Whoa! There was an enormous amount going on, both on and off the field as the sports folks would say. The biggest and most well received news of course was the news that Europe had been saved. Or has it? A whole lot of reaction to the solution, we will have a look at some different viewpoints. There were subscriber numbers released from the MTN Group, which at first glance were iffy, but then you must take a harder look and then put it into perspective. And then to top off a good day and change it to great, there was a US GDP first take on the 3rd quarter this year that met expectations -> Real GDP Recovers to Above Its Pre-Recession Level, but more importantly grew at 2.5 percent. Nope, sorry "the Nouriel", doesn't even feel like a double dip like YOU SAID IT WOULD!! OK, I am angry that so many people think that big talker (who is exceptionally talented and super smart) "the Nouriel" somehow holds the key to predicting the future.

Jozi, Jozi. 26^o 12' 16" S, 28^o 2' 44" E. An explosion of bulls and perhaps a whole lot of bears being squeezed too saw markets rocket higher here in Jozi on Thursday. In fact the US markets have seen their major indices for the month of October (so far) up the most since 1974. Two trading sessions left for that record to be maintained, US futures are a little lower this morning. We managed to add 715 points to end at 32452 on the Jozi all share, that was a gain of 2 and a quarter percent. The strongest movers out of a wild running pack were the resource stocks, which rallied as a whole over three and three quarters of a percent. Platinum stocks added four and a quarter of a percent. Banks "only" added a little over four fifths of a percent. The currency did weigh on some of the dual listed stocks, and perhaps some of the stocks that folks might say are defensive. Like I said, I am not too sure what that means.

One of our longest held companies (from the start) reported subscriber numbers yesterday. We are of course taking about MTN. Here is the copy paste from the release:

"MTN Group recorded 158 590 000 subscribers at 30 September 2011. This is a 4.1% increase for the quarter from 152 272 000 subscribers recorded at 30 June 2011. During the quarter, MTN has successfully maintained market share in most of its markets. Although social unrest remained a factor in some countries, Syria, Yemen and Cote d'Ivoire increased net connections during the quarter."

This is when measured against the last quarter, 4.1 percent up, or 6.3 million subscribers. Do you even remember how many subscribers they had this time in 2010? 2009? 2008? No? OK, so I checked it out. Here goes, same time 2010 MTN recorded a 4 percent increase in their subscriber base from 129.2 million subscribers to 134.4 million, an increase of 5.2 million subscribers. In 2009, on nearly the same day, the subscriber base grew five percent on the prior quarter from 103.1 million to 108.5 million folks, 5.4 million folks. In 2008 at the same point (Halloween in fact) the subscriber base grew 9 percent from 74 million to 80.7 million, 6.7 million new subscribers in the quarter.

So it seems to me that they are adding more or less the same number of subscribers a quarter (for this quarter) for the last four years. Ex growth? Hmmm... no, I would not say so at all. They have more than doubled their subscriber base over the last four years. Quite unlikely that it can happen again, but they are not ex growth. Here is the full RELEASE OF SUBSCRIBER NUMBERS FOR THE QUARTER ENDED 30 September 2011. I have taken the top three subscriber bases for MTN, Nigeria, South Africa and Iran. I was pretty surprised with the South Africa increase and the jump to above 20 million subscribers.

The next "thing" to look for is the average revenue per user number or ARPU, if you like acronyms. In South Africa over the quarter, they were flat. I have always maintained that the rest of Africa ARPU's are low, but that would grow off a very low base. Data is the key to me for the future of almost all mobile businesses. And I think more so in an African context, where the fixed lines are far and few between. And I think I can say that they are flattening out and not declining any more. That is a pretty dangerous assumption, I know, great examples of falling ARPU's because of pricing wars exist in India and East Africa, and that is recent. I am pleased with these numbers. I am pleased that data still has a long way to go in an African and local context. We continue to accumulate this stock.

Byron's beats has a look at one of the major producers of platinum on the planet, Aquarius Platinum. Who have had problems lately. The beats that are back make me really happy.

More results coming at us, this time from the fourth largest platinum producer in the world, Aquarius platinum. That makes them sound big but in truth they are only an R11bn company. Sasha is right when he says that in truth there are really only two platinum miners out there to take note of. That is Impala and Anglo Plats. The capital expenditure to sink a mine with the hope that the grades are as good as the geologists expect are extremely high and for mid tier miners, it is very risky because you have to allocate such a large proportion of your capital to one project.

Unfortunately this seems to be the case with Aquarius. Year on year total production was down 14%. This was as a result of mining contractor underperformance, failure to achieve budgets and unit cost targets, failure to maintain safety standards and lastly industrial actions from labour. Wow that is a lot of excuses. Some of them within the control of management, some of them not. In terms of their financial performance, earnings were up 24% compared to the comparable quarter to $34.9m because of the weaker rand and strong PGM prices. However due to forex adjustments they actually made a $91.8m loss. I would assume that their reserves were held in South Africa before the Rand weekend so much.

After scouring through the results and the production report the biggest stand out for me was the success of their joint venture with Impala in Zimbabwe at the Mimosa mine. This mine was the only one out of their 7 mines which actually met targets. It now constitutes 22% of platinum mined by the company. It is also had the lowest costs out of all the other mines. Is it coincidence that this successful mine is the only one outside of SA? I think not.

As a devout patriot it kills me to keep bringing this up but South Africa is just not a very friendly place to mine at the moment. Pravin Gordhan admitted so in his budget speech the other day. After he mentioned this I asked Paul what exactly we needed to do to make us a better destination to mine. We already know that increasing electricity tariffs are uncontrollable. Without those we will have no electricity at all as Eskom struggles to supply historically cheap electricity. The crux of his answer came down to less intervention. Just let the miners do their thing. Less strict labour laws, weaken the unions, more clarification on mineral rights and very importantly transport. Either privatise rail or get Transnet into gear. I prefer the former.

I understand that mines are profit driven organisations that need regulation otherwise they will exploit the environment and the people in the vicinity. But you have to find a balance. Look at Australia, the only developed nation not to touch a recession this decade and that is because of their mining sector.

Has Europe really been saved? Well, the jury is still out. Some say yes, this is awesome and others are completely sceptical. So the magic that the Europeans managed to sprinkle across the markets is either seen as very good, or there is not enough detail seen from some quarters. I really like the FT Blog view from yesterday -> So. Many. Bailout questions. Phew. So many questions for sure. DO NOT WORRY IF YOU ARE CONFUSED!!! You are not alone, and in fact many of the smart folks sticking out notes are having conflicting views. Which is sometimes refreshing to see!!

There is of course news around that the Chinese central investment vehicle, who is looking to diversify their bond holdings, could be a buyer of European bonds through the EFSF. Just have a look at this picture to see what could be done with the EFSF. It came on the Twitter thingie -> EFSF leverage via Credit Enhancing bond insurance. But here is the picture from that link, thanks so much RBC Capital markets for doing that flow chart for everyone.

Everyone seems to be talking about option two. Perhaps the EU put out some sort of statement and then waited to see what the market thinks and then take that advice. I am of course kidding about that last statement. We are of course expecting some sort of detail in the next month. But interesting, don't you think? I will tell you what The Economist thinks, they are not convinced -> Europe's rescue plan. Poor politicians, they are not there to solve these crises, they surround themselves with people to solve these issues. Wishing somehow for a quieter period in history. I can't think of one though!

This is not designed to be a personal attack on "the Nouriel". OK, perhaps it is. I have heard from people who have attended his talks that he has a real impact and talks with an enormous amount of conviction about events. But it turns out that many of his predictions have been wrong. This is not just me having a go at him, check this piece out -> Who Predicted the Financial Crisis. If you cannot click on the link I have (selectively) taken a table snapshot of his equity market predictions:

So the man who predicted the financial crisis (give it to him, even thought the article does not) has failed to get too much right thereafter. My question is a more pointed one though. Surely the people who monetized the financial crisis (after all we are in the business of money) are the predictors. And as such I always fall back to that Michael Lewis book, "The Big Short", and the different strategies that made money out of the disaster. Guys like John Paulson, who has had a very bad time this year, and that has been very well documented. That is unfair, because he "monetized" the crisis by shorting the subprime market, he made many billions of Dollars. Steve Eisman, Michael Burry, these lesser known guys made serious money for themselves and their clients.

Nouriel is trying to sell his loss making business -> Nouriel Roubini's Firm Is Losing Millions And Now He's Trying To Sell It. Would you buy it if you had the money? To own his speaking prowess over the next few years? What happens if things get a whole lot better and he sounds like a stuck record again?

My next and related point comes from two pieces and they were fuelled by what Paul said in that video from yesterday -> Euro summit conclusion. Paul basically said that if you had been sitting out, then you wouldn't have caught this recent rally. And what were you then doing managing money?

So that is the background to introduce you to this Abnormal Returns piece -> Doing yourself a favor by doing less. Now, this Barry (Ritholtz) piece has a little shorter time frame than what we usually suggest, but you get the point. Flipping, flopping, tracking, jobbing in and out has a huge amount of stress when trading, anxiety about being in and holding is also a big factor. But often we refer back to this visual:

Yes, keep calm and carry on. This year many a trader type has had a bad time, this sort of reporting is definitely not helping -> Can a monkey pick a hedge fund? I am pretty darn sure that all the people managing that money are smarter than monkeys, they probably just have extrapolation disease. Or prone to quarteritis, too much short term guessing. The richest investor is also the most patient, that counts for a lot.

And then lastly, now that everyone has been rubbished, let us see what you guys think about us. Read this one and tell us if we are no different from the Nouriel, I would be curious to know what you think: Portfolio manager performance art.

Commodities and currencies corner. Dr. Copper is last at 364 US cents per pound, the gold price is 1739 Dollars per fine ounce. Both a touch lower. The platinum price is up a touch, 1643 Dollars per fine ounce. The oil price, the only really useful commodity that we consume daily (more on that next week), is last at 92.71 Dollars per barrel. The Rand is steady after having a ripper yesterday, 7.72 to the US Dollar, 12.44 to the Pound Sterling and 10.94 to the Euro. We have started better again here today. I see the headlines already next week, "Market still not seeing clarity on Euro plan" or even better: "Profit taking sees market lower".

Sasha Naryshkine and Byron Lotter
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Today we are going to focus on a few things here, Italy has suddenly captured the attention, now that Greece fatigue has worn us all out. Perhaps Jean-Claude Trichet had a point about the bond vigilantes. We ask the questions about Italian finances, is this really new? we will explore the results released from PPC, which seems at the top end of not the best looking range. And yesterday I was sent the Mooi River Index, we have a look at that!! Real life data, awesome, my favourite. And then please, I know this sounds awful and I feel a little dirty about that, but please Vote for our blog in the SA blog awards. OK, now I feel alright.

Jozi, Jozi. 26^o 12' 16" S, 28^o 2' 44" E. We rallied hard yesterday all the way through to the close, I tell you it must be so hard to find a reason to explain all of these moves if you are an out and out markets reporter. Something so ghastly happened yesterday that I can't share it. No, it wasn't that Justin guy who is supposedly having a baby, baby, baby or the fact that Greece agreed to marry Kim Kardashian for money (only need to be married until the end of January), but rather the clocks were turned back in the US, a week after they were turned back in Europe. This is so completely awful, because it means that we get only half an hour of US trade in the spot market. The biggest downside of summer for people in our industry. Also, more downside for people in our industry is the fact that we are unfortunately going to see Wall Street bonuses down between 30 to 50 percent this year. No wonder everyone is grumpy there and is predicting bad things, because they are about to happen to their bonus pool.

Good things happened across our markets yesterday, the Jozi all share added 597 points to end at 32514 points, that was a gain of 1.87 percent on the day. Banks added a whopping three percent plus, I said to Byron, is that the whisper of a rate cut, he said perhaps. Remember that the MPC meet and decide later this week. Methinks that Santa might be early this year. Resource stocks also rocked, adding over two and a half points. And to think that at the beginning of the day that we were down for the year and day. For the year, and into the second week of November markets are barely in the green as of this morning at the start. And that start is devoid of any European action, because they only join us at ten am now. There is a case to be made for opening and closing at the same time as them.

Drama!!! More of it. And you will not be surprised to know that it came from another Mediterranean country and once centre of the world. Italy and Rome. I must be honest, when I was a kid I was fascinated with the Romans and the progress that they managed to make, and it always amazed me that there was a period of over 1000 years of seemingly very little progress. Well, that I could see, I mean the Romans had running water, sanitation and could harness the power of running water for mills. They had warm baths. There are still usable roads that they constructed. Dams, bridges, they were said to have invented the steam engine. And a rudder. In fact the list goes on. Oh, I forgot to mention sausage.

BUT, notwithstanding all of that amazing technology invented an age ago, their (Italian) bond yields are rising to Euro record highs. All the attention is turned now to the Italians. The spread between the German bunds and the Italian bonds widened to nearly 500 basis points, the borrowing costs for Italy as at this morning 6.67 percent. Or the yield on their 10 year government bond. But listen in here closely, there were rumours that Silvio Berlusconi had resigned and that sent equity markets rallying, and the bond yield of Italian debt lower. But then the man who loves himself more than the under thirty year old woman in Italy said on his Facebook page (yes, you read right) that these rumours were unfounded. And that about sums the man up, communicating through Facebook as head of one of the top economies in the world, what is that all about?

OK, the ego aside, what is going on Italy? Why are they suddenly front and centre of everyones attention? Has something changed overnight? No. Edward Harrison, one of my favourite bloggers on credit matters and bonds in his soon to be paid for premium content has the following to say: "Policy makers know that Italy owes German banks 116 Billion euros. They know that Italy is too big to fail and they will respond. But, policy makers are faced with a simple either or here. Small bond purchases won't do. We see that already because Italy’s yields are well above 6% for 2-year debt."

That and other interesting observations are available for free (for now) in his piece -> Italy! Italy! Italy! Perhaps he should have just gone back to the classic Italia. I think other than Bafana-Bafana, Italy is the only other international team that I have seen more than once. And their fans were pretty vocal. And excitable. But the points that Harrison makes are valid. He expects the ECB to cave and set a ceiling on the Italian bond yields. But he also expects the ECB to dither, as he puts it. I tell you, I smell the Euro bonds, I think that they are closer than ever before. Because if Rome Italy "falls" then the barbarians (bond vigilantes) will have crushed Europe already. And I guess the question about negative economic growth when measured against this time last year, that goes without saying. I am thinking that Mr. Market knows that already.

And if you wanted something swift, then the Italian parliament will vote today whether they want Berlusconi to continue today. Or more importantly, there is the Italian budget vote today, a chance to implement the austerity measures that have been put forward. If the budget does not pass, then Berlusconi could face a vote of no confidence as early as Thursday. This is what I understand.

OK, even if he is voted out, the problems that face Italy are huge. But let me tell you that he has no intention of going. I am told by someone on the box that he has survived over fifty of these votes before. Many reforms are needed. The situation in Italy is not actually unmanageable, they are expected to have a small primary surplus. It is about politics and egos. Should we care? YES!!! Here is a blog post that you must read. It is a couple of months old, but lets you know all you need to know about Italian public finances and more importantly that growth is at the root of all the issues that Europe has right now -> The Policymaker's Fear Of The Italian Penalty Shot. See that? Italy's debt to GDP has been over 100 percent for the last twenty years.

The only way that we are going to change the landscape is to move from an austerity debate to a growth debate. You know when that starts happening that we will be in the right place. Until then, I think that Edward Harrison is sort of right. And so is Bob McTeer in this article -> Where is Europe's Bazooka? Political survival over monetary union is a far more important pastime for a politician!

OK, it is time for some real data. The Mooi River Index! This is exciting. Why? Because it is a measure of trucks of more than five axles passing through the Mooi River toll plaza on the N3 between Jozi and Durban. So what? That is the biggest trade route in the country, so the higher the number of passes, the better the economy. Or so the theory goes. The missing part of my puzzle is the train data, because we have the ports data, which we will have by the end of the week I am hoping. This index was "invented" by the brains trust at the Greenfields farm which has a view of the highway in Mooi River. The principal fellow is a former shipping and transport legend (well, I think so) by the name of Adam Kethro, I think he lives on the other side of the highway! I think.

OK, so an economist at Adcorp, a fellow by the name of Loane Sharpe sent me this graph yesterday based on the data. Quite simply it is the annual percentage change. So, above zero is all good. You can see the fall off when globally we registered negative growth. And the subsequent pick up. So this should be a pretty reliable growth indicator. Here goes:

Next graph, thanks to Itumeleng who is spending a week here, he panel beated the data into shape and presented this graph from early 2004 to last month, October, the number of passes at the toll. Ever increasing, which indicates higher economic activity in South Africa. This is good news!

OK, so here is a bar graph that was sent from the source. As you can see October was the second best month that we have on record:

Good, we will wait for our other real time economic indicators, namely the ports data and the cement stats, which leads us nicely into Byron's beats, which today looks at results from one of our oldest listed companies. PPC. Founded 1892, listed in 1910. If you had owned PPC for the last 15 years (and including this divided, not paid yet), the company has paid you 21.35 ZAR in dividends. Nice. Here are Byron's thoughts.

Remember the PPC revised trading update last week? Well they came out with full year earnings for the year ended 30 September which painted the full picture and actually came in close to the top of the range. The trading statement said that earnings would drop between 21% and 24%. They ended falling by 22%. Not great but it looks like there may be a light at the end of this long dark tunnel. The share price is 1% better than the market, which is up half a percent.

Revenues for the year were pretty flat. R6.826bn compared to R6.807 for the previous comparable period. Cement sales were actually down 3% but prices received were up 4%. The biggest issue came with cost increases which were way above inflation and way above the price increases of cement. I guess that's what happens when you have increasing inputs and slow demand. As expected, the majority of cost increases came from electricity tariffs and increasing diesel prices.

From a valuation point of view, I covered most of it last week and in fact used the right estimation. This is what I said last week with a few adjustments for the actual numbers. "Last year the company made 211c per share. This year they made 164,4c. The stock trades at 2519c and a valuation of 15.3. Expensive? Not really, PPC often trade at a premium to the rest of the sector. That is because they have much better margins and are not susceptible to project risk. That is also why we like them."

And let's not forget the dividend yield. 130c for the year. That is a yield of 5.16%. People often forget that equities are investments and not just a quick way to get rich from doing nothing. Any stock with a dividend yield like that is a good investment, regardless of capital gains, full stop. The company's financials look strong with good cash flows which would deem this dividend sustainable. More capital expenditure is expected in 2012 which is a good thing I'd imagine.

From an operational perspective, the modernisation of the Western Cape factories are progressing according to schedule. The R280 mil De Hoek plant is complete and will be re-commissioned in mid 2012. The Riebeeck expansion is also making good progress and just waiting on some environmental approvals. Now all we need is for the Western Cape to start building again. They are a region that has really lagged.

With regards to the rest of Africa, Zimbabwe showed good growth. 50% in fact. The strong rand hasn't helped with exports but the company looks very keen to expand up into the continent via acquisitions. Sending locally produced cement is very expensive so rather produce it there. They expect to increase revenue there by 40-50% in the next 5 years. And there is no doubt that demand will increase. People are tired of living in reed huts.

The outlook looks conservatively confident. They mention that they are taking new entrants into the market very seriously but most of the hype is mis-informed. They state, as we mentioned last week, that moving averages for cement sales is encouraging. They call the recovery in the South African market 'long overdue' with global economic turmoil the biggest risk. I feel encouraged by these views and even if we are not quite at the bottom, the stock is definitely a buy for the long term.

Commodities and currencies corner. Dr. Copper last traded at 357 US cents per pound, the gold price is roaring again, although lower from where someone drew a line in the sand, last at 1792 Dollars per fine ounce.The platinum price is also "doing a bit better", the last quoted price that I have is 1656 Dollars per fine ounce. The oil price, my most favourite commodity is last at 96.53 Dollars per barrel. The Rand is slightly better than yesterday, 12.76 to the Pound Sterling, 7.93 to the US Dollar and 10.94 to the Euro. We are back in the green at the start. Ten whole years to the day after the beginning of the end for Enron. Remember that? ENRON'S TENTH ANNIVERSARY: THE CRIMES

Sasha Naryshkine and Byron Lotter
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I was worried that there was not a lot to talk about this morning. Sure I tried to haul my hound (or the other way around) up hilly Joburg over the weekend, but that is hardly news. Just slow me and a crazy dog. So I was thrilled to see results for the full year for Astral foods and Barloworld. And if that was/is not enough for you, then there are also results from Lonmin, for the full year. We had a discussion on Friday in the office about the geniuses in Italy, the cheering of the end of Berlusconi and the yields on the ten year bonds now at 6.5 percent. Still, that borrowing cost is still too high. But hey, at least they have an economist to lead them in their most tricky issue right now, the economy!

Jozi, Jozi. 26^o 12' 16" S, 28^o 2' 44" E. A u shape, is better than an upside down u shape I guess. We started OK, and ended OK, just managing to edge into the green by the end of the session, all this after having wallowed in the deep red today. The Jozi all share index added 45 points (0.14 percent) to end at 32261. Does the level really matter, or is it just a benchmark? The answer to the question I guess is that you need to measure your performance relative to something. Perhaps the measured return should always be one that takes into account inflation. The inflation outlook locally not looking that great with the staple diet, maize, running out by the end of the month (supposedly) and now we will have to import maize. Sis. At much higher prices. All this after having sold maize to the Mexicans, South Koreans and the like earlier in the year. Well done. And also the oil price continues to rise, but the currency is not getting stronger, which would offset the price more, but I am guessing that we will see a record fuel price next month, or whenever it is announced.

A couple of results Friday, let us look at the impact. Richemont, after initially surging two percent, the stock actually settled lower, down 0.6 percent. Perhaps the currency was to blame, perhaps folks worrying about the cost to shareholders with regards to share options. A huge cost. Telkom ended the session down a quarter of a percent, although at one stage the stock was down nearly two percent. Telkom numbers next week are going to look ugly, but we will get a chance to dig deeper next Monday. You know what, I cannot wait actually. Not because I want to bash and ridicule, but there you go, I would like to see how the competition is doing!

Lonmin results this morning. I like the prospects of the metal that they produce, I believe that there is going to be huge demand as emissions regulation becomes tighter. We all want to live in a cleaner world, BUT, that will only become a more serious argument in the developing world when the citizens become richer. As they did in the UK and Europe through the industrial revolution. Lonmin is possibly the least spoken about platinum producer in South Africa, of that sort of size and scale, they are the third largest platinum producer on the planet.

OK, so what are the highlights/lowlights of the reporting period. Production met their prior guidance, that is good, they managed sales of 721 thousand ounces of platinum. Their output breakdown is basically 68 percent platinum, 9 percent each for rhodium and palladium and the balance (14 percent) other metals. Profits were boosted by a slightly weaker Rand and a much improved metal(s) prices. Costs per ounce produced increased 11.2 percent. In their own words the safety performance was unacceptable. Well. I do not know what to say about that other than it is what it is, compliance and rules are two different things. As they say in the chairman's letter: "The two major operating challenges for your Company in 2011 were safety and labour relations."

All these numbers of course are reported in Dollars, US of course, because that is what the metal is quoted in, even outside of the US. So, until that changes, expect it to be so. Production in South Africa, listed in London, but reporting in US dollars. Awesome!! Underlying earnings per share of 111.6 cents per share, a dividend of 15 US cents per share hardly seems a king's ransom, but that has been maintained. The group have managed to reduce their net gearing by reducing their debt load by 37.6 percent. Phew. Remember how some of the guys who leveraged up half a decade ago got roasted in 2009 because of the great financial crisis of the year prior. We saw deep discounted rights issues. Rio Tinto springs to mind.

So, production is expected to be better next year, the price of the underlying metal could be better and has been better this year. Rising costs and poor labour relations have been really negative. Not good. And they interviewed a fellow on the box this morning in London who said it like it was. Perceptions sometimes lead to reality, he said that he would not own it because of the aforementioned costs and the threats of nationalisation. Where there are other options around the world in Australia (where he mentioned resource tax issues) and Chile. So, be careful when you say that there has been no signs of an impact on investment in South Africa in this whole debate, because there is someone using his clients money making that decision.

I will leave you with a great few sentences from the chairman's letter to shareholders about the issues of nationalisation, the line before talk about the commitment to a transfer of ownership to previously disadvantaged individuals:

"This approach is however clearly not the same as that espoused by those who claim that nationalisation will achieve these goals more speedily and effectively. While recognising that this is a matter for the elected government to decide, we cannot subscribe to this view. It seems to us at best debatable that South Africa can afford to acquire ownership control of the mining industry, and - if it did - whether the change of control would provide more efficient operations, yielding greater benefits for employees and other stakeholders, while still generating the capital necessary to fund the investment in maintaining let alone increasing production. It is an inescapable fact that there is a world shortage of technical and managerial skills in the mining industry and it must be expected that nationalisation would be seen as a major disincentive by many incumbents."

Music to my ears. Private money is accountable. Private money is ruthless. Private money maximises profits and pays taxes accordingly, which governments choose to deploy how they see fit. Nobody who was really good at business went into politics to maximise government owned entities. Or very few. Nailed it.

Chickens. Some people love eating them. In fact the NatGeo app titled 7 billion said that humans slaughter 52 billion chickens a year. To eat. Wow. Most people then love eating them. Astral Foods produces chickens and today we will look at their full year numbers. After hearing how tough it is out there, these results are not that bad. Revenue increased three percent, headline earnings increased twenty percent and the final dividend (very important) increased 7 percent to 505 cents. One of the main attractions of the stock is their very generous dividend payment. And the company has done really well to contain costs, in part them and in part lower feeding costs. Cheep-cheap!

Here goes, an explanation of the poultry business here locally: "This past year witnessed tough market and trading conditions with a strong Rand driving opportunistic imports of poultry meat. The "classic dumping" of chicken primarily from Brazil, together with the higher import levels placed pressure on the ability to move prices in line with cost increases and inflationary trends." So let me get this right, you can see that Brazil can grow, chop into pieces, vacuum pack, ship across the ocean and sell here FOR LESS. Because, as the chicken industry have said here before, the government is actually interested in the business of business, in the country of Brazil! But I don't want to encourage government subsidies on emotive issues such as food!

The stock is trading around one percent higher this morning. Simple valuations, EPS rose 20 percent to 1148 cents per share, the dividend was a full 810 cents per share. At 11900 cents the company trades on a dividend yield of 6.8 percent, and 10.4 times historical earnings. However, companies in the sector normally trade on much lower valuations, I think the reason that folks tend to pay up for Astral is simple, the great yield. How do you ignore a yield of around 7 percent and not pay more normally? Most folks would still say that this is dirt cheap.

In owning a business like this you have to factor in variable "stuff", the weather, diseases out of your control, food costs are hugely variable, including just a few. As you might have heard before, do not invest in something that can eat, because invariably it can die unexpectedly. In this case your window is very short, the bird life is quite short. And there is a new bird on the block that seems to grow quicker, eats less, the Ross 308. Sounds tasty.

What does the outlook look like? Well, the feed cost has increased significantly. Expect your chicken to get a little more expensive and their food gets more expensive too. And expect the South African staple diet to also get more expensive, check this out guys -> Maize shortage, price spikes 'preventable'. Eish. So that is the bad news. The good news is that the weaker currency is much better for the local chicken producers. But also expect to pay more for chicken, which is not bad for them! On balance the business seems well run, a good outfit, a superb dividend payer, but still not enough for me to want to hold. I know many a dividend portfolio do hold them, and probably rightfully so. If you have them, keep them.

Byron's beats has a look at a company that used to be the envy of corporate South Africa. It is fair to say that the company that Punch Barlow founded and drove for many years is not the company that it is today. But, nevertheless, it is still a good company.

Lots of results being thrown at us this morning. I've decided to have a look at Barloworld because they are an interesting company whose results will give us a decent indication of how the economies they operate in are fairing. These guys have lots of moving parts which includes equipment sales through supplying Caterpillar equipment in 11 countries, car rental, logistics and handling. These operations take place all over the world from Southern Africa to Australia, Russia, Europe, the US and China.

Just as a reminder, these guys took a huge hit in 08-09 when the global economy was in turmoil. After that they have managed a fantastic turn around. Well it looks like that turnaround is still well on its way with a 22% increase in revenues for the year ending 30 September to R49.8bn. Operating profits increased a whopping 51% to R2.29bn which equated to headline earnings of 465c. Net debt declined and dividends increased by 107% to 155c.

This is what CEO Clive Thomson had to say which I think is worth noting.

"Trading results were ahead of expectation and the group delivered a strong performance for the 2011 financial year. Good growth in the mining sector, together with some significant contract awards, led to significantly higher profits in Equipment southern Africa and Russia. Automotive and Logistics produced a pleasing performance in a competitive trading environment, while the handling division showed a substantial turnaround from the prior year. We expect to maintain the positive momentum into the new financial year. While commodity prices are off their highs, they are anticipated to remain favourable for mining investment and production. This will benefit trading in the first half of 2012, while growth in the second half will be slower due to the higher base. Overall we expect to make solid progress in the year ahead."

He seems pretty optimistic about the future which I suppose is worth noting, more so than bearish analysts on the screen or radio that you hear every day.

So how does the company look from a valuation perspective? The share is up 2.5% today and trades around 7123c. That's a historic PE of 15.3 and a dividend yield 2.2%. I asked Sasha why a company like this which is so reliant on the commodity boom trades on a much higher valuation then the diversified miners. He said that makers and sellers of the picks and spades are more cyclical and make a lot more money during the good times. As you can see by the commentary these guys are still expecting good growth going forward following a huge dip.

In terms of the regional breakdown they tell us what we already knew. Fantastic growth in the likes of Africa and Russia but very tough in Iberia (Spain and Portugal) where austerity measures are being implemented. I think this will be a sign of things to come. Good growth in certain markets with slowdowns in the likes of Europe. At the end of the day however there seems to be more growth than not and as investors in equities we can handpick the ones with the right exposure.

As an investment I like the company and the space they operate in. I do however think there are better alternatives. I prefer the diversified miners who have better margins and look a lot cheaper. We also prefer Caterpillar in our New York portfolio. Unfortunately CAT is not listed on the JSE. If you don't have an offshore account and like the space, contact us to get one opened for you soonest. These guys are also doing fantastically well.

Commodities and currencies corner. Dr. Copper is last at 354 US cents per pound, the gold price is slightly lower at 1779 Dollars per fine ounce. The platinum price is better at 1647 Dollars per fine ounce. The oil price is lower at 98.65 Dollars per barrel. The Rand is weaker at 7.95 to the US Dollar, 12.66 to the Pound Sterling and 10.89 to the Euro. European markets are falling as a result of a pending Italian auction. WHAT? Oh well, we have to get anxious about something!!

Sasha Naryshkine and Byron Lotter
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"The market cap had exploded to just shy of 3.6 billion Rand by year end. Wow. Nearly twenty times bigger than five years prior, that was where most of the excitement and gains were made."

Jozi, Jozi. 26^o 12' 16" S, 28^o 2' 44" E. It was time to bring out the old tank engine, the little version which huffed and puffed its way up the hill. I think I can, I think I can, that was the call, eventually Mr. Market ended ever so slightly in the green. The Jozi all share index closed just two and a half point better than where we started, 0.01 percent up on the day to 34298. That does not really tell you anything, but at the worst point of the day, we were down over a percent. So there definitely were some heroics. There was some US data that supplied the second half impetus required to get us all the way back.

There were a whole host of results and trading updates yesterday, we saw numbers from Liberty Holdings, for their full year to end December 2011, there was a trading update from EOH yesterday that looked good, Spur Corporation had results for their first half and Murray & Roberts told us about their rights offer. Capitec announced a three Rand a share dividend, being sneaked in before the dividend tax kicks in.

First, EOH trading update. And "management has indicated that the earnings per share and headline earnings per share are expected to be between 25% and 35% higher than those in the previous corresponding period, being 96.4 cents per share and 96.2 cents per share, respectively." So, the range (these results are for the half year to December) for headline earnings per share is expected to be between 120.5 to 130.14 cents per share. The stock traded up to 2975 on the news. This has been a phenomenal growth story, the company has delivered earnings growth of 26.4 percent per annum for the last five years, dividend growth of 24.6 percent and revenue has grown 36.4 percent over the same time frame. Amazing growth, and the stock at these levels does not looked stretched. It is a small company that has grown quickly. It has made some good looking acquisitions, they seem to have a good team there. Time will tell if they can keep up this breakneck growth.

Second, Spur results, these are for the six months to end December, so you would think that these results are normally the better of the two halves. Personally I am not a Spur person, but that is because their menu is very limited for me. Out of all their franchise outlets, the ones that I am most likely to go to is the John Dory outlets, they do fish! The other main franchise is Panarottis Pizza Pasta of course. There are as at the end of the year, 285 Spur outlets, 59 Panarottis and 27 John Dory's. Spur corp. also recently acquired 75 franchises of DoRego's. Exposure to the lower to middle income group is what they say is the rationale for the acquisition. I think from personal experience that the Fish & Chips Co acquisition by Taste Holdings was better in this specific space.

Franchise revenue increased by 12.4 percent to 78.9 million ZAR for Spur, 6.4 million for Panarottis (an increase of 6.9 percent) and John Dory's grew by 10.2 percent to 5.5 million ZAR. Sounds like a lot of work for the franchise management for these rewards. The distribution and manufacturing division saw revenue up by 10.9 percent to 60.9 million Rand. But this is the beauty of the franchise model, profits before tax rose 21.3 percent to 88.4 million ZAR, headline earnings increased 19.4 percent to 58.2 million ZAR with diluted HEPS clocking 66.5 cents per share, an increase of just over 20 percent. The dividend was hiked by a little more than HEPS growth to 40 cents per share.

At 1575 the stock hardly looks expensive, if you annualise these numbers you get below 12 times earnings. The dividend is always generous, at around five percent. Look, I could think of a whole lot worse businesses to own. I still think that the darling of the sector, Famous Brands attracts a lot more interest, and it must continue to deliver, the premium you pay is much higher. Spur Corp. market cap is a little over one and a half billion ZAR, Famous Brands is close to 4.3 bn ZAR. Taste holdings in turn is 431 million ZAR, one tenth of Famous Brands, but growing quickly. I most certainly do like the sector, casual dining and as they are geared to urbanisation and middle class expansion, I suspect that they will all benefit.

Byron's beats is missing today. The poor fellow is sick. Perhaps even has man sick, which is much worse than normal sick. We wish him a speedy recovery. You know something, I might be mistaken, but Mr. Theron never missed a day of school in his life and in all the time I have known him, he might have been ill for a couple of hours once, bad enough to go home. He has the constitution of an ox.

We missed Grindrod results earlier this week, Wednesday to be precise. This was for the full year to end December 2011, and like many companies doing what they do, it has most certainly been a tough old year. The top line grew 22.1 percent to 35.88 billion Rand, but attributable income fell 32 percent to 530 million Rand. EPS fell by a similar amount to 111 cents per share, HEPS was just over 40 percent lower to 99.6 cents, with the dividend 45 percent lower to 29.5 cents. The stock is not as a cheap as it used to be, trading on over 15 times earnings and less than two percent dividend yield. Although, you would expect the dividend to be lower remember that the group raised 2 billion Rand with a new shareholder, Remgro. The dividend cover has also been widened to 3.8 times.

"Earnings growth on the prior year was achieved in the Freight Services, Trading and Financial Services divisions, whilst the Shipping division was impacted by weak shipping markets." And as such, the shipping division let the whole team down.

Look, it is either a business that you like, or you balk at the earnings volatility, feast to famine. Interestingly the market value of the enterprise has done very little (a term I am always hesitant to use) for the better part of five years. This follows possibly one of the most heroic gains in South African corporate history. In December 1999 the company recorded full year turnover of 989 million Rand, that has grown 35 times in 13 years. They made a loss of 66 million Rand at the end of that year. And they had a market cap of 176 million Rand. Phew. Fast forward to 2004, group turnover was 2.974 billion Rand, headline earnings had surged to 546 million Rand. The market cap had exploded to just shy of 3.6 billion Rand by year end. Wow. Nearly twenty times bigger than five years prior, that was where most of the excitement and gains were made. Of course the business was going through lots of changes, by the end of December 2007 turnover had jumped to 17.9 billion ZAR, headline earnings were 1.19 billion Rand and the size of the business was now valued by Mr. Market at 10.666 billion ZAR. These were the best of times, the stock had more than tripled in another three years.

Sadly, since then there was the period of great pity, also referred to as the (second) great financial crisis (Or global financial crisis of 2008) and that saw many businesses like theirs struggle. To be fair, there were very few global businesses that were unscathed. In fact the mess that was the time, is the mess that is the SENS announcement on their website, tell me if you can make head or tail of this: Grindrod Limited - Audited results and dividend announcement for the year ended 31 December 2011.

So that is the short history of what a fabulous investment the stock has been for folks who have held for that period of time, the more important question now is simple, would you with the same funds apply the same amount of money today? Phew. I must be honest, I really like their new approach to the infrastructural opportunities that exist in Africa. That is going to be the key you see, developing ports and railway infrastructure to supply bulk commodities such as coal (through Mozambique) and iron ore (West Africa, even Namibia where they have a presence already, who knows) to their main customers in China and India. They have committed to locomotive leasing and manufacturing projects in Mozambique and Sierra Leone.

The tie up with Vitol is also a key development. If memory serves me right, Vitol are the largest unlisted business in the world by revenue. I see where they are going, but it is going to be a hugely capital intensive exercise. They are moving towards a more balanced business, with a large profitable utility segment that will own more (or part own) and operate ports, railways and be the preferred logistics partner for many African countries. That is their mission and vision. Many folks have backed them, and have been very right, this next stage in their business development cycle is going to be exciting. The volatility of the earnings however is a problem for us. I wish them luck!

New York, New York. 40^o 43' 0" N, 74^o 0' 0" W. "Things" fell away in the last part of the session, but stocks still managed to end off the day on a positive note, supported by some good economic data. And some decent enough Auto sales too, rising in February to the highest annual rate since the same month four years ago. High gasoline prices or not, this is surely a sign that the average American is feeling more comfortable to make a purchase which is a big ticket decision. I have only ever bought four motor vehicles in my life and that includes two for my wife. One got stolen (that sucked) and the other one that I sold had 170 odd thousand km's on the clock. If I remember right I bought that beauty for 43 thousand ZAR and because I had owned it for so long, I let the car go at around 28 thousand ZAR. Inflation of a depreciating asset. Rising Auto sales in the US are also reflecting better weather in February and surprise, an extra selling day. The leap year effect for all retailers. We are told not to get excited about these numbers, it could be pent up demand.

Session end the Dow closed 28 points better, to 12980, hanging onto 13 thousand seems illusive. I guess it will get and clear that level in due course and then the level watchers can start asking questions about 14 thousand or so. The broader market S&P 500 added 0.62 percent to 1374 whilst the nerds of NASDAQ closed at 2988 (up three quarters of a percent), tantalizingly close to 3000. That level was reached a couple of days ago. That level was initially breached in late 1999, when the valuations were mind blowing. Companies traded on silly multiples. From there, in a mere four months the NASDAQ went higher by another 2000 points plus. Amazing. And, sadly, we all know the story after that.

Commodities and currencies corner. Dr. Copper is trading at 389 US cents per pound. The platinum price is steady at 1699 Dollars per fine ounce, the gold price is lower at 1712 Dollars per fine ounce. The oil price is last at 107.97 Dollars per barrel. The Rand is weaker as markets sell off, last at 7.50 to the US Dollar, 11.93 to the Pound Sterling and 9.98 to the Euro. We are lower at the start here. US futures are lower. That could all change, who knows!

Sasha Naryshkine

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Jozi, Jozi. Thursday was a million miles away. Well actually around 100 hours since the JSE last printed a price. The electronic printing of prices, there hasn't been a tape for years, yet our industry still has quirky sayings like, "don't bite the tape". Meaning, don't shout at the prices if you don't like them, it is not the tapes fault. After all was said and done Thursday the tape said that we had a nothing sort of a day. That makes it three for September where the markets day ended so close to where it had started. And two in a row.

What moved my Jozi markets? The Jozi all share index closed at 28714, down a whopping 7.95 points, or 0.03 percent lower than where we started. Hah. The gold stocks were up, the platinum stocks were lower, the banks were a touch higher and the broader resources index countered that. Awesome, a low volume day with the end result being a bit of a snore. Friday however was where all the action was, we are going to catch up today.

I don't like public holidays. Don't get me wrong, I love spending time with my family, but they do nothing for our competitiveness. Check out what I wrote at the end of August: "There are seven public holidays in China. Here, like in Greece actually, there are 12 public holidays (a year). We lose a whole working week to China as a result of observing all these public holidays. In the US there are ten. In England there are only 8 public holidays this year. In Portugal there are 14. Are you starting to see some sort of pattern here? In Vietnam there are only 8. Now you have a clear picture."

Want to start being more productive? Slash public holidays. So you don't lose two percent per annum of working time to the workaholics in Asia. OK, talking of time away from the battle lines, the interim ANC National General Council did produce real events including perhaps the most important, the National Health Insurance plan. And a full on battle between the president of the country and a president of another sort, of the youth wing of the ruling party. This seems to be getting a little ugly and won't go away.

It finally HAPPENED! Wal-Mart have made a bid for Massmart, our favoured retail stock. In the post results interview with CNBC Africa the chief of Massmart Grant Pattison suggested that the premium of a Wal-Mart type bid had been around for the better part of 18 months. Yip. True. And the stock has looked expensive for that long, but hey, don't fight with the market. Here goes the relatively thin on detail SENS announcement:

"Shareholders are advised that the Company has received a non-binding proposal from Wal-Mart Stores, Inc, ('Walmart') which could lead to Walmart making a cash offer to acquire the entire issued share capital of the Company for a price of ZAR148 per share ('the Proposed Offer'). In the event that a firm offer is received the board of directors of Massmart will obtain an independent opinion and express a view on the firm offer to shareholders."

A due diligence will take place and there will be a period of exclusivity. From both parties, suggesting that Wal-Mart were and are looking at other businesses in South Africa, that part is interesting. By my count there are 201.5 million shares in issue. Multiply that by 148 Rands a share and you get to 29.825 billion Rands. So South African shareholders are thrilled. And I say that lightly, because there are many more international shareholders than locals, because, you know, the stock looks expensive to most here. It does not trade at the long term averages, they say. Oh yes, the long term averages back when the 90 percent of the population was denied credit, those long term averages.

Check this bit out from a message that we sent recently to clients after the analysis on Massmart, this part about shareholders and a bid specifically. Here goes, some excerpts from our message on the 10th of September 2010: Is Massmart overvalued at R129 per share?

One reason often mentioned to justify the elevated share price is the idea that Wal-Mart, the world's largest retailer, is looking to enter the African market, and may do so by acquiring a local company. The two most likely candidates are Shoprite (bigger African footprint) and Massmart (similar business model). Wal-Mart have confirmed their interest in global expansion, and senior executives from Bentonville Arkansas have toured South Africa extensively, but nothing has been announced. In fact, Massmart management have confirmed that there is no deal on the table. Or under the table. Or even under consideration.

Another possible explanation for the high share price relative to earnings is the fact that Massmart has a very high percentage of foreign shareholders, who consider it to be correctly priced compared to similar companies in places like Mexico and Turkey. Take a look at this chart:

Pie chart of shareholders



CNBC's Stephen Gunnion interviewed the Chief Executive of Massmart, Grant Pattison, last week (back then) on these and other issues. Click here to take a look at the YouTube clip, courtesy of ABN Digital.

In fact, we are not that uncomfortable with the current market valuation, and expect Massmart's earnings to grow into the share price in the year ahead. Here at Vestact we depart from the point that share prices are "right", insofar as they reflect the aggregate view of the current value of the future earnings flows that will accrue to a company's shareholders.

So far this morning, as at ten fifteen this morning the stock is up around 10 and a half percent at 149 Rands a share, and the stock has traded a whopping 192 million Rands, a whole lot more than the average 65 million a day. Who are the thrilled local shareholders? The PIC with over 18 million shares (old established holding), Stanlib with around 14 and a half million shares at the beginning of the year, I hope they still have them. But this one when I first received the shareholder register made my jaw drop.

As per a SENS announcement 31 August, when the chief Grant Pattison exercised a few options, check this out: "After the abovementioned sale, Mr Pattison still holds 1,921,389 Massmart shares or options." Wow, that is shy of one percent of the company. He is by my count, the tenth biggest shareholder overall. Wow, I guess he will be voting in favour, or would he vote in this case? Probably not. I don't know the answer to that. Did your jaw drop too?

In a videocast on the Moneyweb website, Grant Pattison said that the first bid actually happened on Friday, the board of Massmart met over the weekend. Like he said, first things first, the due diligence needs to take place first.

From the buyers point of view, 4.2 billion dollars is NOT a lot of money for Wal-Mart. Wal-Mart has a market cap of 196.66 billion Dollars. They trade on less than 14 times earnings at the 54 dollars a share level. Quarterly revenue of 100 billion dollars for Wal-Mart. Let me put it this way, Wal-Mart paid 2.3 billion Dollars worth of dividends in the first half of this year, and are going to replicate that in the second half. Their dividend flow alone for this year is more than the whole deal is worth. Size and scale of Wal-Mart, who employ around one percent of the American population.

And the most exciting thing that could come out of this, we could add to People of Wal-Mart. We must have some legends that hang out at Woodmead Makro. Sis, that is just plain ugly.

Remember on Thursday when I said "pay attention"? All the time. Pay attention to the trends. I was thrilled to see a story of sorts that refers to this exactly, the contrasting worlds of Netflix versus Comcast. And how folks are starting to dis cable in favour of consuming their media via the internet. The WSJ story is as follows: I'm OK, You're Not OK, Say Television Executives. The story suggests that home users are going to start giving up their home subscriptions. As strange as this sounds, I saw something real time this weekend, that made me believe that we are closer than you think.

I saw an Apple TV set top box in action, at the house of my wifes school friend. The fellow, let us call him Fred, showed me what it was all about. And it is so impressive that I was ready to ditch my satellite TV, because it is like TV on demand but really on demand. The cable companies in the states have had this for a long time, but this changes it all. In fact, because of the competition in the US, this device is one of the cheapest Apple devices, but as far as I have seen, the most impressive. The biggest problem is that you have to have an App store account in the US. Which Fred did, he "lives" somewhere according to his iTunes account.

New York, New York. What is shaping up as the best September since pre the second world war for Wall Street, Friday was the icing on the cake as all major indices roared ahead. In part the improving environment and mergers and acquisition activity, but more Friday about the durable goods orders, which were ahead at the core rate. And the core rate is ex transportation, you know, without big ticket items like motor vehicles and more importantly Boeings. Orders were up 2 percent, double what the economissed economists surveyed thought it would come out. New home sales were flat month on month. KB Homes be liking that.

All major sectors advanced led by industrials and financials, the Dow Jones Industrial Average added 197 points to 10860. The nerds of NASDAQ added 54 to 2381 whilst the broader market S&P 500 was up 23.84 points to 1148.

Currency and commodity corner The oil price is trading higher at 76.59 Dollars per barrel. Dr. Copper is trading near the year high, 359 US cents per pound. The gold price is last at 1299.3 dollars per fine ounce. The platinum price is ages away from its all time Dollar high, last at 1639 Dollars per fine ounce. The rand is firmer this morning, last at 7.00 to the US Dollar, 11.09 to the Pound Sterling and 9.43 to the Euro.

Up periscope. On account of us missing a great day Friday on Wall Street we will start a whole lot better.

Sasha Naryshkine
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Jozi, Jozi. It was the resource stocks that led the march here in Jozi, the old faithful. Not Yellowstone, but the stocks that make up the majors on this exchange. This was as commodity prices traded near their year highs. Still, the commodity stocks are off their year highs reached in April, and that counts for all the listings, Anglo and BHP Billiton in London, plus also the two BHP Billiton ADR's in New York. Wow. Down under BHP Billiton are still 10 percent off their 52 week highs, but be reminded that there are special circumstances here, in the form of the Potash Corp. pending deal. We are still waiting on this side for the Sinochem counterbid, when you are ready guys.

The Rand continued to power ahead, some folks suggesting that we could do with another 100 bips cut in interest rates, c'mon Gill and Xolile, you can do it sooner, announce a surprise meeting ahead of your 17 November meeting. Back to matters global, there was a tasty pre jobs morsel in the form of ADP payrolls data, which turned out stale. Some coated it with cream cheese, but a fall off across small, medium and large business hiring in September does not bode well for payrolls data Friday. Having said that, the consensus is that we should still looking for about flat. Is that right? And that follows a weaker number in August.

Who, when, why, what? Our overall market level was heading towards 30 thousand points in early trade, but the wind was taken out of the sails a little, 29847 was the day high, we eventually closed up shop 129 points better to 29698. The last time we were at these levels was early July 2008, when the lift cable broke and it was all fall tumbling down, as my eldest used to say when she was smaller. I fell dad, all fall tumbling down. In fact, for those who love the record books, we were only ever in this zone and higher for a period of 50 odd weeks, Mid July 2007 till the beginning of July 2008. So am I to believe that these are multi year highs? Thanks to elevated commodity prices.

Platinum miners roared as the underlying metal price soared to what I call normalised highs. Currently the platinum price is trading at 1715 Dollars per fine ounce. But those are Dollar highs remember, the Rand has been weaker at times and that has skewed what you see on the screens. I was thinking that because Zimbabwe in dollarized now, this should in some way benefit them, right? I guess. I have used this five year Kitco graph to explain what I mean by normalised highs for the platinum price, cheack it out:

See the two black circles? The first one is just before Eskom started sucking wind back in late 2007 and then boom, the platinum price rocketed as the lights went out. Ironically with lower production and much elevated metal prices this was a record time for our platinum companies. The second black circle to the right is now. The abnormal period is when the lights were off. Do you agree with me that aside from this (serious) blip that we are trading at levels that are "normalised highs"? In Dollar terms.

Let us stay with the platinum miners. Sorry Northam Platinum, go away and re-think your wage offer is the line from NUM. I saw a line on their website two days ago: "The shaken company has its pleading eyes on the workforce to accept the offer and return to work. The National Union of Mineworkers (NUM) lauds its members for standing firm for five weeks in support of the demands put forward."

I wonder what a lot of this militant type style talk does for business? I get a little too emotional about these matters, but surely if I think that this is the case then others must too. The official line from Northam is a little more apologetic to their shareholders, the official SENS reads as follows:

"The management of Northam been informed that members of the National Union of Mineworkers ("NUM") employed at the Zondereinde platinum mine in Limpopo Province have rejected the company's revised wage offer, which includes an average increase of between 9.0% and 9.5% on wages and an increase in the living out allowance from R1 600 to R1 750 per month.
The Chief Executive Officer, Glyn Lewis, expressed disappointment, particularly after the constructive meeting between Northam management and representatives of the NUM on Monday, 4 October 2010. Nevertheless, the company remains committed to further talks in an effort to expedite a resolution to the current situation."

No work no pay, so I guess standing firm by your (NUM) original demands you are hoping for a long term resolution of sorts. As per the original SENS back on the 5th of September: "Zondereinde produces approximately 1 000 ounces (platinum, palladium, rhodium and gold) per day. At current rand basket price levels, revenue losses are estimated to be R9 million per day." Northam remember are going to have to draw on every single existing resource to develop Booysendal, from their results at the end of August, capital commitments not yet authorised amounts to 3.6 billion Rands so far. Which, once developed, will eventually lead to a production facility of 162 thousand ounces per annum and no doubt create a whole lot more mining jobs.

New York, New York. Blue chips were ahead, tech stocks were bashed and the broader market closed marginally lower. The ADP read came in showing that private payrolls (who use ADP as their processor) shed 39 thousand jobs. The expectation was for 10 thousand jobs to have been created, and not all these jobs to have been lost. I guess folks kind of shrugged their shoulders, futures sold off a touch.

The two major tech stocks that took tap were Amazon and Citrix Systems. Citrix has been around for a long time with their virtual desktops, pretty recently they have done a lot of work around the whole "cloud computing" concept. You know, the internet being the source of storage and information, rather than the desktop, you can imagine that this is right up their alley. Believe it or not, but the warning from a peer in the cloud computing space is what saw a 14 percent sell off of the stock back to 60 Dollars a share. But they were less than 40 a year ago. That does not make the pain any easier to suck up, they were 71 odd bucks a share less than a week ago. Ouch.

It was not just Citrix, the whole dam burst yesterday, following Equinix's guidance lower. The market guided the share price 33 percent lower. Ouch!!! I suppose that is what happens when you trade on 40 to 70 times earnings, as many do in the peer group, one miss and you are going to get completely thrashed. But apparently we were all warned by Barron's a while back: Cloud Computing Bubble Bursts Following Equinix (EQIX) Warning. Yech.

And Amazon? Down three and a half percent. Yip, they are a cloud service provider too, as are HP, IBM, Microsoft, Google and Salesforce. Plus they also closed Tuesday at a YTD high. Ah well, techs have not enjoyed the best time, but I LOVE technology and think that it has the ability to change lives for the better, rich and poor alike.

The most amazing thing I read so far this morning was a comment made on a Seeking Alpha article titled: Consensus Earnings Growth Doesn't Justify Share Price for Some Tech Bellwether Stocks where a user commented that the iPad has had the "Fastest adoption rate of any electronic device in history, beating the former record set by the DVD player." Really? That is astonishing because it is one device from one company, and not multiple participants. Again, Apple lead the way.

General Electric announcing two separate deals yesterday. The first one was that GE was buying a business called Dresser for three billion Dollars. Dresser makes gas engines that are used in the oil and gas industry and in the mining industry. Dresser derives 60 percent of their revenues outside of North America, which adds to their "global footprint" as they say in the official release, with 85 percent of overall revenues from energy customers around the world. Natural gas fired engines? Check it out, it is all about getting energy to remote areas of the world: Dresser Waukesha.

And then, staying busy with GE Money, the company announced that they would be acquiring 1.6 billion Dollars worth of credit card assets from none other than Citigroup. Creditnet.com reports: "GE bought credit card debt which Citi controlled but did not issue itself, the report said. Instead, they were for "retail partner" cards, which typically carry higher delinquency and default rates than the company's normal, branded accounts.
New statistics show credit card delinquency rates recently declined, but the number of charge offs climbed after dropping for several consecutive months"

So, it is perhaps a case of noting that whilst the climate is still wishy washy, the outlook is improving. And Citi are selling assets like crazy. So we will see in due course whether this was a smart move. GE remember has around 100 million credit customers, ranging from retail clients to big businesses, this finance division has been around since the great depression.

Session end the Dow closed up nearly 23 points to 10967, the nerds of NASDAQ worse (no thanks to the cloud) by 19 to 2380 whilst the broader market S&P 500 was down around three quarters of a point to 1159.97.

Currency and commodity corner The gold price has printed another Dollar high, 1358.5 Dollars per fine ounce. The aforementioned platinum price was last at 1722 Dollars per fine ounce (improving whilst I have been writing from above), the copper price is last at 378 US cents per pound. The oil price is higher at 83.82 Dollars per barrel. The Rand is firmer to the Pound and Dollar again this morning, 10.87 to the Pound, 6.84 to the US Dollar and weaker to the Euro at 9.57.

Up periscope. Wow, I will go with a big fat fence sit. We have started here this morning completely flat. Initial jobless claims are later today, perhaps it will reveal something slightly different to the ADP data.

Sasha Naryshkine
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Jozi, Jozi. We were always going to be quiet without the yanks, even though it is much more a global environment than I can ever remember. More emphasis is being placed on data outside of the older traditional markets. But without over a third of the worlds investable assets at work on a holiday of theirs, volumes were always going to be light. I am sure that the trader junkies got their fix, but even then, there was not much on the go. And normally when this is the case, markets tend to trend lower and that is exactly what happened here in Jozi yesterday, even though we made a go of it. It wasn't like there was nothing going on, the cheese eating socialists put on a show of their own, Swiss retail sales were better than expected, European services PMI was also a fraction better than expected. Breeteesh services PMI was lower than anticipated, that was the figure that most preferred to focus on.

Maude street shakes, moves and grooves. We closed near the lows of the day ending a day of low and slow volumes, a bit like watching Jack Russell bat for England at the Wanderers on that last day. Why can't I forget that day, but don't remember the four glorious days before that? Some things stick in your head more than others. Session end the Jozi all share index closed at 26182, down 131 points for the session. Banks bucked the trend and had added one third of a percent by the time the session closed. And just after that, Goodluck Jonathan, the Nigerian president found his season tickets came to his senses and unbanned the national team. It was that sort of day. Resource stocks were stuck a percent and a half lower, that is what ultimately saw us end a whole lot lower than the rest of the market suggested.

Bart's shorts. Sasol fined and the company still maintains innocence, but restructures their fertilizer assets. Lots of news from Down Under, including the RBA not cutting rates and not looking like cutting rates any time soon. Richemont upgraded to a buy by the fellows over at Merrill Lynch. The world according to COSATU and a client comments on the South African GDP in Dollar terms.

Sasol Nitro yesterday afternoon making public the extent of the fine that the company received from the competitions authorities, and ending a dirty saga that has plagued the company for a number of years. Even though this means that the company will restructure their fertiliser business, the company still believes that they did not engage in any practices that led to the enquiry. Which is interesting in itself. Nevertheless the company has been proactive and have approached the competitions authorities with the following proposals:
"1. Divesting its regional blending capacity in Bellville, Durban, Kimberley, Potchefstroom and Endicott whilst retaining its full production activities in Secunda.
2. Altering Sasol Nitro's fertiliser sales approach to a Secunda ex-works model. All fertiliser retail agent contracts will be phased out and a new fertiliser sales operating model formulated.
3. Pricing all ammonium nitrate based fertilisers on an ex-Secunda basis.
4. Phasing out ammonia imports on behalf of customers in South Africa."

I guess most important for shareholders from the release is that "the agreement will be a full and final settlement of the alleged contraventions of excessive pricing and exclusionary practices, which are the subject of the Nutri-Flo and Profert referrals, but requires confirmation by the Tribunal. As the Commission is of the view that the settlement will address their competition concerns, the Commission has not sought an administrative penalty."

Other than the 250 million Rands that they have settled on already, as per the competitions authorities release earlier in the day: "The Competition Commission reached a settlement agreement with Sasol Chemical Industries Limited ("SCI") on the 25th of June 2010, finalising the abuse aspect of the fertiliser case. This follows the settlement reached with SASOL on the collusion part of the case in which SASOL was fined R250 million." In the now infamous words of a former chief of police, this is now "finish and klaar". In this case, not his case.

Whenever I feel like I need a downer I read Constitutionally Speaking. No, I am kidding, UCT Constitutional Law Professor Pierre de Vos is a gatekeeper, a Doberman, the necessary protection and has a great way of writing simply enough on a complex subject, so that we can all understand. His latest piece titled On corruption in South Africa is another sobering reminder on how important a strong opposition party is for any democracy, anywhere in the world. You could interpret this as complacency. What do you think about Pierre's charged piece?

I saw a note yesterday that saw the fellows over at Merrill (you're terrible Muriel) Lynch upgrade Richemont to a buy from neutral. It had underperformed the broader luxury goods index they said. It is the cheapest pure play they said. Not over priced they said. A good looking balance sheet they said, the kind that even saw the most shy accountant look up for a second. And for me one of the most exciting things that Muriel, I mean Merrill said, is that improving margins in the medium term led them to believe that it was attractive. Agreed. I remember a once eccentric junior analyst who once said to me, around ten years ago, that a neutral rating was a load of you-know-what. You either buy it, or you sell it.

And we are going to stay with you're terrible Muriel theme as we head down under. To chat about a couple of matters, first and foremost that the RBA did not raise rates this morning, even as inflation rose for an eighth straight month. The Australian says as much: RBA keeps interest rates on hold at 4.5pc but pointed out that this was consensus. And if you read further you see that the RBA says that rates are appropriate at current levels. And starting to worry about the Chinese demand going ahead. So right now, it is a balancing act.

Staying down under with matters vegemite and Rio Tinto, one of the worlds largest mining companies said that even with the new improved super tax proposals. Check it out Australia Tax Still Among World's Highest. So, Rio are still going to check out what the implications are at current levels and then make a decision.

COSATU do not agree with the proposals put forward by the G20, and think that the great age of austerity is completely wrong in a South African context. The trade union points out that unemployment is still way too high, got that, poverty remains way to high, agreed, factories are operating below their capacity, for sure and that infrastructure backlogs are placing the responsibility of demand stimulus on the public and not the private sector. I see, so the private sector does actually create more jobs and is more efficient. You know, the more I think about it, the more I think that labour should really engage business meaningfully and start ignoring government. But here goes, the G20 austerity measures and the world according to COSATU:
"Fiscal austerity and monetary policy based on an overriding goal of price stability is the therefore unwarranted and should be rejected. Instead, COSATU calls for an expansionary fiscal policy to deliver basic goods and services to poor communities as the basis of demand expansion. We also call for the further easing of monetary policy and the management of the exchange rate to maximize the domestic impact of the demand stimulus. Therefore, we reject the recommendation on exchange rate flexibility. Fears of debt ballooning out of control with expansionary policy are premature. Instead fiscal austerity and tight monetary policy will generate ballooning debt by destroying the tax base and jobs."

We had an email from a New York based stock broker last week. Who probably by his own admission, his world ends at the Atlantic seaboard. But it was interesting nevertheless, here are some excerpts on how he sees the summer pan out:
"Some pretty smart people that I talk too think the market is way oversold and therefore reasonably good value at current levels. Unfortunately, the market acts terrible and it looks like we are going lower. Big employment number in the am. Last, and I know I have been on this soap box for 18 months...its Obama and his left wing politics which at the moments it trumping almost everything else when it comes to the stock market. Which leads us to the mid-term elections in early Nov. If the Republicans can recapture the majority of the seats both in the house and the senate that are up for re-election it should send a very powerful message and the market most likely will be positive for the balance of the year. If on the other hand, the Democrats manage to hold on to a decant amount of there "seats" in both houses this will not only be bad for the market for this year, but perhaps well into 2011 and beyond....possibly a mirror of Japan lost decade. Looks like we are in for a long hot summer."

In other words as some pretty smart people do in our industry, we wait before we commit and there is always something to agonise about. In this world of fluid news flow there are far more data points and "things to watch" than ever before. For me it is simple. I think that company earnings will be key, they always are, but how companies see the second half of the year is always going to be key. How my big favourite consumer companies, like Wal-Mart, Proctor & Gamble and McDonald's see the balance of the year. How FedEx and GE see the world according to them, not only in the US, but in the rest of the world. Intel, Cisco, what they have to say about business spend. These are all real to me and give us better ideas of making up our mind.

New York, New York. The Americans burnt meat, (had a barbeque, something we call and love as a braai) ate apple pie, and then watched fireworks and then wished themselves 234 years old, hip-hip hooray. And in amongst all of that they sing songs to remind them of the great America. And sing songs like Neil Diamond's On the Robert E Lee, that one always stuck with me. A bit like Jerusalem, which is sung on the last night of the proms, the Poms get all teary eyed and swell with pride. Good for all these old traditions.

Wall Street wanders. Nothing, all closed yesterday. Niks.

Commodities, currencies, Drs. Copper and bushveld. Dr. Copper last at 294 US cents per pound, the gold price flat at 1209 Dollars per fine ounce with the sister commodity platinum last at 1512 Dollars per fine ounce. The oil price last at 72.26 Dollars per barrel. The Rand is weaker at 11.69 to Pound Sterling, 7.70 to the US Dollar and lastly 9.68 to the Euro.

Up periscope. We should start better, Asian markets are comfortably off their lows. A big data point in the US later, ISM non manufacturing.

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

07/07/2010

Jozi, Jozi. The yanks came back and so did all the action. A global rally from East to West, which topped out at around midday and then levelled off into a stronger US close gave the bulls something to cheer. Ironically on the day that the running of the bulls started, in a place that everyone has heard of and sort of knows where it is, Pamplona. Northern Spain. The bulls gathered momentum and spurred US futures, some arguing that on a fundamental basis that markets have never look this cheap in decades, so you should participate. But what are the levels telling anyone? And can market participants get it so wrong? To me the levels are always a reflection of what participants think on any one given day. On the whole, markets are hugely efficient.

Maude street shakes, moves and grooves. Session end the Jozi all share index had tacked on two percent plus, closing at 26723, up 541 points on the day. Banks as a whole were really strong, jumping over three percent. Broader resources rallied a little more than the rest of the markets, the only noticeable under performers were the gold stocks as the gold price came under pressure and the construction stocks which closed about flat yesterday.

Bart's shorts. There was of course chatter that continued around Cynthia Carroll and her appointment as chairwoman of Angloplat, and whether that was a good idea. Mostly mixed views is the feedback that I am getting. What is mostly mixed anyhow? BHP Billiton put out their chairman's statement and focusing specifically on the Aussie mining tax. ABIL spreading their wings. Nouriel and James. James who? You know who you are. Are the Obama policies and taxes really bad for business?

BHP Billiton releasing their chairman's letter to shareholders yesterday outlining the tax issues that all the mining companies face in Australia. As the letter points out however, "there is still a great deal of detailed work to be done before this tax is enacted and its impact is certain. We will work with the Government to ensure that the final outcome of the minerals taxation proposal maintains the international competitiveness of the Australian resources industry and is in the long term interests of all Australians." And not just Australians is where our interests lie, but rather the shareholders of BHP Billiton, who are spread across the globe. I think what I read into it is that whilst all parties feel a little more comfortable, the fact remains that Australia still has a high tax rate. Check out the whole letter.

This is a great snapshot of the copper majors and what their output was last year. And this again underscores why we like BHP Billiton, because of their diversity in the mining space. Not only are they a iron ore major, but here you can see that they are a copper major:
A table from Bloomberg, with production figures in thousands of metric tons, I have left the bottom three off the list. Remember that Codelco is the Chilean copper company that has really been able to compete with the global majors as a government entity. It does help when the skills WANT to work for you. Check it out.

Company Production 1. Codelco 1,781 2. Freeport-McMoRan 1,611 3. BHP Billiton 1,168 4. Xstrata 837 5. Rio Tinto Group 822 6. Anglo American 686 7. Glencore 671

I guess the comment that I made about BHP Billiton holds true for Rio Tinto here too, and Glencore remember have more than a third stake in Xstrata, so their copper production is actually higher than that, I guess. They would sit in placing 4 on the scoreboard. Dr. Copper perhaps used to hold true to this definition: "Many traders have affectionately referred to copper as "Dr. Copper," because it is considered to be "the only metal with a Ph.D. in economics." That is, copper historically has been considered to be an excellent barometer of the overall state of global economic activity because of its widespread use in industrial applications" I suspect that this holds true in a world 7 to 8 years ago. Dr. Copper is perhaps not the predictor that he or she once was, simply because the demand is from different quarters of the globe now.

And then perhaps one of the pieces of news that went under the radar screens yesterday. African Bank announcing that it had "listed a US$1,000,000,000 Euro Medium Term Note Programme on the London Stock Exchange." This is part of ABIL's diversification program, if you have a week of spare reading time, download the whole Euro Medium Term Note Programme and read it. Let me know what you think. Wow, what a long document.

As you can see from this Bloomberg piece on the note issuance program, African Bank Lists $1 Billion Bond Program in London to Fund Its Expansion the intent is to tap markets beyond ours. And I think it is clever, because with rates lower for longer, investors offshore are searching for yield.

Nouriel was on CNBC Squawk box yesterday afternoon our time. Gosh, he must have been spanked hard as a child. In fact he is so cool right now that the producers with the multiple boxes on the telly screen put him on twice, I tweeted it: Nouriels special CNBC double dip He of course has made a resurgence because all this talk of a double dip recession (ah-dubbel-dippa-reseshon) has made him more desirable to the media.

This is in no way an attack on him (OK, it is, I have something personal against him) but what is the extent of the funds that he manages? Or how much of his own personal wealth is actually invested in the equities, fixed income and property markets? Here is a Times article from back in June 2009 titled Fame and Fortune: Nouriel Roubini that gives you a little more insight. As an economics professor he could teach people to live comfortably within their means. He says "I regularly save about 30% of my income." Good for him, he has no spouse or children that are dependents, that makes it easier, right?

When asked if he still participates in the equities markets, and this is back then, remember, I am struggling to find something more recent, he said:
"I used to have a lot in equities — about 75% — but over the past three years, I've had about 95% in cash and 5% in equities. You're not getting much from savings these days but earning 0% is better than losing 50%. The 5% I have in equities is invested through an employee savings plan, known as a 401k. You make tax-free contributions from your salary, through salary sacrifice, and the employer also contributes."
"You decide how your fund is managed. I use Vanguard, a mutual funds company. It provides access to funds that track global indexes."
"The two main indexes I track are the US S&P 500 and the Morgan Stanley Composite Index of global stock markets. I don't believe in picking individual stocks or assets. As for actively-managed funds, I never saw the point of paying someone large fees for sub-standard returns."

I wish someone would ask him. Because he got it so wrong last year, and if you had followed his advice, you would have been saying some really stinky things about him. And he might well be right, in my industry however, if you make big short term calls, 18 months just doesn't cut it. It is not just me, read this fellow who has been following him since the early part of last decade: Nouriel Roubini Was Wrong, Again, and Again and Again... And then this more recent one about his calls specifically from last year, from the fellows over at Wall Street cheat sheet: A Chart of Roubini's Horrible Trackrecord in 2009.

On the complete opposite side of the argument and equally quirky is a fellow called James Altucher. Who manages real money, he thinks that the markets are going to go roaring back, and the S&P 500 will be back at 1500. Well, a hedge fund of funds (flag, sounds like fee of fees) called Formula Capital. And probably long of course and talking his own book, but at least he has a book to talk and is putting money in harm's way. On the same show as dear Nouriel (who we can call by his first name, like Cher or Prince, because everyone knows he is Roubini), Altucher said that "we're probably going to see about $80 in S&P 500 earnings — back out the cash on the S&P 500, we're trading at about 11 times earnings" Check out the video, if your bandwidth allows it, because of his resemblance to Alfred E Neuman aptly titled, What, Me Worry?. Love the interaction with the Nouriel. Dig the hair too.

Has Obama policies killed the radio star? Well, in some peoples minds, and in the words of the lyrics (video killed the radio star), people hang (or used to) on every word that Obama says: "Lying awake intent at tuning in on you." don't get me wrong, I dig the guy and think that he will leave a lasting legacy, but those around him setting policy in the short term are creating this perception Barack Obama: The great jobs killer. What do you think? Do you think that his policies will be vindicated over time?

New York, New York. The rip roaring early rally was scuppered by a worse than anticipated services PMI data point. In fact an around two percent gain at the best point on the day eventually saw stocks in the red in the afternoon, and the bulls were only saved by the bell, closing in the green with another late afternoon surge. I tell you, it must be tough there to predict the last half an hour, seemingly it can go either way in a hurry. The Royal Bank of Scotland (held by the tax payers of the United Kingdom) upgraded the stock of BP. And that stock surged. I also see that BP are quite close to plugging the well, going in through another side well. Whilst the stock was surging, the fellows over at BP were handing part of the bill to their partners in the leak, Anadarko and Mitsui. Yeah, thanks guys, here you go. All this whilst Tony "the spillman" Hayward hangs onto his job and gallivants around the world.

Wall Street wanders. This page tells you all that you need to know about where markets ended up. We should just all bookmark this page, right? It tells you what happened. The nerds, the broader market and the index chosen by a select few, sounds a little like FIFA.

Commodities, currencies, Drs. Copper and bushveld. The oil price last at 71.80 Dollars per barrel, lower on the session, the gold price lower at 1191 Dollars per fine ounce. Ditto the copper and platinum prices, 296 US cents per pound and 1509 Dollars per fine ounce respectively. The Rand crosses mixed at 11.57 to the Pound Sterling, 7.66 to the US dollar and 9.64 to the Euro.

Up periscope. We will start lower on account of the late sell off on Wall Street. Seriously, there is a case to be made for overlapping trading times all around the world. Or is the more or less 23 hour trading day what everyone wants?

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

08/07/2010

Jozi, Jozi. It was like meandering through northern France in the peloton and then bam, something happened, an American break away and the rest of the pack was trying frantically to keep up. You know, the cycling, the best advertisement for France every year, the most watched (live) sporting event, the tour de France. That is what it felt like, the Americans opened mid afternoon and suddenly markets were surging. Surely not Doug Kass, surely not. Much has been made about "the death cross on the S&P 500", which is not something that budding astrologists search for in the night skies, but rather a technical term where the 200 days and 50 day moving averages (MA) on the S&P 500 cross. With the 50 day MA below the 200 day. Because a chart of course told you everything that you knew already, the rear view mirror is important when driving, not when investing. We can get to the technical and fundamental argument later. Byron hates technical analysis, the mere mention of the word makes him mad. Try it when you call him.

Maude street shakes, moves and grooves. Our lowest point was around 11am on the Jozi all share index, the real kicker came much later in the day, we ticked up in the last hour of trade eventually, after threatening to do so several times during the day. Session end the broader measure of the markets had closed at 26854, up 131 points or around half a percent. Banks were the strongest of the majors, up nearly one and a quarter percent.

Bart's shorts. Aspen, will, they or wont they give Sigma a real wind. Aspen have lowered their price for the Australian distressed company, shareholders down under not happy. Mooi river is not just a pretty place, but rather a the point where a key piece of economic data comes out every month. And you know the best thing about it, the data, it is fresh and new, long ahead of the fellows over at the official releases. One more time, courtesy of the think tank at Greenfields farm, shot dudes. All this double dip talk is attracting more and more attention and making me hungry for octopus tentacles, all the rage in Germany as from last night.

OK, the Aspen deal or no deal is hotting up. Two points here, Aspen are not hell bent on doing a deal at any cost, they have looked at European generic businesses submitted bids and lost out before. The second point is that over here at Vestact we have enough confidence in the company management over at Aspen to believe that as big shareholders they would do the "right thing". A journalist asked me a few questions and I emailed her back, here goes the interaction:

First she asked: "Now that there's a bit more, and given today's release, would you be prepared to chat to me over the phone about whether a tie-up is a.) likely, given the lower bid and b.) desirable, given that Sigma has only recently released a profit warning?" And when she refers to a little more, she is talking about this release Aspen Sigma SENS Cautionary Renewal.

I answered: "Yeah, that is what a lot of people have been saying, perhaps they are being too cheeky, that is what the Aussie (well, actually Bloomberg, I wasn't thinking) media are saying:
Aspen Lowers Its Sigma Takeover Offer by 8.3 Percent
This line:
"The list of caveats there would suggest that there's still a lot of uncertainty," Dan Hurren, a health-care analyst at UBS AG, said by phone from Sydney. "There's a view out there that this offer is too low and Sigma can trade out of this, and it's undervalued. A lot of people think that," Hurren said.
Judging from what shareholders of Sigma appear to be doing, you might well argue that this is starting to hot up.
AUD = 6.5 ZAR
Aspen would assume net debt of A$785 million. = 5.1025 (bn Rands)
This seemingly is a Metorex slash Supergroup type scenario. I wouldn't be surprised to see Sigma with a deep discounted rights issue if shareholders kick up too much of a stink.
It is starting to emerge that with some sanding and a spot of polish Sigma, could look better than it does at face value, and hence the Aspen intent, remembering that they have made great headway over the years down under." I left her with the same thoughts at the beginning of this piece on Aspen, that management would do the right thing in their very well respected opinion.

How about that Mooi River index, that the collective we have been following for a few years now? You know, using the N3 measure of trucks with five axles or more going through the toll gates backwards and forwards, Durbs to Jozi. It went semi viral, thanks to Tim Cohen, turns out most people still read print. An interesting email that was a lot more insightful later on, but I promised not to use the juicy stuff, but rather this:
"I thought I was the only person to take a deep interest in commercial traffic and how it acts as an indicator of the health of the overall economy. The N3 is a great freeway to pick as a study (your article below). Imports come into Durban and a third are trucked up to Gauteng. Gauteng's goods are picked up and trucked to Durban for local consumption and exporting." Exactly. Stay tuned for the next edition.

Random insert. Possibly the funniest snippet to come out of anything in the foreign media related to our beloved vuvuzela, was a lame Wall Street Journal video, where they superimposed Sarah Palin's head on someone who asked, Did you see that "Vuvuzela, isn't that next to Columbia?"

Also hotting up is the debate about a double dip, is it going to happen or not. Roubini, Taleb, Ferguson, Rosenberg, all the bears cases are being advanced as the recent economic data points turn worse than anticipated. All back in the limelight, we care less whether they got the short term picture right, because doom is back. These types of views: Here's Why The Great Recovery Is A Big Fat D.U.D.D.

Soft patch or double dip, it will feel like a recession, even if it technically is not is what most of the bears will say. So the technical version of a double dip is when a downturn in the economy sees a temporary recovery and then GDP turns negative again. If you can imagine two or more quarters negative economic output (against the comparable quarter the prior year) and then seeing recovery and positive economic output. And then the double dip, which is nice when you are ordering ice cream, but useless as a bull, economic growth splutters and there is another negative quarter or two.

And then there are the cases that the bulls are advancing, the most recent one is Doug Kass, a famous bear. Not from East London. Remember the grammatically incorrect tweet a few days ago, well here is some mainstream follow on: Doug Kass: Market Has Made Low For Year. Thanks Doug. I suspect that the main problem for finding the bottom or believing that stocks will go lower or higher is that there is conflicting data. Check this out: 5 Questionable Arguments Against the Double-Dip. And then perhaps the most level headed argument so far, from the new normal PIMCO guys: El-Erian: The Consensus Has Changed, Now Everyone Is Looking For "Self-Insurance".

This is a great interaction between myself and a client (let us call him Mr. Client), what do you think?
Mr. Client: "I think there is a difference between "the markets reflect what participants are thinking" and actually true efficient markets. If I am wrong in this, which is quite likely, then I would like to know what it means to say that markets are efficient. Because to my mind, markets reflect several things, correct pricing might be one of those things (is that efficiency?), but surely markets also reflect fear/hope/greed. Are the latter proper components of an efficient market ? If so, then the term "efficient market" is pretty meaningless from the point of view of true underlying long term value."

I used my email as an opportunity to say that markets had changed over the years: "In the "old days" market participants were more inefficient than they are today. I do believe that markets are efficient, but there are many more participants and trading models that are not determined by individuals and are machine trading algorithms. That cannot tell whether a company is cheap or not, they trade around the price specifically, and we saw that the systems are inefficient, remember the flash crash?
So it is important to separate short term price movements (trading) and stock valuations (investments).
I would like to think that it is all baked in the case and the daily market participants reflect what the mood is on any given day."

But then Mr. Client fires back, quite rightly: "You seem to be saying that markets are not efficient after all – "mood" is just a reflection of fear/hope/greed, is it not?"

And then I tried to explain what is essentially a philosophical open ended discussion, in a few lines: "It is, but mood, fear, hope and greed are human qualities. Machines and algorithms can't feel, equally humans can't move as nimbly, or calculate. It always counter balances itself.
If we always rated markets at historic multiples, it would aggregate earnings and get to a multiple and give the individual stocks and indices the "right level" at the end of each quarter.
Markets are predictors and the news flows reflect what the participants are thinking at any one given time about the future."

Mr. Client ended with some telling arguments, predictions are not so useful: "I think it is still unclear from your arguments that at any one point in time the market truly reflects perfect efficiency or even something close to it (notwithstanding your discussion in reply to my queries). I also query the value of historical information because "things" are changing all the time. And this is one of the reasons I am critical of investment models that use mean and standard deviation and correlation coefficients of one class with others – it has been shown that one gets different results depending on the precise historical period chosen – just a few years in, for example as much as 70 years, can upset things. Moreover, averages are very dangerous things and standard deviations even more so and so too correlation coefficients and can hardly ever be relied upon to give one a good prediction of "what's next"?"

New York, New York. Volatility plunged, stocks soared. As various market reports pointed out, there were few clear catalysts. I think that is not true, it was exactly the opposite when markets go down and market reporters have run out of reasons, they blame profit takers. So clearly this must be a whole host of reverse profit takers. Let us stick with that theory, rather than say something equally stupid, like, markets are bouncing off oversold levels. I can't wait for company earnings.

Wall Street wanders. Up and away, stocks flew. Took off. The Dow closed at 10018, up 274 points. Having threatened to go under 1000 points the S&P 500 roared to 1060, up 32 points. The nerds of NASDAQ added a whopping 65 points to close out shop at 2159.

Commodities, currencies, Drs. Copper and bushveld. The copper price was last at 302 US cents per pound. The gold price 1204 Dollars per fine ounce, the platinum price last at 1534 Dollars per fine ounce. The oil price is much better at 74.76 Dollars per barrel. The Rand firmer, 11.52 to the Pound Sterling, 7.59 to the US Dollar and 9.60 to the Euro.

Up periscope. We should start a whole lot better than yesterday.

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

Jozi, Jozi. Another day for the bulls, isn't it bizarre that the rally this week has coincided with the running of the bulls? Or not, the running of the bulls in Pamplona happens every year, markets are open then, it is bound to happen all the time. The IMF upped their target for global growth for the year of 2010 from 4.2 percent to 4.6 percent. Whoop dee doo, but can you predict football match outcomes like an octopus called Paul? And apparently the German octopus has a rival, a parakeet called Mani, I kid you not. Both the central banks of Europe and Britain kept their respective rates on hold, and they said that all their interventions and programs were appropriate right now. Perhaps the most telling data point for the day was weekly jobless claims, which have been heading in the wrong direction. There was a marginal beat, and from that point on we were always going to close higher.

Maude street shakes, moves and grooves. The shaking and grooving was left to Nedbank, could you believe that the same old rumour about a British bank looking at a South African bank raised its head once again. Nedbank surged nearly four percent on the day, comfortably ahead of the other banks. Hardly what you could call very excited market participants, the supposed suitor, HSBC ended the day nearly 1.4 percent up in London. The Jozi all share index closed up shop at 27061, up 206 points on the day, a gain of 0.77 percent. Off the highs, but not by too much, around a quarter of a percent. Predictably banks and financials had a good go of it, helped by the Nedbank rumour. Construction stocks enjoyed another day of completely nothing.

Bart's shorts. Same rumour, same suitor, different source, I am talking about Nedbank here. Massmart release a sales update for the full 52 weeks of the year. Short term means short term, forget past records. Annual uranium sales, who are the main folks that count in a strange sort of market. Hugo Chavez has spawned a new currency, and it is made of cardboard paper.

Is this where the HSBC story broke? On the Sky news blogs? Here: Exclusive: HSBC Hires Lazard For Possible Nedbank Offer. Mark Kleinman is his name, he hasn't been at Sky for long, but seemingly from his bio lived through the worst of times, like us all. No doubt in his fox hole.

Lazard, who are they? Well, from this graphic, no presence in South Africa. I don't know what to think about any of this, other than I have heard this many times. Through the shareholder register from all of six months back Lazard asset management US, probably some of their funds and clients, own 6 percent of Nedbank. But that means nothing, you have to talk to Old Mutual, who own over 52 percent. I almost want to throw my hands up in the air and say, I have heard this rumour so often that I care less unless someone somewhere sticks something official on the wires.

Massmart releases a sales update for the 52 weeks to 27 June 2010? And the outcome from the company release is a whopping: "R47.5 billion, representing growth of 10.1% over the prior year's 52-week period, with overall deflation estimated at 0.4%. Comparable store sales increased by 2.6%. Excluding African sales from both periods, the Group's total sales and comparable store sales increased by 12.1% and 4.5% respectively."

And here is the picture across the divisions, if you forgot or need a refresher on the breakdown, then visit Massmart's website. Here goes: "Divisional total sales growth for the 52-week period to 27 June 2010 (comparable sales are shown in brackets) were as follows:
- Massdiscounters increased by 8.5% (3.2%) with estimated deflation of 4.2%;
- Masswarehouse increased by 3.6% (3.6%) with estimated inflation of 2.8%;
- Massbuild increased by 13.9% (3.4%) with estimated inflation of 1.8%; and
- Masscash increased by 14.5% (0.6%) with estimated deflation of 0.6%." I would say on balance neutral for where we are now, but as Paul pointed out, if you had said this time last year that sales would be nearly 48 billion Rands, most would have said that was too bullish.

This is amazing. These are one month's worth of June Sales: How Retailers Fared. See Costco's one month sales more than Massmart's annual sales. Obviously they have access to a much broader base of wealthier people, but I am just saying.

Ha-ha. I heard a business news anchor say that we have these days where it is risk on and risk off to my favourite currency guy, an Algerian fellow who lives in New York, Ashraf Laidi. Kind of like wax on and wax off, you remember Daniel-San in that bad karate movie? And that leads me to my next piece, about short term thinking. Let us call it what it is, without knowing the specifics, the guy made a lot of his investors bucketloads of money, but that is history, because now this is the headline: Paulson Said to Lose 6.9% in June With Advantage Plus Fund. When you are up with the stars you get a chance that everyone is going to knock you down. I might not agree with Paulson's current calls, but hey, is it enough to have pulled the money?

Staying with production figures, two days ago we had copper production for the whole of 2009. Check out the uranium mining companies output: All the figures are expressed in metric tons.
Company ProductionAreva 8,623Cameco 8,000Rio Tinto 7,963Kazatomprom 7,433Uranium Holding ARMZ 4,624BHP Billiton 2,955Navoi Mining 2,429Uranium One 1,368Paladin 1,210General Atomics/Heathgate583
In response to my piece last week on global GDP, a client sent me something interesting, he looked into this a little closer. Just to remind you, this is clickable away to the link: Gross Domestic Product. So here goes:

"A comment on South Africa's GDP growth
Looking at the World Bank link which has a table of the GDP of countries around the world for the period 2005 through to 2008, I was surprised to see how little South Africa's GDP in $ terms had grown - 14% over the period. I then looked at a number of other countries which had far bigger growth. For eg, the BRIC's - Brazil 78%, Russia 120%, India 43%, China 93%. I then looked at another mining country Australia, and it showed growth of 51%. What about Africa? Nigeria 85%, Malawi 50%, Mozambique 50% and Zambia 100% all showed good growth. However, in keeping with SA, most of the SACU countries had low growth like RSA, with only Botswana showing fair growth of 30%. I guess one can argue that some are showing good growth off low bases and some have oil, but it does not paint an encouraging picture?" I suspect that the African economies have grown off really small bases but the BRIC comparisons are justified.

Hugo Chavez can now be responsible for the creation of something completely different. Who needs central banks when you have your own people replacing your national currency with pieces of cardboard? Don't believe me, check it out: Venezuelan Socialists Replace National Currency With Small Pieces Of Cardboard. I dig the passing shot, "If only there were a way to short this."

This is just one side of the story, my wife always tells me that there are three sides to a story, their side, your side and the truth. In rural Venezuela many of the locals have benefitted as a direct spin off of oil money, free healthcare, better living conditions, and Chavez has entrenched his support base here. Of course the economic reality is that the country with a GDP similar to ours is sucking wind. An internal view, even if it is seemingly biased does not paint a pretty picture for Hugo Chavez: VenEconomy: And Then He Came Up Against the Economy. How he deals with this, all very nice for freebies, but eventually the chickens come home to roost.

He has lost the plot old Chavez, as Venezuela arrests two for banking rumour Tweets. Via the Daily Maverick. Who is the twit now? Why do I even care about Venezuela? Because, they have done the opposite of Russia, China and Brazil, they have nationalised assets and not privatised. Just pointing out a real life example of an economy similar in size to ours and similar in its reliance on the mining sector, energy in their case. Plus how populist policies have panned out.

New York, New York. Doug Kass tweeted last night that "market looks a bit tired. as i mentioned earlier some backing and filling would be healthy $$" Dude, I know that it is social networks, but your English grammar teacher must be appalled. Kind of like mine :-) OK, all the same reasons that saw our markets jump, the IMF statement, plus the weekly employment claims dropping, that was a positive. Again the last hour of the trading day determined where the markets would end up. I saw the ever unshaved Paul Krugman with his op-ed piece Pity the Poor C.E.O.'s bash all those types that have been calling Obama anti business. And he is just explaining the cycles.

Wall Street wanders. The Dow closed at 10138, up 120 points whilst the nerds of NASDAQ added nearly 16 points to 2175. The broader market S&P 500 added 9.98 points to close out shop at 1070.

Commodities, currencies, Drs. Copper and bushveld. The oil price last traded at 75.90 Dollars per barrel. Dr. Copper last at 305 US cents per pound. The gold price last crossed the wires at 1198 Dollars per fine ounce. The platinum price is 1528 US dollar per fine ounce. The Rand is a bit mixed, 7.56 to the US dollar, 11.48 to the Pound Sterling and 9.60 to the Euro.

Up periscope. We should start much better again, thanks to a late push on Wall Street.

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

Jozi, Jozi. We were up all day here in Jozi on the markets, global happiness returning and it really was a good week for equity longs from Tokyo to Taipei and back again. Oh, and for the record Paul the octopus trumped Mani the parakeet, a wanabee animal football predictor, there can only be one Mani, sorry. Time to get Paul the octopus a new job, predicting markets daily. Resources ruled the roost Friday, there wasn't a great deal of data or company news to take away and digest ahead of one of the biggest sporting events on the calendar. Ever. And pat yourself on the backs, I think that we did a great job in being hosts, even if our team did not progress beyond the first round, having had a look at the FIFA rankings you might well suggest that we had the toughest group. What comes out of the tournament will be important for us, perhaps if one has family or friends who have never been here, ask them if they saw sights and sounds that would make them come here, or invest here. And then relay it back.

Maude street shakes, moves and grooves. There was a trading statement from the fellows over at Kumba Iron Ore, again the dispute with Arcelor Mittal is not solved yet, which is a slight problem I guess. But a great trading statement, more on that later. The fellows from Telkom said, September gone in July, Jeffrey Hedberg is the new guy at the helm of the Telkom ship. With all due respect to September, Hedberg is well regarded in local telco circles. Session end the Jozi all share index closed at 27272, up 211 points on the day which is just a little more than three quarters of a percent.

Bart's shorts. Sigma tell Aspen that they need to rethink their potential deal down under, thanks for the time being, but raise your game is the call. Kumba Iron ore still have a strange relationship with Arcelor Mittal. Stressed out banks in Europe, debt holders are looking for more clarity over the next few days, which ties nicely into the next bit about sovereign debt. Tackling unemployment in the US, is it dark in Sun Valley, or is this all rather short term in our thinking? IT got the cash, yes they do, IT got the cash, how about you?

I guess if you don't try you don't get, perhaps Sigma shareholders and the board reckon that the business might well be able to survive under the mountain of debt, if they are a little more nimble. The Australian reports that with the rejection, Sigma have found new life: Sigma boss Mark Hooper turns to generics to reject Aspen's bid. The end for Aspen in this very short chapter? I don't know, they have taken a look under the hood and lowered the offer, that tells me all I need to know. As the article points out, Sigma has to roll over some debt early next year. So who knows the extent of it all, Aspen might have been courting some of the key shareholders. It aint dead in the water, but Aspen might need to cough up, as AFR reports, Sigma says will work with Aspen on offer.

Kumba Iron Ore came out with that aforementioned trading statement on Friday. Check it out, from the SENS release:
"...shareholders are advised that earnings and headline earnings are likely to be between R6,100 million and R6,600 million, with headline earnings per share ("HEPS") and earnings per share ("EPS") being between 1,900 cents and 2,055 cents." Where the comparative period was 1,076 cents and 1,073 cents respectively. Phew.

Reasons for the big jump in earnings? "The increase in earnings is largely attributable to an increase in export iron ore prices and a 10% increase in export sales volumes in the period." And perhaps a slight revelation, although we do know that this is happening in the background: "From 1 March 2010 Sishen Iron Ore Company (Pty) Limited(a subsidiary of Kumba) has invoiced ArcelorMittal South Africa Limited (ArcelorMittal) at market prices. ArcelorMittal has paid only cost +3% on purchases of 1.452Mt of iron ore from Sishen Mine. In determining earnings for the period Kumba has accounted for revenue at cost +3% to ArcelorMittal, in the absence of agreement on an interim price." That must make for a few awkward moments and phone calls. Errr.. the bill says this and you paid that. Errr... got to go, have another call, keep that iron ore coming, later!

Staying with resources, you saw that piece on uranium production from last week, that table, that suggested that BHP Billiton was the sixth largest uranium producer in the world. That freak of an asset, Olympic Dam is obviously key for BHP Billiton, the single biggest deposit of uranium in the world. Plus the fourth largest copper deposit. Plus the fifth largest gold deposit in the world. And there had been some suggestions that because of the lower uranium price that expansion might be on hold. But this seemingly is not the case: BHP Billiton: Olympic Dam expansion review on track.

Stressed out? Well, folks trading the credit default swaps on EU banks are starting to become less edgy. Bloomberg reports this morning that Bank Swaps Show Stress Fears Ebb as Bonds Rally: Credit Markets. You can see that CDS levels for European banks are at eight week lows which of course are a direct translation on the recent equities rally. Bloomberg reports that EU Ministers (are) Under Pressure to Provide More Stress Test Data. We need the results are what the bondholders are screaming for. Give me. As many market pundits are pointing out, if all the banks come through with flying colours market participants will give them a big fat raspberry. So we wait, and interestingly the Greeks are due to try and raise funds later this week, that might be a more important test.

Isn't this next piece just brilliant. It is titled: Part 2. How Often Have Sovereign Countries Defaulted in the Past? Take a look at the third part 1981 to 2003, and you will see South Africa's name thrown in there. And about all of Africa through the eighties all the way up to the much publicized Zimbabwe defaults of this last decade.

Read the first part of the argument which talks about the debt that governments have racked up over the last few years, focusing on 2007 through 2009, titled: How Large is the Outstanding Value of Sovereign Bonds?. The next part which we shall have to wait for, will tie in nicely with the European stress tests on the banking sector. And if that is not enough for you to worry about then the New York Times points out the obvious with this piece over the weekend: Crisis Awaits World's Banks as Trillions Come Due. I am always reminded that a crisis feels worse when you are in the midst of it.

Unemployment remains high all around the world, but in the US it is a problem politically. As is it here, but we seemingly worry about the problems, but have few answers. Felix Salmon has a few insights and points in his Reuters blog: Attacking unemployment where he takes a whole lot of views from some important summer time pow wows. Places like Sun Valley where Caution Still Reigns. What I take away from this piece by Felix Salmon is simple, entire regions and countries need to take a look at what they are doing around improving the long term. Perhaps that is one area where you could say, we are all in the same boat.

A direct result of folks being uncertain about the future is that companies rather than expanding, they sit on their hands. Check out this piece, well timed just ahead of earnings season: More evidence on "hoarding cash". AD = aggregate demand. A lot of technology companies with an enormous amount of cash. There is a recent Economist article that again highlights that companies must do more: Show us the money - For the recovery to proceed smoothly, firms must stop hoarding cash. Until there is complete confidence, I guess the cash pots of these IT companies might well give them the proverbial continued honey pot attraction by the investor bees. Strange aint it, whilst government incurred record debts, this WSJ article points out (a little old) U.S. Firms Build Up Record Cash Piles. All part of the cycle I guess.

New York, New York. The final hour again, seeing stocks ramp up after a pretty listless day tells me that the next look might see inflows into the market. Wow, the best week for stocks for the whole of 2010 is what Briefing.com is telling me. This is the big week of second quarter earnings, where we hear what CEO's are seeing in the medium term, what their business suppliers and customers, more importantly. Are they hiring, are they expanding, what are their medium term plans. Because this stuff you can't put on a spreadsheet.

Wall Street wanders. Session end the Dow closed at 10197, up 58 points, the nerds of NASDAQ were higher by 21 to 2196 and the broader market S&P 500 up by 7.68 to 1077.93.

Commodities, currencies, Drs. Copper and bushveld. The oil price was last at 75.59 Dollars per barrel, the good Dr. Copper at 302 US cents per pound. The gold price at 1208 Dollars per fine ounce, the platinum price lower at 1528 Dollars per fine ounce. The Rand is weaker at 7.62 to the US dollar, 11.40 to the Pound Sterling and 9.56 to the Euro.

Up periscope. Passing shot. We should start a little worse this morning. The JSE has technical problems this morning though. Happy birthday Mom!

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

Jozi, Jozi. We did not start until ten thirty here, perhaps basking in the glory of our performance to deliver a world class event almost perfectly, the only spot was the ACSA incident last week at King Shaka airport. Other than that, the few fans that I engaged with had a great time, and we should thank the international media for having bashed us so much and having set the bar so low, because we managed to deliver a great tournament and blast everyones expectations right out of the water. So, thanks for the bashing, now, how about the apology? How does that work, or does it just not? Markets closed the day close to their highs, we did manage to hang onto some slim gains as we went into the last part of the afternoon. And I was going to suggest that Paul the octopus gets to call markets, but apparently he has hung up his predicting tentacles. As for Mani the parakeet, he will retreat back into parakeet obscurity.

Maude street shakes, moves and grooves. Platinum stocks performed the best out of the majors, up nearly 0.9 percent, construction stocks got a break and closed two thirds of a percent higher, whilst the broader retail sector was also lifted, up 0.8 percent after all was said and more importantly done. Not winning was the broader resource sector, down around two thirds of a percent, banks off a little over half a percent at the end of the session. Not too much on the company news front it must be said. Not too much economic data around, the poms had a little on the go. Session end the Jozi all share index closed exactly 80 points lower to 27192. I still need to remind you that our markets are off by a mere 1.7 percent this year.

Bart's shorts. Alcoa kicks off earnings season, with a marginal beat, but that is a good thing, right? The Chinese economy, we want that to slow, right, why is everyone so anxious about Chinese curbs. Plus the fellows from Moody's have kicked Portugal's debt rating down the road.

Alcoa reports numbers and we all take notice. Is it simply because they are the first Dow Jones constituent on the earnings calendar? I suspect so, perhaps for historical reasons too, their ticker is AA. The company is an aluminium producer, however you want to spell that word, I have seen variations. We are talking about a company that services companies that manufacture everything from airplanes to tin cans. Consumer electronics to construction. And of course the automotive industry, our beloved vehicles.

Sales of nearly 5.2 billion Dollars for the quarter, annualise that and you get to nearly 21 billion Dollars, so lets say that you can compare this company in terms of sales to a Sasol, using a South African company example. Which for the record sits in fifth place on the ranking tables locally for turnover, behind BHP Billiton, Old Mutual, British American Tobacco and Anglo American. OK, so a big company in a South African context, in a US context this is dwarfed by revenues from the likes of Exxon Mobil of 310 billion Dollars a year.

I know you are all wildly interested, so download the Alcoa Q2 results and have a look at the analyst presentation. The company has a pretty good outlook, seeing "improving demand in most regions, including Russia, China, and Europe."

They make some good long term points, check out page 16 of the presentation where Alcoa points out that the global population is set to rise from 6.6 billion in 2006 (almost 6.8 now) to 7.9 billion in 2025 and over 9 billion in 2050. So what, you say. Well all those people need to consume goods, from consumer electronics to drinks in cans, to flying in airplanes. And the urbanization trend if quite interesting too, remember that a couple of years back we ticked over to modern civilization for the first time ever having more folks in urban areas than in rural areas, and that is set to continue.

OK, so if the global population is roughly 6.7 billion and half of those folks live in urban areas, that is 3.4 billion people. If that trend is set to be somewhere in the region of 60 percent in 2030, we should have around 8 billion people on the planet (possibly more) at that stage. 60 percent of 8 billion plus is somewhere around 4.8 billion people. So that is 1.4 billion people plus that need to be urbanized in the next twenty years. Roughly the entire population of China and Mexico put together. Industrialization in the internet era with improved medical access for many. That helps a lot. Check out page 19 of the presentation, turns out Europe isn't finished.

This drives me mad. Alcoa comes out with results that are better than anticipated and the wires all chat about the recovery being intact. If the company had missed by a few cents then we would all be saying, oh, global growth is going to be slower and lower, see. Here is the positive view: Jeff Saut: Sorry Bears, Signs Of An Economic Rebound Are All Around. But that is obviously the bullish case for stocks, this is the bearish case, the good old professor Niall Ferguson: A US Fiscal Disaster Is Imminent, And Bernanke's Monetary Policy Is Appalling. Yeah, yeah.

This also drives me mad. Six to nine months ago everyone was worried about the Chinese economy overheating and that efforts are needed to slow the economy. And now the officials (HQ Beijing) have stepped up to the plate and introduced all sorts of lending curbs and now everyone is anxious over a slowing Chinese economy. Err.. I thought that is what everyone wanted? See the latest China's Stock Futures Drop as Government Maintains Loan Curbs. The curbs relate specifically to the property markets. Where, correct me if I am wrong, the US in their infinite wisdom according to the aforementioned Ferguson, the folks setting monetary policy got it all wrong. Which works better then, direct political intervention, or indirect political intervention?

What is happening to Nicolas Sarkozy? His approval ratings are at an all time low. Well, the answer might lie in the fact that the politician is completely out of touch with the people. Remind me, when are politicians in touch with the ordinary person on the ground? Do you remember the great French children's book called "Le petit Nicolas"? About the little boy who always gets into trouble but manages to deflect attention away from himself. There is a scandal that has been brewing in the background involving his cabinet members, France's top echelons of society and brown envelopes. The kind of stuff that happens when you involve politicians.

They obviously are in a bad Moodys this morning. Moody's have downgraded Portugal's debt by two notches. Ah yes, problems re their debt-to-GDP, I guess that was public knowledge a long time ago. Congratulations on being so speedy. I guess what the ratings agencies are trying to do here is make sure that they don't make the same mistakes, as they made in the past. So, lower revenue collection should see the markets decide what they want to pay for the countries bonds. And stay tuned folks, Greece is going to try and raise some money in the open markets.

New York, New York. Stuck stocks waiting for earnings. A new ban on offshore deepwater drilling, until the 30th of November did little exciting for both the service providers as well as the producers. It was actually all about waiting for Alcoa. Who beat the street after market. The markets bottomed out mid morning and then proceeded to creep all the way back to break even. What the news types will call a choppy session. There was a treasury auction where the Government managed to get away 35 billion Dollars worth of three year notes on an all time low yield of 1.06 percent. And the question was for everyone, who is buying US government debt? Clearly they are not listening to that fellow Ferguson.

Wall Street wanders. Session end the Dow Jones closed at 10216, up 18 points, the broader market S&P 500 hardly moved, up 0.79 points to 1078 whilst the nerds of NASDAQ having wallowed deep in the red managed to just close better at 2198.

Commodities, currencies, Drs. Copper and bushveld. Dr. Copper last at 297 US cents per pound, the gold price is higher (on the past six hours or so) at 1204 Dollars per fine ounce, the platinum price also higher in the last little while at 1522 Dollars per fine ounce. The oil price is about unchanged at 74.93 Dollars per barrel. The Rand is firmer at 11.44 to the Pound Sterling, 7.59 to the US dollar and 9.53 to the Euro.

Up periscope. Wow, we should start slightly better on account of a US hurrah in the second half of the day, but Asia was slightly lower on balance.

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

14/07/2010

Jozi, Jozi. Have the ratings agencies lost their mojo, and one specifically, the fellows from Moody's, or is the market less anxious about sovereign default amongst the PIIGS economies of Europe? Perhaps a little of both, but I am sure that if this downgrade had happened six to eight weeks ago when anxiety was that much higher, then we would have definitely seen market participants reacting with a lot more force. Probably helping the situation in terms of the nerves settling was that the Greeks managed to get away 1.625 billion Euros (2.04 bn USD) of six month treasury bills away at a relatively cheap 4.65 percent. Remember that the Greek ten year yields over ten percent. Before you get too excited, the similar rate offered in January was a paltry by comparison 1.38 percent. But the fact that the Greeks have participated in the debt markets, and that they managed to get a little more away than anticipated, was a net positive.

Maude street shakes, moves and grooves. Up, up and away. Thanks for that Moody's, but we are not in a bad one, we are in a good moody's said equity market participants. And they bought stocks, we started lower on the day, but surged higher and although we closed off the three o'clock highs, we were 303 points or 1.12 percent higher on the Jozi all share by the close. Which of course is 27495 points, if the level is important at all, I suspect that of course it is. The biggest losers was an index called fixed line telecommunications index, you know, Telkom. We will tell you why a couple of paragraphs lower. Other than that it was pretty much a broad based rally across the indices in a chilly Jozi, thanks for all your snow you people from the Cape. My mother tells me that the mountains around here were covered with snow on the weekend.

Bart's shorts. Last name Simpson Nelson, first name Bart Peter. Come on everybody let's do the Bartman Telkom board shuffle. Naspers, where there is no time to rest, at all. ABC – always be closing. Deals that is, the company announcing that they are going to be folding some of their existing assets into Digital Sky Technologies (and pay some cash) in return for a bigger direct stake in the company. The French celebrate Bastille day, where the current leader is just as much out of touch with the people as the ones 221 years ago. Today we have processes, back then we had revolutions. When was the 1929 S&P 500 high actually eclipsed again, on an inflation adjusted basis? Thanks Felix "the cat" Salmon for pointing this out in a tweet this morning, PIMCO "the new normal" geniuses have launched a bunch of GDP-weighted sovereign debt indexes. Felix Salmon thinks this is a great idea.

Telkom. Next generation, or touch tomorrow, or whatever you want to call this part owned government business. With the recent ousting sidelining of ex chief September and the entry of new chief Jeffrey Hedberg there has been another big board shuffle. And perhaps it is a case of he wanted the job and did not get it, or there might be personality issues that we don't know about, but the SENS release is short and sharp, and in fact tells you about all you need to know that this is not a happy ending: "...shareholders are advised that Peter Nelson has informed the Board of Directors of Telkom ("the Board") of his resignation as director and Chief Financial Officer with effect from 9 October 2010. The Board thanks him for his valuable contribution to Telkom and wishes him well in the future."

OK, so that is where "things" seem to be going badly. The stock price of Telkom down 3.4 percent, on a day when the overall market was up over a percent. That tells you about all you need to know. Techcentral have learnt that Nelson actually left last Friday, because of the way that the company was being run. Why are we surprised. This is and has always been one of the main reason that we have avoided Telkom in the past, because management and frustrations are the order of the day. The stock might seem cheap, but I say for a reason. Duncan Mcleod (Techcentral editor) tweeted last night: "It's really sad what's happening at Telkom. It didn't have to be like this. Government is to blame for the mess. All so predictable."

Where "things" seem to be going well, a company called Naspers. With still a strange sort of control structure, that sort of worries me. A fairly big announcement this morning, lets check it out: "Shareholders are advised that a subsidiary of Myriad International Holdings B.V. ("MIH"), an indirect wholly owned subsidiary of Naspers, has entered into agreements regarding its interest in Mail.ru, the leading Russian internet communication and gaming company. MIH will exchange its 39,3% stake in Mail.ru and invest a further US$388m (R2,9bn) cash to obtain a 28,7% economic interest in Digital Sky Technologies Limited ("DST") (the "transaction")." Excellent, we will have to look at the impact of this in the coming day, but here is a company that is more than a little interesting.

It is Bastille day today, this day 221 years ago where French commoners stormed the castle and threw out royalty that were completely out of touch with the realities of the common folk. To replace them with politicians like the incumbent Sarkozy, who is completely out of touch with the common people. And doing such a bad job that his ratings have fallen to a 1 in 4 approval rating. The austerity measures, in particular the change in retirement age has not exactly been cheered, by anyone actually.

But, these are necessary evils. My mothers side of the family all live in Paris and have done so for decades, around half a century in fact. It is no secret that my uncle has nothing short of a great job. He may be really good at what he does, in fact of course my family tell me that he is, but his annual holidays seem too good to be true. I think what I am trying to say, is that the short term measures taken by the governments in a European context might feel unfair, but perhaps the decades of overindulging where equally unsustainable. That is all. So perhaps the PIMCO new normal holds true.

This is absolutely awesome. Not really, because folks like to talk about the great depression a lot. Especially in light of recent events of our time, the great period of oh dear when credit was too freely given to homeowners that could not possibly have afforded them, and then the chickens came home to roost when the assumption that home prices always go up did not hold true. That period. But what about the equities markets? The equities market rally post the great depression was slow and was interrupted by the second world war, which the Americans entered in late 1941. But this is fascinating, because many folks say, well the S&P 500 only regained the 1929 highs all of 20 years later in 1949, it took twenty year. The Japanese wish that the December 1989 highs were anywhere close. But the Business Insider has done some aggregating and Doug Short has come up with this piece: When Did The U.S. Market Really Regain Its 1929 Highs?

As you can see from the charts adjusted for inflation, that not only did an inflation adjusted inflexion point only took place in 1985, all of 56 odd years later. More interesting is this notion that the highs of the S&P in 2000 have been eclipsed by some margin, topping out at around 1550 in October 2007, but the comparable March 2000 peak of the S&P, on an inflation adjusted basis sees that we are still 30 odd percent below the real level, just to have broken even. What is more worrying interesting is that the October 2007 highs on an inflation adjusted basis is only 2.5 percent higher than in 2000. Where this falls quite flat is that there are no adjustments for dividends. For example if you had bought GE in March 2000 for 55 Dollars, at the current level of 15.21 you are still looking rather worse for wear. But they would have paid you 8.40 bucks over the years. So a little more than half of the current price. Bad example on the price, but you see what I am saying about the dividend.

Hey Apple! What is up, did you sell a lemon? There has been much talk recently about the signal strength of the new iPhone 4, especially if you touch the outside ring, the signal seems to drop. And this has worried several consumer watchdogs in the US, so much so that they have dissed the new product. Pundits have said that the fans are a loyal bunch, the others out there have pointed to a tipping moment for the competition. All I can say is that folks voted with their feet, but as we know, Apple fans are loyal.

Intel. Chips and watch out, Bloomberg reports Intel Forecasts Add to Evidence That Economy Getting Stronger. What a twist! Over here at Vestact we are optimistic that the future turns out almost always better than you think. Amazing, 80 percent of the worlds PC's have Intel chips.

New York, New York. All rise, the honourable earnings are in town. Financials were the winners, everyone cheered the earnings from Alcoa and perhaps that was the kick off for the earnings season that everyone needed. Today we have retail sales and FOMC meeting minutes. As Briefing.com pointed out in their closing update, treasuries also attracted favourable attention: The stock market's strength kept steady pressure on Treasuries this session. They weren't helped by the latest 10-year Note auction, which was met with a bid-to-cover ratio of 3.1, dollar demand of almost $65 billion, and an indirect bidder participation rate of 42%. The prior auction produced a bid-to-cover of 3.2, dollar demand of $68.0 billion, and indirect bidder participation of 40%. The only items on the economic calendar included a June Treasury budget that showed a $68.4 billion deficit, which is not quite as steep as the $70.0 billion deficit that had been expected, on average, by a sample of economists polled by Briefing.com. There was also a Trade Balance for May that showed a $42.3 billion deficit when a $39.4 billion deficit had been expected, on average, by a sample of economists.

Wall Street wanders. The Dow Jones Industrial Average closed 146 points higher to 10363, the nerds of NASDAQ better by 43 to 2242 whilst the broader market S&P 500 up by 16.6 to 1095 points. Ah yes, still only 450 odd points to go till we reach those October 2007 highs.

Commodities, currencies, Drs. Copper and bushveld. The oil price in New York last clocked 77.05 Dollars per barrel. Dr. Copper last at 302 US cents per pound, the gold price last at 1212 Dollars per fine ounce. The platinum price better, last crossing the screens at 1529 Dollars per fine ounce. The Rand is firmer, last at 7.51 to the US Dollar, 11.44 to the Pound Sterling and 9.56 to the Euro.

Up periscope. Thanks to the fellows over at Intel we should have a positive steer.

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

Jozi, Jozi. We started much better for the day, thanks to what one could term the Intel factor, the worlds biggest PC chip maker. I was so tempted to say PC computer, but refrained. Darn, there I went. We slipped away in the afternoon after headline retail sales in the US for the month of June softened, a second consecutive month. You know the old saying, understand the consumer that matters and the rest falls into place. In this case the core number was inline with expectations, the core number of course (of course) excludes transportation. You know, big ticket items like airplanes and not so big ticket items like motor vehicles. Stuff you don’t buy very often, or not at all, I doubt that most of us will ever buy an airplane in our lifetime. Local retail sales beat the street, excellent.

Maude street shakes, moves and grooves. So we gravitated lower and closed down on the day on the Jozi all share index, at 27443, that is lower by 52 points. The construction stocks caught a break, hey, up three quarters of a percent. That sector as a whole has seen a couple of really miserable years, last year the construction sector grew at 8 percent, versus a market of over 28 percent.

In 2008 the construction sector as a whole was down 43 percent versus a market that was down 25.7 percent. This year so far the all share is 0.9 percent lower whilst the construction sector is 12.5 percent lower. For the last three years the construction sector has woefully underperformed the broader market after comfortably outperforming in 2006 and 2007 (75% vs 37.1% 2006 and 75.4% vs 16.2% 2007). If anyone thought the construction sector had not been paying attention, then you need a closer look.

Bart's shorts. NTT with an all cash offer for the fellows over at Dimension Data, seemingly 120 pence a share in London. A 19 percent premium or so and more than half of the shareholders have waved their yes flags. Chinese Q2 GDP over ten percent and crazily everyone is a little disappointed, what is that all about. The FOMC meeting suggests what most folks have suggested, growth will moderate in the second half. Rates lower for longer is what this tells me. The new normal and all of that jazz, plus also what that Krugman is saying, because he is called on by the Pimco fellows.

Righto, never a dull day. I picked up from a tweet (you see, Twitter is useful) via Reuters that NTT are close to buying Dimension Data for 300 billion Yen. Which is a whole lot of Yen, but reverses back into 3.4 billion US Dollars. The rumour (fact?) emanates from the website, Nikkei.com, when I checked it out it was the most read story. Sadly the full story is only available to premium content subscribers, and I guess I am not going to throw the kitchen sink at this story quite yet. We will see how the stock opens up and see if there is any truth, or more importantly, whether the market participants believe that there is any truth to the rumour.

Nothing of any sort from the NTT website, their line at the moment is no comment. NTT that is, I have yet to see anything official or unofficial from the fellows over at Dimension Data. But wait, as I write this the news becomes more official. Struth, I have read just all of that.

That is what I like about blogging, you can keep it up as we go along, the news from the wires suggests that an all cash offer has been approved by both boards, and over fifty percent of shareholders have given their commitments to the offer, to vote in favour. It has emerged that NTT has offered 120 pence a share, a premium of 19 pence to the closing price of 101 pence in London. Hah. Next question, NTT, why chasing this asset specifically? Looking at Africa as part of their strategy? We wait for a little more clarity, I can't seem to find the press release from Dimension Data, this is what I have heard from the box.

So disappointing really (sarcastic). The Chinese growth machine only registered growth for the second quarter of 10.3 percent. A problem that absolutely any country, developing or not would love to have. And the wires are suggesting that the slowing from the first quarter and only single digit growth is expected for the full year. Another reminder chaps, 8 percent if the magic number for Beijing.

The National Bureau of Statistics of China has the following release: National Economy Showed Good Momentum of Development.

Some key takeaways from that release, check out the paragraph on internal matters: "Sales on domestic markets enjoyed fast growth and the popular commodities maintained high sales. In the first half of this year, the total retail sales of consumer goods reached 7,266.9 billion yuan, a year-on-year rise of 18.2 percent. ..... Rapid growth was registered in emerging areas for consumption: the sales of motor vehicles rose by 37.1 percent; that of furniture went up by 38.5 percent, and that of household appliances and audio-video equipment grew by 28.8 percent." Holy smokes.

And what about inflation, is that a problem at all? "In the first half of this year, the consumer prices went up by 2.6 percent. The price rose by 2.5 percent in cities and that in rural areas by 2.8 percent." Hardly a problem at the moment. OK, so what is everyone worried about. Seems like the huge machine is rolling ahead at a breakneck speed, and inflation is under control.

I have been a reading a lot of different views of where the world economically is, I mean right now. And what the smartest guys on the planet are thinking right now. PIMCO always seem to be a collective measured head, their views are openly shared with the market, and indeed they were the ones who coined the phrase, "the new normal".

They are always worth a read, I saw that someone referred to in an article Global Central Bank Focus written by Paul McCulley, titled Facts on the Ground. I urge you to read it, it is high brow, let me know how it went.

Bill Gross in his July investment outlook writes about Alphabet Soup, all the R's and bears in there. He says: "But they - the developing nations - are not growing fast enough, at least internally, to return global growth to its old standards. Their financial systems are immature and reminiscent of a spindly-legged baby giraffe, having lots of upward potential but still striving for balance after a series of missteps, the most recent of which was the Asian crisis over a decade ago." I just read that the average person in China in real terms has 7.5 percent more disposable income this year than last. Phew.

OK, Paul Krugman is raging mad again. He had two posts yesterday in his Op-ed column in the NYT, the first one is titled Tax Cut Delusions. And staying with delusions check this next piece out, much more interesting (for me at least) titled: Delusions About Debt Dynamics. Worried? I guess you could say that he is simply putting his view forward that the current debt levels should not be balked at. Not shared by many.

And of course the Fed statement counts too, the minutes of their last FOMC meeting was released last night, and this gives us insight into how the Fed officials see the US economy panning out over the short term. So here are a few extracts from the release, if you want to read the entire thing, be my guest: Minutes of the Federal Open Market Committee.

If not, then these are the key points that I take away, here is from the "Review of the Economic Situation": "Businesses continued to increase employment and lengthen workweeks in April and May, but the unemployment rate remained elevated." That being said, the June number was hardly pleasing, even if the private sector did only add jobs at a less than exciting rate. 83 thousand jobs are 83 thousand jobs. The unemployment situation remains stodgy

The commentary continues, the real economy is in better shape than a while back: "Industrial production rose at a robust rate in April and May, with production increases broadly based across industries. Firming domestic demand, rising exports, and business inventory restocking appeared to have provided upward impetus to factory production. In April and May, production in high-technology industries again rose strongly, with substantial gains in the output of semiconductors and further solid increases in the production of computers and communications equipment. ..... Capacity utilization in manufacturing rose in May to a rate noticeably above the low reached in mid-2009, but it was still substantially below its longer-run average." So markets are recovering, but at a slower pace.

Inflation expectations are muted: "Survey measures of both short- and long-term inflation expectations remained relatively stable." And lending, what is going on out there? "Net debt financing by nonfinancial corporations increased in April and May relative to its pace in the first quarter. Gross bond issuance by investment-grade nonfinancial corporations in the United States remained solid, on average, over those two months; nonfinancial commercial paper outstanding increased as well. ......Consumer credit contracted again in recent months, as revolving credit continued on a steep downtrend." I guess you can read that as mixed.

And more importantly, how do the FOMC see the future? "While the recent data on production and spending were broadly in line with the staff's expectations, the pace of the expansion over the next year and a half was expected to be somewhat slower than previously predicted. The intensifying concerns among investors about the implications of the fiscal difficulties faced by some European countries contributed to an increase in the foreign exchange value of the dollar and a drop in equity prices, which seemed likely to damp somewhat the expansion of domestic demand."

And so they continue: "The implications of these less-favorable factors for U.S. economic activity appeared likely to be only partly offset by lower interest rates on Treasury securities, other highly rated securities, and mortgages, as well as by a lower price for crude oil. The staff still expected that the pace of economic activity through 2011 would be sufficient to reduce the existing margins of economic slack, although the anticipated decline in the unemployment rate was somewhat slower than in the previous projection."

New York, New York. The Intel glow was short lived as retail sales at the headline level failed to inspire. Stocks were higher midday, but drifted lower to below par before ending the day off flat. The last FOMC meeting minutes failed to inspire the buyers either, but hey, that was what we knew all along. Technology stocks of course rocked, Intel closed at 21.36, up a percent and two thirds, even though the stock was over five percent higher than that at the get go.

Wall Street wanders. Session end the Dow closed 3.7 points higher at 10366, the nerds of NASDAQ better by 7.8 points to 2249 whilst the broader market S&P 500 ended marginally lower at 1095, down a paltry 0.17 points.

Commodities, currencies, Drs. Copper and bushveld. Dr. Copper last at 300 US cents per pound. The bush doctor (the platinum price) last at 1521 Dollars per fine ounce, the gold price at 1209 Dollars per fine ounce. The oil price is lower at 76.56 Dollars per barrel. The Rand is weaker at 7.54 to the US Dollar, 11.52 to the Pound Sterling and 9.59 to the Euro.

Up periscope. The weatherman said that today it would rain. As I look out the window I cannot see a single cloud in the sky. This is just like markets. Equally unpredictable and after a decent run, again it will be left to corporate America to steer us in the right direction. Today it is the turn of JP Morgan Chase during normal trading hours and after hours AMD and Google will report numbers. And perhaps for short term market movements, weekly jobless claims will be telling mid afternoon.

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

Jozi, Jozi. We started lower, were lifted by global markets later and then fell away towards the end of the day as disappointing economic data offset what looked like a good face value result from JP Morgan Chase Q2 results. Plus new US weekly jobless claims fell to their lowest level since August 2008, but that was not enough to drag the focus away from a manufacturing index that disappointed. But we managed to drag back into the green for the last part of the day, and at face value it may have seemed uninteresting, but on the contrary. There was that Anglo break up document doing the rounds, well kept secret and report guys, I am sure that your bosses are thrilled, perhaps that is all part of the idea, get the company thinking. I thought that was nonsense and in fact made the following remark: There is a certain irony in the Bank of America Merrill Lynch report titled "Time for two Anglos?" And weatherman did speak with fork tongue as the clouds finally blew in midday, but there was no rain.

Maude street shakes, moves and grooves. Session end the Jozi all share index had moved up a whopping 31 points to 27474. Banks were off 0.85 percent, resources were off nearly half a percent, whilst in the general retailers and general industrials columns there were gains of around half a percent. It was a day of local inc. leading the bigger and more illustrious dual listed stocks. Hey, what are you doing today for flying the flag Friday. I must be honest that I am way to clod to wear any sports jerseys or jumpers of any sort, I only have my South African scarf. I guess that counts.

Bart's shorts. On a very busy day for telecommunication and tech companies, I guess that we have to tie in Dimension Data, Telkom and MTN, all sorts of announcements, of course the one was a company changing one, Dimension Data. I have heard some concerns that NTT have rather a hap hazard approach and this might feel right, for the time being. Like I said to the dudes in the office when they said they were reading that, yip sounds like the Japanese version of Telkom. And let us not forget that in the previous session that I thought that the guys from Naspers had done a great job in consolidating their holding structure (and paid out 2.9 billion Rands) for a bigger stake in Digital Sky Technologies. Plus BP puts a cap on it finally, Goldman Sachs gets a kick butt fine, earnings from Google after hours and a closer look at the results from the first big financial, JP Morgan Chase. Apple press conference.

Telkom. Never can quite touch tomorrow. Or even get a handle on today. The company resembles a pack donkey rather than a thoroughbred stallion and unfortunately acts like it too. Perhaps it has something to do with the 40 percent shareholder. I must stop being rude. All we have to say is that we don't own the shares, because we have little confidence in the execution of management. And their track record proves exactly that. Yesterday the company announced that they had finally settled a nine year running legal battle of epic proportions, with a company called Telcordia. And it relates back to a contract that they signed in 1999. Good luck to them, 80 million Dollars payout. The biggest laugh of it all was that the contract relates to a customer service product and solution, which, let us just say, Telkom needed more than Telkom Media.

Moving on to a quality operation, in our opinion, MTN. The company releasing a wave of announcements yesterday. A much bigger implementation of a broad based empowerment deal, with quite a big discount, the deal itself is a little complicated and the release is really long. Plus there is a three year lockup, but that is the norm. If you want the document I have it, email me and I can send it to you. Plus there were a few other announcements that were seen as positive from the broader market, relating specifically to the company's dividend policy, with the possible inception of an interim dividend as soon as August.

Here goes the official announcement, some highlights: "The majority of the markets in which MTN operates have continued to show strong subscriber growth to the end of May 2010 despite increasing competition. Group subscribers increased nearly 10% for the 5 months to the end of May 2010. As the Group's non-SA operations contribute in excess of 70% of MTN's revenue, the continuing strength of the South African currency has again had a negative impact... the level of capital expenditure investments in infrastructure is anticipated to be lower as emerging markets enter a phase of higher penetration. As a consequence of the sector evolution and MTN's anticipated future cash generation, going forward, the Board is able to more easily balance its growth aspirations with that of ensuring improved short term returns to shareholders." See that last line, read, more dividends.

And then lastly, the outgoing MTN chief Phuthuma Nhleko getting a 33 million Rands golden handshake in return for a three year restraint, as far as I understand it. My first reaction like you no doubt might be to balk, but then I had a conversation with a great chap, tops all round and believe that with his knowledge (Nhleko) he would be too valuable an asset to let into the wilderness just yet. If you add up Nhleko's bonuses for '08 and '09 you get to 21 million Rands. Is this too much, 33 million Rands? We ended the conversation by saying something like the guy is way too smart and knows way too much for the company to take any chances.

How do we know that the world is a very different place now more than ever before? Well, first things first, we have technology. We can interact and do business with people that we never meet. Just ask the dudes who run that website, Alibaba.com and they will tell you exactly that. And I thought for the purposes of trying to prove this, I would quote a tweet from Anand Mahindra, who is the Vice Chairman and Managing Director, Mahindra Group. The large Indian industrial company, with tentacles everywhere, in fact I see that they are selling a vehicle that looks somewhat like a jeep locally.

Anyhow, he tweeted twice, and you can see how times are a changing, even in his world: "K.C.Mahindra scholarship interviews today. One of the best parts of my calendar. Get to do a reality check on young ppl&their dreams" So we all know that his company is giving away scholarships and yesterday was the interview process. And then he said: "Kids we're interviewing are so young yet so sharp. Giving me an inferiority complex. Well,at least it makes u optimistic re India's future" Now India as I understand it has more than 50 million graduates, more than we have people living in this country. And I guess when he graduated, there were a lot less graduates. Hardly any. Just saying.

JP Morgan Chase second quarter yesterday, it is time to listen to the experts and what they thought of the number. Doug Kass tweeted in his foul grammar and punctuation style: "i am reducing my jpmorgan long at over $40.50 in premarket trading - slightly less than meets the eye in eps release! $$". Some of my other favourites out there, like Dick Bove said that this Was Not A Good Quarter For JPMorgan. And lastly, Edward Harrison, I quite like him, this is what he had to say: The Nitty Gritty on JPMorgan Earnings.

New York, New York. BP, Goldman and to a lesser extent JP Morgan Chase results kind of dominated the session from a news flow point of view. Stocks managed to shake the monkey towards the end, literally in the last hour stocks were buoyed. You know the same old trick where the serious action takes place in the last half an hour. In fact stocks closed at their best point for the day, even if that was not a spectacular fireworks ending.

And the Real Fly, a really potty mouthed anonymous type blogger that everyone loves to hate was crowing, because he said that he had bought stocks at the days dip and was long into tomorrow. Byron thinks he lies and can't be that good. Or, I think he never tells on his losers. And Goldman Settles Its Battle With SEC. Sees. 550 million. Perhaps not really enough, some folks point out that is 14 days of profits.

BP put a cap on it. And the oil spill has stopped. The gusher is gone. All rather complicated and intricate, the relief wells are in the mean time still being drilled. A relief for all concerned, including the shareholders left, who saw the stock rally seven and a half percent in normal trade.

Google stock is down four percent pre market, their numbers after hours failed to inspire. The business seem confident that the core and emerging businesses are doing really well, happy that they are adding hungry people and employees to their most awesome canteen. Bloomberg reports Google Declines as Research, Marketing Crimp Profit. The biggest worry for folks were the rising costs. But hey, this story is short, for us in the office, if they could really monetize Youtube, they could do really well.

Wall Street wanders. Session end the Dow closed 7 points lower to 10359, the nerds of NASDAQ lost 0.76 points on the session whilst the broader market S&P 500 closed all of 1.3 points better to 1096. The only winner amongst the majors, where utilities and health care led the charge on the day.

Commodities, currencies, Drs. Copper and bushveld. One barrel of oil traded on NYMEX will set you back 76.43 Dollars, although to get that price you have to trade in bulk. 1000 barrels a contract, every time you see the spot price move chaps. Dr. Copper last trading at 301 US cents per pound, the platinum price is lower at 1524 Dollars per fine ounce, the gold price last at 1207 Dollars per fine ounce, also lower on the session. The Rand is trading weaker at 7.56 to the US Dollar, 11.67 to the Pound Sterling and 9.77 to the Euro.

Up periscope. We should start a whole lot better here today, a late Wall Street rally

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

Jozi, Jozi. Oh dear for the bulls, I suppose the gory running of the bulls ended in Pamplona earlier in the week, so should the bull run in markets. Dumb. We still closed marginally better, after having threatened 28 thousand points at one stage on the Jozi all share. GE results in the middle of the day were better than anticipated, but the real kick in the chops was a much lower Michigan consumer sentiment read that sent markets in New York much lower. And in that we participated, the selling pressure accelerated into the close, a few buyers stepped up at the close. A US inflation read suggested that we have nothing to worry about on that front.

Maude street shakes, moves and grooves. Session end we closed 55 points higher on the Jozi all share at 27529. At one stage we were up for the year around two thirds of a percent. Whoop dee doo. Banks had a good day, up over a percent. Telecommunication stocks, mostly in the form of MTN continued to power ahead, that stock up three and a half percent on the session. Because as you might have heard, 3 in 100 people having internet access across the continent means that MTN is ex growth. I have never heard such garbage in all my life, do you think folks are going to access the internet waiting for a fixed line? Because it is never going to arrive, mobile is there already.

Bart's shorts. Today I guess one might be excused for thinking that it was all about Kumba Iron Ore and Arcelor Mittal. Because this is bigger than just the payment dispute about the product, this impacts all heavy industry that uses steel.

Whose side of the story do you take? Or none. Because it is what it is. I am talking about the saga that is Sishen Iron ore and more importantly Kumba Iron Ore and Arcelor Mittal. Last week I referred to the awkward silences that must exist between the two when it came time for paying and ordering for iron ore, with Arcelor Mittal insisting on cost plus three percent, but Kumba invoicing another. Now the story has taken on epic proportions, the kind usually reserved for pre prime time soapies.

First the background to the favourable pricing, the companies used to be one big state mining and steel production facility, who would invariably provide big industry in South Africa with cheap steel. And as such advance the economy further and create jobs, or that of course would have been the plan when Iscor was first mooted post World War two. Now the two companies were separated (Kumba Resources included what is now Exxaro and Kumba Iron Ore) from Iscor. Iscor had a new majority shareholder in the form of the Mittal Steel global operations. Eventually ending up as Arcelor Mittal, and Kumba Resources split with Exxaro and Kumba Iron Ore being the two entities to come out of it. So out of one company a decade ago, there are three very different shareholders bases with very different agendas.

Kumba Iron Ore gives some background to the favourable pricing that Arcelor Mittal has been receiving for the better part of 9 years, whilst the spot price of iron ore has been shooting higher. In their Friday statement, Kumba say: "Sishen Iron Ore Company (Pty) Ltd ("SIOC") notified ArcelorMittal South Africa Limited ("Mittal") on 5 February 2010 that it was no longer entitled to receive 6,25 mtpa iron ore contract mined by SIOC at cost plus 3% from the Sishen mine, as a result of the fact that Mittal had failed to convert its old order mining rights."

Because "This arrangement (in relation to the supply of iron ore from Sishen mine which was concluded in 2001 and which was premised on Mittal owning an undivided 21.4% interest in the mineral rights to iron ore) lapsed as a result of Mittal's failure to convert its old order mining right and, accordingly, became inoperative in its entirety as of 1 May 2009."

So there, that is the background as far as Kumba Iron Ore are concerned, the agreement was in place as a direct result of Arcelor Mittal having a stake in the mineral rights, and as such the very cushy agreement is no longer valid. What has happened to the mining rights and how they were awarded is another story entirely, turns out that some of the dates on the documents may have been backdated. We are of course talking about Imperial Crown Trading 289, another part of the broader story, but not this chapter. Farewell old agreement on favourable pricing, in the minds of Kumba Iron Ore acting on behalf of the SIOC.

Because, as Kumba Iron Ore points out, "SIOC has delivered 337 402 tonnes to Mittal's Saldanha plant in the period 1 March 2010 to 30 June 2010 and 1,115,180 tonnes to Mittal`s inland plants in this period." And the price that SOIC have been receiving as per the SENS announcement: "Up to now Mittal has only paid the cost plus 3%."

So SIOC has made a number of proposals, that Mittal would have to accept by close of business 15 July, that being Thursday last week. Which of course was the day before this SENS release. One thing has been clear all along, the fellows at Kumba are on top of their game as far as the paperwork is concerned, which indicates they are more efficient. To me anyhow. First proposal, Mittal pay the difference between the cost plus three percent into an interest bearing escrow account and at the end of the arbitration, the balance goes to the victorious party. Or Mittal are to provide a guarantee of sorts, to be settled again when the courts decide on the matter.

The second proposal is a phasing in of the iron ore price, to cushion the blow for Mittal. OK, the proposals are to offer a set price, but one that is greatly away from the spot price. Ending 1 September 2011, where Mittal will pay the spot market price. As Kumba point out, a damning swat in the direction of Mittal, "SIOC does not anticipate the proposed interim pricing would have any impact on the domestic steel price as Mittal has consistently stated that it does not determine the price of its steel products on the basis of its input prices. In addition, Mittal has continued to set its domestic prices in line with global steel prices." For the record, Mittal have rejected both proposals. So Kumba have said that Mittal must move to a "pay and take basis". And pay them for the accumulated amounts.

More damning for me is that Mittal have been paying the cost plus three percent, but charging their customers with a special levy, that they have been paying into an escrow account on behalf of their customers. Government does not like this at all and the Competitions authorities are still "investigating". What? Why can't we see a more prompt outcome.

So the response from Arcelor Mittal is bleak. Check out: Kumba halts iron ore supply to ArcelorMittal and further cautionary announcement. I laughed when I read this line: "SIOC had demanded that ArcelorMittal pay to SIOC a price of US$50 per ton of iron ore for the Saldanha plant, and US$80 per ton of iron ore for ArcelorMittal's inland facilities." There are hundreds of steel mills around the world that would love to pay that price. For the record, various websites have iron ore spot prices, and let us just say that it is somewhere around 115 US Dollars per ton.

And the release goes on: "ArcelorMittal now has no alternative, but to immediately initiate plans:
for the immediate closure of the Saldanha plant;
for the curtailment of all exports; and
for a material reduction in domestic market production, resulting in market allocations."

Pointing finger back. Here is a passing shot on this very important matter from me. If government think that the steel industry is so key to South Africa to intervene (they might), then I have this to say to Minister Dr. Rob Davies, who as I understand it went to the same school as myself. How come the trade and industry ministry did not express the same concerns when Mittal was getting such a good deal? Imagine if we had cheap steel locally, because all the inputs were cheap? Would that have not stimulated local industry more, and then created more jobs? Paul makes a good point here, perhaps in the Mbeki era it was seen as favourable for businessmen like Lakshmi Mittal to be participating in our economy. All the while that the parent company grew their stake, that was fine. Now, it is not. Government wants to meet all parties today.

New York, New York. GE results beat the street and in fact CEO Jeff Immelt was making some favourable remarks about the future. He basically was suggesting that the industrial business was going to be key for the future and less focus on the money part. You know, the financial services part of the business.

The FT have a great piece on Reforming the global financial system. That of course top of the pile, remember that the financial regulation bill is about to become law. Dick Shelby was outraged by the size of the document, around two and a half thousand pages. Imagine the pork in there. Market participants focus was on that consumer sentiment number, what did they really expect, an unchanged number?

It has emerged on the weekend that the BP cap might not exactly be the best solution for the time being. It turns out that there are leaks of sorts nearby. The stock trading down this morning in London, around four percent lower. Lizzie O'Leary from Bloomberg tweeted that the pressure at 6700 pounds per square inch, which we worked out in the office was comfortably north of 450 atmospheres. In fact the pressure inside of the well should be rising more, and not less. The current measure is around 6700 pounds per square inch, BP will cheer if it reaches 8000 pounds per square inch. Any amateurs out there with opinions, let me know.

Wall Street wanders. Session end the Dow Jones industrial was crushed, down 261 points to 10097, the nerds of NASDAQ off by a whopping three percent plus at 2179, that was 70 points lower on the session. And the broader market S&P 500 off by 31.6 points to 1064.

Commodities, currencies, Drs. Copper and bushveld. Dr. Copper at 295 US cents per pound. The oil price last at 75.82 Dollars per barrel, the gold price lower at 1192 Dollars per fine ounce, the platinum price last clocked 1510 Dollars per fine ounce. The Rand is weaker understandably, think about the flows, at 7.61 to the US Dollar, 11.68 to the Pound Sterling and 9.88 to the Euro.

Up periscope. We have to readjust our level backwards here in line with world markets. This is a massive earnings week in the US. Hungary and Ireland on the radar screens for the wrong reasons. Not good.

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

Jozi, Jozi. We started understandably worse for wear, but managed to make it back to even keeling at lunchtime, but then stocks slid on weaker housing data towards the end of the day, US data in the form of the NAHB Housing Market Index. There was some comments on the local front with suggestions and commentary from the OECD, who are raising a few red flags, but on balance we are doing a good job out here. Deep south. And the Dollar moved south too, with the gold price too, not really making too much sense, they normally move in the opposite direction to one another. A weaker Dollar around 1.30 to the Euro at one stage, the gold price at 1182 Dollars per fine ounce. But possibly the biggest news of the day amongst the majors was the department of minerals saying that some mechanised mining methods are a no go from here.

Maude street shakes, moves and grooves. Session end the Jozi all share index had closed 200 points lower to 27329. That is around three quarters of a percent lower on the day. Gold miners were given the heave ho, the gold price weakened over the course of the day, accelerating in the afternoon. Yip, none of the majors winning on the day, all in the red with the sentiment reader still looking a little light for the bulls.

Bart's shorts. Aquarius Platinum falling in a heap as the rules change. The Chinese jump to first place on the podium as the top energy consumers of 2009, a position that the Americans have held since around the First World War, if you needed another sign you got it. The OECD fine with some policies and not so cool with some other policies of the ruling party. Nokia Siemens buying Motorola's network division.

Bord and pillar mining. This is something that is normally associated with coal mining, but it is a mining method that Aquarius Platinum employs. The directive comes from the Principal Inspector of the North West Region on mining companies employing this method. The old Department of Minerals and Energy website is still empty of all sorts of useful information. In fact as far as that department is concerned the world cup is here and we can feel it. Maybe I am just looking in the wrong place.

But what kind of an overreaction are we talking about here? Aquarius are appealing the decision, but hey, throwing stones at armour plating is what it seems like to me. Aquarius spell out in their SENS message that they have "retained the services of an international mining consultant who concurs with Aquarius' South African management that the implementation of the Directive as currently stated, will not give rise to a safer mining environment in respect of 'fall of ground' accidents."

The stock sold off 23 and a half percent on roughly one months worth of normal trading volumes, slicing a few billion Rands worth of market cap by the wayside. Some folks suggesting that we are only talking about twenty thousand ounces worth of platinum production for the current financial year. What about safety? Clearly one life lost is one too many. Aquarius say that this won't make a difference to their safety practices. And this is the whole point of telling the company to mine safer, at least in the opinion of the report. Does it scare off investors that the rules keep changing? Or is this part of the process?

The stock is up 13 percent this morning, as an announcement post market saw those who had sold the stock bashing their head against the wall, nothing that they could do now, check it out: "The meeting with the DMR was positive and constructive, and the Company is, together with its international mining consultant, reviewing mine design and support parameters to present best practice guidelines to the DMR in respect of each of its mines individually. In the interim, AQPSA will continue to apply its existing mining techniques and will shortly present to the DMR interim safety measures which AQPSA intends to implement to ameliorate the threat of fall of ground incidents, pending the outcome of the aforementioned exhaustive review." Short term respite and a big bounce back.

I think that this is a big deal. China has replaced the US as the country on the globe that consumes the most energy. So what? Well, the US has held top spot for around a century. This is from a report that the IEA released. I can't seem to find that report specifically, but I stumbled across a renewable energies report, brand new. Get this, from the report titled Global Renewable Capacity Continues to Grow in 2009, Fueled by Policy and Ongoing Investment: "China added 37 GW of renewable power capacity, more than any other country in the world, to reach 226 GW of total renewables capacity." Correct me if I am wrong, that is South Africa's ENTIRE grid in renewable in just one year.

Back to that report that I have only been able to find references to, I suspect that it must be on this page under Publications for Sale. Everyone seems to be quoting the WSJ article China Passes U.S. as World's Biggest Energy Consumer. Did you get that part that ten years ago China's energy consumption was half of the US. Half. So you can build empty condos, have a housing bubble, a market bubble, whatever bubble that Jim Chanos and his buddies think are going to derail the stability of the world, but how do you grow your energy usage at that pace if some sort of economic miracle is not happening in the background. Just saying.

Is it just me or can you also feel some sort of anxiety when you read this next piece China #1 Energy Consumer: Where Does New Era in Energy History Lead? And that leads me to my next point, several parties have covered the story that the OECD talk about the grant system in South Africa becoming unsustainable. Because these two are in some way interconnected, the Americans living beyond their means and the gross imbalances that exist in our society.

So what do you make of the OECD making various comments about South African policies and what is needed to grow employment locally? The ugly truth is that there are too many imbalances in South Africa. We can't stand idly by whilst millions starve and you would have to admit that although 12 million folks who receive grants is disproportionately large for a population of around 50 million, it is necessary as a stop gap method for now. And bear in mind that there are around half as many tax payers as there are folks receiving grants.

The Daily Maverick has a good piece titled OECD: SA rocks, just hamstring those darned unions in which they point out that the unions won't want to hear that the above inflation wage increases are a problem. Plus that the restrictive labour laws are a problem. Sorry, not listening. Read it, useful stuff.

Nokia Siemens Networks are looking to buy the Motorola networks division for 1.2 billion Dollars. Nokia up nearly six percent. Doesn't sound like a whole lot of money when you are talking about those sort of names I guess, but this is pretty key for Nokia. It was just last week that the company was being blasted, remember this story: Nokia Board Faces Call for Change on $77 Billion Lost Value. They need to crack the US market, their name in that geography is poor.

The calls have been for Olli-Pekka Kallasvuo to hit the road. Olli-Pekka, what a great name. Look, the truth is that Nokia have not had a hit phone for a while. They make great reliable handsets, have nearly 4 in 10 sales of handsets globally, but are always a step behind when it comes to the exploding, more lucrative smart phone markets, where if you look a little closer, Apple have been eating everyone's fruit salad.

Check out this Business Insider slide from one of their pieces on smart phones about to explode. This is about the consumer. Who coincidently never lies. Apple iPhone owners are the most satisfied by far. "HTC is next, but its owners are less than half as satisfied as Apple's. Note that this was taken before the iPhone 4 antennagate."

And then check out the next set of slides about the wireless market in America and then you start to see why the Nokia Siemens purchase of the Motorola network division makes sense. 25 Awesome Charts On The State Of The Wireless Industry.

New York, New York. A patchy day on the street, finally ending the session comfortably in the green, the biggest worry actually is volumes. Bloomberg had a cutesy graph with the caption, volume on vacation. Halliburton reported pre the bell and blew estimates away. Yip, and this was during the great BP spill of 2010. And remember as the Huff post pointed out, the company was working on the now sunk rig less than 24 hours before the fire.

Wall Street wanders. Session end the Dow closed 56 points better to 10154, the nerds of NASDAQ up 19 to 2198 whilst the broader market S&P 500 up 6.37 points to close out at 1071.

Commodities, currencies, Drs. Copper and bushveld. Dr. Copper last at 298 US cents per pound, the oil price better at 76.74 Dollars per barrel. The platinum price was last at 1514 Dollars per fine ounce, her better loved sister, gold, last at 1182 Dollars per fine ounce. The Rand is firmer as the flows come back this way, the Rand at 7.60 to the US Dollar, 11.58 to the Pound Sterling and 9.87 to the Euro.

Up periscope. So a better close on Wall Street should see us through to a better start, even if IBM results post markets left folks pondering their next moves for the old big blue.

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

Jozi, Jozi. Bring it back, bring it back. We started better in the morning, but slipped and spent the middle part of the day wallowing in the red. Blaming IBM and Texas instruments from the night before, not awful results, but the headlines started suggesting that earnings were disappointing. Most of what I saw was pretty good, the inner readings were not bad either. Plus the debt issuances from the troubled EU countries had been lapped out by the broader markets, perhaps the yields too juicy to ignore, with the implied back stop from big brother in the form of Germany and France. And the ECB and the ever aging Jean-Claude Trichet.

Maude street shakes, moves and grooves. The Jozi all share index closed a whopping 19 points higher to 27349. Banks lost half a percent, gold miners down two thirds of a percent, whilst platinum stocks were up half a percent. The broader resources index ended the day around 0.4 percent better. There was a SABMiller downgrade from the fellows over at Barclays Capital, who suggested that the stock should be downgraded to "equal weight" from "overweight". The product user is almost always overweight, hence the phrase beer belly.

Bart's shorts. Bart checks out BHP Billiton's production report, and then also some commentary on Aquarius platinum and their methods of mining. Plus Kumba Iron Ore has sent a letter to the mines minister Susan Shabangu asking her to cancel the mining rights for Imperial Crown Trading 289. Don't confuse Venezuela and Vuvuzela. Goldman Sachs results and Apple results. Plus all the apps you could ever wish for.

The BHP Billiton production report for their fourth quarter and for the for the full year was released this morning. If you want to download it, check it out here: BHP BILLITON PRODUCTION REPORT FOR THE YEAR ENDED 30 JUNE 2010. Wow, some of the headlines are pretty mind blowing: "Western Australia Iron Ore achieved its tenth consecutive annual production record." and "Petroleum delivered its third consecutive annual production record following the successful delivery of a series of growth projects in the Gulf of Mexico (USA) and Australia." And that division is much higher margin than their others.

Some of the commentary, if you did not download the report: "BHP Billiton continues to be cautious on the short term outlook for the global economy. Uncertainty surrounds the near term prospects for growth in the developed world as governments adjust fiscal policies following a period of significant stimulus and subsequent increase in sovereign debt levels. Within China, measures introduced to reduce growth to more sustainable levels means volatility in commodity end-demand is likely to persist. BHP Billiton sees these measures as a normal continuation of China's economic management policies."

Iron Ore, petroleum and Copper. That is where it is at for the company. OK, so let's look at the year on year production number, the petroleum division was astonishingly better, barrels of oil equivalent rose on a yearly basis from 137.97 million barrels to 158.56 million barrels, all driven by crude oil production. As BHP Billiton pointed out, those projects that came online during the course of the year really helped. I guess that they will struggle to get to these levels next year, with all the bans on drilling in the gulf, it could be tough. Copper production was much less than last year, production problems at Olympic Dam and Escondida impacting the overall number, 13 thousand tonnes less in concentrate and around 120 tonnes less cathode production. Olympic dam around 90 thousand tonnes less on the year.

And then Iron Ore. Total Iron ore production for the full year, 124.9 million tonnes, increases from all of their production areas. But ten and a half million tonnes more produced. So that is a great outcome. The clock is still ticking on the Rio Tinto JV, with BHP Billiton. All in all quite a good report, even if they are cautious in the short term.

The Aquarius Platinum price soared 13 and a half percent yesterday, after getting a softer stance from the inspector, after an urgent meeting revealed a favourable result for Aquarius. After my piece yesterday, there was a fellow who fired back exactly what Bord and Pillar mining was, his email to me:

"Just for interest! Bord & Pillar mining is a mining method where you normally cut "bords" of 10 metres in width and the pillars are generally 6.0m x 6.0m.
The instruction from the DMR is to cut bords of maximum width of 6.0m.
Assuming you do not alter the pillar size you have to effectively cut your production by 40% from the same face width (10.0m to 6.0m)
The theory is you will reduce the span of the bord and prevent rock failure due to joints and weakness in the rock not easily detected in a singular plane. This rock failure is similar to the Impala incident last year."

He gave it away at the end there, you can read into it that he does not work for Impala Platinum. Very interesting, thanks so much for that, I really dig the feedback, it helps to educate us all, even if it is about mining methods.

Staying with mining and government intervention. Some of the top stories making the rounds are that Kumba Iron Ore are basically fighting for the Sishen Iron Ore Company (SIOC) award of the mineral rights, by asking the Minister of Mineral Resources Susan (shootin' Susan) Shabangu to cancel the award to Imperial Crown Trading 289. Stating that all sorts of irregularities had cropped up, and in fact as far as I can understand it, some of the documents submitted suggest that they were delivered and back dated. If that is the case sounds like fraud to me. Is this really our Venezuela moment? Or Vuvuzela moment if it is proved that there was intervention. Still, the fact remains, these are prospecting rights on an existing mine, how does that work? Venezuela if it stands, vuvuzela if it does not.

What does Twitter actually do for you? I always say that Twitter is a customizable news feed, you can follow who you want. I follow Doug Kass, he is a trader type, check out his website Seabreeze Partners Management. You can actually get more information following him on his twitter feed DougKass.

And there you will see some of his recent 140 character updates, all from yesterday, when Goldman Sachs numbers hit the street he tweeted: "i paid $142 FOR gs IN PREMARKET TRADING $$" And then later on, five hours later he suggests that he is out: "i have sold out the balance of the GS trading long rental - +$6 is enough for me in a few hours $$". And then perhaps the most telling, when the markets were in the toilet around four o'clock in the afternoon, the tweet of the day in my feed: "ludicrus forecast - at some point today the market will be higher on the day $$" And in fact one better than that, stocks much better on the day.

The guys from Zero Hedge had a great write up, even by their own bearish standards, they had this piece: Goldman's Discount Window Backed "Hedge Fund" Trading Revenue Drops 40%+ Sequentially And QoQ. Check the last graph where Goldman's tax rate had ramped significantly, in fact the dudes at Zero Hedge suggest that this is because of the UK bank tax. And the author of the piece, Tyler Durden, he or she is not a real person, this is an alias. Tyler Durden remember is from the movie Fight Club.

Hey Apple. Apple results yesterday. A beat by a country mile. Read from the companies website: Apple Reports Third Quarter Results. Record revenue. So notwithstanding all these tough times in the developed world, the consumer will still follow quality and in fact buy more quality products, not less. Amazing, think about that for a minute, this is a pure discretion spend bunch of products, that ooze the cool factor, but the company never seems to struggle to sell, because of that very factor. As Paris would say, that is hot.

Arrogance or truth, who knows, but here is from the last piece of that release: "Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork, and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple reinvented the mobile phone with its revolutionary iPhone and App Store, and has recently introduced its magical iPad which is defining the future of mobile media and computing devices." The best and leader. And I guess that is all about you need to know about that.

This is awesome. Fast company with this one: Infographic: Our App-Happy World. So many awesome applications, so many useless ones, ultimately it depends how you monetize it, right? Don't spend half a day digesting all this information, but it is truly awesome, the world of applications for smartphones, that need we remind you, is only around two years old.

"Dow Nears 10000 on Disappointing Earnings". I checked this headline and thought huh? Bank of NY beat, Goldman Sachs beat on earnings, lower on revenue. Harley-Davidson beat. Illinois Tool fell short by a cent. Johnson & Johnson in line with expectations. Peabody Energy beat and PepsiCo beat. UnitedHealth had a big beat and Whirlpool had a great beat with better guidance. The night before is what the headline refers too, IBM and Texas Instruments. And not the results through the day, so ironically, the better results through the day did not matter. Ah well, today we see the opposite of that as Apple woke everyone up.

New York, New York. Bottom left to top right, a graphic that all bull love to see of a days market action. And lets be honest, the fellows in this office sit firmly in that camp. As Briefing.com put it, a one percent loss turned into a one percent gain. Perhaps it was the majors that had disappointed, J&J, IBM and Texas instruments. Moody's said that they thought the steel industry in Japan needed an upgrade. Everyone said "ratings agency" and went on with their work. I was reading a piece in "The Big Short" that suggested that the ratings agencies knew what they were doing in the subprime market, but the business was too good to ignore.

Wall Street wanders. Session end the Dow closed at 10229, up 75 points, the nerds of NASDAQ better by 24 points to 2222, whilst the broader market S&P 500 added 12 and a quarter to 1083.

Commodities, currencies, Drs. Copper and bushveld. Dr. Copper last at 301 US cents per pound, the gold price lower at 1188 Dollars per fine ounce. The bushveld Doctor at 1505 Dollars per fine ounce. The oil price last at 77.9 Dollars a barrel. The Rand last at 11.56 to the Pound Sterling and 9.72 to the Euro and 7.54 to the US Dollar.

Up periscope. We should start a whole lot better on account of better Apple numbers lifting the globes sentiment and plus better markets out in Asia.

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

Jozi, Jozi. A cracker of a day on the local markets, so good in fact that we managed to squeak into the green for the year. Talk about oh so very black Friday, but that of course is US retailers post Thanksgiving. We have left it late and I am just trying to point out that this has been a choppy sort of a year. Helping stocks was a beat from Apple in the session before and pre market in the US, there was a whole host of beats, including Morgan Stanley, Coca-Cola, Wells Fargo amongst the majors, while Altria was in-line with earnings expectations. Hurting from the night before was Yahoo. Clearly too much yippee. Also on a dose of yippee was the currency, roaring ahead I guess with all the foreign inflows. Thanks guys, you help inflation expectations as an import nation.

Maude street shakes, moves and grooves. Financials led the charge, along with banks, both clocking in returns for the day which was comfortably above two and a half percent to the good. If you are a bull, if not and you were short, yowsers you got caught. The Jozi all share index closed at 27833, up 483 points, which was 1.77 percent for the day. And for the year, the market is up a whopping 0.61 percent. Best sector year to date is by far and away retail, including the food sellers too, both up around the 28 percent mark for the year.

Bart's shorts. Rates decision today, most of the experts agree that there won't be a rate cut, but there is a possibility of a surprise. Iron ore spats finally see an interim outcome, an interim agreement has been signed between Arcelor Mittal and Kumba Iron Ore, credit must go to the Department of trade and industry for having seen the two come to a conclusion. Kumba Iron Ore results out this morning, and they are good. Vodacom trading update too, more on that before I get told I ignore this mighty giant. The (almost) famous Mooi River Index. And lastly, what the bearded Ben "the measured" Bernanke said to spook markets.

Will she or wont she? Not really her decision, but rather the decision of the MPC, as governor Gill Marcus is often at pains to point out. I am talking about an interest rate cut. Consensus is still for no cut, but and this is a big but, the very same circles suggest that the economy is sluggish enough for one last cut. Almost like Ben Bernanke when he started his tenure as head of the Fed, he cut once. Gill Marcus can do one here is my sense. Although, the very same economists will tell you that inflation pressures in the form of way ahead of inflation wage hikes and way ahead of inflation electricity hikes are damming up. In other words don't expect anything at all. Plus we had better retail sales for the month on May, and better retail sales are largely anticipated for the month of June, which was the World Cup month. I miss the World Cup.

I could have thought that this would happen. I see that the Metalworkers union Numsa have demanded that Arcelor Mittal be nationalised in order to end this dispute with Kumba Iron Ore. Over iron ore. Over iron ore that Arcelor Mittal were getting on the cheap (very cheap) and then charging customers international prices. Nice lumpy margins. Steel is key to the industrialisation of any country, but the business of steel making is hugely cyclical and this is why the companies all trade on earnings multiples that look cheap.

Back to the nationalisation issue. Arcelor Mittal has a market capitalisation of 35.258 billion Rands. So the cheque would have to be that size, right? That will not please shareholders in the least. In fact, that might mean that no Indian company ever wants to do business here again. Because the rules could change. Mittal Steel holdings and Vivca investments and trading nine own around 57 percent of the company. And to think that all this would not have happened, had the senior management been paying attention.

But instead they had relied on Kumba Iron Ore kindness to renew their mining rights. My analysis of Arcelor Mittal remains the same, if they are holding the jobs card out, they could have created more jobs by supplying cheap steel into this market. Industrialisation would have taken place at a quicker rate. That is all I am saying.

Hah. As luck would have it, a SENS release has been released with the finalisation of the Sishen Supply Agreement. An interim price agreement. I should write this piece later and not earlier. Stress, this is an interim agreement. And AMSA is Arcelor Mittal South Africa. Got that, bombs away, here is what you need to know, this agreement is "Retrospective to 1 March 2010, and will endure until 31 July 2011" The prices that AMSA will be receiving is "a fixed price of $50 per ton of iron ore Saldanha Steel plant .... and $70 per ton of iron ore, deliverable to AMSA's inland plants"

But more importantly for Mittal there will be "no escalation in the prices agreed to for the duration of the interim period." And in terms of overall volumes, "AMSA will be entitled to purchase a maximum of 520 000t of iron ore from the Sishen mine per month" And then the volumes over and above that 520 000 tons per month, "Any iron ore in addition to the maximum monthly amount will be purchased by AMSA at the then prevailing spot calculated EPP based price."

Who is this a good outcome for? Well clearly "the lead higher" two proposals by Kumba Iron Ore would have resulted in a better outcome for them. The simple truth is that Arcelor Mittal will not pay cost plus three percent. So 50 and 70 bucks (plus transport costs) a ton might seem very light of the spot price of around 115 Dollars, but it is much better than cost plus three, which is somewhere around 29.5 bucks a ton, which probably also included transportation costs . This is worked backwards from the recent Mittal SENS announcement rejecting the original proposal from Kumba: "The SIOC offer of US$50 per ton and US$80 per ton of iron ore amounts to increases of 69% and 171%" So, as ever in these agreement's all parties feel a little better.

And then Kumba Iron Ore results, as if you could not get enough of them. At face value, they are stunning results, these are the headlines from the release, I mean highlights: "Headline earnings up 90% to R6.5 billion. Interim cash dividend R13.50 per share. Sishen Mine production up 17% to 21.1Mt. Export sales volumes up 10% to 18.8Mt. Sishen Mine unit cash cost increase contained below 4%." And "Attributable and headline earnings for the period were R20.27 and R20.28" Wow, for a stock that trades at 360 odd bucks that is awesome. On track for 50 million tons per annum, that is the short term target. What is quite clear is that Arcelor Mittal is not as important a customer. It was five years ago, more so 9 years ago at the time of the split, now that represents one seventh of their production.

And these results don't reflect the agreement. Stay with me here, back of matchbox stuff, 125 thousand tons per month to Saldhana at 50 bucks a ton versus 29.5 or so. So that roughly is 20 bucks extra a ton for 125 thousand tons times 4 months. That works out to 12.5 million US Dollar, around 75 million Rands. Inland it is more, four months of roughly 400 thousand tons per month at 70 bucks, roughly 40 bucks more a ton than was being paid. That works out to 63.2 million US Dollars, 474 million Rands. Add the two together and you have 549 million Rands more revenue. Is that right?

As ever these are never about the profits of the past, but rather predicting what you would pay for a business like this right now. And that is the most tricky part of course. Because now we would know that this news above is baked in the cake. Prospects are fairly muted: "Due to the large gap between current index prices which are lower than the implied July-September 2010 quarterly benchmark prices, uncertainty exists around future export iron ore pricing mechanisms and price levels for iron ore." Sounds a bit uncertain.

And so the prospects column continues with a slight uncertain undertone: "Chinese steel production and iron ore imports in the second half of 2010 are expected to be marginally below levels achieved during the first half as Chinese steel mills prioritise cost over productivity and therefore focus on the use of domestic iron ore." There is a great South African saying, yes, no, loosely translated from Afrikaans. Single commodity stock. One big shareholder. Successful expansion plan at the right time, plus the "stuff" you sell went through the roof. Clever or lucky or both, shareholders have had a great time, including the 63 odd percent Anglo American hold. 73 billion Bucks.

The mighty Vodacom have come out with a trading update this morning. Seriously, their ads with MTN are amongst the best in the country, undoubtedly. And perhaps Nando's. This is why I think those that say that mobile growth in South Africa is mature, have got it all wrong. First check it out from the release "15.7% increase in the contract customer base." Pre paid turning into post paid. And also on the data front (something that excites us) "43.2% growth in Group data revenue"with a "54.5% increase in South African data traffic".

That hardly looks ex growth to me. Excluding the one off RICA type losses of subscribers, they added 1.1 million subscribers to 37.7 million in total. Quarterly revenue slightly lower than the March quarter, but about 450 million Rands more than the period last year, in South Africa, overall flat. The big ramp up in their contract users, around 640 thousand is most pleasing. I just want to know one thing, why have the Mozambique and Tanzania ARPU's fallen at that magnitude, currency translations? What are they in real currency terms? Shillings and Metical are not my strong points.

OK, real life data in the form of the Mooi River Index. Quickly, what is it? Well, it is a measure of all the trucks with five axles that pass through the Mooi River toll. Trucks that carry loads in excess of 25 tons, so it is easy to see that this is an economic measure, not just wheels and vehicles through the toll. Because trucks that size are the blood line of trade between the Highveld and the coast, through the port of Durban. This index was dreamed up by the Greenfields think tank, who can see and hear the highway from their office. The first graphic is the raw data from 2007 through to June 2010, kindly stuck in the best form for consumption for human beings. A picture. And as you can no doubt see, June was the third best month on record. The world cup effect? Because there was a large jump from May, 7500 thousand extra trucks for the month.

Click on the graphic to get a larger view.

And then the second graph is of a table of data all the way through back to the beginning of 2004. And you can clearly see that June is normally always lower than May, no exception, so from this table we can deduce that there almost certainly was a world cup effect in these numbers. But still, going in the right direction.

New York, New York. What did that spook Bernanke say? I mean, Ben "the bearded and measured" Bernanke in his prepared testimony uttered one phrase that saw the markets in New York sell off heavily. After having spent much of the day in the green, all the broader indices were sent lower. Read the whole release folks: Semiannual Monetary Policy Report to the Congress. Genius Ben. This line: ".....we also recognize that the economic outlook remains unusually uncertain." As Paul points out, was this not clear over the past two years? The future is not something you should take for granted.

Wall Street wanders. So, this is where stocks fell flat, the Dow fell 109 points to 10120, the nerds of NASDAQ lower by 35 points to 2187. The broader market S&P 500 fell 13.89 to 1069.59.

Commodities, currencies, Drs. Copper and bushveld. Copper trades at 310 US cents per pound, the platinum price 1516 Dollars per fine ounce. The gold price was last at 1186 Dollars per fine ounce. The oil price last at 76.76 Dollars per barrel. The Rand is slightly weaker at 7.55 to the US Dollar, 11.49 to the Pound Sterling and 9.72 to the Euro.

Up periscope. I cheated. PMI data on balance in Europe is much better than anticipated and as such we are getting a lift. 3M, AT&T, Caterpillar and Nokia are all big results today. And little Murali got 800.

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

Jozi, Jozi. We started a touch worse, but then boom, a whole host of PMI data released from Europe beat expectations, all for one out of seven. German, French and the rest of the Euro zone PMI seems better than most people think. Or thought. And we thought the stress test results would be revealed yesterday. The French say that their major banks are all fine. I can hear the Americans sigh and say yeah right, and when the results are revealed I think today, just after our markets close, there will be nothing that we can do about it.

The gains we hung on too, in the cold chill of a weekly jobless number from the US, once a week it rolls around and this time it looked rubbish again. And, apparently what Ben "the bearded and measured" Bernanke said in his prepared testimony in the previous session was not that bad. That is what I said. And lastly, keeping us comfortably in positive territory were results from some majors that beat the streets expectations. 3M, Caterpillar, AT&T all comfortably beat earnings expectations, Nokia came in-line, and a bit mixed, but the markets liked what they saw. And if that excitement was not enough for you, we had the small matter of an MPC meeting mid afternoon.

Maude street shakes, moves and grooves. Boom, it was on steroids through the day, a bit like the fellows on the tour. Doh! Sorry, I did not mean that. The Jozi all share index closed at 28274, up 441 points on the day, or just shy of one and two thirds of a percent. The stocks that really rocked were the platinum fellows, up nearly four percent on the day and firing on all cylinders. What a lame thing to say, firing on all cylinders. In fact, all the majors were higher.

Bart's shorts. No change from the fellows who try and predict the future. Hey, that sounds like almost every single business out there. I mean the Reserve Bank and the MPC decided to keep rates on hold because the future is uncertain. As ever. And then today is the day that the EU banks come under the spotlight, we will see the results of the bank stress tests. And then America, a country of great opportunities but more importantly, the differences between the haves and the have nots is still huge and seemingly widening. Is all the talk of a double dip completely overdone? Morgan Stanley seems to think so.

No change, sorry. For those who need to pay back the bank that is. Not for those with cash on deposit. I am talking about the Statement of the Monetary Policy Committee yesterday afternoon. The local inflation outlook is supposed to look great, in the band all the way through to the last quarter 2012. How are you supposed to see that far out? 27 months.

OK, from the release this is in the plus column: "Positive factors include lower interest rates, lower inflation, positive wealth effects arising from favourable house price and equity market developments, and high levels of real wage increases for those in employment." Unfortunately real wage increases are also a problem too: "Wage expectations also remain elevated" True.

And the consumer is still not spending, still looking rather reserved in his slash her spending patterns: "Factors constraining consumption expenditure include continued job losses and high levels of household debt and low levels of credit extension to the private sector." The deleveraging process of course and uncertainty about job security in the short term is most certainly keeping the consumer out of action. Although credit extension seems to have bottomed and retail sales might be buoyed by the soccer ball effect. So perhaps we are at the bottom of the cycle starting to see some improvement.

So, no change and this is what the central banks outlook in the short term, I guess until the next meeting: "The Monetary Policy Committee assesses the risks to the inflation outlook as being evenly balanced and views the current monetary policy stance as appropriate. Therefore, the MPC decided to keep the repurchase rate unchanged at 6,5 per cent per annum. The committee is aware of the fragilities and vulnerabilities to the domestic economy, driven in part by global uncertainties."

So, until the Greeks, Spaniards, Portuguese, Irish and Italians amongst many others in Eastern Europe get their finances in better shape, we still look a little fragile. I must admit that there was a sense that the problems that these countries have is starting to fade. And all of course will be revealed today, the EU banks stress test results are due to be released at 1600 GMT, so that means that our markets will be closed already.

Bank stress tests. What does that mean exactly? Well testing the banks for all sorts of scenarios, if unemployment were to tick up to such and such a level, if GDP were to slow down to this level, or beat and go to that level. If consumers were to default to this level or if the outlook was a little better, where would the banks have to be from a capital reserves ratio. It is ultimately about getting all the major European institutions on the same page with regards to what capital levels some of the banks are short. And who passes the test. Tim "the toolman" Geithner actually travelled to Europe to let the folks there know how it is. So those results today later.

This is possibly the most amazing info graphic that you are going to look at today. I think. If you have something more wow, please send it to me and I will post it onwards. It will be cool and stuff for everybody else, my littlest daughter tells me that sharing is caring, of course she picked that up from that weird purple dinosaur. This was tweeted by Paul Kedrosky yesterday, and is titled: Where's The Money In America?

It is a simple outcome having looked at that graphic, the rich are rich and not in a great deal of debt, the middle class in America have way too much of their personal wealth in their homes and not enough in equities. That is my personal view, but then I am biased. If the geyser bursts out at 14th Avenue MTN headquarters, you don't have to replace it, they will get someone in to replace it. Of course you can never leverage up and borrow money from the banks to own some shares, although I always wonder why that does not work and should not work.

I want to explain that a little further. Let us say that the bank took a ten year view on a portfolio. We lend you the money now at prime plus four and a half percent, a very expensive rate. For ten years. You can use the dividend flow plus your own income to pay down the capital amount over the next ten years. Until such a time the bank or broker owns the equity portion and transfer takes place over time. Sounds like leverage and not something that a bank would want to do, would require at least a 25 percent deposit.

Wait no, this can be done it requires derivatives, single stocks and contracts for difference, you can do it already. Problem is that folks use these as trading instruments and not investing instruments. Just saying that there is a case for this. In much the same way that the bank would not approve a loan where a house is on the edge of a river bank that floods periodically, the lender should only allow an elite set of stocks. Only a small portion of stocks and the lender has the ability to have full say until those stocks are paid for in full. And then you are on your own.

OK, but back to that graphic I have lost you by now already with my off the wall divergence. Back to that graphic that shows exactly how skewed America's wealth is. The index that measures inequalities the best, is the Gini Coefficient. Here is a definition from Wikipedia: "The Gini coefficient is a measure of the inequality of a distribution, a value of 0 expressing total equality and a value of 1 maximal inequality. It has found application in the study of inequalities in disciplines as diverse as economics, health science, ecology, chemistry and engineering."

And America has a Gini coefficient the same as countries like Jamaica and Ivory Coast. And for the record South Africa, Namibia, Botswana and Lesotho are the worst countries by this measure. It is by no fluke that at the other end of the yardstick you find all the developed economies in Scandinavia and small countries in Europe. Think Denmark. Needless to say that most of these countries have a serious socialist steer. But hey, it works there, all the people are wealthy, it is better than having all your people poor and the same.

Double Dip is not when you are ordering an ice cream with sprinkles but rather when you are talking about another set of negative GDP reads. In the big economies of the world. Morgan Stanley: Here's Why The Double Dip Scare Is Way Overblown. Have a look at the piece by Morgan Stanley. And then seriously, let me know what you think.

New York, New York. Better earnings numbers trumped housing data and jobs data, with the likes of Caterpillar, 3M and AT&T beating expectations. Although the housing data itself was hardly poor, it is just at historically low levels. Total months supply in the pot, nearly nine months. Got that, existing home sales inventory at nine months. Again I am going to stress that it is all about earnings and that is what the markets focussed on. Plus of course better economic data out of the Eurozone and the UK, seemingly settling nerves.

Wall Street wanders. Session end the Dow Jones closed at 10322, up 201 points, the nerds of NASDAQ up 58 and a half points to 2245, whilst the broader market S&P 500 tacked on 24 points to 1093, up two and a quarter percent.

Commodities, currencies, Drs. Copper and bushveld. Dr. Copper has been on a tear lately, up 6 percent in a few days, last at 318 US cents per pound. The gold price at 1198 Dollars per fine ounce, the platinum price better 1546 Dollars per fine ounce. The oil price is lower on the session at 78.97 Dollars per barrel. The Rand on a tear as the flows come in looking for the interest rate differential. 7.43 to the US Dollar, 11.39 to the Pound Sterling and 9.61 to the Euro.

Up periscope. UK GDP has beat the streets estimates. The high street that is. So we have been lifted by that and we have started much better this morning.

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