Jozi, Jozi. I could see a whole lot of green yesterday, more than just green shoots on a day early. Mind you, do not get ahead of yourself, as comforting as the recent rally has been, we have not quite scrubbed the big oopsie from the beginning of the month of August. But nearly, we managed to close only 200 points down for the month, nice. On the day we added a whopping 640 points to 31005 on the Jozi all share, that was a percentage gain of 2.11 percent. A pretty broad based rally, there was only one blip from all the major indices, with only real estate off half a percent, otherwise every other index was in the green. Awesome. For the bulls that is.

There was a jobs number, the taste tester to the real deal, the ADP employment report, which was about in line with expectations. More on that a little later. There was a Chicago PMI number that was better than anticipated, a factory orders number that was better than anticipated, all this lent to the cheerful feel amongst the bulls. Of course the sceptics would be more sceptical, markets are not supposed to rally for the bears, in the same way the opposite is true for the bulls.

Murray & Roberts reported numbers for the full year, yesterday afternoon. The big broom is what a twitter mate called it, set the base low is what he suggested. Disposing of business units that they figured were non-core, and recalibrate. So the ugly part first, the group made a loss of 678 million ZAR versus a 1.535 billion ZAR profit last year. Yech. Here is a short list of the charges recorded for the period:

1.15 billion ZAR for the Gautrian contract finalisation costs.
"Marine Construction: Gorgon Pioneer Materials Offloading Facility ("GPMOF") – R582 million of estimated contract completion costs;
Middle East – R164 million for impairment of contract receivables in respect of legacy contracts; and
Construction Products – R79 million impairment of assets."

Ahhh, man. This is one of the reasons why we have always been reluctant to own construction companies, when the tide turns your trunks get sucked out to sea too. All revenue, not all profits through the good and bad, even though Murray & Roberts are quick to point out that their business is geographical diversified and divisionally so too. And that does show.

I am not going to look too long and hard at these numbers, they certainly are ugly at face value. But I think that the new team has done the right thing. Get it completely off your chest. The stock was off the highs by about two and a half percent after this release, but still closed up and is off a fraction this morning, telling you that the market knew this all along. We knew this news, it was priced in. The most important question is then, do you buy the stock at these levels? On balance we do not like the sector, because of the margins and project risk, which you see cycle after cycle, but at these levels I am thinking that it could get no worse. Read the transcript or listen to the podcast here on Moneyweb: Murray & Roberts full-year results: Henry Laas - CEO, Murray & Roberts. Let me know what you think, particularly if you are in the industry, how it looks from here.

Byron's beats takes a look at the green economy, which is most apt, because today is spring day, the first of September. Come one summer. Only one third of Africa is in the southern hemisphere. Kenya is only partly in the Southern hemisphere. There is only one Asian country which is mostly (but not entirely) in the Southern hemisphere, and that is Indonesia. So let us just say that the rest of the world is less excited about today, because that signals winter is imminent. But that is one of the reasons we live here, good weather. And it is an awesome day today in Jozi!! Let the beats of Byron begin:

Because it is spring day I want to talk about how we as investors can benefit from this very obvious shift into environmentally friendly practices. I think it is quite obvious that climate change is taking place. I do realise that we have more access to media than we have ever had before and we are much more aware of climate related disasters. To give you an example, when the earthquakes hit Washington, news of the event reached New York via Twitter before the actual aftershocks did. Although we are more aware, scientific evidence tells us that the ice caps are melting and this has long term implications, especially for our future generations.

As investors we can allocate our money into sectors that will profit from authority initiatives and policies which are aimed at protecting the environment. Our original choice was Impala Platinum. It may sound ironic that we chose a big dirty miner but it is what they mine that is important. Legislation around the world is forcing car manufactures to install catalytic converters. These are made out of either Platinum, Rhodium, or Palladium and they convert toxic exhaust emissions from vehicles into non-toxic substances. Unfortunately we have taken Impala off our list due to rising costs but you knew that already.

Unfortunately the South African market does not offer too many other options. There is Interwaste, a small cap waste management company who also delve into recycling innovation. Check out their website if you are interested. They definitely look interesting but unfortunately they are very small and not at all liquid. History tells us that bigger blue chip companies bring back better returns and that is why first choice in this field is GE. I know that they are not listed in SA but unfortunately we don't have any other choice.If you want exposure to GE you are going to need to open up an account in New York.

So why GE? The massive conglomerate has been investing in alternate energy for years now. It launched an initiative in 2005 called Ecomagination which aims to capitalize on environmental problems. In 2007 revenues from renewable energy which included wind, solar and biomass came to $7bn. Last year revenues from the energy sector came in at $37,5bn. R18bn of that came from ecomagination. That is 12% of all revenues whilst the company looks to grow this by investing up to $10bn into the initiative in the next 3 years. The initiative includes everything from appliances to energy management to power and water to transportation. Solar plants, capturing carbon, wind power, fuel cells, you name it. Check out this link if you are interested, it's fascinating. Ecomagination

This brings me to another point. I am a believer in human innovation and when you browse through the link above and see what amazing things are being done you can see how capitalism can sort out real social and global issues. We are experience a convergence of energy sources. While the petrol price increases and dirty energy sources become less economically viable due to regulations or input costs, cleaner alternatives are becoming cheaper and economically viable as technology improves and more investments are thrown at the problem. I'm not saying problem solved but I feel we are getting there.

It is a tough old job being a central banker, but imagine being a central banker in China, where you have to cater for the very different needs of around 1.34 billion folks? Just plain hard really to run an economy centrally, but I guess you have to say that they have done a good job. Did you see that piece I keep referring to (boring now) Sylvia Nasar "Grand Pursuit", in which the book (and artist) explain that in 1952, when Mao Zedong came to power, China's standard of living was half of that of Africa and only 5 percent of that of the USA. And there were plenty of Great Leaps forwards backwards that would have seen that not change for a long time.

The standard of living calculation is just a crazy calc, you can check it out here ---> Human Development Index. The top countries over the last twenty years have been Japan, Canada, Norway and Iceland. Sadly we find ourselves at the wrong end of the list, behind Indonesia and just ahead of Vietnam. Check out "the list" ---> List of countries by Human Development Index.

OK, but this is not a history lesson, nor trying to figure out what the UN could do better. No sir. We are rather focusing on Chinese PMI data for the month of August out this morning. It is complicated, because there are quite a few moving parts, I have already heard two different views on the same data read. One saying that there is a soft landing taking place in China right now, another still concerned about inflation. On balance, and feeling the very bumpy ride that we have had recently, I would say that this is a good number. Check out the full details here ---> China PMI rebounds in August; export orders fall.

The part that pleases me the most is internal consumption, that is increasing slowly but surely. That would be where everyone wants it to "end up", we cannot be reliant on one particular geography forever, a diversification of consumers is a good thing. A pick up in wages is again not a bad thing but I noticed this piece in the morning when I switched on the fruit box ---> Another Company Moves Production Back to U.S. Strange, but true, the Chinese still have a lot of work to do.

New York, New York. That ADP number as promised, here we go, a look at the private market. Here it is, I can almost hear Hampton Pearson in the background, The ADP National Employment Report for the month of August. Bookmark the page, because the release is always at the end of the month, the last Wednesday of the month. Just before the non-farm payrolls number, which is tomorrow, how very exciting!! For the August 2011 ADP National Employment Report, follow the link there.

You know my view on these surveys and reports, the grouping is often too small and unfortunately this one has been pretty unreliable. But I like the ADP number, for one reason only, the company (listed, ticker ADP on the NASDAQ) has a nice enough spread of their own data to work with. Check this out via that website: "Automatic Data Processing, Inc. (ADP) is the nation's premier provider of payroll-related services. Currently, ADP processes over 500,000 payrolls, for approximately 430,000 separate business entities, covering over 23 million employees, in all major industries and states. While doing so, every month ADP collects a wealth of information related to payroll employment well before publication of the Employment Situation." 23 million employees!! So, I guess this does give you a fairly good guesstimate of the overall number, the missing part in the government number are the government employees.

For the record for those stock jockeys that are keen as beans for the number Friday, expectations as far as I can tell are for an increase of 125 thousand jobs for the month of August. I wonder what the impact of the Washington D.C. debt ceiling standoff would have had here. I suspect, like with these consumer sentiment numbers, which translate into real life, this number might well disappoint. But then again, 125 thousand is not great either, better to be adding jobs slowly than none at all.

And then something that might get the pro business types spitting nails, the antitrust regulators have expressed concerns over the AT&T purchase of T-Mobile. No, the regulators say, too few operators means that the consumer will not benefit. I suppose a working example of that is here in South Africa, where the major provider is not that influential anymore and prices are decreasing.

Strangely, if you think this FCC Expresses Concern on AT&T Deal as Justice Challenge Unfolds is not that friendly for business, then spare a thought for the event that took place 27 and a bit years ago ---> Regional Bell Operating Company. Broke it up all those years ago, as you were, is what I guess is what the regulators are saying. Are the regulators really looking after the best interests of the consumer? Surely a business with size and scale, with stronger cash flows would also help consumers with more aggressive packages? Can't fight the government.

Commodities and currencies corner. Dr. Copper last traded lower at 414 US cents per pound, the gold price is also lower at 1817 Dollars per fine ounce, the platinum price is down at 1838 Dollars per fine ounce. Note the marginal gap, it does tell me something. The oil price is off the session high, 88.48 Dollars per barrel. At the current currency conversion rate, 7.02 ZAR to the US Dollar, that is 621 ZAR a barrel of oil. There are just short of 159 litres in a barrel of oil. 3.90 ZAR per litre. Now that puts it into perspective. This is for NYMEX WTI, we pay more for Brent, which was last quoted at 114.08 Dollars a barrel, or 5.03 ZAR a litre. The Dubai Mercantile Exchange Oman Crude trades at 109.35 Dollars a barrel, or 4.83 ZAR a litre. Nice work if you can get it, to process, not to transport and not on the retail side. Although as you know, that is a costly business.

The Rand is steady, you know where it is the US Dollar, to the Euro it is last at 10.02 to the Euro and 11.39 to the Pound Sterling. Yields here will be more exciting I guess. We are comfortably off the best for the session, I guess caution will be the watchword ahead of the big jobs number on Friday. Happy spring, if it is your hemisphere.

Sasha Naryshkine and Byron Lotter
Email us
Follow Sasha on Twitter, and Follow Byron
011 022 5440