July 30, 2010 in Uncategorized
Jozi, Jozi. Markets were open, all day. See below who is to blame for Tuesday’s oops, and you ain’t gonna like it! A bit ropey to begin with, but we ended the day round about the top end of the trading day. Initial jobless claims in the US were still stubbornly high, the unemployment rate in Germany is still stuck at 7.6 percent, whilst mortgage approvals in the UK rose to 48 thousand for the month of July, less than anticipated. Local PPI blew out to 9.4 percent for the month of June. Grrr…..
Maude street shakes, moves and grooves. The Jozi (Joe-zee) all share index closed at 28550, up 182 points on the day, up a whopping 3.2 percent on the year now. That dreadful construction that we have been talking about has been on a tear, just a short few weeks ago was down 13 odd percent for the year, but now is only down 7 percent. To be fair, the whole market has moved in that direction. In charge yesterday were the general retailers, up over a percent and three quarters on the day. That PPI read hardly looked favourable to me, I must admit. Higher electricity prices starting to feed through.
Bart’s shorts. Anglo American results this morning, what does the world look like according to them? Strikes and pay, who should get what and are we entering into what I call the great area of entitlement? Pay me more and I won’t do any more, because you are not paying me enough. And then in China, what do higher wages actually mean for all and sundry? Across the globe that is, because studies suggest that the Chinese have not only been paid more, but they are more productive too.
Anglo American results this morning. The div is back, and no I am not talking about P Div. These results are for the half year to June 2010. And they are measured in Dollars, which made Byron mad. But I said to him, everything they sell is priced in Dollars, it makes sense to report in Dollars. Plus they are no longer a local company, or even a company with a primary listing in London, they are both operationally geographically spread and have shareholders from everywhere.
Highlights, revenue increased 35 percent to 15 billion Dollars, profits of 4.071 billion Dollars, that is a whopping increase of 114 percent on a very scratchy half to June 2009. Basic earnings per share is 171 US cents per share at their average for the half of 7.53 that equals 12.87 Rands worth of earnings for this year. It would be a hack to annualize that, but do it anyhow, 25.75 Rands earnings for the year, the stock then looks relatively cheap at 290 odd Rands a share.
Where do their profits come from, or which divisions should I say? The Copper and Iron Ore & Manganese divisions contribute 64 and a half percent of operating profits. Platinum is only 9.6 percent, by the same measure, but methinks is absolutely key. These numbers of course are back looking. The problem with having bought that South American iron ore asset is that it is going to suck cash, so whilst the dividend has been restored, 25 US cents per share, that is 183 ZA cents a share, an exchange rate of around 7.32 Rands to the USD, it is hardly a kings ransom, and in fact thanks must go to Kumba Iron Ore. Shot dudes!
Minas Rio. Check it out. “The 26.5 million tonne per annum phase one iron ore project in Brazil, we have made good progress on those areas of the project where the necessary approvals have been secured, in the context of what has become an increasingly rigorous and more complex environmental permitting process in Brazil in recent years.” Interesting in itself that the process in Brazil is becoming harder. That makes the existing assets in Brazil and the folks that are producing already, perhaps much more valuable.
And how far away is the asset from producing? “Once the remaining initial approvals are granted, we believe it will take 27 to 30 months to construct and commission the mine and plant and to deliver the first ore on ship.” And because the regulatory environment is becoming increasingly difficult, the costs are going to be more than anticipated. Come to think of it, when last did you hear from a mining company that their developing of an asset was completed before target date and cost less? Tell me.
And the outlook is measured in the short term but good in the long term, read the world according to Anglo: “The short term outlook for the world economy has become more uncertain in recent months, with certain less favourable leading economic indicators. However, in the medium to long term, we remain confident about prospects for Anglo American with the process of industrialisation and urbanisation in China, India, Brazil and other emerging countries continuing to drive demand for our key commodities.”
There you go, don’t blame the JSE for the fumble and fall Tuesday, but rather MTN, one of our favourites over here at Vestact. One of the stocks that are top of our list. Interesting that the JSE had little comment Tuesday evening and it took until Thursday for them to confirm that there were multiple issues across the MTN network that led to dealing only commencing at 15:20, after a 15 minute auction process. I read a Reuters article which points to four problems since September 2008, three of them being trading halts. I guess like airlines, you expect them to be on time. Imagine that, a hunk of flying metal, with the luggage of 200 odd people, plus having to check them and shoo them into their seats, must leave on time, otherwise you are irate. But if the Doc is half an hour late, that is OK. Just saying. Anyhow, looks bad for MTN.
The full release is not yet available on the JSE’s website, there is the last link to the July 12 outage in trade titled Upgrade regarding JSE interruption in trading today. Surely they mean update and upgrade? And I guess we might well see the publication on their website a little later.
What do you make of the current strike impacting all public services. What is essential and what is not essential? Is teaching an essential service with end of year exams just around the corner and not much teaching time left? The Public Servants Association or the PSA accounts for over 200 thousand folks in various government departments, so they are a sizeable force to be reckoned with.
I read with interest the “COSATU today” newsletter from yesterday, the one always titled “Our side of the story” and was struck with a few pieces, titled: “COSATU public service unions go on strike”. A few very valid points made:
“During these negotiations our members were reading on a daily basis of the government’s wasteful expenditure on cars, hotels, parties and advertising, World Cup tickets and this was sending a wrong message because we were told that there is no money. This amounted to hundreds of millions of rands.” Yip, dead right, the wasteful expenditure has outraged us all. What has irritated me however is that there is a reluctance of public officials to say, yeah, this is wrong, this is excessive. There is even less accountability.
The letter continues: “During this year’s round of negotiations other public sector employees settled as follows:
Local Government 13%
South African Revenue Services 8%”
And just a refresher folks, the employer (government funded by the tax payer) is offering a 6.5 % wage increase and a R620 housing subsidy. The collective unions have revised downwards to demanding an 8.6 percent wage increase and a R1000 housing subsidy. Would someone please explain the housing subsidy to me please, dumb question I know. Plus government want to implement from 1 July, unions want pay increases to be back dated to 1 April, no fools I promise. The passing shot is a little worrying: “It is therefore unacceptable that the Public Service Unions are offered a mere 6.5%.”
And by a little worrying I am saying that the norm now (let us call it the new normal wage settlement South Africa or NNWSSA) is comfortably above where CPI is right now. Perhaps there is some serious lag impact here. But Zwelinzima Vavi has a point. He was interviewed on CNBC Africa last night, and he spoke about executive remuneration in South Africa and the big disparities between the workers and the chiefs. He said something along these lines: The average chief of a listed company, of the top twenty listed South African companies earn around 1750 times more than the workers. And earns in three months what the president does for the year.
Is it too much? What are the skills required and pressures of being in the top job. Nobody ever tells me how long and hard and how pressed you are at a personal level. Any chiefs out there, email me your normal week.
And yesterday of course we also chatted about the costs of labour around the world. Well, not really around the world, but here, in the USA and in China, the manufacturing hub of the world. Check out this Economist article from yesterday The rising power of the Chinese worker.
I have extracted a numbers of lines (I know you are busy) that show you that the global economic landscape is changing, and fast, on monthly wages: “That is a mere $197, little more than one-twentieth of the average monthly wage in America. But it is 17% more than the year before.” And how that ironically might help the Americans of tomorrow, because if all that free cash was used to consume, as the article points out: “A 20% rise in Chinese consumption might well lead to an extra $25 billion of American exports. That could create over 200,000 American jobs.”
Perhaps the most telling is that not only have the Chinese been paid more, but they are more productive: “And Chinese wages were anyway only half the story. The other half was Chinese productivity. Chinese labour costs tripled in the decade after 1995, but output per worker quintupled.” What! Basically even as the giant economic miracle has happened, there has been no resting on any laurels, if anything the work force is trying harder. Again, how do you compete against badly paid workers by global standards who are willing to work harder and be more productive.
New York, New York. An insipid session for the bulls and bears alike, stock off a little, not a great deal of action. Is this as a result of the summer time blues, or does that start sometime next month. You know, when all the rich folks participating in markets and making liquidity all head to their respective coasts for the last bit of summer. Check out a map of the world and you can quickly see that most folks live in the northern hemisphere. Sorry to us souls down here.
Kellogg’s were post toastied after a recall of something like 28 million boxes of cereal and flaky results. Colgate-Palmolive results disappointed. I said that this was a direct result of people not washing you see, because they need an iPhone rather than soap. Exxon Mobil beat the street, but traded lower.
Wall Street wanders. Session end the Dow closed 30 points lower to 10497, the nerds of NASDAQ down by nearly 13 to 2251, whilst the broader market S&P 500 was lower by 4.6 to 1101.
Commodities, currencies, Drs. Copper and bushveld. Dr. Copper at 324 US cents per pound, the gold price at 1169 Dollars per fine ounce, whilst the platinum price is last at 1552 Dollars per fine ounce. The oil price per barrel at 77.65 Dollars per barrel. The Rand is weaker as everything else sells off, 7.34 to the US Dollar, 11.48 to the Pound and 9.59 to the Euro.
Up periscope. US GDP is key for sentiment today, we have started lower here already.