Slasher's coffee beans

Jozi, Jozi. We started better, slightly better, but then were met with all sorts of obstacles, the one being a holiday looming in the US and UK and the other major obstacle being the anxiety over the Euro. Let’s face it, it is going away until it is. Until markets and their participants start to believe that the Euro zone have the problems under control, then I guess it will be anxiety that will rule the day. Whilst the question marks remain on the PIIGS economies in Europe, the rest of the developed world seems to be recovering and the developing world has again picked up pace. Locally we are alright I guess, growth has resumed at a fairly good click, but remember that the Euro zone is still a big trading partner of ours.

Maude street shakes, moves and grooves. End of session the Jozi all share index closed at 27202, down 247 points or 0.9 percent. Resources down 1.5 percent, general retailers up 1.4 percent, banks down a little, as were financials. Construction stocks up a little, up a third of a percent. But all the majors lower.

Bart says digest these shorts. Everybody loves Illovo, but now for their results. BHP Billiton negotiates a contract that in Eskom’s mind is favourable for them. Spain rained on as their rating is Fitch forked. Tim “the toolman” Geithner goes to Europe to help out, as shock and awe not enough. Indian GDP in-line with expectations and growing strongly at 8.6 percent. Top kill fails after it was touted as a success.

Illovo Sugar out with their full year numbers to March 2010 this morning. A bit mixed in the initial commentary paragraph, they have benefited from better international sugar prices, at 28 year highs inside of the reporting period. But at current prices that would not be the case, the price has come off sharply. An EU pricing in their favour has expired as of 1 October last year. Remember that there was a rights issue last year, so there would be a dilutionary effect on earnings, but has seen them move to a cash positive position, from one of being over borrowed. Malawi and Zambian profit contributions are 60 percent of overall, add in South Africa at 17 percent and there you have your most important geographies.

Overall sugar production exceeded the previous financial year, that is what investors want to see, volume growth. So Africa is where it is at for the group, the planned Zambian expansion is in full swing, with the aim to be at one quarter of current production in due course. Mozambique too, seeing a major ramp up. And Tanzania too. Good for them. Revenue of 8.467 billion Rands. Headline earnings five percent lower at 702 million Rands, per share because of the dilution showing a 19 percent fall to 171 cents. Stock trades at 3048.

Prospects, well you read through and tell me how you feel at the end of all of it: “In the current 2010/11 year, own cane, sugar and downstream production are all anticipated to exceed the levels achieved in the last season, with output in Zambia expected to increase by more than 25%. World sugar prices are extremely volatile and futures prices are currently below last year`s average prices. Although the world sugar market is forecast to remain in deficit, if prices remain at present levels this would be negative for sugar revenues. Domestic market offtake is expected to remain positive. The results for the current year will again be affected by the level of the rand compared to other currencies. In addition, the value of the Euro impacts on downstream sales and sugar export earnings from sales to the European Union. Sugar exports into the European Union are anticipated to grow following increased market access. Whilst this will be of long term benefit to the group, the current financial crisis in the Euro zone and its impact on currency values is likely to have a negative impact on results in the current financial year.”

BHP Billiton And Eskom Sign An Amended Agreement For The Mozal Smelter In Mozambique – Discussions On South African Smelter Contracts Continue. That is what the headline reads and BHP Billiton try and put on a brave face, I heard Andrew Etzinger on the wireless, the brave face of Eskom said that the details of the contract are not for public consumption. But at the same time say that it was in Eskom’s favour. Still, the consumer sucks it up and the municipalities are about to shunt through their increase, as seen in some of their budgets.

Spain. Pain. Spain is a big economy and possibly the most important so far of the PIIGS in the spotlight. Fitch have predicted that the Spanish economy will grow at 0.5 percent in 2011. The Spanish say that this is not the case and it is more likely to be 1.3 percent. The last week in Spain saw fast and furious activity. A few weeks back folks were saying, well the Spanish have done very little so far. Well, last week that changed, the new budget was passed in Spain’s parliament by the narrowest of margins, one whole vote. Friday the fellows over at Fitch downgraded Spain’s debt rating from AAA to AA+. A political fight is boiling: Zapatero Losing Credit as Fitch Strips Spain of AAA Rating

What are the knock on effects of the Euro zone slowing and seemingly scrambling on a weekly basis? In the US it is that rates will stay even lower for longer. This was confirmed on the weekend by Federal Reserve Bank of Chicago President Charles Evans, who is nowhere near the shores of the US. Rather he is in Seoul, the capital city of South Korea. Looks like a rather pretty city, lots of mountains about. Rates have been at near zero since December 2008, and should remain there for this year and into next year. However the same fellow, Evans, said that if inflation did start to rear its head then the Fed would act. I am sure of that, one thing is for sure, forget the blogosphere and their constant attacking of the Fed and Treasury, to me anyhow they have all done very good jobs.

The US Treasury secretary, Tim “the toolman” Geithner went to Europe the end of last week. Probably to catch some French Open. Kidding, he met with all sorts including his new counterpart, George Osborne, in the UK and his German counterpart, Wolfgang Schaeuble. Many have accused the Germans of taking control without consulting their other counterparts in the Euro zone, with the ban on naked shorts seemingly desperate. And they have not achieved the desired outcome, at least for the Euro zone. Check this out, what the Americans are thinking anyhow: Geithner: EU action should calm markets. Meanwhile over in Greece the Finance Minister Defends Austerity Steps.

Indian GDP growth for the first quarter came in at 8.6 percent. From the horse’s mouth, the Indian Economic Times: India’s Q4 GDP grows at 8.6% y-o-y. Check that out, inflation is a bit of a problem in India, much more than it is in China. But still, where would you rather be, in the developing world or developed world?

New York, New York. A really choppy session on Friday, I hate to use that overused word, but hey, that was a good explanation of what happened. Stocks were never going to be up, but at three stages during the session stocks losses were relatively small. At the end into the Memorial day long weekend stocks were bashed, trader types squaring out and taking the known. Because as Donald Rumsfeld put it, it is the unknown unknowns that you really have to be careful of. And nowadays almost anything could happen, tensions in the Korea’s, Chinese market intervention, almost anything chaps.

Wall Street wanders. Session end the Dow closed at 10136, down 122 points. The broader market S&P 500 closed at 1089, down 13.6 points whilst the nerds of NASDAQ fell away 20 points.

Commodities, currencies, Drs. Copper and bushveld. Top kill did not work. That was the BP plan. Check this out, I found it rather interesting from the dudes over at the Business Insider: Why Oil Depletion = Environmental Tragedy. Good points. The oil price last traded at 74.42 Dollars per barrels. The gold price is last at 1214 Dollars per fine ounce, the platinum price is slightly better at 1566 Dollars per fine ounce. The copper price was last at 311 US cents per pound. The Rand is slightly weaker at 11.08 to the Pound Sterling, 7.63 to the US Dollar and 9.39 to the Euro.

Up periscope. Both the US and the UK closed today. A bit of direction lacking could see a day that flip flops a little.

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

Jozi, Jozi. Up. Not quite away at the get go, but we managed to add to our gains and close at the top end of the day towards the close, gathering momentum as the spot market in New York replicated what the futures markets had predicted. A run away start. It was a strong showing by that half of our market, resources, sometimes I think if you get that right, know which way resources are going to trade for the day, you are almost home and dry. If you know the other major sector banks on top of that, you are as they say, sorted.

Maude street shakes, moves and grooves. Session end the Jozi all share index had racked up one and a half percent, 402 points better to 27449. Markets now 0.78 percent down for the year. Resources still down five percent for the year, offsetting big gains from the likes of the retailers, up 18 percent for the year, banks up six percent.

Bart says digest these shorts. Foschini results, when last did you ring the tills there? Tongaat Hulett, schweet or not? The big blue, Standard Bank and their AGM with fairly a cautious outlook. The Germans are getting old, plus losing people. Jobs for pals is definitely not a local or continental issue, it happens everywhere.

Foschini released results for the full year to end March yesterday. When last did you rack up a purchase there? My last few purchases have been sporting clothes, got myself a new Bafana tracksuit top to counter the cold effects of football Friday at this time of the year, but not from one of their stores. From a niche sports shop at a discount. Enough about covering me, Foschini results. Highlights, revenue up at 10.78 billion Rands, retail sales up 6.4 percent to 8.6 billion Rands, net income lower at 1.162 billion Rands, seems like decent post tax margins. Earnings per share 521 cents per share, dividend of 288 cents. Share price of 6450, not cheap, not overly expensive.

Foschini is quite a good retail measure, they have the @home division for all your bedroom/bathroom and kitchen requirement, Exact!, Foschini and Markham cover the main clothing outlets whilst American Swiss is as the group points out, the largest jewellery chain in South Africa. So you can see that you have good coverage, plus add in the aforementioned sporting apparel in the form of Totalsports and Sportscene. Bad debts have seemingly topped out and starting to stabilize. The retail debtors book is 3.2 billion Rands, and that showed a 15 percent increase. Credit sales as a percentage of overall sales is just over 62 percent. Remember that Foschini own 55 percent of the consumer finance division, RCS, the balance being held by Standard Bank. Similar to the ABSA slash Woolies relationship. Can you now understand why African Bank bought Ellerines?

Prospects for the group as per the release looks a little muted: “Retail turnover for the first eight weeks of the new financial year has been encouraging, with an upward shift in consumer spending. The 2010 World Cup which gets underway in a few weeks` time should create more positive consumer sentiment, which together with the reduced interest rate and inflationary environment should improve consumer spending. However, the effect of the increase in the cost of electricity on the disposable income of our consumers is unknown. In addition, unemployment and associated factors in our economy remain as a potential risk, as do the ongoing problems in international markets.”

OK, so we have seen the apparel retailers report this week and I think that it is safe to say that Mr. Price deserves it higher rating relative to its market peers. The future as ever is unknown, the analyst community have pegged their earnings of Foschini that makes them their cheapest retail share. That is based on earnings two years out. Plus the second best yield on the same time frame. As ever the risks are headwinds facing the consumer. And there are still many, but early signs that repaired personal balance sheets might lead to another big consumer push.

Sweet. Come on, say it like your favourite office employee from the deep south of Jozi. Or is that Schweet? Like sugar, not like a lemon and we are talking about Tongaat Hulett, which released 15 months (??? – changed their year end) results to March. If you think Copper prices are wild, try a closer look at the sugar prices. Although as far as I understand it, different contractual prices are what Tongaat Hulett enter into with their customers, and not always at international spot prices.

A quick search reveals stories that suggest that the sugar price in 2006 was going hog wild because ethanol was all the rage. Last year Sugar prices were set to rise to 40 cents a pound because Brazil and India struggled with droughts. But the rains came late and the price now is below 15 cents per pound. Although a Bloomberg story suggests that Sugar Prices May Rally on Increased World Demand, Survey Shows.

Back to Tongaat Hulett, you would say that it is a well established, profitable company with some interesting prospects on more fertile soil in Africa. Mozambique and a recovering Zimbabwe should be interesting. Someone once asked me “why would you want to hold a business (any business) that depends on the weather? Farming is a lifestyle choice, not a good idea if you want to make money.” If you are looking for a reliable company with earnings year in and out, then I suspect any commodities company, let alone an agricultural company, is not for you.

What do you make of the Standard Bank outlook from their AGM yesterday? Puts a bit of a dampener on matters not so? Let us extract a few key lines from the Jacko Maree prepared statement: “Improvements in credit impairment charges were encouraging during the first four months of the year across personal, business and corporate lending. Despite the absence of material new impairments within Corporate & Investment Banking in the period, corporate default risk remains relatively high.”

Hmmmm… and then this one, right at the beginning: “For the four-month period to 30 April 2010, normalised headline earnings for the group grew by 7%. This result reflects a tough environment for revenue growth in banking activities with both net interest income and non-interest revenue lower than in the previous year, and a much improved performance from our insurance subsidiary, Liberty Holdings Limited (Liberty). Lower than expected interest rates in South Africa have put increased pressure on interest margins but have somewhat helped to ease the financial stress of households. The translation effect of a stronger rand exchange rate has had a negative impact on the group’s earnings.” So, in short you can summarize that the environment is still tough, but again the worst is past us and has stabilized. Perhaps bad debts have peaked.

Jobs for pals exists everywhere. I was struck by this Op-ed piece from David Einhorn written for the New York Times, titled Easy Money, Hard Truths. I was struck by this paragraph: “Public sector jobs used to offer greater job security but lower pay. Not anymore. In 2008, according to the Cato Institute, the average federal civilian salary with benefits was $119,982, compared with $59,909 for the average private sector worker; the disparity has grown enormously over the last decade.”

Did you get that? Twice, the average civil servant earns twice the amount that the average civilian earns. What risks do you take when you work for government? Are you more efficient than your private sector counterparts? Answers, none to the first question and no to the second question. It is too simplistic to presume that the private sector pay should be greater than that of the government. Want to make government more effective. Have an independent party who is paid for making sure and that hold government accountable.

Here are a few things that I am reading and digesting, you might find these things useful. The first one is interesting, I recently started following the German publication Spiegel in English, this piece is telling: Graying Germany Contemplates Demographic Time Bomb. Phew. And this one still hanging around, the ANCYL and nationalisation. I mean really, I think that saying very little about it tells me a lot about what I need to know. That is all. A reminder, the BRIC nations are unravelling government ownership, not the other way around.

I am also reading these interesting snippets, these guys over at the Business Insider are tops, French Strikes Are Already Breaking Out, And Austerity Has Barely Been Mentioned Yet. Spanish law makers just managed to push through some budget cuts, from the New York Times: Spain Narrowly Approves Spending Cuts in Test of Prime Minister’s Support. Phew. One I (Ireland) missing at the world cup amongst the PIIGS, the luck of the Irish deserted them. Do you think that the problems back home will help them, or hamper them?

And then as BP announced that operation Top Kill had worked, Obama orders halt to deepwater drilling in Gulf from the FT. World oil demand is 86.5 million barrels a day. The OECD uses 44.8 million barrels, that is the developed world, the rest of the world uses the balance, 41.2 million barrels. I suspect that the projections that we might reach 130 million barrels in the next twenty years, most of that is going to be the developing world. Price underpin you think?

New York, New York. Once folks got wind of the fact that the Chinese were not looking to sell their Euro holdings, or at least they put out the fire associated with that. So the futures had floored it, even a marginally lower second look at US Q1 GDP failed to deter the bulls. Initial jobless claims were also way too high for everyone’s liking, but the days outcome definitely felt like the bears were throwing mud at a Teflon pan. The BP plug using Top kill (two TV anchors came up with Top Gun and Kill Bill mashed together as their version of where it comes from) and the fact that drilling must stop in the gulf is both good and bad.

Wall Street wanders. Up, up and away, the Dow Jones closed at 10258, up 284 points, closing at the best point seen on the day. The nerds of NASDAQ better by 81 to 2277 with the broader market S&P 500 up 35 to 1103 by the time the bell rang for the close.

Commodities, currencies, Drs. Copper and bushveld. Dr. Copper checked in last at 315 US cents per pound, the gold price at 1215 Dollars per fine ounce. The platinum price last at 1561 Dollar per fine ounce. The oil price has raced ahead to 75 bucks a barrel. The Rand has firmed no doubt as the flows have come back, to the US dollar at 7.50, to the Pound at 10.97 and lastly to the Euro at 9.33.

Up periscope. We should start marginally better here today. And important inflation read in the US later in the form of a PCE Price Index, plus consumer sentiment could see where we close out the week here. So far, so good. A long weekend in the US, Monday is memorial day, perhaps some longs closing out ahead of the long weekend. Why do they do that? Good luck to our colleague Paul Theron, attempted to break 9 hours at Comrades this weekend.

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

Jozi, Jozi. We have had two favourable local economy reads two days in a row now, first it was a surprise GDP read Tuesday and yesterday the CPI read for April came in almost in the middle of the Reserve Banks range. Do you smell that? A rate cut perhaps wafting in. Yesterday markets bounced hard, perhaps some of the immediate concerns about the PIIGS have abated, even though heat is being turned on the fiscal woes of Greece and Portugal. And Spain. And most of the developed world to be perfectly honest, I saw one bond fund manager make a big call on emerging market debt as being the safest asset in the world. As long as you don’t nationalize assets, because Venezuela are the country still the most likely to default. Fact. Anyhows, politics aside, local equity markets enjoyed a feasting yesterday after the recent famine.

Maude street shakes, moves and grooves. We closed above 27 thousand on the Jozi all share index at 27047, up a whopping super sized 867 points. That is three and one third of a percent. Markets are volatile, as one seasoned investor told me, that is not a good sign. But as we both have discussed it is different every time, you can’t draw historical connections to eras of horse buggies and ostrich feathers and compare them to eras of iPads and hybrids. Don’t ignore history either, but there is a reason they call it history. Company prices, MTN surged yesterday as the Algerian company said that the crown jewel in the Orascom stable, Djezzy (say it like you would our presidents initials) was not for sale. Short squeeze or relief rally, depending on whether you are a bear or bull, MTN added 8.15 percent to close at 110 bucks exactly. Politics. Economics. The two can’t escape each other.

Bart says digest these shorts. Richemont results, an earnings miss and the announcement of a share buy-back program. Local bank reserves. Local CPI. BP and their top kill to block the leaking well. Chinese rumours about their Euro holdings. Barton says buy. So does Mobius. Are media types creating a new crisis in the form of Australia, or does it really exist? Apple eclipses Microsoft as the biggest tech company in the US by market cap.

Richemont out with results this morning. 599 million Euros worth of profits is a miss, the market consensus was at 725 million Euros more or less. Margins under pressure, notwithstanding some good cost cutting exercises. Operating profits were 14 percent down, whilst sales were lower by four percent to 5.176 billion Euros. From the release:
“The lower margin primarily results from the lower levels of manufacturing capacity utilisation and the strengthening of the Swiss franc during the year. With almost all of the Group’s watchmaking facilities being located in Switzerland (A. Lange & Sohne is based in Germany), the Swiss franc is of particular importance to the Group’s cost of sales. The lower gross margin percentage, combined with the decrease in the value of sales, led to a gross profit decrease of 7 per cent.”

Break it down, as Hammer would say. From a divisional revenue contribution. Jewellery sales 3 percent lower in Euro terms at 2.688 billion, Watches 6 percent lower at 1.353 billion, pen sales also 6 percent lower at 0.551 billion and lastly “Other” (leather goods, fancy hand bags etc.) 8 percent lower at 0.584 billion Euros. Operating profits are really heaped at the jewellery division, 742 million Euros and then watchmakers contributing 231 million Euros. Pens (they call it Writing instrument Maison) contributes 79 million Euros whilst contribution from “Other” (remember that must also include the recently acquired Pret-a-porter) makes an operating loss.

OK, here is the part that most interests me, the trends of their geographic sales. In Europe sales fell 11 percent in Euros at 2.099 billion. Makes sense it is their currency. For now. In the America’s it fell 20 percent to 712 million Euros. In Japan, a big luxury goods market, sales in Euro terms were down 17 percent to 625 million Euros. And now for the interesting part, in Asia Pacific sales increased 17 percent to 1.74 billion Euros. A repeat performance from this division will see it next year as the most profitable region for the company. The economic shift East is happening in front of our eyes. A bright spot in the results. Another is that “Richemont announces a programme to buy-back up to 10 million Richemont ‘A’ shares through the market over the next two years…”

I think that the earnings miss will weigh on the stock today. Still, notwithstanding the fall in earnings this is a very profitable company with a sharp geographical swing happening. Their outlook from the JSE release which was a lot later than the international release sums it nicely: “Richemont has weathered the economic crisis to date and is in a strong financial position. Our businesses reacted quickly and positively to the downturn in demand and have grown market share….. Sales in the first quarter of 2010 have continued to follow the trend seen in the pre-Christmas period and sales in the month of April were 24 per cent above the prior year`s depressed levels, primarily driven by wholesale sales. …. There will still be plenty of challenges ahead but we are confident that Richemont`s Maisons will surmount them.”

The South African Reserve Bank and Stats SA with two important data releases yesterday. First of course was the CPI read for the month of April, which came in at 4.8 percent. That was where the focus was. I had a look at the Stats SA release, Consumer Price Index – April 2010 in order to gauge whether or not the recent union demands were completely outrageous. So I guess it would be fair to look at transport, food and utilities to see if those parts of the basket are running comfortably ahead of the overall read.

Firstly food as per the read: “The food and non-alcoholic beverages index increased by 0,1% between March 2010 and April 2010. The annual rate decreased to 0,9% in April 2010 from 1,3% in March 2010.” Is the short answer no to that category?

OK, then a deeper dig into the Housing and utilities item reveals that Electricity and other fuels has increased 24.3 percent. OK, starting to make sense now, although the weighting of this sub group is less than two percent of the overall basket. Not necessarily everyone’s basket though. Transport up 4 percent. You take your pick on whether you think leading with 18, 17 or even 15 percent is a reasonable starting point. Don’t say that the old abrasive governor of the Reserve Bank did not warn us.

Staying with the reserve bank, there was an interesting release, Annual Report 2009 – Bank Supervision Department. Take a quick flick through. I did. Because I know that some sort of global coordinated bank rules are coming. I was struck with a few things, check this: “As at the end of December 2009 there were 31 banking institutions reporting data to the Department (excluding 2 mutual banks, but including 1 institution conducting banking business in terms of an exemption from the provisions of the Banks Act, 1990, namely Ithala Limited) and 42 international banks with authorised representative offices in South Africa.”

Interesting, but no way as interesting as this part: “Of the nominal value of the total South African banking-sector’s shares in issue at the end of December 2009, foreign shareholders held 47,5 per cent, domestic shareholders held 30,4 per cent and minority shareholders held 22,1 per cent.” Got that, we SHOULD care what foreigners think about us.

And then lastly, this is very useful: “Total banking-sector assets amounted to R2 967 billion at the end of December 2009, compared with R3 177 billion at the end of December 2008, representing negative year-on-year growth of 6,6 per cent……Homeloans and term loans remained the largest component of gross loans and advances, representing approximately 50 per cent thereof, followed by lease and instalment debtors at 10,5 per cent and commercial mortgages at 9,7 per cent.”

Operation “top kill”. OK, to get into the mood for operation top kill, watch the Top Gun music video. Turn up the sound, who cares if you annoy the youngster who just can’t understand this movie. Oh, and by the way, whilst you are at it, go and retrieve that Top Gun poster in the basement that you have not thrown away yet. OK, what is operation Top Kill? It is BP’s plan to finally plug the leaking well. There are real life pictures from one and a half kilometres under the sea being beamed into news networks, check out one here from Russia TV: Footage of underwater tests ahead of ‘Top Kill’ operation at BP oil spill site.

The method being employed in the BP version of Top kill is one that oil companies use to block wells. Pumping mud and then cement into the well. It just has never been done at these depths before. As Joe Weisenthal, the deputy editor of the Business Insider tweeted yesterday: “I’m surprised anyone would disagree with the fact that “Top Kill” is orders of magnitude more important than Apollo 13.”

You can either turn on CNBC or Bloomberg (the first channels in my personal bouquet) or check in with the Google news feed under: top kill method. In fact, if you wanted a recap through the night, then check out (and start following) Joe’s Twitter feed.

The guys over at Bloomberg with their fancy screens have come up with a bunch of touch screens with fancy shifts that explain what BP might actually be in for, the cost of the spill. The unknown of course is any liabilities that the company might face in the form of cases against them. I am thinking class action suits by shrimp farmers in the Gulf of Mexico. The Bubba Gump shrimping company and others. The clean up could cost them 12 billion Dollars, that is a top end of the range. Who knows, we wait.

OK, rumours about the Chinese looking to ditch the Euro. And all the talk less than nine months ago, 300 days guys, that the Dollar was to be replaced as a reserve currency. One of the Chinese authority front office types have rubbished this claim that saw US markets dive at the end of their session. This story will develop over the coming days, we will watch and report back. Strange how conclusions on conversations can u-turn inside of a year on the same subject.

Barton Biggs and Mark Mobius agree. Some people are known by their first name, others are known by their surname, I would put Barton in this category, as would I Mobius. Barton Biggs runs a business called Traxis, and he wrote a book you might be familiar with, Hedgehogging. You guessed it, Traxis and Biggs are hedge fund managers with a long track record. Biggs said that he thought the drop below 10 thousand was ridiculous and was a big buying opportunity. As Bloomberg TV points out, the last time he made this type of call markets rallied 22 percent from there. Mobius says that he is buying BRIC’s again. Old wise heads.

Is this anxiety about Australia founded? Or do we move far quicker in today’s world. High paced bloggers and media alerting us of pit falls. The PIIGS story is not new. I think the reason why the Greek story gathered momentum all the way through these last few months was that it became apparent that they were not going to meet the mid May deadline for their debt repayment. This obsession with Australia in the blogosphere has been fed these types of comments, this one a tweet again from Joe (and no, I am not obsessed with him): “Australia is the world’s fulcrum nation: Complete exposure to China + Anglo-Saxon debt culture. Can only boom or bust like crazy.”

New York, New York. Up a lot and then a wild swing down. Anxiety placed square on market participants over the rumours that the Chinese were looking to offload European reserves. Durable goods orders were worse at the core, better at the headline levels. New home sales were much better than where the market was expecting. So all the good news was cheered until the China slash Euro report. And big news, Apple’s market cap has eclipsed that of Microsoft. It is now the second biggest American company, after Exxon Mobil. People want those phones and pads like crazy.

Wall Street wanders. Session end the Dow closed 69 points lower to 9974, after having been 145 points higher at one stage. The nerds of NASDAQ dropped 15 to 2195, whilst the broader market S&P 500 ended at 1067, down 6 points.

Commodities, currencies, Drs. Copper and bushveld. Dr. Copper says 310 US cent per pound. The bush doctor, the platinum price last at 1539 Dollars per fine ounce, with the gold price last at 1211 Dollars per fine ounce. The Rand has gained to 7.64 to the US Dollar, 11.10 to the Pound Sterling and 9.42 to the Euro. The oil price was last at 72.51 Dollars per barrel. A crazy climb over the last session.

Up periscope. Expect a better start for the day ahead. Markets are so volatile that I would rather predict the weather in George for the next week.

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

Jozi, Jozi. We should have turned up that Billy Joel song, We Didn’t Start the Fire, because it felt like some geo political factors were grabbing the attention of equity markets. Equity markets. So the sell off on account of the Spanish now under the whip was surprising, I thought that the S in PIIGS was Spain and everyone had thought about this long and hard. Clearly not. And for the record, the Greeks and their situation still under the spotlight. And then of course the North Koreans turned ugly on their Southern neighbours. Jane Wells, a CNBC contributer out in California tweeted: “With a certain irony, Greece and North Korea played each other in soccer today, and ended in a 2-2 tie. #losers”. Today in the context of this Tweet was the 25th, yesterday.

Maude street shakes, moves and grooves. It was all fall tumbling down yesterday, a phrase my eldest coined when she was smaller than now. The IMF report on Spain suggesting something serious needs to be done in the worlds 9th biggest economy was met with the same reaction by market participants as the reaction when local politicians see the workings of government services. Shocked, horrified. Yeah right. Financials were hammered, banks were bashed, down nearly 4 percent. You know, banks. Health care did alright, defensive, you don’t skimp on your health care if you can afford it. Session end the Jozi all share index had closed off its lows, but 597 points off to 26179. We are now down 5.4 percent this year and around 13 percent from the recent highs.

Bart says digest these shorts. SA GDP growth. Adcock Ingram and Rainbow Chicken results. Mr. Price with results this morning, or is that Senor Price? Eskom and all of us saved by the bench. Is down under really the land of milk and honey? Definitely the Hussey brothers. Entitlement, what happened to good old fashioned values? Kerviel, the dude that crushed SocGen, or took the fall, depending on who you are.

Did you see that the growth forecasts were smashed by yesterdays Q1 GDP read? Those are local of course. If you want to check out the whole Gross Domestic Product – First quarter: 2010. From the release:
“The largest contributions to the quarter-on-quarter growth of 4,6 per cent were as follows:

• The manufacturing industry contributed 1,3 percentage points based on growth of 8,4 per cent;
• The mining and quarrying industry contributed 0,8 of a percentage point based on growth of 15,4 per cent;
• The finance, real estate and business services industry contributed 0,5 of a percentage point based on growth of 2,5 per cent; and
• The wholesale, retail, motor trade and accommodation industry and general government services each contributed 0,4 of a percentage point based on growth of 3,3 per cent and 2,8 per cent respectively.”

Quarter on quarter the increase is negligible, so annualize the 627 billion Rands and we are a 2.5 trillion Rand economy. In Dollar terms that is around 320 Billion US dollars. We have a nicely spread economy: Finance, real estate and business services – 22,9 per cent; and General government – 16,3 per cent. Agriculture, forestry and fishing – 2,1 percent, Mining and quarrying – 5,2 percent, Manufacturing – 15,1 percent and Wholesale, retail, motor trade and accommodation – 11,8. Good to see.

Adcock Ingram released half year results to March yesterday. What struck me immediately is that the business is really simplified from the outside looking in anyhow. Two divisions, , and one of those divisions split quite nicely down the middle. This company for the half saw their turnover tick up to 2 billion Rands, with profits post tax of 398 million Rands. Those are good margins. Basic earnings per share at 226 cents, the interim dividend stands at 78 cents. Boatloads of cash on hand at 918 million ZAR, ready for acquisitions, they have recently secured an 800 million Rands facility.

The completion of a transaction post their unbundling from Tiger Brands, one in West Africa, a Ghanaian business called Ayrton, which the group paid 121 million Rands for a roughly two thirds stake. There is some strange call option process by Baxter Healthcare SA going on in the background, resolution of what the price should be and whether Baxter will go ahead will be revealed inside of the next two months. Anyhows, the prospects look decent enough: “Whilst current economic conditions remain challenging, we expect volume growth in our core businesses in the second half of the year. We are seeing improved trading activity across all sectors and we expect gross margins to be maintained provided the Rand remains at current levels.”

And what are Adcock going to do with all that cash on hand? Here goes: “Adcock Ingram continues to seek opportunities to access high growth markets and expects to further diversify its earnings beyond the borders of South Africa. We remain committed to our vision of growing Adcock Ingram both organically and by prudent acquisition, into a leading world-class branded healthcare company.”

Rainbow Chickens results for the full year to March 2010. Chicken business, I remember knowing someone in chicken farming, his name was Mickey. Really, nice guy. He wore shorts in the middle of winter, that is all that you need to know about chicken farming. Revenue for the full year to end March of 6.95 billion Rands, those are not Mickey Mouse sales. This is not just a chicken business, there is a feeds element too, and a services business, which if memory serves me correct it was a logistics business that AVI sold to Rainbow chickens.

Of that 6.95 billion Rands in sales, 5.5 billion is attributed to the chickens business. Headline earnings 10 percent higher at 351 million Rands, which translates to 120 cents a share. Total dividend for the year at 76 cents. Stock at 1565. Cheap, cheep? I guess not. But remember, Remgro tried to take out the minorities. Oh, and lastly, did you see that the South African chicken market is around 17 billion Rands. Now that is a lot of chicken.

Mr. Price with results this morning. For the full year to end March, they certainly are gushing at us now. I quite like this company as an outsider, they look quite expensive, say, the same way that Capitec looks expensive. Always ahead and earnings almost never disappoint. There were rumours of round tripping of clothing products. But that is just hearsay, feel free to shout objection. I always wanted to shout objection. This is a group with sales of 9.747 billion, of which retail sales are 9.454 billion Rands, income of 661 million Rands. That translates to headline earnings per share of 277 cents per share, a full year dividend of 173 cents. And as they point out, a dividend cover of 1.6 times, that is good. The stock trades at 41 bucks. 14.8 times earnings historical as of today. A dividend yield of 4.2 percent. Looks alright at face value and have delivered the goods over the last five years.

According to the newswires and Fin24 which I checked this morning, the courts have basically stopped the NUM from going on a national strike. Sympathy strikes using the name of that event that gets you into trouble as leverage. But the strike action has been stopped, check it out: Court stops planned Eskom strike.

I read this story yesterday and could not quite figure out whether I was shocked or thought, yes, this is the world that we live in. A world of entitlement. I am pretty sure that labour and business will have two contrasting views of who should be paid what, but the idea that the average Greek pensioner should be paid more than the average German pensioner is nuts. This article: LATEST PUBLIC PAY OUTRAGE: NYC Bus Driver Took 191 Paid Days Of Paid Leave After Spitting Incident.

I left a comment, because I thought of this for an angle for today’s message, the last bit quite rude though:
“We are the entitlement generation. This is not unique to any particular country, this could happen anywhere in the western world.
Is anyone surprised that the Chinese, the Vietnamese, the Malaysians are in a much better space? Work less, get paid more, that seems to be where we have found ourselves.
I smell a tax payer revolt of sorts, too bad that the tax payer cannot galvanize like the Unions.
The feast is over. Perhaps the famine could serve the above driver well”.

I tweeted a piece that I found very interesting about Australian mortgages, a new product that has been designed I guess is the right word. I said, you have heard of the never ending story (oversized flying dog with equally oversized ears) now there is the never ending mortgage: Revealed: The home loan that could save you a fortune.

This is crazy, reminds me a little of the US subprime market at its best, if you need a refresher on that crisis, let us just remind you with a Steve Liesman tutorial on subprime derivatives from a long time ago: short segment on CNBC showing how and why the subprime market is turning sour. And then the same author got a response from the previous piece and an answer from a follower Down Under: Email Regarding Global Bust II – Perfect Storm for Australia; How Safe is Australia’s Banking System? For the record I think that the resource story is sound and intact. So that will help if the problem is at these proportions.

Did you get a chance to see that interview between Bloomberg’s Ryan Chilcote and Jerome Kerviel? I can’t seem to find a copy on the internet, but the exclusive (there is probably why) states that Kerviel said that the bank knew exactly what was going on. When he made money for the bank, his superiors would say, “well done dude”, those were his exact words. Don’t you think that Kerviel looks like Robert Patrick as the T1000 in Terminator 2? Check these two pictures, Kerviel and then the T1000.

Anyhow, this is going to end badly for Jerome Kerviel’s superiors, of that I have no doubt, the time and place is very right for them to be roasted all the way to the top. SocGen have said that they want Kerviel to pay something crazy like 4.7 billion Euro’s. The trial starts just before the kick off of that tournament that the football authority owns and everything associated with it. Even ourselves seemingly. 8 June to 23 June, that is how long the trial is expected to last. The most anticipated trial in the financial world since Bernie Madoff? I would say yes.

New York, New York. Back from the dead. Markets were buried by a deluge of sellers at the get go, and managed to claw their way back to level pegging. At one stage the Dow was down nearly 300 points to close almost flat. A consumer confidence report showed that people were happy that things were looking up. Earlier in the day UK GDP had met expectations, slightly and only so very slightly better. A house pricing index showed a beat. Case Shiller, another housing index showed the largest gains since 2006.

Wall Street wanders. Session end and a benign looking session at face value showed that the Dow had lost 22 points to 10043, the nerds of NASDAQ lost 2.6 points whilst the broader market S&P 500 actually eked out a marginal gain, up 0.38 points to 1074.

Commodities, currencies, Drs. Copper and bushveld. Dr. Copper last at 307 US cents per pound, the gold price at 1208 Dollars per fine ounce, with the platinum price last having crossed at 1523 Dollars per fine ounce. And a barrel of oil, if you buy a contract will set you back 70.05 Dollars per barrel. The Rand is firmer at 7.82 to the US Dollar, 11.26 to the Pound Sterling and 9.63 to the Euro.

Up periscope. Expect a much better start for the day. Getting ready to bounce.

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

Jozi, Jozi. We started out fine. In fact there was green on the screen and we were staring at SABMiller at the start that had been sold off heavily and was just holding the overall market back. And then the same old nightmares and anxieties came back and some seriously hard selling ensued. We accelerated the losses into the afternoon, the Us futures started pointing lower and lower and when Wall Street opened at three thirty our time, heavy selling saw a sharper sell off. Pictures of the streets of Athens did not turn out the way the networks wanted went by peacefully. And as such stopped been shown quite quickly.

Maude street shakes, moves and grooves. Session end the Jozi all share index must have felt like it went a couple of rounds with Max Schmeling and then lifted back off the canvas to go another two rounds with Floyd Patterson. Hey, a piece of history that you did not know, Wyatt Earp actually refereed a world heavyweight boxing bout in 1896. No guns or bare knuckles back then. Hey, last divergence, I don’t care what your avatar is, what would your moniker be if you were a boxer? Session in the city built on good old fashioned slug outs, the Jozi all share had lost 837 points to 26337 points. Banks down 4.66 percent. Platinum stocks down 5.3 percent. All in all it was a horrible no good day.

Bart says digest these shorts. Does the Rand have anything to do with it? SABMiller, what gives with that company? Fielding questions from anxious clients, we are all anxious right? Finreg gets a leg up as more folks are convinced that it is the right thing to do. And lastly, does the whole free world really hinge on one vote from the Germans today?

The Rand cross to the US Dollar has been crushed over the last few weeks. It has nothing to do with the local currency. It has nothing to do with how people feel about the economy or their political outlook. It only has to do with the Dollar flows. Because of the liquidity of certain markets around the world and their ease of entry, the same capital markets are as easy to exit. Check it out, a blog that I stumbled across yesterday: U.S. Dollar is King (for Now). The Kiwi, the Ozzie, the Loonie, the Rand, the Real, the Peso, the Won, all crushed. So don’t get beat up, worry more about when the anxieties will abate and that will see Dollar flows come back.

SABMiller with results yesterday. It was strange because the trading update a couple of weeks back was really well received, but the results yesterday were not. It looks a little stodgy at face value, but remind ourselves again that we have undergone a period of serious economic stress. But then again these were compared to a time when markets were awful September 2008 though to March 2009. Revenue up 4 percent for the full year. Volume growth flat. European sales lower. The big problem I think in the results are that the assets in Asia that they acquired aggressively contracted. India is the problem. Latin America is where it is at for this company chaps. And South Africa. Asia still only represents 1.6 percent of EBITA.

The outlook for the company: “Although the economic environment began to improve for some of our emerging market businesses in the latter part of the financial year under review, a broader recovery in consumer spending is not expected before the second half of the current financial year. Price increases will be taken selectively, predominantly in the second half, and we expect raw material input costs for the year to be level with, or marginally down on, the prior year. We will continue to implement our cost productivity initiatives while increasing investment in our brands.”

Of course we are going to be fielding questions like this one emailed to me by a client yesterday, after all it is our job: “I do hope I didn’t buy at the top of the second dip recession! Only time will tell. I am still to digest all the links you sent yesterday. Surely the Euro cannot explode / implode / cease to exist??? The Newsweek headlined “the end of the euro” with no question mark. It said that political centralisation must be implemented for the euro to survive since there is a fundamental contradiction in currency unity without central bank control … I think?”

Let us call her Jane, because that is a plain enough name. I actually told my wife that we should have named one of our daughters Jane, because she would have been the only Jane in her class. After all, how many Jane’s do you know under the age of ten? Under the age of twenty? Under the age of thirty? Thought not.

Back to Jane’s (stress, not her real name) questions. No, you did not buy at the top, because the recent top was in October 2007, when the S&P 500 topped out at 1555 and in May 2008 when the local market crested 33 thousand points. Is there a double dip on the horizon. Not in the US, which is still the worlds most important economy. Was enough pain felt in Europe at the same time as in the USA? I think that the short answer was no. I think that is happening now. Growth forecasts have been ratcheted down in Europe over the last few days, but still, the pundits are expecting some growth in the Euro zone.

The end of the euro. Statement or question? I guess that is the important part. Angela Merkel vowed yesterday that she would not let the Euro fail. Nicolas Sarkozy (bless his little cotton socks) has been outspoken about this too. They are the two biggest economies but have not shown the type of leadership that I think this crisis needed. I think the most important question that needs answering is the one where the central bank stands clear of the individual treasuries. Clearly fiscal independence was a bad thing. But I am reminded that this was a crisis era. Comparable in debt levels to post war periods. So that last sentence is right, something more needs to be done in the long term. If you want to belong to one currency with one central bank, there needs to be a central authority. Perhaps they should look at the US state and federal systems.

I often bemoan the fact that the media that we consume is completely Western oriented. In other words the developed world time zone and English media that we consume is from the world’s oldest economic powers. I often wondered what the papers in London looked like in 1900 as the USA was becoming a more dominant economic force. Much like the newsflow looks like nowadays about China. In the same way that the Greeks experienced when the Romans wrestled economic control away from them. Admittedly in a different way. Get what I am saying? I hope that I have in some way reminded Jane that we live in interesting times, and those willing to commit capital to equity markets in the medium term (five years) will be rewarded.

OK, this next piece is not true, but makes for good reading. Now That Is One SERIOUSLY Hyperbolic Alert On CNBC. Got that, the fate of the free world hinges on several German politicians. Give me a break. This is awesome and my real favourite (although he is a few shot gun shells and canned beans away from you know what) Rick Santelli on Wednesday. Listen carefully to his rants about the German and American politicians, it is really quality TV. A CNBC video titled April Consumer Price Index. Listen to his first part and then the second part from about 5:30, just when Rick starts laughing and interjecting. Dropping dots in a phone book, the last part, that is hilarious.

OK, so what time, where, who and how does this German vote take place? Merkel Relies on Majority as Euro Bailout Goes to German Vote. Good luck. Remember that the first TARP vote in the US failed. Remember. The markets fell without fat fingers.

New York, New York. Whoa, back away from the screens please, it was starting to get ugly. Perhaps it was easier to leave the screens and go talk about football for a while. The oil price was smashed. As Jon Najarian from Option Monster (what is with the ponytail dude?) put it, people are just selling whatever they can, just to get liquid before any margin call in the last hour of trade. If you don’t stop yourself out, he said, the firm will automatically stop you out starting three thirty. It was crazy, the oil price was down seven and a half percent at below 65 bucks at one stage. On fears that the European Union might disintegrate and then what, make sure that your money is in US Dollars or Swiss Francs. Because the gold price got a paddy whack too.

Afterhours the US Senate passes financial regulation bill from the Washington Post. Wow, check out some gleeful Senators. I wonder what the unintended consequences of this bill will be? Less credit lines for small and medium size businesses because banks will need to meet higher capital requirements. The consumer protection agency thing. Will have to read more about this.

Wall Street wanders. Session end stocks were met with an equally heavy handed selling which saw the Dow Jones Industrial close up at 10068, down 376 points. The nerds of NASDAQ were bashed 94 points to 2204, whilst the broader market S&P 500 closed down 43 points to 1071.

Commodities, currencies, Drs. Copper and bushveld. The gold price is at 1177 Dollars per fine ounce. Dr. Copper at 300 US cents a pound. The platinum price is last at 1499 Dollars per fine ounce. The oil price last at 70.37 Dollars per barrel. The Rand has stabilized at 7.91 to the US Dollar. 11.39 to the Pound Sterling. 9.93 to the Euro.

Up periscope. We should start slightly better. A bounce off the savage selling.

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

Jozi, Jozi. More selling as the Euro zone situation (what else do you call it?) still leaves little clarity in the short term. If tough austerity measures are put in place, does that mean that economic activity will lower than the forecasts currently suggest. I think that the short answer to that is yes. So whilst we try to make sense of what is going on in the back rooms politically in Europe, market participants will continue to sell off. Germany’s rules about short selling have kind of been ignored by the French, Minister of Economic affairs there Christine Lagarde not quite sure that this is the right path to follow. Some are calling the attempts to stop naked shorts as a desperation tactic that has backfired. Sounds like about almost everything that the EU has done. Goldman Sachs, the masters of the financial universe, says it is overdone. A well known German market commentator has apologized on behalf of all Germans. The upshot of all of this is selling, another day on the local exchange.

Maude street shakes, moves and grooves. Session end the Jozi all share index closed at 27175, down 398 points by the time the doors shut at 5pm. The main laggards and culprits were the resource stocks. Down over two and a third of a percent. Company results other than the previous session were a little light. The only real major was Lewis, the furniture people. IPO back in 2006, was a pretty high profile one. I guess that Raubex, the road builder with higher revenues than Lewis deserves more than a passing glance. Get to that.

Bart says digest these shorts. Finreg fails at the first hurdle. Trying to explain the new MTN offering of uncapped 3G. Plus the Smartphone market and the trends. Transnet strike action nearly over as Eskom strike looms. Deflation versus inflation. Local retail sales. My favourite topic, but not really, gold. Lewis and Raubex results. Invest like a President.

Hey, local retail sales finally grew. Because eventually you are measuring up against a low base, which is easier to grow off. Capiche? Retail sales up one percent from last March. March? Come on Stats SA, we are at the end of May. Anyhow, here is the official release: Retail trade sales. We are at third quarter 2006 levels at constant 2008 prices. If you understood that, put up your right hand, if not look for Figure 1 in the release. After all, a picture tells you more. Or shows? Check that out, a long way to go back to the height. But, in absolute Rand value terms, double what it was back in Feb 2004. In constant terms at 2008 prices, Table 4, 37.4 percent higher. Sounds like the medium trend is moving in the right direction.

Full year results from Lewis yesterday. Overall revenue up 8 percent to 4.11 billion Rands, post tax profits of 565 million Rands. HEPS of 630, the overall dividend the same as last year at 323 cents. The stock trades at 5930. So seems like a good option. Remember that we prefer African Bank. Huh? Lewis is not a bank? Neither is African Bank in its current form. Lewis has 500 thousand account holders who are up to date with their payments. More than last year. Take a careful listen here, Instalment sales and loan receivables is 3.4276 Billion Rands. Credit sales are 68 percent of total sales, around where African Bank wants Ellerines to be. Provisions for doubtful loans have risen to 635.4 million Rands. See, we are talking provisions, loans, credit. Sounds like a banking outfit.

Prospects for the furniture group are as follows, and they echo Tiger Brands cautious view from a couple of days back: “While trading conditions are showing early signs of improvement, the environment is expected to remain challenging in the year ahead as the country emerges from recession. Job creation remains key to stimulating economic growth among the Lewis target market. Debtor costs appear to have peaked and should moderate in the year ahead as the credit collections environment continues to improve.” Jobs, economy, still uncertain really.

Raubex. Who are they? As per their website: “… is a construction company that operates throughout Southern Africa. The company has been in the business of civil engineering construction since November 1974. It is a leader in road construction and rehabilitation, infrastructure development, pipelines, concrete structures and the supply of materials to the construction industry.”

Raubex has revenue of more than Lewis at 4.58 billion Rands. Basic headline earnings of 591 million Rands. EPS of 323 cents (that is ZAR cents) and the stock trades at 2160. A bigger discount than the fellows over at Lewis, in terms of the share price, that is the sector norm for construction right now, huge discount relative to the rest of the market. The margins seem very good, better than most of the sector in fact. The short term outlook is hazy, longer term the group are confident.

The Transnet strike is expected to end today. Union representatives have sent the recommended proposal to their constituents. Who should then come back to the representatives before the day is out, around 3 is the time mooted. This will end 11 days of strike action and the ports and rail authorities will be back at work tomorrow if all goes according to plan. Meanwhile the Eskom NUM members are planning to go on strike next week, if their current wage demands are not met. I have no doubt that the World Cup is used as leverage. 18 percent is what is being led with again. These wage hikes comfortably in excess of inflation are going to come back and bite is my sense.

Phew, the release of the last set of bank of England minutes has got the blogosphere out raged, judging by this article. And for the record if you want to comb through the cucumber sandwich crumbs and tea stained Bank of England statement, be my guest. We are reluctant to own anything in the UK environment, we think that this problem that the Bank of England faces is a medium term one.

Meanwhile, back at the ranch in the US, it is deflation that has got the very same blogger types wild. And that David Rosenberg guy. He is very bearish. Just for a change. Check out the CONSUMER PRICE INDEX – APRIL 2010. Check out Deflationist David Rosenberg Passes Along A Scary, Hyperinflationary Scenario. Gold bugs of the world unite.

I am sorry, but I think that this guy is a bit of a nut job. His name is Bill Fleckenstein, he was interviewed on Bloomberg yesterday afternoon here, long flowing locks and the same old story of hoard gold. Because Gold is a real currency and has been for centuries. Hey Bill, I said in the office, next time you want to send a message, saddle up in your best armour and take a parchment to one of the few people that can read it. Watch out for thieves, savages and Robin Hood big highways with things called cars. Anyway, got that off my shoulders, check out what the guys at the Business Insider have to say: The Only Difference Between The US And Greece Is A Printing Press.

It got me thinking. If gold is the only true store of wealth to protect against these printing machines then we should all have a little gold. But OK, if we were to disperse all the gold amongst every man woman and child in on planet earth, 6 821 800 000 is the last estimate. And all the gold ever mined is purported to be 161000 tons. 161 000 000 kilograms. Roughly 5 679 107 866 ounces. At 1183 Dollars per ounce that would have to mean that the entire wealth would be 6 718 384 605 360 Dollars. 6.718 trillion Dollars. 984 Dollars per woman, man and child. Get where I am going with this? How could that be the only way that you could ever quantify wealth?

Smartphones. Remember the Vestact piece on MTN when they released their results and how we explained that the smartphone market was exploding? If not, then watch it here, Vestact on MTN. And then this kind of confirmed the trend that is well and truly in place: Apple, Google lead smartphone surge. See that, smartphones are growing quickly. Everyone wants one.

Talking about everyone wanting a smartphone, everyone wants quicker broadband too. So I thought that rather than me trying to explain it, let Duncan McLeod of TechCentral do a better job: MTN unveils ‘uncapped’ 3G broadband.

Invest like a president. OK, this is more than a little sneaky. This is way creepy, but hey, that is what disclosure and the checks and balances of the US political system are all about. Here is the complete list of the US presidents assets, his public disclosure report. Yip, that is right, a Northern Trust check account with less than 15 thousand US dollars that earned no interest. Nothing even worth mentioning.

New York, New York. After hours the financial regulation bill failed to make it through the senate, a few democrat stragglers not quite happy with the bill in its current form. Democrats delay US reform legislation. Normal trade was choppy, that inflation read had mixed reactions around. This was worth reading into, Delinquent Loans Plateau at High Level, plus that followed on from an outstanding credit card book in the US at a 45 month low. That is good right?

Wall Street wanders. Session end the Dow Jones closed at 10444, down 66 points. The nerds of NASDAQ lost 18.9 points to 2298. The broader market S&P 500 ended up losing 5.75 points to end at 1115.

Commodities, currencies, Drs. Copper and bushveld. The gold price last at 1189 Dollars per fine ounce. Up since I wrote that piece above. Dr. Copper at 300 cents per pound exactly. The platinum price is at 1584 Dollars per fine ounce. The oil price has recovered to 72.61 Dollars per barrel. The Rand is weaker, but might be able to gain some traction here, 7.80 to the Us Dollar, 11.21 to the Pound Sterling and lastly 9.69 to the Euro.

Up periscope. European markets called better. Initial claims later in the US, that could see where they start. Which as ever is an important tipping point. I see that Breweries have been bashed early, they are a big constituent.

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

Jozi, Jozi. A fairly cautious start on equity markets, and then we managed to march forward with some purpose through the afternoon. Selling fatigue? Who knows? Whilst the concerns remain around the Euro and their latest move, the shock and awe move from two weekends back, the questions around the high indebtedness levels have not been solved. If anything, the future is less clear. Meanwhile on the local front the Transnet strike drags on, some reasons to believe we might see a conclusion soon. After all the world cup kicks off in just over three weeks time.

Maude street shakes, moves and grooves. We were led higher by financials and banks, gold and coal stocks were in the minus column. Resources underperformed the broader Jozi all share index, which closed up shop nearly a percent at 27573, up 267 points. Other notable contributions amongst the majors were the moves from Breweries (you know, SABMiller), up nearly three percent, Tiger Brands results received a poor showing, down one and three quarters of a percent.

Bart says digest these shorts. Germany bans naked short selling of government bonds, some credit default swaps and some financial institution stock. The Euro is at a four year low. The Greeks get the first round of their money. The Transnet strike continues. Harmony Gold with something completely different. Refinancing of the FirstRand empowerment deal. Jack Bogle and long term investing.

And now for something completely different. From Harmony Gold. I was kind of taken aback by this new approach, but clearly both the National Union of Mineworkers and Harmony think that this is a good idea: “In terms of the agreement, certain sections of the Virginia operations’ Merriespruit 1 shaft will continue to operate, provided: these sections do not make a loss (on a total cost basis, including any capital expenditure) for two consecutive months; and total costs remained under R250 000/kg. Last month, Harmony announced – after an extensive review – its intention to close three loss-making shafts at the Virginia operations – Merriespruit 1 and 3, and Harmony 2. The company has since engaged with trade unions under the auspices of the Commission for Conciliation, Mediation and Arbitration (CCMA), in a bid to mitigate the effect of the closures on jobs.”

What do you make of that? Paul’s immediate reaction was, what is in it for the mine workers. I rather callously said, well they get to keep their jobs, not so? But this again underscores the obvious about the gold mining industry in South Africa, too dark, too deep, too dangerous, too expensive. If you use the David Attenborough analogy from the “Life on Earth” series, the clock is well into the late afternoon on the gold mining company methinks. In other words the sun is setting, it could take a decade or two, but we are there.

A FirstRand release around their refinancing of their empowerment deal was worth a read yesterday. From the release “In 2005 FirstRand facilitated the acquisition of 6.5% of its issued share capital (363.8 million FirstRand ordinary shares) by FRET as part of its BEE Transaction. Pursuant to the unbundling of Discovery Holdings Limited (“Discovery”) by FirstRand in 2007, FRET became the holder of 20.4 million Discovery ordinary shares, in addition to the 363.8 million FirstRand ordinary shares it already held.” OK, so we have some of the background, this is how the Refi is actually going to work. I know, an American term, I could not help myself:

“The Refinancing comprises the repayment of approximately R3,371 million of outstanding funding, the distribution of R200 million to BEE beneficiaries and the funding of transaction costs through:
- the raising of new senior funding of R1,537 million;
- the raising of new mezzanine funding of R444m ; and
- the realisation of R1,668m in proceeds from the disposal of 77,846,154 FirstRand shares and 4,415,294 Discovery shares.”

So FirstRand are raising some serious funding and selling some assets. The truth is, markets have been tough, no getting around that.

The Transnet strike drags on, comfortably into week two. The unions make some good points, one, the average worker is paid 121 times less than acting chief Chris Wells. If Wells is an acting chief, does the taxpayer company really need to pay him in excess of six million Rands a year? This does not seem entirely right but gives a good ball park figure: Salary Snapshot for Chief Executive Officer (CEO) Jobs. And remember no work, no pay is where the Transnet striking workers are at. Short term there are companies that have announced an impact, Kumba Iron Ore last week, ArcelorMittal again behind the curve:

“ArcelorMittal informs shareholders of the following: – Due to the ongoing Transnet industrial action, very limited raw material deliveries including iron ore and coal are being received at ArcelorMittal’s facilities and the Company has informed its customers that it has invoked Force Majeure provisions provided for in the general conditions of sale; and – On 15 May 2010, a raw material bunker failed at ArcelorMittal’s Saldanha Works. The Company is currently considering measures to minimize the impact of this incident. The full impact of the above events is still being assessed.”

I was struck by the simplicity of a release from the Greek government that I found via the FT yesterday. An official release saying that the funds had arrived. And these are the countries on the hook, plus the first part of the release: “Today the Greek Government received the amount of 14.5 billion euro from the European Commission through the European Central Bank. The first disbursement comprised of bilateral loans from 10 lending Eurozone countries participating in the first tranche with the following amounts:
Germany – 4,427,870,552.22
France – 3,325,164,236.57
Italy – 2,921,922,720.93
Spain – 1,941,619,822.56
The Netherlands – 932,510,618.54
Austria – 454,003,276.67
Portugal – 409,274,004.99
Luxembourg – 40,847,902.58
Cyprus – 32,009,604.25
Malta – 14,777,260.69
TOTAL – 14,500,000,000.00″

Italy, Spain and Portugal? Their problems are well documented. But still, they need to fulfil their obligations to the Union. And perhaps the biggest market moving news yesterday was the news from Germany. And the reason for the sell off last night in New York, plus the sell-off in Asia this morning is because the move is seen as somewhat desperate from the German government and Angela Merkel. Because it is as much about politics as it is about economics. Jack Bogle made that good point that you will see later on in the message, “separating the Fed from the Treasury” is effectively what the Euro zone have done. Giving countries fiscal independence from each other, but having one central monetary authority. Good point, needs a rethink.

OK, back to “that thing” that Angela Merkel did. Some of the major business news folk are covering it well, here is a good start: Germany Bans Naked Short-Selling, Swaps Speculation. The bigger picture however in financial regulation. And the unintended consequences thereof. I do agree that not being short and not having a correlated long does amount to some type of ethical breach, but price discovery is also important. I would rather the price get somewhere in a hurry rather than slowly. But I can understand where we are going here.

There is an abundance of good quality reading material around, if you must only read a few pieces then make sure that it is the following pieces. Mohamed El-Erian, oh he of new normal and old normal moustache fame, the CEO and co chief investment officer at the world’s biggest bond fund writes about the Difficult Choices Still Facing Europe. Wolves vs. PIIGS is a piece written by the bears at the Daily Capitalist. Good piece and the point about the wolves eventually getting there is price discovery, right? I guess. Lastly via Felix Salmon at Reuters is a piece titled The orthodox loss of faith which leads nicely into the next paragraph. You know, the good old days.

I heard Jack (or John) Bogle on the box yesterday. He is the founder of the Vanguard Group, which he ran for quite some time. A lot of what he had to say during the Bloomberg interview with anchor Betty Liu was worth repeating. He seemed like he was at a CFA conference in Boston, but what he said was the same page that I find myself on. When asked about the Euro he said, I don’t know, where is it today, 1.20? To which Betty jumped in and said 1.24. He carried on and said hey, when the Euro first floated it was at 1.17 to the US Dollar, what is the fuss about? Check out the interview, too much faith in technology and not enough faith in human judgement, here it is, six and a half minutes well spent: Bogle Says Financial Rules Bill Should Go Farther. What you think?

New York, New York. Angela Merkel and what some market participants view as desperation tactics saw the Dollar again gain momentum through the session. And an early rally turned into a selling Oktober fest, thanks to the new rules that Merkel plans to implement. The Euro touched a fresh new recent four year low. Fresh ones. That led to selling of stocks again, sell first and then ask questions later. Oil prices which had recovered earlier in the session were met with selling again after having posted a sharp recovery. Pre the session start April PPI numbers came in lower than expected. A minus. Which will get all the deflationary theory pigeons bobbing their heads with much vigour. Housing starts were slightly better at the beginning of the session.

Wall Street wanders. The Dow Jones Industrial average closed at the bottom end of the days range, down 114 points to 10510. The nerds of NASDAQ lost 36 to 2317, whilst the broader market S&P 500 ended the session deep in the red at 1120, down 16.

Commodities, currencies, Drs. Copper and bushveld. Dr. Copper is lower at 298 US cents per pound. The gold price is lower at 1206 Dollars per fine ounce. The bush doctor at 1649 Dollars per fine ounce. The oil price weaker at 71.79 Dollars per barrel. Comfortably below the 70 mark last night. The Rand is weaker at 10.95 to the Pound Sterling, 9.34 to the Euro and 7.65 to the US Dollar.

Up periscope. Easy. Sell to begin with. US CPI later.

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

Jozi, Jozi. We managed to close near the flat line after having wallowed for the whole morning down by the red water hole. Slowly but surely sentiment improved across the globe and matters improved across equity markets from Istanbul to New York. Results came gushing in even as the oil gushing out in the gulf had been partially dealt with. The oil price fell, the longs gushing out. A whole lot of gushing going on. The UK Chancellor of the Exchequer, which is a fancy posh British way of describing what everyone else calls the minister of finance, delivered his first major public speech. Or in the case of the US, the the Treasury Secretary. Fellows name (Chancellor of the Exchequer) is George Osborne. Changed his name from Gideon a long time ago. Why? He is quoted as saying: “Life was easier as a George; it was a straightforward name.” Something for me to think about. Just for the record two of the last three people to hold the office of the Chancellor of the Exchequer have become prime ministers.

Maude street shakes, moves and grooves. Session end the Jozi all share had given up a mere 35 points to close up shop at 27306. At one stage we were comfortably around 300 points lower on the session. Resource recovered and ended the day slightly better. There were results from the fellows over at Netcare, the stock ended the day 1.36 percent better. Revenue lower by five percent. Currency impact from their UK business felt quite hard as you can imagine, the average exchange rate was 18 and a half percent stronger in this six months compared to the same six months last year.

Prospects for the health provider Barring any unforeseen circumstances, and particularly given the general financial soundness of medical aid funds and the strong underlying demand for private healthcare, the outlook for SA remains stable and positive. The prospects of healthcare reform facilitating greater healthcare access and care for all South Africans is seen as an imperative and viewed positively in terms of the Group’s wide range of healthcare services on offer. I am still not sure that we would want to be involved here, uncertainties about the regulatory outlook and the UK debt burden. But you know, they could ironically be the benefactor of a flip approach from the government down the line when the State assets are put up for sale. Maybe, but that is definitely not the style right now.

Impala Platinum with a production report yesterday. For their third quarter to March, remember that they are a March year end. On a nine months basis platinum production exactly the same for the nine months measure versus last year. Palladium production higher as was the case with Rhodium, although marginal. What was pleasing to see was that the grades were marginally better. Zimplats, that one was pleasing to see, although there are many unanswered questions about that spot. The land of my birth. Price received were as you can imagine much higher than the previous collective nine months. Over 100 Dollars an ounce on platinum and nearly 60 Dollars an ounce on palladium sold. Which is much higher as a percentage. Conversely as you can imagine, the exchange rate received is much stronger. As you might imagine.

Staying with the platinum producers, the biggest platinum producer, Anglo Platinum had a trading statement yesterday. Here goes, it is from the release yesterday Anglo Platinum hereby advises shareholders that both basic earnings per share and headline earnings per share for the half year ended 30 June 2010 are expected to increase by at least 20% from the basic earnings per share of 1,144 cents and headline earnings per share of 169 cents for the half-year ended 30 June 2009. This is despite the increase in number of shares in issue following the rights offer. Excellent. Seems like a good outcome and just showing you how quickly the environment can turn for the platinum producers. No wonder these stocks are so wild in their price action.

OK, and then another major, Tiger Brands. Formally Tiger Oats. Well known brands such as Jungle Oats, Tastic Rice, Ace Maize meal and Albany bread. The producers of these staples and is where the revenue is all at for this well established South African business. And not Black Cat peanut butter, Pasta Fatti’s & Moni’s Pasta and the favourite Koo brands. Domestic revenues for the half year to March was 8.356 billion Rands, of which Grains and Milling & Baking make up 7 billion of that. There is a telling line in the prospects column which tells me that the local consumer is still under pressure: The Company continues to experience difficult trading conditions as consumer spending remains under pressure. Another rate cut?

And then the first mobile company in South Africa, Vodacom, reported results for the full year to March. Most notable from the results was the bigger contribution from the data division, offsetting lower voice offerings. In this mature market the data portion contributed nearly 32 percent more than last year to 4.5 billion Rands. Out of 58 billion Rands in total. Plus overall customers accessing data services has risen by 42 percent to 1.1 million people. 510 cents worth of earnings and 175 cents worth of dividends on a 58 Rands share price, seems about fair to me. The biggest problem for me remains that geographically this business is bound to South Africa. The EBIDTA contribution from South Africa is even higher this financial year at 93.9 percent of the group. Gateway. On interconnect rates: The Group will actively participate in the ICASA public consultation process on the draft regulations.

What do you make of what is happening in Thailand right now? The Red shirts. Yellow shirts. The government forces firing live rounds at protestors. Over sixty people dead since the violence started in the Thai capital, Bangkok. Which is one of my most favourite places, that Bangkok. We just thumped their football team four nil over the weekend. The Bangkok Post is a good source of information about what is happening right now. The unintended consequences of the deadly stand-off (from the same publication) is that Tourist arrivals (have) drop(ped) sharply. Which is an important part of their economy. See that, normally 30 thousand people arrive each day at the main airport. Wow.

Now all this has to do with the ousting by military coup of the former Prime Minister Thaksin Shinawatra. Can that be right, as the countries 23rd Prime Minister, he was the first ever to serve a full term. I also thought that needed some checking, so here goes, this List of Prime Ministers of Thailand confirms that. Check to the right and you will see Term Ends – reason. So, in reality, if we draw this against a historical context then we should not be at all surprised that this has had little impact on the Thai currency or their markets.

The kind of impact that you would expect. Check out this Thai Baht (THB) to 1 US Dollar (USD) for the last six months, scroll right down to the bottom and see that the currency has basically not been impacted at all. Here is a graphical representation from the same source. See, hardly anything over the last six months, for what has happened politically.

The Thai stock exchange is only 35 years old, the Nigerian market is older to put it into context. Check out the six month performance for the Thai top fifty index, the SET. See, again, hardly a sharp move down. Which leads me to believe that some political events impact on some countries and in some countries there is little impact. Even if the Red shirts are prepared to die for democracy in Thailand, foreigners that invest in that zone are used to these events. Imagine if the same thing happened here what the consequences would be and how we would bleat.

New York, New York. A worse than expected manufacturing read in the form of the sort of useful NY Empire State Manufacturing Index, pre the session kind of set the tone. A negative session was rescued by a NAHB Housing Market Index, which was comfortably above expectations. What the …? The NAHB Housing Market Index? What is that? Well, here goes, another index to be watching which has some relevance, the NAHB/Wells Fargo Housing Market Index (HMI).

As the website says: NAHB provides the current Housing Market Index (HMI) data, as well as historical data. Learn more about what makes up the HMI and how it is tabulated. Search the resources compiled below by title, detail, or date. Take your time and browse, read, or download related information or purchase the item that interests you. And from that point onwards markets dragged themselves better, the Euro managed to get some back. Technically it is oversold. Whatever that means. Because technical watchers often don’t look at the fundamentals.

Wall Street wanders. Session end the major indices managed to eke out some small gains, the Dow Jones Industrial Average added 5.6 points to 10625, the nerds of NASDAQ managed to close better by 7 and a bit to 2354 whilst the broader market S&P 500 added a point and a quarter to 1136.

Commodities, currencies, Drs. Copper and bushveld. The gold price is lower as some uneasiness comes out of the “system” for want of a better word. Last at 1216 Dollars per fine ounce. The platinum price is also better at 1681 Dollars per fine ounce. Dr. Copper last at 301 US cents per pound. The oil price last at 71.40 Dollars per barrel, it dropped below 70 bucks a barrel last night, around 69.75 Dollars per barrel midday, lower with the whole market. The Rand is weaker at 7.50 to the US Dollar. 10.87 to the Pound Sterling and 9.31 to the Euro.

Up periscope. We should start better here. Loads of inflation reads from the Euro zone, to Britain to the US.

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

Jozi, Jozi. Whoa, back away from the screens. Things starting hotting up towards the close of the session in Jozi, the sellers stepped up the pace. Just push the big red button in the corner of the room please Mr. (Ms) dealer. Resources hit hard again. And the culprit being the same usual suspects, anxieties about the future of the Euro zone and their ability to keep it together. Talking of which I saw a message from the dudes at the Business Insider and they have it on good authority that Nicolas Sarkozy banged the table and basically said guys, if we don’t give Greece this aid, then France is out of the Euro zone. Ah yes, everyone misses French Francs, perhaps the little Frenchman president longs for the old notes. Hey, in 1995 the French Franc was a bigger part of global foreign reserves than the Pound Sterling. Interestingly the Dollar was a bigger reserve last year than in 1995.

Maude street shakes, moves and grooves. So anxiety = sell and sell hard was what happened Friday, the Jozi all share index closed at 27342, down 699 points. Phew and most of the recent selling has been against the backdrop of decent enough economic data and good company earnings, which on balance have beaten expectations two out of three times, even across in the Euro zone. The Transnet strike that entered day five Friday saw Kumba Iron Ore say that they had suspended their exports. Plus don’t forget the ongoing spat with the fellows at Arcelor Mittal. Someone is going to come out with a bloodied nose, because this looks like a good old fashioned mining town slug out.

Talking of slugging it out, I was not surprised but marginally irritated that the Greek Prime Minister was lining up the big investment banks for having helped Greece to hide their high debt levels. After all this is what the government of the day wanted. Way back when they entered the Euro Zone. Dear Curious George Papandreou, this might be very popular, from Washington to London, Paris to Berlin, but the true problem lies closer to home.

To be fair to curious George, that is happening too, doctors that have been cheating on their taxes are starting to be named and shamed. The FT reports that the Greek government has named 60 odd of the worst offenders. Ministry names doctors accused of tax evasion. Yeah good, that should up the ante. Perhaps I am being unfair, curious George inherited these problems, he only assumed to top office in October last year. He is a well equipped and educated man who has been in government for a quarter of a century. But what was he doing as a member of the opposition for five years? That counts, does it not?

OK, enough George bashing, he is very well educated and has loads of experience. He just finds himself in sticky Baklava up to his neck. Yech. Another man feeling sticky and dirty is Jean-Claude Trichet. Over the weekend he was working hard to keep “it” together. But Trichet remains confident in ECB plan according to the FT. You see, inflation is the next problem, remember the mandate chaps, because as everyone was falling all over each other the ECB wanted to maintain price stability. Remember, a few short weeks back. We wait, in the meantime the Euro is getting trashed and folks are starting to talk about Euro Dollar parity.

If you are still lost, or you have been in the Amazon jungle out of range for the last six weeks, this is quite a good summary of not only the last ten days, but the structural problems that face the Euro zone. Europe Throws A Hail Mary Pass. Nice.

We saw Marius Kloppers, the BHP Billiton chief on CNBC squawk box on Friday. Joe Kernan was more interested in his beer tastes, he said no Fosters, yes to VB Bitter, no to the Outback Steakhouse, Kloppers is a vegetarian. And yes, he is coming to the World Cup, he will watch some games in Cape Town and at Soccer City. A city all by itself, I can’t wait. Check out the video: Exclusive: BHP Billiton CEO on Mining Tax Hike. Phew, tough stuff from Kloppers (he does sound strangely like Nathaniel), but you know, they need to come out fighting. He talks about a rule change.

And this WSJ article echoes what he was really there to discuss, the proposed giant hike of Aussie mining tax, not a done deal. Check out the article, because the threatening part is clear from themselves and other majors, go ahead in the current format and we WILL look elsewhere. This refers specifically to the JV between BHP Billiton and Rio Tinto: BHP Could Re-Evaluate Venture. And they lost the cricket last night. To three South Africans and an Irish fellow England.

What do you make of Barrack Obama wanting to get really tough on the oil drilling companies? What he says is right the companies are all pointing fingers at each other like naughty school boys in the headmasters office. They used to be friends. BP however have finally succeeded after three and a half weeks trying last night. Awesome, well done dudes, and I really mean it, three and a half weeks of oil gushing into some pretty sensitive ecological areas was nothing short of the major ecological disaster of the last few decades. Not as deadly for humans, but the same sort of feeling as Chernobyl. For me at least. Check it out BP Succeeds in Inserting a Tube to Funnel Oil From Leaking Well.

But let us get back to the point I am trying to make, how is it possible to inspect 1500 metres under the sea at single figure temperatures Celsius? We obviously have pretty stringent safety procedures onshore, but the same cannot be guaranteed at that sort of depth. Impossible. Too expensive for anyone up and down the chain. What is the answer? Alternatives. The USA still uses the most oil globally according to this old (2008) measure: List of countries by oil consumption.

Did you see the graph on the right hand side: Daily oil consumption by region from 1980 to 2006. The North Americans are addicted to oil: Consumption (per capita) (most recent) by country. That needs to change. And high prices ironically are the only thing that will make it change.

Rotten luck. Visa and MasterCard were slapped with a new set of rules, out of the blue really. Limits for both the companies which also included limits on their debit card fees. From the brave senators of course, perhaps they all carry cheque books and are scared of technology. Interestingly Visa and MasterCard hit back and said that this would do little for the consumer and would actually benefit the retailers. No really, back to cheques. Check it out: Visa, MasterCard Fall on Vote Curbing Debit-Card Fees. Visa at least is a more global business, MasterCard is less so.

More rotten luck for the airlines. More ash clouds belch from Iceland only weeks before the greatest sporting spectacle on the planet. Bigger than the Olympics? Perhaps, have not seen the visitors and monetary benefits to everyone, but I suspect Football is greater. Will check it out. Back to that bad ash cloud, Scottish and Northern British airports were closed. This is starting to worry me, for the world cup that is.

New York, New York. Yech. Pretty much broad based and across all the major sectors there was very little in the form of any green to be seen Friday. A slight bounce at the end of the session but by then the battle was well lost, for the bulls at least. Something that would spill into Saturday at the hands of the Stormers, for the Bulls at least. Second team or not, methinks it was a bad idea to lose momentum. But hey, I do this and not that, what do I know.

Wall Street wanders. The end of a very grubby session again on Wall Street, the Dow Jones closed at 10620, down 162 points. The nerds of NASDAQ managed to be the worst of the bunch, down nearly two percent at the end, 47 and a half points worse for wear at 2346. The broader market S&P 500 closed up shop at 1135 down 21 and three quarters of a point.

Commodities, currencies, Drs. Copper and bushveld. Dr. Copper has fallen back to 312 US cents per pound. The gold price continues to find excellent support from those chicken of the Euro, although the shine has gone a little, last at 1231. It nearly touched 1250. I tell you the bugs were wild with excitement. The platinum price last crossed the wires at 1722 Dollars per fine ounce. The oil price continues to get crushed, last at 72.01 Dollars a barrel, NYMEX. For delivery at a place called Cushing, Oklahoma. The oil pipeline capital of the world, even if there are less than 9000 people that live there. The Rand is weaker at 7.53 to the US Dollar, 9.31 to the Euro and 10.95 to the Pound Sterling.

Up periscope. A poor day to start no doubt. Happy birthday to my eldest, a whole five she is today. Awesome.

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

Jozi, Jozi. The 2nd team bulls fought hard during the day to get back to even by mid afternoon, but the bears eventually notched that one on their scorecard. Many unanswered questions about the health of the Euro zone economies and even though there has been this short reprieve, truth be told folks still worry about the ability to repay any extra debt incurred. And again these moves by the Euro zone have prompted even the most hardened to question the future of one of the newest currencies around. Get to that later. On the local front interest rates were left unchanged, I lost to Byron, I was against consensus on this one.

Maude street shakes, moves and grooves. Not much in the green column leading to the overall Jozi index being 136 points lower to close at 28041. A strong push down on construction, which is down four percent for the year, relative to a market that is up 1.36 percent. The biggest outperformers this year have been the retail stocks, the food sellers and banks. Retail up 21 percent this year. Banks up 11 and a half percent, whilst the food sellers are up over 16 percent. Resources lagging the broader market, down three and a half percent.

Gill Marcus and the gang deciding to keep rates unchanged. I watched and listened to the question session afterwards with an eye and one ear. The full statement I read through, this line could have suggested that there was scope to cut …. According to the Reuters CPI survey, respondents expect inflation to average 5,3 per cent in 2010, and 5,8 per cent and 6,0 per cent in the following two years. But ultimately new risks in the form of Euro zone periphery countries offset the positive inflation outlook …. The main risks to the inflation outlook emanate from administered price developments and from the risks emanating from the global economy.

And as such ….the MPC deems it appropriate to maintain the current stance of monetary policy. Accordingly the repurchase rate remains unchanged at 6,5 per cent per annum. I must admit there was a part of me that believed that there might have been some political muscle exerted on the MPC to cut rates. The official line from COSATU was: The Congress of South African Trade Unions deplores the Reserve Bank Monetary Policy Committee’s decision not to cut the repo rate but keep it at its current high level. The MPC has yet again today missed an opportunity to give a boost to economic growth and strike a blow for job creation.

I think that the high unemployment rate in South Africa and dissatisfaction around it, is bubbling under the surface again. Phew. Some dude phoned into the wireless and was incensed about the demands of unions. Just for the record he had 37 years worth of experience in the textile industry and had worked for Frame. He said that he thought the current demands from unions would cripple other businesses. Phew. Fighting talk and clearly resentment. His contention was that the retailers were also to blame, South African retailers that is. Any solutions, anyone? I noticed that a committee was set up to have a look at the Parastatals. But because it seemed mostly like old and current parastatal and government employees, politically connected individuals, I cant see the outcome being anything significant.

Nedbank and Standard Chartered. This rumour has apparently been rubbished by management in an internal memo. Plus more importantly, why would the parties be talking without informing the market, the groups are not under cautionary. Is the “leak” or “source” feeding this to someone who will regurgitate the rumour? How many times have we heard this? Like I said to a client yesterday, if folks want to buy to these levels and believe that, then they are equally at fault.

Nassim Taleb. Clearly a very clever guy. But man, I suspect that like some of the other self important bears out there, he has a fairly high opinion of himself. He tweeted after his Bloomberg interview yesterday: Was on Bloomberg TV –impressed: vastly more professional than competitors; better, thoughtful staff, even the make-up was superior. Perhaps that might be the only place you get a business TV interview again. At least in the short term.

Taleb sees a failed US auction. Again this is the inability to see that action can be taken. Ex Honeywell chairman Larry Bossidy was on the OTHER business network channel and he said that when the time came, the US could act decisively. Check out how many people Nassim Taleb follows on Twitter. One. Even Nouriel Roubini follows more people. Check this out, here is a real important guy, Paul Krugman, who quite simply says We’re Not Greece. Yip, exactly.

Staying with Taleb. The Daily Capitalist writes on his website yesterday: In this interview on Bloomberg TV He is referring to Taleb, he cuts no corners. He dislikes Geithner, Summers, anyone in the OMB, and Bernanke. He thinks the euro bailout is a disaster. He thinks the structural problems in the EU and the US haven’t changed since the crash. He thinks schools teach all the wrong stuff about economics and investing. He is worried about a failed treasury auction, here as well as abroad. He thinks the stock market is a trap, and long-term Treasurys should be avoided. He is worried about hyperinflation. You know what? He sounds exactly like me. Hmmm….

“Cool Breeze” Bob Pisani has written a piece about the new circuit breaker rules that the SEC has been working on. I trust that the exchanges have been involved in some way or another. I picked this piece Circuit Breaker Rules to Be Unveiled Next Week up via Clusterstock. You should subscribe to their RSS feeds. Because as “Cool Breeze” points out, it is complicated affair, complicated math. But why implement these rules when it is clear that the SEC are not even sure what caused this. Yip, the FT writes: Schapiro on the flash crash: no evidence of a fat finger. Go figure.

Paul Volker, you know, the rule guy, is questioning the future of the Euro. The fellows over at Zero Hedge have pointed their readers towards The Daily Capitalist. Check it out Greece: The One Solution They All Ignore. Growing voices of dissent towards the current solution and the future of the Euro.

New York, New York. A strong sell off at the end of the session pushed stocks much lower than where they had been for most of the session. Worries about new financial regulation and worries that the big banks might be all targeted by the authorities, on mortgage trades done in the past. As one person pointed out, who would you rather do business with, Morgan Stanley who lost 9 billion Dollars in mortgage related investments, or Goldman Sachs, who on the same activities made money? One is solvent, the other might not be. I saw that the ratings agencies are next inline for a bashing from the law makers.

Wall Street wanders. Session end the Dow had closed 113 points lower to 10782, the nerds of NASDAQ worse by 30 to 2394, whilst the broader measure S&P 500 lost 14 and a quarter to 1157.

Commodities, currencies, Drs. Copper and bushveld. The gold price tells you something. The bugs of gold see the price at 1235 Dollars per fine ounce. The platinum price last crossed the wires at 1730 Dollars per fine ounce. Dr. Copper at 321 US cents per pound. A barrel of oil, wow, down 15 percent the price in two weeks. 73.89 Dollars per barrel right now. The Rand is firmer to the Pound Sterling, 10.88, 7.46 to the US Dollar and 9.37 to the Euro.

Up periscope. Expect a lower start at the get go. Us retail sales could be key later in the day. Till then.

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