities up to? Well banks have had to up their reserves ratio as a result of them being hiked, some of the big banks were told Jan 19 to stop lending for the rest of the month. So there are worries that the clamp down could lead to firmer measures, measures such as rate hikes around Q2. Some say no, with the Dollar peg the authorities might not blink until the Americans do something. All I know is that Chinese authorities are all over inflation problems. And that for me, is a good thing.

OK, not good for Toyota. Very bad in fact, because we all know what happens when a brand takes a bit of a knock. Toyota have recalled 2.3 million vehicles as well as asking their dealerships across the US to stop selling eight specific models. Safety issues you see. Too many moving parts. Phew, motor companies, we need them, but they don’t exactly make for great investments.

New York, New York. OK, down, up and then down again. Same old. Basic materials again bearing the brunt of the sell off on concerns tighter money in China could mean lower commodity demand. Financial stocks also having a bad time of it. The markets on Wall Street closed down after having been up comfortably in the middle of the session, as much as 0.85 percent higher. The Dow lost two and a half points to 10194, the nerds of NASDAQ lost 7 to 2203, whilst the broader market S&P closed down 4.6 to 1092.

The oil price is trading lower at 74.61 Dollars per barrel. The gold price is lower at 1092 Dollars per fine ounce, the copper price, the March contract, last at 332 US cents per pound. The platinum price is lower, but has recovered to 1509 Dollars per fine ounce after having traded lower than 1500 Dollars per fine ounce yesterday. The palladium price is 419 Dollars per fine ounce. The Rand is weaker at 7.62 to the US dollar, 10.70 to the Euro, 12.29 to the Pound Sterling.

A bit of a mixed start expected here, perhaps marginally lower to begin with.

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

Jozi, Jozi. Yesterday we managed to snap a losing streak, largely due to the fact that folks stepped back into the buying zone, after hiding for the second part last week. Single commodity producers were the winners on the day, Aquarius Platinum had a cracking day, up over eight percent. Session end the Jozi all share index ended flat, little changed, up nearly 17 points to 27080.

Did you see the trading update from PPC yesterday? We have had little guidance from the cement producers, we used to get the monthly statistics, but since the competitions authorities started probing the cement sector, these have stopped. This part of the trading update was most telling and perhaps sums up what folks think about the sector right now: “A number of mixed signals exist as to the outlook for the South African economy in 2010, including the extent of electricity tariff increases and the impact of the World Cup, making the forecasting of cement demand extremely difficult”.

You see, that is why most of the construction companies are trading on very low multiples, between six and eight. Because as you can see, forecasting of demand as a producer is very difficult, perhaps the work will really slow. To be perfectly honest, government has indicated that the big infrastructural plans mooted what seems like an age ago now, is still on track. So I am getting the sense that this budget pending in a few weeks time is going to be more key than ever before.

In terms of guidance for the cement producers, the construction companies and the bolt on sectors. Oh, and two million houses or so still need to be built you know, we still have that massive shortfall. Plus the service add on that go with it. The biggest question that remains, how are we going to pay for all of this? With revenue shortfalls at SARS and rising social spend, although not at uncomfortable levels just yet. Well, if the economy recovers, we should see the shortfall reduced.

City Lodge out with a trading statement yesterday. Normalised earnings per share for the six month period to end December will be 12 to 17 percent lower than the previous corresponding period. The stock has become a recent favourite of ours, a very good management team, Hans Enderle will step down this year at the beginning of August, exactly 25 years after opening the first hotel in Randburg. 40 years worth of knowledge that the group will part with, 15 years at Holiday Inn, and 25 years at City Lodge.

Management at the group are well regarded, Clifford Ross the CEO and his team are well regarded, Ross has been there for 25 years himself. Most analysts have a buy rating on the stock, the company are a great dividend payer, they have a good occupancy rate relative to international trends. We shall do a write up and an official recommendation, but we have been buying the shares.

OK, so the rates decision will be made by the South African Reserve Bank today, although there are a few kite flyers who are suggesting that the governor and her team must cut rates, that is unlikely to be the case. Most weather forecasters, I mean economists polled are of the view that rates will stay on hold.

I did see an official media release from the SARB yesterday around the issue of making the central bank an official state organ, rather than having external shareholders, something I still find quite bizarre and a throw back to an era past, no doubt. Read the release here. Let me know if you find any more clarity on how the Reserve Bank came to have external shareholders. Was it funding requirements a long time ago?

Staying with rates and central banks, did you see that the Argentinean central bank governor has vowed to stay on the job, even though he has been locked out of his office. And barred by the police. The bizarre story will become clearer, once you read the FT’s take on it, he failed to bow to pressure from the president. To use the countries reserves to pay down debt.

Argentina know what it is like to have a debt crisis. A serious one that led to political changes amongst widespread riots. Runaway inflation. Military rule, the after effects of the Falklands war, big social spending programs, civil war. Yech. Not good. Another example of how if you don’t plan properly, bad economic repercussions are often felt by ones children and grandchildren.

Oh come on, who else? You have any ideas on who should be the next Fed chief, or should we just let the fellow who steered us away from the edge. One of them. He is calm, cool under pressure, never looks flustered and always seems to answer the most stupid Washington questions without being too rude. I could not, the questions show that law makers are often in over their heads, simply because they are expected to be experts in all fields, an impossible task. It is emerging however that most senators are confirming their support for Bernanke judging from this WSJ article. So fear about a change are being allayed.

Apple. Whilst the worst kept tech secret is leaked in the form of the Apple tablet, the numbers for the fourth quarter were a little different for analysts to analyze. As the guys from 247Wallst said in their article Apple Shines, Accounting Change Confuses (AAPL). I just want to know how the analysts missed so big, well here it is in the above article. Not too sure I agree though. What do you think about that?

At what price though? The Greeks managed to quash lingering fears about their ability to raise money as a five year government bond was four times oversubscribed. At an enormous cost though, a record high rate, when compared to the German and Eurobond rates.

Right, it is time for the V in the MAVINS, Vietnam. No doubt that Hollywood have done a lot to stereotype peoples images of the country, for a long time the country was in a centrally planned economy, post the disastrous wars, that lasted from the beginning of World War two to 1975, when the Americans decided to exit. So, no doubt three decades of war, which was then followed with centralised state planning in a Communist economy, over a twenty year period did little to help progress.

One disaster after another, economic reform was slow, resulting in reforms in the mid eighties. With some land reforms the country has now managed to be the worlds largest producer of black pepper, cashews, and number two in the rice stakes.

The economy is around the 57th largest in the world, falling into company with desirables like Bangladesh in and around them. Think Angola, Morocco. Those types. A fairly skilled big middle class population, unusual that the Gini coefficient is so low, but I guess communism will do that for you. Low unemployment rate, fairly agricultural based economy, but that is shifting fast. And with that, one of the worlds fastest growing economies.

Check out the two Business Insider slides, the first being projections of where they could be in ten and forty years time. A tiny capital market, but it is growing, but the only way to buy for international types is to buy the EFT, check it out here..

My best mate, before he was married, went with his wife to be on a couple of Soviet era motorbikes and visited the countryside of Vietnam. The pictures were nothing short of phenomenal, the people were hospitable he said. Deep in the rural areas it was very rustic. I shall try and get hold of a few of his pics. And post them on Twitter.

New York, New York. A bit of a choppy day, good, bad, better, ending lower than the highs but still up on the day. Healthcare stocks were the only sector in the red, even if just slightly, perhaps the aggressive plans that the Democrats had on healthcare have to be ratcheted back. And those questions were raised around Philips results yesterday and that division for them specifically. Session end the Dow closed 23 points better to 10196, the nerds of NASDAQ better by five and a half to 2210, whilst the broader market S&P 500 up by 5 to 1096.

The oil price is trading lower at 74.18 Dollars per barrel. Goodbye eighty. The gold price is trading at 1094 Dollars per fine ounce, watch the Dollar firm up as assets return home, checked that the yield on the 3 month plunged, indicating that folks are parking for the handsome yield of 0.02 percent. The platinum price is also lower at 1530 Dollars per fine ounce, the palladium price is last at 435 Dollars per fine ounce. Copper, Dr. Copper is last at 333 US cents per pound. The Rand is weaker at 7.62 to the US Dollar, 12.37 to the Pound Sterling and 10.75 to the Euro.

All and sundry have the hand wringing around the Chinese tightening cycle. And as such Asian markets are trading lower, US futures are lower and we are going to start that way too.

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

Jozi, Jozi. Not a good day Friday, all fall down. Resources bore the brunt of worries around Bernanke re-election, re-jigged mining taxation in Australia, Greek debt worries and perhaps the biggest worry, the changing of the laws with regards to the banks and their ability to trade. Resource stocks down one and a half percent, the broader market down 1.55 percent, that was 426 points down to 27063. Banks given a crack, down over two and a quarter percent.

OK, so CPI on Wednesday and PPI on Thursday on the local front, that is the big data this week, plus the MPC will deliberate today and tomorrow and release their finding tomorrow, expect that at 15:00 local time. I guess that the meeting findings wont have the benefit of these data releases, and again Eskom and the Nersa findings are going to be the final decider on whether or not we are going to see inflationary pressures down the line. We wait.

Crazy, how can anyone in their right mind actually think that Jacob Maroga is going to sue Eskom for 85 million Rands in unpaid benefits due to being muscled out of his job as a direct result of poor results from the electricity giant. Who for 15 years twiddled their thumbs. Bad timing Mr. Maroga methinks. Check out the Times take on it, completely outraged.

What gives about the nationalisation of the Reserve Bank in inverted commas? Because to be perfectly honest the SARB is one of a handful of central banks globally that don’t lie in government hands. I am more interested in what the price would be, what government would pay? And if made an offer, what the shareholders would say? I heard something on the wireless, but I was not sure whether or not it was “right” and appropriate. Let me know if you come across anything, but somewhere around 12 billion Rands. Huh?

OK, the second letter in the MAVINS is Australia. Which does not really make much sense, there does not quite seem a fit of any sort. First things first, it is not an emerging market, when compared to the M and the VINS, the others. But it is a place of enormous mineral wealth and sits closer to China than all the other resource bases globally. Paul actually put that question to Joe Weisenthal, why Australia, and he answered it, in one of his Q&A sessions, check it out.

OK, back to Australia, there are two slides on the How to invest in the MAVINS piece from The Business Insider, the first showing the breakdown of the US ETF and the second a more pointed look at some of the specific stocks to invest in. I might have done a better job on the stock specific stuff, but Vincent does some sterling stuff, in-between all of this.

OK, so what gives about Australia? It has the worlds 18th largest economy, where it differs from the others markedly is that there is a big middle class. Their Gini coefficient is low, their human development index is high. They run a fiscally sound ship. Not so many people and I think relative to their MAVINS peers embarked on economic liberalisation much earlier than their peers. Proximity to China, large resource base, solid middle class and sound financial markets, with a stable political environment, everything you would want.

And on that score, please note that the graphic is a little over the top, but this is a Clusterstock look at why they think that the term BRIC’s, the term coined by Jim O’Neill is flawed, the R part. Russia. The motherland. In some senses a great story is Russia, lots of natural resources, lots of educated folks, in large part thanks to the Soviet systems. But there are some problems as this article Russia Is Toast.

For the record I don’t agree with the notion that Russia is toast, their politics might not be workable in a Western sense, but Vlad has a large base of folks following him, and enormous support. I had breakfast with a dear couple yesterday who had recently visited Russia, they loved it. Almost everyone plays a musical instrument and is well educated. The problems of alcohol abuse, the problem of crazy politics remains, plus high levels of red tape and seemingly very bad business practice. Interestingly Jim O’Neill thinks that this is not the case, at least for this year.

Here is an interesting story, although I am not one for ratios at all, and what they mean, but here goes, a Bloomberg story on ratios between Gold and Platinum prices suggest that we are still trading at current levels long below their ten year mean. That reversion to the mean thingie that I can never quite get my head around. Something has changed. Read it and let me know what you think about it.

OK, so Ben Bernanke earns his second blazer scroll, or not. Many folks have already given their two cents worth, some more so, Paul Krugman’s op-ed piece in the New York times on Saturday is a interesting piece, but then again Krugman is a strange old fellow. Methinks that the anxiety is misplaced and Bernanke might face stiff opposition from some partisan types, but will get the necessary votes for re-election. After all, who else?

New York, New York. Stocks plunged Friday on Wall Street, technology stocks bearing the brunt of a pretty broad based sell off, in the middle of some better than expected numbers from General Electric and McDonald’s. GE with a beat on earnings, plus without the once off they would have been much better. McDonald’s with handsome numbers, still struggling in the US though, that is still their key market though, but other parts of the world growing. And catching up. Session end however weighed down by all of the above concerns, top paragraph, the Dow closed at 10172, down 216, the nerds of NASDAQ down by 60 to 2205, whilst the broader market S&P 500 closed at 1091, down 24.

The oil price fell to a four week lower, at 74.55 Dollars per barrel, the gold price is last at 1099 Dollars per fine ounce, platinum, the price that is, last at 1542 Dollars per fine ounce. 334 US cents per pound is where the copper price last traded. The Rand is at 7.57 to the US Dollar, 12.23 to the Pound Sterling and 10.71 to the Euro.

Probably a better day, recovering off the extreme sell off at the end of last week.

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

Jozi, Jozi. Whoa, back up there fellows, you are sitting on me. A big sell off across the globe, materials and energy stocks hurt hard as commodity prices back tracked. A few reasons, one, the lurking concerns of Greece’s debt still weighs on the Euro, boosts the Dollar, which has the inverse effect on commodities. Second, the hot Chinese GDP number raising concerns that the Peoples bank of China will start reigning in loose monetary policy and withdraw liquidity. But that has been happening already.

Third, the hotter than anticipated inflation number in the UK Wednesday still stinking up the joint, whilst very average European data below consensus, as well as a German ZEW number (confidence) was lower. And then a US initial claims number that rose for the first time in 19 weeks. And then perhaps the most important, the new US banking regulations.

Locally the resource stocks tumbled over two and a half percent, banks were flat, mobile telecom stocks, there are only two, MTN and Vodacom, actually had a decent day in the midst of the all fall down. Session end the Jozi all share closed down 411 points to 27489.

Eskom, OK, today is the last day of the hearings. It is almost like being stuck between a cliff on the right of you and a ravine to the left, with a dark tunnel ahead. No choice, the tough route is the tunnel, but it is the path that has to be taken.

So in order to fund the power necessary to grow the economy, to create jobs, we have to suck it up now. We have to see a massive increase in our electricity bills. There is seemingly very little option, the privatisation route is the one I would like to see followed, but to be honest that will take months to sort out.

Paul will be co-hosting a show on CNBC (channel 410 on the DSTV bouquet) tonight at seven with Bronwyn and have Annabel Bishop from Investec and Stewart Jennings from the PG group, discussing Eskom’s funding methods. Check it out. A rerun takes place at seven in the morning on Monday.

OK, so lets start off with another country looking to raise more money for the fiscus, our fellow participants in the tri nations, Australia. They are looking to rejig their mining tax. A national tax is going to replace the state levy, it seems that a national resource tax will likely be set at 40 percent. Read the Sydney Morning Herald take on it.

But, it only applies if the company is profitable. So, if implemented here, would not impact any of the gold majors, there track record is very patchy at best. This tax rejig is aimed specifically at coal and iron ore operations, and remember they have to be profitable. Read the Bloomberg story on it.

OK, lets go to perhaps a most historic day yesterday, the day that the Obama administration wanted to change the rules. And this is what concerned me the most all along, when the banks had been bailed out, the rules had to change. Saying things a year ago that suggested the tax payer had bailed out Wall Street. And this was true, whether or not in the time of Hank Paulson and the bank CEO’s having to sign a note, scribbling the amount that they might need.

13 October 2008, in the middle of the storm, nine bank CEO’s were summoned to Washington and signed, not exactly a gun at their heads, but signed a note each to exchange 125 billion Dollars from Treasury for a loan in the banks. From then the rules changed, and even though the Obama administration inherited the mess, it is now theirs to solve.

Read the whole address given by Barack Obama, without many details as of yet. But the delivery sent a message, a clear message that the excesses of the past, trading markets on behalf of the firms is going to be on a much smaller scale. I have a theory, I suspect that there will be a whole host of much smaller firms popping up.

There have been outcries, Michael Bloomberg, the mayor of New York is understandably upset, it impacts his constituency as you can imagine. Bloomberg reckons that there will be massive job layoffs. He was so upset that he said about congress: “Maybe we should hold back their salaries for a decade or so and see whether the laws they pass work out,” and by that he is referring to the Senators in Washington.

Question, why did we get the massive bonus culture that exists now? Well, a congressional salary cap of 1 million Dollars was imposed in 1993. That was the law. And that led to compensation by other means, including bonuses.

Because the proposals by Paul Volcker (I want a mind like that at 82) are set to impact on the banks who trade their own books, prop trading. So some banks would be impacted enormously, some not at all. In a South African context, yesterday saw a good day for African Bank. Check out this FT Alphaville graph which show clearly the divergence between the trading banks and the normal run of the mill banks.

I suspect that this is nowhere near finished, the Republicans even though they are in the minority will fight this tooth and nail and perhaps a few changes will come about before the final proposal becomes law. But again, I said for ages that I thought the rules would change and that bank profitability going ahead would be impacted, here is the start. I suspect that a global coordinated rule base needs to be put into place.

OK, I promised yesterday that I would get a start on the MAVINS, the M in the MAVINS stands for Mexico. This is a short overview from the fellows over at the Business Insider on Mexico.

For the average American I guess Mexico is a place of cheap hot food, great beach vacations and a crazy criminal element. But the country is a democracy and a pretty well diversified export based economy. Plus the US is next door and accounts for around half of all their exports. And as you would imagine Mexico imports a lot from the USA, around 45 percent of all of their imports.

Mexico is a large economy, around the 11th biggest in the world with around 1.559 trillion Dollars. And growing at around five percent per annum, as you can imagine last year was a very tough year. The agricultural sector is still relatively important as an employer, around one in twenty people but much, much smaller as a contributor than ever before, 4 percent now as compared to 25 percent back in 1970. Tells you how much the economy has gained traction.

So other than being next door to the worlds biggest consumers, the labour force is progressive, smart and reliable. Plus the government is sensible, all of their oil assets are government property but are operated on a private public basis. In terms of importance, oil as a contributor to GDP has plunged.

The banking system and the securities markets have improved dramatically. As the Business Insider back of the matchbox suggests to folks, that the Mexican economy could be 75 percent of the current US economy, but that is in 2050. OK, lets watch it. What to buy? Here are the big ADR’s listed in New York, that we have access to. Femsa about to be bought out.

New York, New York. George could tell that it was going to be a terrible, horrible, no good, very bad day. That is George Bush, of which I saw a picture of him waving, miss me yet? Ha-ha. If you think banks and financials had a bad time, basic materials fell in a hole. Goldman Sachs beat the street, but the bank regulation weighed on the stock, down four percent. Morgan Stanley down 4.2, JP Morgan down 6.6 percent, Bank of America down 6.2 percent, Citi down five and a half.

Energy stocks were crushed, the big ticket materials stocks were blindsided, Rio Tinto, BHP Billiton and Anglo American. Today there are big ticket earnings from General Electric, Kimberly Clark and McDonald’s. Session end the Dow closed down at 10389, down 213 points, the nerds of NASDAQ down 25 points to 2265, whilst the broader market S&P 500 closed down 21 points to 1116. Tech stocks least hurt.

As you can imagine the commodities complex sold off heavily, the oil price was last at 76.27 Dollars per barrel, the platinum price was last at 1564 Dollars per fine ounce. The gold price has also gone lower through to 1096 Dollars per fine ounce, the copper price down at 330 US cents a pound. The palladium price was last at 440 Dollars per fine ounce. The Rand is weaker at 7.54 to the US dollar, 12.26 to the Pound Sterling and 10.67 to the Euro.

A poor start here again expected today, resources are going to be dealt a blow. Buying opportunities are starting to rear their heads again.

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

Jozi, Jozi. Started a little wobbly and then went south as the day progressed, the commodities complex was under pressure for much of the day, notwithstanding some record production numbers from BHP Billiton. I guess their copper division was more than a little disappointing. Resources slumped over two percent, dragging the broader market down with it, at session end the Jozi all share index closed at 27901, down 184 points. Oh yes, and a week ago globally nobody had heard of Scott Brown. Now everybody knows him.

Not too sure how and when that came about, the ANC’s 25 percent stake in Hitachi South Africa. But as you might or might not know, Hitachi South Africa was awarded a 38 billion Rands contract back in 2008 to supply boilers to the Medupi and Kusile power stations. So I guess if the ruling party was government and needed to award a contract after a tender process, you can imagine that it must have been very difficult to not award it to a company in which you have a stake. Not so?

It does not just stop there however, Hitachi has a bigger presence in the country that extends beyond this, although the stake is just in the power part, as far as I understand it. But what are the rules though? Obviously the ethical debate around ruling party and government arises, I don’t really know. Read the interesting Mail & Guardian take on it.

Local retail sales disappointed again yesterday. I know that consensus is going to point to nothing on the rates front this year, but I suspect that if the currency continues to strengthen on account of their trading partners still having a bad time of it, i.e. their problems, that might open the door for more cuts. And whilst on the local front we might actually see weaker demand lead to lower inflation. And, and this is a big and, if the power hikes that Eskom is asking Nersa for are resolved in another way, that might dampen future inflation expectations.

Some like it hot. Some like it cold. But mostly we all like Goldilocks, not too hot and not too cold, just right. Just like that, we can have a sleep after our porridge and feel comfortable. I suppose it depends who you are, but this morning there are again signs that the Chinese growth story is still the most significant and powerful across the globe. Fourth quarter GDP data shows that the countries economy grew by 10.7 percent. Phew. December industrial production grew by 18.5 percent. Yowsers.

And perhaps the most important data for the bears out there, 2009 urban fixed-asset price investments grew 30.5 percent. And why is this worrisome for the bulls, sounds like nothing short of fantastic numbers to me. Interestingly this was light of price estimates. So who cares how hot these numbers are. I don’t, all it is again is another sign that the beast is rumbling on, and the rest of the world is sensing economic power ebbing away from them.

Also, bearing in mind that the first and second quarter this year will be measured against a bad first quarter and an average second quarter last year. And the Peoples bank of China will start their tightening policies, and already have, albeit slowly. That is their job right? So if inflation becomes a problem, they will act. I have no doubt.

I saw a commodities economist on the box this morning, he was in Melbourne where Justine Henin and Kim Clijsters continue to astound. He had way cool spiky gelled hair. But other than that, he made complete sense, saying that commodity prices had been way oversold and had just returned to more normal levels, some levels that I guess some folks might have said, we have only a recession on our hands, there won’t be a depression. As such copper prices were up 130 odd percent last year.

But check out this graph and it puts it into perspective you see, 2008 was a very rubbish year after having topped out at 4 bucks a pound (I remember a spike where the copper price hit 20 cents more than that) the price fell to below 130 cents a pound in the same year. Inside of six months. Wild, wild, wild moves.

So notwithstanding all this amazing data from China, folks are expected around 9.3 to 9.6 percent growth from the red dragon, whilst Europe is expected to grow around 1.4 percent, the rest of the world 3.9 percent, the US around three percent. So why worry about the growth? I suspect that is a very western way of thinking of growth.

We never quite got to the bottom of the MAVINS, Mexico, Australia, Vietnam, Indonesia, Nigeria and South Africa. You could argue that Australia are the odd one out there, nothing edgy about that place, whereas the others are more colourful, but these are apparently the next hot investment destinations. I suspect that a little time checking each one out is worthwhile, so we can benchmark ourselves, and perhaps come up with another acronym to see why we are not at the front of that group.

Tomorrow, we start with Mexico, but here is something to whet your appetite for knowledge. Thanks Byron, mostly thanks to the fellows over at The Business Insider.

When people get scared they get scared as a group, when confidence comes back, it happens once at a time. That was what Warren Buffett said yesterday, he had two major interviews with both CNBC and Bloomberg. The special shareholders meeting was ahead of approving a stock split of the class B traded shares, a fifty for one, which might actually mean that Berkshire could get into the S&P 500.

He is great, you don’t have to like him and might think that he is all sorts of things, but his very practical approach to investing is amazing. I am currently reading The Snowball, and you can actually see where he got some of his investment ideas, as a boy. His dad was a stock broker and a politician, a member of the House of Representatives. His father actually took him to the Goldman Sachs offices in 1940, where Buffett met and was taken by senior partner Sidney Weinberg and the idea of making money.

I guess he got his chance 68 years later to invest 5 billion in Goldman Sachs. A dream come true for a young boy? Perhaps. If you want to read the full transcript, or watch the videos, check out the full CNBC coverage here.

The one comment that I loved was the one about the special bank tax. Buffett said, why not go and have a look at the senate who oversaw Fannie and Freddie, and perhaps a special tax imposed on all the senators. Ha-ha, what a hoot.

New York, New York. Basic materials and energy stocks slumped badly as the Dollar gained against the Euro. As such commodity prices fell. The broader market followed suit. Building permits for the month of December were better, housing starts were worse. PPI was tamer than expectations at the core level, slightly higher at the headline level. Company results, lots of financials coming through with numbers, Wells Fargo were a beat on earnings, Bank of America were a miss. Morgan Stanley were a miss. US Bancorp a beat.

After the bell both eBay and Starbucks with a beat, and both better than last year, some businesses are just a little more cyclical. A massive beat for Seagate too. Session end the Dow closed at 10603, down 122 points, the nerds of NASDAQ down 29 to 2291 whilst the broader market S&P 500 lost 12 to 1138.

The oil price last traded at 78.08 Dollars a barrel, getting a little lift from the good Chinese data. The gold price is trading better at 1116 Dollars per fine ounce, the copper price is also better at 339 US cents per pound. The platinum price was last at 1630 Dollars per fine ounce, the palladium price at 471 Dollars for the same quantity. Both moving higher. The Rand is weaker at 7.51 to the US Dollar as the Dollar gains momentum to the Euro. Last below 1.41 on that read, 12.23 to the Pound Sterling and 10.60 to the Euro.

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

Jozi, Jozi. For all intents and purposes a day spent waiting for the US markets to open, waiting for action on Wall Street after their long weekend. In the end we managed to follow Wall Street in the last bit of trade, the last half hour, but by then it was a little too late for the bulls.

Session end on the Jozi all share we closed down a whole 13 points to 28086. Banks were the stars, healthcare stocks were the big winners, resources flat, helped there by platinum stocks, whilst in the losing column beverage stocks, and that by far and away is SABMiller. Retailers and gold miners also in the losing column.

BHP Billiton out with their production report for the first half of their financial year and second quarter, with records being set in their iron ore and petroleum divisions, as well as a little further down in the importance column, but nonetheless records for Nickel and zinc for the half year.

On the project pipeline I noted that BHP Billiton are on track by the end of calendar year 2011 to produce another 76 million tons per annum of iron ore, that is around 5 percent of global production. Adding an extra 5 percent to global production by themselves.

OK, to the production report, a better petroleum report in part thanks to the Shenzi ramp up, for the half year nearly 80 million barrels of oil equivalent. That of course includes natural gas. To put that into perspective, if they were to double that for the full year, BHP Billiton would effectively being supplying the globe with two days worth of equivalent oil.

Just crude alone, then a little over one day worth of production. So effectively, notwithstanding their great mining prowess, BHP Billiton are a one day worth of global oil supply company. Did I explain that well enough, or not? The Olympic Dam production was hampered by some hoisting problems back in October, which is still not fixed properly and will take some time. If you have a moment go through the production report, always a good read.

Staying with BHP Billiton, yesterday the group announced that they would be looking to combine their iron ore mining interests with ArcelorMittal in West Africa. Seems good for both companies, check out the Bloomberg story.

I am not saying, I am just saying. We don’t like tobacco stocks here at Vestact, for no other reason than governments globally are going to see this as an increasingly easy collection method. And this is because it places undue pressure on healthcare systems. It did however come a bit of a surprise that the Chinese are starting to do this, check out this story from 247WallSt, the Chinese authorities will just like that ban smoking indoors in seven provincial capitals. Check it out, the two trillion stick (that is cancer stick) market

Here is another story, from Business Week, which suggests that one of the worlds biggest sovereign wealth funds, the Norwegian one, has excluded 17 tobacco companies from their latest report, for ethical reasons, and the stocks have been sold. There you go chaps, not just us who has a problem with cigarette stocks as an investment, although for slightly different reasons given. Hmmm, the plot thickens whilst the public air gets thinner in a smoke sense.

This is very, very, very good. Three times very, in my humble opinion. Written by the founder of Vanguard mutual funds, Jack (or John) Boggle, a guy who wanted the ordinary Joe to follow the markets at the lowest possible cost. This article written for the WSJ contains a big sideswipe at the institutions who have invested on behalf of peoples pensions, their savings though mutual funds and perhaps most importantly, his competition. So I guess that is a factor. But in part as shareholders allowing the banks to rip shareholders off, he says so

How a non related event gets the market going. And an important event, because politics and business go hand in hand, they both need each other in some form or another. This is a blow to the Democrats and perhaps a clear message from the voters to the Obama administration, Scott Brown, a Republican has picked up the vacant seat of Ted Kennedy in the state of Massachusetts, beating Democrat Martha Coakley.

So why do we care? Well, it swings the shift of power in the 100 Senate strong of the Republicans from 40 to 41 seats, but more importantly leaves the Democrats with one less seat at 59, one shy of the 60. And why is that important? Because you need three fifths to stamp a motion. And if parties are split down their political difference, you need to start compromising. Healthcare reform, many are saying that this is what it has all boiled down to in the minds of the voters.

A wake up Washington call, or will the Democrats press ahead and not listen to the polls at all? Not too sure really. But that seems to be the general consensus so far across the wires. Time will tell, but this could be the change that the Republicans can start to believe in.

New York, New York. So a pending victory for the Republicans should have a non impact on markets right? Wrong, not according to my favourite bloggers, who has this to say: Stocks Predict A GOP Win In Massachusetts. So it did have something to do with it, but all sectors received a boost. Utilities and basic materials led the charge. Session end the Dow closed 10725, up 115 points, the nerds of NASDAQ better by 32 to 2320, whilst the broader market S&P 500 added 14.2 points to 1150.

The oil price last traded at 78.62 Dollars per barrel. The platinum price is last at 1627 Dollars per fine ounce. The gold price is also lower 1129 Dollars per fine ounce. Ditto the copper price, 340 US cents per pound. The Rand is weaker, last at 7.48 to the US Dollar, 12.17 to the Pound Sterling and 10.62 to the Euro.

Flat to start. Earnings week is huge this week in the US.

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

Jozi, Jozi. Friday was about the Euro, about the Greek debt restructuring plans, about the rumours that Angela Merkel, the German chancellor and that perhaps she would resign. So those two pieces of news grabbing the headlines around the world of currencies, the folks who are interested in that. Because of course you could earn up to 1000 Dollars a day in those el cheapo forex ads on the box, what they don’t tell you is that with your endless gearing you could lose up to your house and more tomorrow. Session end the Jozi all share index closed at 27929, down 212 points.

OK, the cynic in me aside when dealing with currency traders, Friday was about more than just that, later in the day it became apparent that the JP Morgan numbers were attracting a lot of attention. JP Morgan, what do they do? Well, I suppose that the about us section on their website is about good enough to explain to you.

So there, now that you have read every last word (yeah right) now you know the global bank with 2 trillion Dollars worth of assets. Yowsers. And trying their best to look better by reducing the compensation for their employees, but too little too late is my sense. The Obama administration is going to buckle to public pressure and tax the big banks who received funds as part of the TARP program. Not sure if that is a good idea, but the people have perhaps spoken and are tired of record pay inside of an environment where job losses continue.

I always say, where are the shareholders and why did they not respond more forcefully on executive compensation. Why? Not wanting to rock the boat? Will this force banking institutions to go private again? A break up of these institutions as employees want to be out of the prying eye? Perhaps. Moving to other parts of the world, that is likely. Hong Kong, Dubai, Singapore, these are places that that friendlier to bankers. For the moment. That is the problem, no one set of rules exist. And that might lead to an exodus of bankers, particularly from the UK. Watch that space.

Amplats with a trading update at exactly nine am on Friday. Sis. Let us just say not good. We had lunch yesterday to celebrate both my youngest daughter and wifes birthday, would you believe on the same day. At the lunch and arriving quite late was an Amplats corporate finance guy, he was late and I asked him whether or not he was hiding in the toilet, because the trading update was so bad. We laughed and nobody else did. It was a geeks joke.

And here is why, here are the numbers, for the full year to end December 2009 headline earnings per share are expected to be 89 to 99 percent lower than the 5609 cents made in 2008. So, somewhere between next to nothing (a coin with a Strelitzia on it, that is a fifty) to six bucks a share. Why then does the stock price trade at 772 Rands a share? Down four percent on Friday, that is down a lot.

OK, but back to that, why does the stock trade there? At 772, if at best you are going to see headline earnings per share in the region of six bucks a share. That is because in a couple of year, fast forward to the end of 2011 analysts expect somewhere in the region of 36 to 40 bucks worth of earnings. Stronger vehicle demand globally, increased prices of the PGM basket see the price where it is now, not past earnings. Markets are predictors, not reflections of the past.

Then Richemont released third quarter sales update this morning, much better than a few folks have expected. Read the full download here. More interesting than that though is that the group is starting to make noises about a much better trading environment, the months beating each other consecutively. I guess that the real test will come from these next three months, the last three months of the financial year. Lets just say that at the beginning of this year folks are a lot more favourable about the future than they were this time last year.

Did you see this? Man, it is amazing. The headline reads that China have increased their foreign reserves by 23 percent last year, to just shy of 2.4 trillion Dollars. And the last line of the article is most telling, “And to think, China is still considered an emerging market by most”

This is an amazing website that quite a lot has been written about in the short term. Advertisers be very aware that this could be the changing consumer and what they are looking for. It is called http://blippy.com/ blippy and basically you signup and then publish all or parts of your purchasing behaviour automatically. Amazing.

So you can see what your buddies are buying. Is that good or bad? Not sure, just amazed that this type of platform has been invented and how folks like this. Who spends what where. Check it out and watch what folks are buying. Obviously not stuff we know, like Netflix for instance.

This is fascinating. And long. Sorry about that. If you don’t have time for all the well thought out written paragraphs, sometimes a picture such as in the previous paragraph can tell a thousand words. The one that grabbed me a lot was the Figure four from this piece, a 43 page document so fresh that I can smell the ink when I downloaded the pdf.

Picture four tells how the US debt to GDP and equity to GDP have risen over the last 60 years. Back in the 50′s after the second world war, debt to GDP was around 120 percent, passing 200 percent back in 1987 and 300 percent in the middle part of last decade. An overbloated (imagine, even if bloated was not enough) valuation of the tech market in the late nineties saw the value of assets to GDP surge to nearly 200 percent of GDP, but that is the highest it got, over the measured period.

New York, New York. Oh dear. Worries about the implications of the special tax to be levied on financial institutions and perhaps more short term, worries about the JP Morgan retail operations and the losses that might still have to be incurred, as loans still turn sour. Session end the Dow closed down 100 points to 10609, the nerds of NASDAQ off by 28 and three quarters to 2287. The broader market S&P 500 down 12.4 points to 1136 points. Basic materials, that is commodities to you and me, fell sharply, down one and a half percent.

The oil price last traded at 77.74 Dollars per barrel. The gold price last at 1135 Dollars per fine ounce. Platinum, price per ounce, 1617 Dollars per fine ounce. Copper, that is Dr. Copper to you and I, 340 US cents per pound. The Rand is mixed, firmer to the US Dollar at 7.39, weaker to the Pound at 12.07 and 10.63 to the Euro.

If you have not yet heard from or spoken to him, he is Byron Lotter, our newest team member. We will introduce him to you over time. Byron has plenty of energy, has recently completed his degree at Wits and is a terrier. I mean that in the nicest possible way.

It is a holiday right across capital markets in the US today. So, no direction always means waves lapping at your feet.

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

Jozi, Jozi. We were moving along swimmingly well, until disappointing US retail sales. Greek credit worries and what impact that would be having on the Euro continue to do the rounds and again this has raised question marks about more than just Greece. Japan too. Not helped by Japan Airlines, widely expected to file for the biggest ever corporate bankruptcy in Japanese corporate history next Tuesday. There, take the weekend off, come back next week and file for bankruptcy.

Not helping matters on the lower front were lower commodity prices, folks still vacillating about the impact that tighter credit markets in China might have for commodities. And as such asset prices globally, because largely the Chinese have been the beacon of light during this very troubled and choppy time at sea. But we managed to close in the green, the last forty or so minutes we managed to turn it around, at the end the Jozi all share index closed at 28141. Up 74 points and about 150 points off the highs.

Healthcare stocks and the broader sectors around it left them looking worse for wear, platinum stocks were also in that category. Tech stocks had a good time of it, Datatec with a pleasing interim management statement. Still, the lack of choice in the broader IT sector still irritates me, in the US it is an enormous part of the economy and exchange, check out Finviz to see what I am talking about. Top left hand corner.

The entire IT sector here, software and services, plus a much smaller hardware sector, is worth 28.7 billion Rands. With Dimension Data at 16.5 billion Rands and Datatec at 4.9 billion Rands, those are the big two. In the US the companies are massive and global, add Microsoft, Apple, Google, IBM, Oracle and HP market caps together and you have 1.075 trillion Dollars worth of value. That is 7.948 trillion Rands. Six tech stocks. Serious size. Less than one third of a percent of the size of these big six, our entire sector.

Fin24 reporting yesterday that there are signs that Treasury as going to implement a gas guzzler tax. In the office here if we added all of our engine capacity together it would not even equal the biggest SUV out there, the three of us have an average of 1.7 litre engines. Perhaps still big, but hey, we are all for the tax here because we are modest. I think. Still, these are probably signs that Treasury are under pressure to collect funds with lower revenues over at SARS. Perhaps.

OK, well signs that we have made a comeback from the perceived brink still continue to permeate through the box and onto the screens in front of me. Remember the concerns around Rio Tinto’s gearing levels? Remember that they almost off loaded a large portion to Chinalco at much protesting from shareholders and the Aussie government.

Well, Bloomberg is reporting that an analyst from Bank of America Merrill Lynch may by the end of the year to only 10 billion USD. What? It was nearly 40 before the rights issue not so long ago. Less than 15 months ago. That would put gearing at current levels at around ten percent. Amazing how in 18 months to the cliff and back again to seeing it on the horizon.

Right, US retail sales yesterday disappointed all and sundry sadly for those looking for something better. December for only the second time on record seeing a year on year drop. The only other one being December 2008. Economists surveyed were looking for a 0.5 percent gain, the actual number came in showing a 0.3 percent decline.

Some fellow I follow on Twitter suggested that we should line all the economists up from end and to end and keep them there for good. Not too sure what that means, but I suspect that he is displeased. The most surprising of the lot however, when you look at the official release, is that November is a much better month than December. Strange, aint it.

OK, so back to Greece. Where the fat got too much on the drip tray and not the finance minister finds himself having to cut left right and centre and the excesses of the past are quite clearly over. Ovah, as an Aussie rugby commentator would say, try it with your best burly Aussie rugby accent. Hard I know, but get your best rugby fanatic friend to do it.

Right, back to Greece. At the ECB press conference post the announcement that rates were going nowhere, Trichet basically rubbished the idea that Greece would look to leaving the Euro zone. Greece have announced steps to crush their deficit over the next three years. As Bloomberg puts it, a new Greek tragedy? Oresteia. Read the WSJ extract from Dow Jones News Wires. Expect three to five years of very tough times.

Phew, where is the Nigerian president? What is he up to? The BBC reckon they spoke to him, some parties reckon that he is comatose and effectively brain dead. So that would mean unable to be the president. It is complicated in Nigeria, very complicated. A North slash South power sharing agreement. Plus still fragile and memories are not so short. The Economist has a different view on it, titled, Is he a goner?

Staying with Nigeria, did you see that Standard Bank and FirstRand are hunting the banks in Nigeria. Banks that are cheap and have had government help. I like that a lot, really, the country is our continents China, lots of smart people, resource rich. The last decade in Nigeria has been nothing sort of astonishing, the next holds the key.

Staying with banks, what do you make of the big bonus outcry that has now directly led to a once off levy on the banks, announced by the Obama administration. Will it pass the test of getting through congress and the house? Will it have the broader support of the voting population? Perhaps. But this is a risky and bold move. So was paying yourself excessively, but that is a shareholder issue not so and not a government one? Time will tell, not too sure what the full 117 billion Dollars as a percentage of the entire bonus pool? I am sure stories will come.

New York, New York. After the bell Intel blew away estimates and showed that corporate could be making a big comeback here. Revenue inline. See that? Good. Bank bonus tax impact being measured by all and sundry too. Session end the Dow closed at 10710, up 29, the nerds of NASDAQ better by nearly 9 to 2316, whilst the broader market S&P 500 ended at 1148 up 2.78.

The oil price is lower at 78.92 Dollars per barrel, the Dollar getting some traction here. The gold price is better at 1142 Dollars per fine ounce. The copper price is about nowhere at 337 US cents per pound. The Platinum price is also higher at 1605 Dollars per fine ounce. The Rand is last at 10.65 to the Euro. Last at 12.07 to the Pound Sterling and 7.39 to the US Dollar.

Should be off at the start, JP Morgan with results later.

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