Yes! Cry for Argentina

"Well, since the incumbent won a landslide victory last year, as the FT reports, the countries macro accounts are worsening. So, they are in short looking for extra revenue streams. And in their view, Argentina, Repsol has just been milking a national asset."

Jozi, Jozi. 26^o 12' 16" S, 28^o 2' 44" E. The market was a bit like a lazy afternoon of getting on and off the couch, hugging the line between slightly positive and slightly negative. Alas, the overindulgence meant that the market was lower at the end of the session, but it was not without trying hard towards the close. The financials led the decliners, with Old Mutual shares falling hard on being ex their hefty special and normal ordinary dividend, slightly cushioned by the share consolidation. Lending positive support were industrials, beverages (read into that SABMiller), construction found themselves in a very bad place, down another one and a half percent.

There is very little happening on the local companies front, I did mention that earnings season is going to be huge in the US, starting yesterday with a disappointment in earnings from CitiGroup, but the stock actually rallied after having been down in the pre market. There is a Spanish debt auction of shorter term debt today, just after a German sentiment number from the ZEW. But the big one for Spain is going to happen on Thursday. I laughed at John Robbie (or is it Robbie Johns?) when he said about Spain, "Things theem not thoow good". I think that the ECB will restore confidence and be participants here in the Spanish bond auction, just to lend a little bit of a hand and settle things.

SABMiller yesterday announced that they were going to be expanding into the rest of the continent (ex South Africa) and investing around two and a half billion Dollars. They plan, as far as my reading is concerned, to revamp existing operations, and build new breweries. Meeting growing beer drinking demand, remember that whilst beer for rich people is not necessarily a luxury, premium beer products amongst middle class folks show that they are upwardly mobile. Even if it is just the facade of being upwardly mobile, beer is a cheap luxury. And Africa as a continent is a growing market with a big growing (and better earning) population for many fast moving consumer goods businesses. Not an industry that we like in the long run, you can already see how the ban in advertising of alcoholic beverages is getting the brain gears moving.

But that is a separate story altogether, another one that we are watching is the Australian cigarette packaging ruling -> Tobacco Firms Challenge Australia Plain Packs. I can see how this is an issue for both sides, just where do you stop telling people what you can consume and what you can't. BUT, if you are paying for their healthcare at the states expense, perhaps you can tell folks what their consumption habits must be. Nannying? Or just simple economics? Whilst the tax revenues on cigarettes is still big, what is bigger is health related economic losses. Check this from the tobacco atlas piece titled New Tobacco Atlas Estimates U.S. $35 Billion Tobacco Industry Profits and Almost 6 Million Annual Deaths: "During 2000–2004, the value of cigarettes sold in the United States averaged $71 billion per year, while cigarette smoking was responsible for an estimated $193 billion in annual health-related economic losses."

Notwithstanding that, from the same document: "More than 43 trillion cigarettes have been smoked in the last ten years and cigarette production has increased by 16.5% in that time period, according to The Tobacco Atlas. Annual cigarette consumption has also increased significantly during this time period." WOW! That is amazing. So, whilst my long term theory remains intact, the share prices of the listed stocks, especially the one (and only one) that we have access to here, BAT has been a massive winner for shareholders. HUGE. But I have suggested that the stock looks quite expensive now, and perhaps will lose the defensive qualities in due course. But for the mean time folks still rate the stock a buy and better than all of their peers. I wonder what the Chinese government will do, as deaths directly attributed to smoking are going to rise to 3.5 million people per annum by 2030. So, that is enough to wipe out the whole of South Africa in 14 odd years!

New York, New York. 40^o 43' 0" N, 74^o 0' 0" W. Phew, there was major hand wringing around the Apple share price falling 4 percent in normal trade and one percent post market, the folks have been real nervous here. Real nervous that they did not miss out and now real nervous on the selling front. Amazing! The market cap went from 600 billion just a few days ago to 540 billion at the close of business last evening. That is like wiping Nokia and RIM out three times over. Sounds more dangerous when you say it like that. The nerds of NASDAQ sank three quarters of a percent, the broader market S&P 500 ended about flat, whilst the Dow Jones industrial Average added over half a percent.

Byron's beats takes a look at retail sales in the US yesterday:

Yesterday we had retail sales figures come out of the US which showed some healthy growth. Sales grew 0.8% for the month of March which was way above the expectations of 0.3% thanks to a stronger jobs market. Most of the growth came from increases in building materials, autos, furniture and clothing.

This is great news for the global economy because we all know how important the US consumer is to the overall mix. It also shows that the US consumer has been very resilient to the increasing fuel prices. This has been a major concern for economies across the globe as disposable income gets sucked into transport costs rather than general consumption thanks to the elevated oil price.

I stumbled upon this interesting article from the WSJ which highlights a few factors explaining this consumer resilience. What interested me was the part about fuel economy. According to a study done by the University of Michigan the average vehicle sold in March got 24.1 miles to the gallon compared 20.8 four years ago. That is a 15.8% increase in millage per gallon. They also mentioned that alternate sources of transport are being used and people are actually driving less.

I may be going on a tangent here but this data makes me think of our situation in SA with regards to fuel increases and the e-tolls. We often forget or don't even know that we are consuming less fuel and that the cars we drive are much more efficient than in the past when fuel was so cheap. Yes inflation is certainly an issue when it comes to fuel increases but I do not think that the e-tolling and petrol increases will have too much of an effect on our strong consumer. People will find alternatives. Drive less, use lift clubs, use the Gautrain. It is human nature.

Retail sales locally grew by 3.9% in January year on year and I do not believe this trend will slow anytime soon. I really do believe consumption of the developing market will be the next big growth theme of the future. The fact that the US consumer is still strong is a great underpin. We continue to like stocks that play towards both the US consumer and the growing developing market base. These include Nike, Visa, Apple, Richemont, McDonalds, Massmart, Woolworths, Mr Price and African Bank.

Currencies and commodities corner. Dr. Copper last traded at 364 US cents per pound, a multi week low. We have seen some very average looking Rio Tinto production numbers and Chinese weaker FDI data which is not helpful for Dr. Copper's health. The Reserve Bank of India cut rates unexpectedly. That is an event which might be good for commodities. The gold price is slightly better at 1652 Dollars per fine ounce, the platinum price is ticking up, last at 1572 Dollars per fine ounce. The oil price is slightly higher at 103.68 Dollars per barrel. The Rand is firmer, at 7.85 to the US dollar, 10.37 to the Euro and 12.51 to the Pound Sterling. We are slightly better here, a "favourable" Spanish bond auction and a better than anticipated ZEW number is to thank for that.

Parting shot. Dumb, dumb, dumb. Stupid, stupid, stupid. Nobody I read so far this morning thinks that the Argentinean government taking a 51 percent stake in oil company YFP is a good idea. Let me rephrase, the Argentinean government in nationalising 51 percent of YFP and thereby taking control away from Spanish oil company Repsol. Repsol will now own just 6.4 percent of YFP, as they lose 51 percent. Argentina is going to throw a few Peso's in Spanish companies Repsol's direction. How many state owned entities are there in the USA? They helped the banks and the motor manufacturers only because they had to, the stock has been sold off, in some cases for a sizeable gain. But Argentina is not nationalising YFP because they need to help the company. They are doing this because their own internal finances are in a bad place. 100 years ago they had the world at their feet, but for various reasons, political wrangling and personalities, Argentina lost their way, and the USA won.

So why are Argentina scrambling? Well, since the incumbent won a landslide victory last year, as the FT reports, the countries macro accounts are worsening. So, they are in short looking for extra revenue streams. And in their view, Argentina, Repsol has just been milking a national asset. No guys, those dinosaurs and ancient forests were there long before humans were there, this is where the oil comes from. Bloomberg has this take: Argentina Seizes 51% of Oil Producer YPF to Stem Imports.

The imports of oil are as a result of the Argentinean government putting a cap on export prices, you can't get market prices. So naturally nobody is going to push the envelope from a production point of view. Another disaster in the long line of Argentinean economic meddling. Economists are not even allowed to question high inflation numbers. Yeah, good luck with this, I bet..... in the next half a decade, you will see another credit event, as once again governments prove that they are not able to control economies and resort to desperate measures. Buyers of Argentinean bonds? Venezuela! Crazy. This is going to end badly again for Argentina.

Sasha Naryshkine and Byron Lotter

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Harmony feels the heat

"But, that crazy guy Jim Cramer said that the market participants could actually be captured by a poorly performing Spanish bond auction, which he actually expects. But, earnings ultimately drive share prices levels in the long run. But I am well aware that sentiment makes up around half in the short term, perhaps even more of that."

Jozi, Jozi. 26^o 12' 16" S, 28^o 2' 44" E. It was a strange sort of a day here in Jozi, I expected worse because of the lower than anticipated Chinese GDP numbers, but, 8.1 percent growth is still the envy of the rest of the world. Unless you are Ghana, which I saw grew at around 16 percent in the fourth quarter, driven by a boom in the oil sector. But not off the enormous base that China has grown too, remember the message Friday? Resource stocks sold off in the second part of the session, they were actually comfortably in the green at the beginning of the session. The Jozi all share index closed off one third of a percent, down 111 points on the day to 33705 points. The same old worries emerged, Spain and their funding issues and the impact that is having on Italian borrowing costs. At much irritation of the Italians as I can understand!

Yech. The Harmony Gold stock price took some heat Friday, down at a 52 week low, 7869 ZA cents per share. The loss on the day was three and a half percent. The reason why the stock declined on Friday? Well, there was a production report for the first quarter, which was ugly, the company expects 18 percent lower production than the previous quarter. Now remember that gold production in the previous quarter was up 5 percent to 344592 ounces, whilst cash operating costs were actually lower at 249 thousand Rands per kg, or 958 Dollars per fine ounce. AND, there was a very modest dividend of 40 ZA cents for the first half.

BUT, 18 percent lower on the quarter? Wow. That is around 282 thousand ounces produced last quarter. And the gold price and currency have actually been working against them in this quarter. More so the currency, although that has been really weak in April, but that is outside of the last quarter. First, in Dollar terms, the quarter was about the same as the previous one, check it out, courtesy of Kitco directly off their website:

BUT, this is a much more important graph, the Rand gold price versus the Dollar gold price, you can see that the local currency weakening has really helped out holders of GLD (the Rand gold price instrument) and the gold producers locally, but not as much sadly. Here it is, again courtesy of Kitco:

The part that I want you to look at is the January to March Rand gold price, which is lower than the prior six months. So, what I am trying to say is that it could be uglier than at face value. So why was production so much lower? The company lists a few reasons, let me do a Jackie Selebi copy and paste, first reason:

"The festive season and public holiday disruptions associated with the March quarter, being less shifts worked than in the December quarter, as well as slow start-ups post the holidays;"

Huh? Public holiday disruptions? New Years day and Human rights day? Or is it just a case of the workforce only getting into the swing of things after a couple of weeks in January? Perhaps.

"Safety stoppages;"

We know that one, you know my views, perhaps a closer look at the shaft versus mine debate, when there is a fatality. Don't get me wrong, one mining death is one too many, but it is a very dangerous profession. And a poorly paid one too, in large part because the skills for the poorly paid jobs (in almost every industry) are lower. I do not know what the answer is, but it is impacting on one of our main industries in South Africa. But one death is one too many. So the balance needs to remain.

OK, next:

"Shifts lost due to the one day protected strike of the Congress of South African Trade Unions (COSATU);"

One day, that basically is 3745 ounces, or 6 percent of the ounces "lost" relative to the last quarter, so perhaps not the biggest issue that Harmony had. And then Harmony talk about the heavy rains in PNG at their Hidden Valley asset, remember that at the half year stage production had ramped up 25 percent. There is nothing that you can do about the weather. And then the upgrade of infrastructure at the Doornkop asset, but that was not a surprise. This resulted in a loss of 44 percent in production relative to the previous quarter. Doornkop represents around 9 percent of all South African revenue, and about the same amount from a production point of view. So I am guessing that this has about one quarter to one third of the production losses when measured against the last quarter. Next and perhaps most disappointing, the grades are lower, in particular at their biggest South African asset, Tshepong:

"Lower than expected grades at Tshepong, Masimong, Unisel and Joel contributed to a 12% decline in underground grade."

All in all, they, Harmony are disappointed. As was Mr. Market. And I am guessing that the trend of higher costs will remain. I am guessing that the gold will become deeper, more dangerous to find and that most of the "easy" stuff has been extracted, so perhaps grades are going to be impacted further. In a world of what I consider investment grade, sadly they do not get a podium placing. Sorry gold bugs, but the last thing, and most important, I still do not understand the fundamentals behind the product that they produce, the yellow metal, that still captures a lot of appeal as an alternate investment class. You know the argument, the only real currency. Why is that so? Because someone told you that it was so. From a share price point of view, the stock might actually look cheap at these levels, having been squashed.

New York, New York. 40^o 43' 0" N, 74^o 0' 0" W. A big sell off towards the end of the days trade, after Mr. Market tried hard to make a comeback towards the middle of the session but a late sell off, attributed to a weaker than anticipated consumer confidence number at the beginning of the session. Session end all the major averages were lower, the Dow Jones just over one percent, the S&P 500 down one and a quarter percent, whilst the nerds of NASDAQ closed lower by nearly one and a half percent! Not good.

This week should be all about earnings! BUT, there is a Spanish ten year bond auction on Thursday morning. In amongst some results from Citigroup today, Coca-Cola, JnJ, IBM, Intel, Goldman Sachs on Tuesday, Halliburton, Qualcomm and Yum! Brands on Wednesday, Bank of America, Du Pont, Freeport-McMoran (from general commodities point of view) and Microsoft on Thursday, whilst on Friday we will see numbers from General Electric, McDonald's and Kimberly-Clark. Whoa! That is more than enough to get you excited, but the reason why I am most excited is simple, it can then be all about earnings. But, that crazy guy Jim Cramer said that the market participants could actually be captured by a poorly performing Spanish bond auction, which he actually expects. But, earnings ultimately drive share prices levels in the long run. But I am well aware that sentiment makes up around half in the short term, perhaps even more of that. Good companies able to be bought at good levels will stand you in better stead in the long run, trading markets, that is just hard and requires a large amount of luck.

Currencies and commodities corner. Dr. Copper is last at 364 US cents per pound, the gold price is ticking up a little, 1649 Dollars per fine ounce, the platinum price is last at 1574 Dollars per fine ounce. 102.76 Dollars per barrel is where NYMEX WTI trades. The Rand is trading mixed, 7.87 to the US dollar, 12.63 to the Pound Sterling and 10.37 to the Euro. The market is mixed today, up and down.

Parting shot. Don't be confused. Old Mutual today goes ex dividend of 21.5 UK pence (which includes an 18 pence special dividend), roughly 270 ZA cents. But the share price is down only 130 odd cents today. Why? Well, there is actually a consolidation too, for every 8 shares that you used to have, you will be getting 7 now (actually next week), a strange sort of a consolidation really, normally it is a ten for one or so, that has been my experience, or two for one, that ratio is not one that I am completely familiar with. So, let us see where the share price should have adjusted, bearing in mind that there might also be natural sellers in the form of dividend stripping folks. Those who sell post the dividend, although I am not too sure that practice takes place as much as it did in the past. So, first things, the price needs to be higher in lieu of fewer shares in issue, if the value needs to be the same as before. PLUS, the price needs to adjust for the dividend. So, don't get anxious if you own the stock (many South Africans still do through the demutualisation process), there are the two things happening.

Sasha Naryshkine and Byron Lotter

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Young one's failure to launch

"For 2011 the economy of China was 6.98 trillion Dollars, that is the estimate. So, if the Chinese economy grew by "only" 8 percent this year, the size of the economy at the end of 2012 would be roughly 7.5 trillion Dollars. An addition of around half a trillion Dollars on last year. Which was the entire Chinese economy in 1994."

Jozi, Jozi. 26^o 12' 16" S, 28^o 2' 44" E. Well, the mood improves globally notwithstanding the same old problems globally, Spain and Italian bond issuances coming in at higher yields than the last auction, there was also a weekly jobless claims number that was higher than anticipated, there went my theory, but the one thing that got the bulls going was a narrower than expected US trade deficit. That was the single event that for me anyhow saw the futures go higher, although what I read suggests that it was the repeated approach from Fed officials who said that they did not see any chance of rates changes until that official 2014 target. So why get excited about something that you know already? Strange, I am confused. There was on the local front some better than anticipated tourist arrivals in South Africa, growing at 3.3 percent I think, that is good news! And then building confidence is picking up according to an FNB construction survey, but the truth is that two thirds of respondents still think things are not better, but this compares favourably to a few months ago where eighty percent of respondents thought "things" sucked were not good right now. Moving in the right direction I guess.

Session end we closed 184 points better or 0.55 percent up to 33817 points on the Jozi all share. Retailers slipped. Gold miners slipped. Resources were the real drivers, up nearly a percent and a fifth, but are still as a collective down nearly four percent this year. Banks were flat on the day and industrials were around one third better in the session. There really is a lack of local company news at this time of the year sadly. So we have to resort to making sure we scratch around for economic data, and I guess luckily from a news flow point of view there are anxieties about Spain, I know that the Italians are irritated at having to be lumped with the Spanish problems. But there was and is a small matter of the North Korean rocket launch which failed! Hah-Hah.

Beijing central. 39^o 54' 50" N, 116^o 23' 30" E You are going to read the headline today, China growth slows to 8.1 percent. And in fact misses the expected growth rate of around 8.3 percent. So this is bad news, yes? Well, yes and no, I am of the opinion that anyone you talks about a landing of any sort never did any physics of any sort. Let me be clear, Spain's economy contracting by around 1.5 percent this year, that is a landing and in fact going deep into the underground bunker for a while. Growing at 8.1 percent means that you are still maintaining an upward trajectory, albeit at a lower rate. In fact this is the lowest recorded growth since the first quarter of 2009. BUT, before you take the rest of the day off biting your nails and hiding under your desk, with your stomach full of knots (yes, he will ask you out and yes, she will say yes), check out this graph here, because this really does put it into perspective:

See? You missed 2011 in this graph, 6.98 trillion Dollars, that is the estimate. So, if the Chinese economy grew by "only" 8 percent this year, the size of the economy at the end of 2012 would be roughly 7.5 trillion Dollars. An addition of around half a trillion Dollars on last year. Which was the entire economy in 1994. The whole economy 18 years ago is expected to be added this year. So my simple take on it, is that the Chinese miracle continues, now we want it to morph into something different. And there are signs that it is happening. Because in our view, internal consumption and a lower savings rate would indicate that the economy has made the shift to a more consumer based economy which helps expand the service sector too.

But there were some metrics that we set out at the beginning of the week that I thought was key here, firstly fixed asset investment which clocked 20.9 percent year on year growth rate, beating expectations ever so slightly. And then there was retail sales that we also thought was important, that beat expectations too, coming in at 15.2 percent growth rates. Lastly, industrial production clocking 11.9 percent growth year on year, also beating expectations. The property sector was what weighed on the overall number, but for a while now many have been suggesting that the air should go out of some of the key real estate markets in China. Nothing like a bit of a softening in that sector to put it all back into perspective, for individuals at the moment. As ever, my line is going to be that you cannot grow at that same rate forever, there will be a quarter in the next decade when Chinese growth moderates significantly, we could be seeing percentage numbers with fours and fives in them. But I can assure you that the Chinese economy would be far bigger than it is now, so a five percent (or four percent) growth rate would be acceptable. Or not, I am happy with that too.

New York, New York. 40^o 43' 0" N, 74^o 0' 0" W. Stocks rocketed for the reasons mentioned above in the opening segments, markets interpreting other Fed officials saying that rates are going to be low for a while as a good thing. Again, forgive me from being stupid here, but in the VERY recent minutes release of the March minutes of the FOMC, all voting members bar for one voted in favour of low rates all the way through to 2014. So, what is new? Stocks as a collective were up just a little more than one and one third of a percent, basic materials (commodities) and Energy stocks ramped up 2.69 and 2.09 percent respectively, I guess maybe some of those gains today will be unwound. All major sectors ended in the green, that was pleasing I guess.

And then earnings after the bell from Google inc. This is a company with a market capitalisation of 211 billion Dollars, incorporated in September 1998. So, if Google were a person, they would not be able to get a drivers licence or enter into any legal agreements without consent of their parents/guardians. There is to be a stock split and the control aspect by the founders (Larry and Sergey) and major shareholders leads me to believe that they think they are the parents. Which means that the shareholders are the kids right?

Felix Salmon has this take -> Google's evil stock split. I suspect this is a bit of a problem. BUT, don't cry foul here, in the founding Google document there is a line that suggests that investors will have little ability to give strategic direction to Google with voting rights. In other words, you should have known that all along.

Here are the results release after market: Google Announces First Quarter 2012 Results and Proposal for New Class of Stock. Sales up 24 percent, international revenues were stronger than before and now represent 54 percent of group revenues. Costs have risen again significantly, but that is because the Google machine is getting bigger. GAAP operating income was higher (32 percent) as a percentage of total revenues in the first quarter this time around when measured against last time, 27 percent, BUT were lower than the prior quarter (33 percent). Total costs and expenses as a percentage of revenue fell to 68 percent from 73 percent in the corresponding quarter. Non GAAP EPS clocked 10.08 Dollars per share, well ahead of the expectations of 9.65 Dollars. Total cash and cash equivalents, and short-term marketable securities? Hold your breath, 49.3 billion Dollars.

They could buy Nokia and Research in Motion and more than half that left over. 49 is to 211 as a percentage is just over 23 percent of their share price in cash alone! So, excluding that cash portion (I know you shouldn't), you come to a share price of roughly 500 Dollars. So, annualise this current quarter and you get above 40 Dollars worth of earnings. Ex the cash on hand the stock then trades at 12 and a half times earnings! Hardly expensive, is this about as cheap as I have ever seen the stock price.

But what are the key risks here? Well, some folks have pointed out, a lack of being in the tablet space and what are they going to do with the Motorola asset now? On the conference call apparently Larry Page told someone to be patient about the whole phone thing! And the long term development stuff? Ads online? What about Facebook? I suspect all things considered Google has stayed true to their culture, they still have the energy to explore new and exciting concepts (virtual reality and driverless cars amongst other things) and they still should get more traction on their adverts, the core of their business. Even though we are all familiar with Google ads and how they work, not all of use the new methods enough. I am going to say that the company should still be accumulated, the base is very low outside of their two main territories which are the US (46 percent of all revenues) and the UK (11 percent of all revenues). We continue to accumulate the stock.

Currencies and commodities corner. Dr. Copper is last at 370 US cents per pound, the gold price is better at 1675 Dollars per fine ounce, whilst the platinum price is flat at 1596 Dollars per fine ounce. The oil price is a tad lower at 103.34 Dollars per barrel. The Rand is firmer, 7.87 to the US Dollar, 12.56 to the Pound Sterling and 10.38 to the Euro. We have oscillated between positive and negative territory for much of the trading session.

Parting shot. I saw something via my Tumblr feed (get with the program people) this funny take on the failed North Korean missile launch from a user that I follow called inothernews. Here goes:

North Korea's missile and satellite:

1) stopped halfway through the ionosphere to ask for directions
2) is called "Kim Il Sung Looking At You"
3) is actually an import
4) accidentally had its gas tank filled with ketchup
5) was the last official project of the Palm Pilot team
6) runs on Windows ME
7) knows what's in the suitcase
8) urged Rick Santorum to stay in the race
9) drives a Buick
10) thought it was heading into mySpace.

My favourite is that last one, and Windows ME, remember that operating system? The closest that you might come to a nightmare today is watching a scary movie later, or the power of Kim Yung Un, I did see some live footage of him dealing with the birth of his grandfather celebrations. What a bore, North Korea, what a tragedy for the people, who have no way of knowing how much better the lives of their flesh and blood is, just to the south. That is no laughing matter. Kim Yung Un could get a Nobel peace prize if he changed the course of history. But I bet he won't.

Sasha Naryshkine and Byron Lotter

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Nokia knocked as their lunch is noshed

"But, the stock is near 15 year lows. Those phones sold were great at the time, sadly for Nokia both Samsung and Apple have been dominant in the smart phones, where the margins are so much better. Samsung in the coming quarters could even overtake Nokia. One can almost compare Nokia to General Motors. Being in a dominant position in their market and then falling from grace."

Jozi, Jozi. 26^o 12' 16" S, 28^o 2' 44" E. An interesting day in Jozi to say the least, we had better than anticipated local manufacturing data yesterday and some employment data earlier in the week which points to a stronger than anticipated recovery. That data, manufacturing data was all the way back from February. But we have said that already. One event at the beginning of the week (or was it late last week?) that irked me so, was the Concrete and Cement Institute announcing that the competitions authority had asked them to stop printing the monthly cement stats. And now we were only going to get stale data, three months old and once a quarter. Because you know, the old data from the official streams are looking bad with their 45 day late releases. And you would have noticed that the Mooi River Index is slow in coming too, I suspect that there are similar problems.

The only data that is timeous and forthcoming and on time is from Transnet. Perhaps there is a blue light brigade driving the person releasing the results, ala the sports minister, who used some fancy German motor vehicles to ride behind him as he struggled up the hill on his bicycle at around a quarter to seven in the morning in the Northern Suburbs of Johannesburg. Yes. Really. BUT, it turns out that he normally does this activity at four in the morning. I can only beat the streets at 5am, perhaps I should wake up an hour earlier and be on the lookout for him, see what he is up to at that time. Riding clearly.

OK, away from all of that, there were comments that were made by a high ranking ECB official, a French fellow by the name of Benoit Coeure who said two key things. One, that the problems that Spain has will normalize soon, or could normalize from the current situation and more importantly for me anyhow, alluded to the fact that although the ECB has not used the Securities Market Program to buy Spanish bonds, he did not say that they (the ECB) wouldn't. That is about as typical as it gets in a European context. Mixed messages all the time, but I guess with the language barriers and multiple cultures we shouldn't expect anything less. It always amazes me that the ECB's press conferences are held in English. Yes, English. The language of the olde enemy across the channel, English. Perhaps in time all Europeans will speak English as their second languages.

After a better session prior, we did not enjoy the same gains that global markets did, our Jozi all share index rose only 15 points, or 0.04 percent to end at 33632 points on the day. Banks sank half a percent, resources added 0.7 percent but industrials sank nearly half a percent to drag. There is very little from a company point of view at the moment, there was news of course that Standard Bank were reducing their stake in a Turkish unit from around three quarters to just one quarter. But we would be expecting that kind of move, that has been the strategy as of late, less emerging market exposure, more Africa push.

This is kind of left field, I saw on a Google alert set for Anglo American that they had a permit suspended for power supply for their Brazilian Iron Ore project, Minas-Rio. Not good news at all really. But according to the Bloomberg story titled Anglo Has Power-Line Permit for Minas-Rio Project Suspended, Anglo have in their minds followed all the necessary rules and regulations when applying for the power. And apparently, from another source, the expectation is that Anglo will have the licence reinstated inside of the next two weeks. Or course the opposite would be disastrous. This is one of their key projects, and expected to be producing around 30 million tons of iron ore pellet feed annually, coming online at the end of next year. Power is key. We shall check this one out, but I suspect as a school friend of mine, who lives in Brazil said once, the number of regional and state taxes and mining regulations were many. So, some are suggesting that this might be local government versus state government and muscle flexing. Nice. Or not really nice.

Nokia. What a disaster. They still sell roughly 25 percent of all the worlds mobile handsets. BUT, that is apparently the lowest levels since the dot-com go-go days of the late nineties. In fact I noted on "the twitter thingie" that the share price was last at these levels (pre market and during normal trade) when the big seller was this awful thing (which was a cracker at the time), the Nokia 6110. Follow the link to see all the awesome photos of a 6110. I remember a few mates having those, I had the amazing 3210, one of the best selling models of all time, according to Wiki, Nokia sold 160 million of these.

But, the stock is near 15 year lows. Those phones sold were great at the time, sadly for Nokia both Samsung and Apple have been dominant in the smart phones, where the margins are so much better. Samsung in the coming quarters could even overtake Nokia. One can almost compare Nokia to General Motors. Being in a dominant position in their market and then falling from grace, I like to think that the brands (or too many) actually might have something to do with it. That is where Apple are sublime, they have only ever launched 5 phones. Check out the list of Nokia phones over the years: List of Nokia products. Remember that old thing about General Motors whole array of brands, all of which fell out of touch for a while. They are back, the question is, will Nokia be back?

The stock fell in a heap, down 16 percent at the close to 4.24 Dollars a share (their ADR program), in the middle of the year 2000 the stock traded at 58.50 Dollars. Since then, the stock is down 92 and a bit percent. Sis. But since October 2007, where the market was clocking their last all time highs, the Nokia share price is down 88.5 percent. Terrible. Their press release tells it all: Nokia lowers Devices & Services first quarter 2012 outlook and provides second quarter 2012 outlook. See this line, this is why the stock (or one of the reasons) got crushed: Nokia currently estimates that its non-IFRS Devices & Services operating margin in the first quarter 2012 was approximately negative 3 percent, compared to the previously expected range of "around breakeven, ranging either above or below by approximately 2 percentage points"

I have seen some people already lump RIM and Nokia with Borders, the now defunct bookstore chain and Kodak, the Polaroid kings that failed to change. RIM of course makes the Blackberry and we had a whole lot to say about their recent results, not so long ago in this piece: RIM's Waterloo. Waterloo on the French side. So, what next for the people over Nokia. First things first, they are in agreement that the Windows phone and the strategic tie up with Microsoft is the future. The Lumia 900 launched a few days ago. There is a great review by the folks over at PC World, Nokia Lumia 900. They like the phone. But with the closed Windows platform you can't do everything that you can on an Android phone, I would presume that would be their target market. As an Apple user I would have to see something wow before I would consider the switch. Too early to write an epitaph for either RIM or Nokia, but one thing is completely clear, investors have voted as consumers voted with their choices. Here is a five year price chart that I hacked from Google finance of the stocks that I have taked about above:

Microsoft, I threw them in there too, in fact there was and is a rumour that exists that Microsoft could take some stake in Research in Motion. Yeah I kid you not, I saw it via one of the folks I follow on the twitter thingie, Doug Kass:

That link resolves to a story titled: Does Microsoft want a piece of RIM? But that would be weird and stuff, not so? Nokia, RIMM and Microsoft in the middle. Sounds like a digs that I would not like to live in. Who actually knows, perhaps Microsoft will acquire both of them over time, as a combined market cap (Nokia and RIMM = 22.72 billion USD) to Microsoft last evenings close (254.62 billion USD), it is just less than nine percent. In reality Microsoft could buy both, but I am sure that there would be an antitrust case to answer.

Currencies and commodities corner. Dr. Copper was caught a bid, 371 US cents per pound, the gold price is marginally lower at 1655 Dollars per fine ounce. The platinum price is slightly better at 1586 Dollars per fine ounce. But both are looking worse for wear, remember we asked the question, when are gold miners going to hedge? Perhaps not. Who knows? Not I. The oil price is last at 103.02 Dollars per barrel. The Rand has firmed a little, last at 7.95 to the US Dollar, 12.68 to the Pound Sterling and 10.44 to the Euro. We are marginally lower here today, having been higher. If we are looking for a number to change todays events or course, then I suspect that the weekly jobless claims number could be your thing. I suspect that the filings will be lower as a result of Easter time.

Parting shot. Bill Gross, the worlds largest bond manager, or of the company PIMCO that is the largest bond fund in the world has been slowly leaking out of treasuries and getting into {wait for it} mortgage backed securities! His flagship fund, according to the WSJ has gone from a 38 percent weighting in MBS's in September all the way through to 53 percent at the end of March. So, what is he up to? Well, I guess it points to probably many people starting to shift out of government bonds, safety first into something with a greater risk profile. And remember that loveable old guy, Warren Buffett who said that American houses, single family houses were the best investment that he could see right now. Not just him you see, turns out Bill Gross has been voting with his feet too!

Sasha Naryshkine and Byron Lotter

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Alcoa, fun to look at, not to own

"There was a bit of excitement at the opening bell when the Apple share price traded up to 644 Dollars exactly, which meant that the market cap of Apple had passed through the 600 billion Dollar mark. It has been pointed out several times that Microsoft was of course a 619 billion Dollar market cap back on December 30 in 1999. General Electric got close to 600 billion Dollars in the summer (northern hemisphere) of 2000, but did not quite crack that mark."

Jozi, Jozi. 26^o 12' 16" S, 28^o 2' 44" E. Whoa! Watch out everybody. We did not actually feel much of the pain that was unfolding around the world, for one reason or another, banks added comfortably over another percent. At the other end of the spectrum were the resource companies as a whole, the sector down nearly one and a half percent, with the gold miners down over two percent. It was mixed, an even smattering of green and red, the Jozi all share index closed down just over one third of a percent to close at 33617 points, that is a loss of 114 points. What did protect us to an extent yesterday was a weakening currency, in the whole risk off trade the Rand took a bit of a beating, but that saved us from the worst of the selling taking place in Europe.

Listen in a little closer, because the main anxieties of the day were the Spanish and Italian bond yields that spiked, raising concerns once again about the debt levels and lack of growth inside of those sovereigns specifically. The Spanish government said, nope, we don't need a bailout. The central authorities in Europe continue to say, over and over, Spain must do more to reign in their government spend. In other words more austerity. And in the face of lower growth rates, in fact contracting economic activity, the debt to GDP ratio rises even more. Which in turn makes your debt less attractive to others, so rising Spanish and Italian bond yields I guess are here to stay. And having to pay higher interest on new issuances, that throws cold water on the other spending cuts that are wildly unpopular on the home front. Ironically, in other parts of the Euro zone the yields are falling, and the spreads between Spanish and German bonds are widening again. Ditto for Italy.

So what happened when everyone got completely anxious about the rising yields in Spain and Italy? We start, for one, hearing the rhyming about Spain and pain. That was a given. But equity markets and in particular banking stocks sold off, London's FTSE closed down two and a quarter of a percent, the Dax in Frankfurt sank two and a half percent and the Cac40 in Paris was over three percent lower on the day. Yech. Whoa. And don't forget there are French elections soon. Very soon, it is coming in a number of days, 11 to be exact. There is in fact a political party called the New Anti-Capitalist Party with a candidate, or as I like to call it, friends of North Korea. Methinks the incumbent will squeak through, even though the French threw the monarchy out over 200 years ago, change is not altogether something fun to live with. The other reason of course why Mr. Market sold off, were the missed expectations of the jobs number Friday. That was of course hanging in the background like a bad smell. Clear it out the fridge!

New York, New York. 40^o 43' 0" N, 74^o 0' 0" W. Another case of the global jitters and the worse than anticipated jobs number hangover pre-Easter saw the sellers step in and the buyers run for cover. The old saying, shoot first and then ask questions later. We have now had five successive sessions of selling on Wall Street, the futures today do suggest a reprieve, but the sellers were most aggressive last evening. Perhaps they were the most tense after a few days of selling and then just could not take it anymore. The markets sold off aggressively, the Dow was down one and two thirds of a percent, the nerds of NASDAQ down below 3000 points, 1.83 percent lower after all was said and done, whilst the broader market S&P 500 sold off to the tune of 1.17 percent.

There was a bit of excitement at the opening bell when the Apple share price traded up to 644 Dollars exactly, which meant that the market cap of Apple had passed through the 600 billion Dollar mark. It has been pointed out several times that Microsoft was of course a 619 billion Dollar market cap back on December 30 in 1999. General Electric got close to 600 billion Dollars in the summer (northern hemisphere) of 2000, but did not quite crack that mark. If you needed reminding, Microsoft market cap last evening was 255 billion Dollars, GE was last at 198 billion Dollars.

Something that is exciting for the watchers, Apple is up an astonishing 60 odd percent this year, I think that the idea that the stock was way too cheap and now needs to be re-rated to levels relative to their peers. Price to earnings expansion or PE expansion as they call it. GE trades on 15 times earnings, Microsoft on 11 times earnings and Apple inc. on just less than 18 times earnings. HP has experienced the opposite, PE contraction. PE deflation. The stock trades on 8 and a bit times earnings, just a little less than Dell. Ah well, Apple might still have some way to go, there was a brokerage house who just recently stuck a 1000 Dollar share price target on the stock. Piper Jaffray's Gene Munster said so, and Gene has clout. But then Apple would have to be making at least 40 Dollars a share and growing by 20 to 30 percent per annum. Apple iPhone 5 and the TV pending, who knows.

Earnings season kicked off after the bell last evening, this was both good news because it was a beat, Alcoa made a "surprise" profit when analysts had pencilled in a loss. Well, I guess estimates are meant to be beaten, but I thought that it was by just a penny, not by a country mile in this case. Alcoa reported earnings of nine cents for the last quarter, versus Mr. Market expecting somewhere in the region of a four cent loss, that was consensus. So what was the big miss on the analysts part? Well, one part, there was a cost cutting exercise on their part, closing high cost smelting operations but more importantly (for me anyhow) was rising orders. Check it out: Alcoa Earnings Rebound Over Prior Quarter on Higher Productivity, Improved Market Conditions.

That point that I have been making, about how companies used the tough times to make sure that they were leaner and meaner, Alcoa are exactly that. But they still trade at one quarter of the price from back then in the go-go days of 2008. I am not so much interested in the company from an investment point of view, their earnings are too cyclical to warrant anything remotely close to investment grade. But I am more interested in how they see the world. Why? Because they sell to people who make all the useful indicators about growth, they should be a proxy for the economy, but have too many pressures. Check this out:

"Alcoa is raising its 2012 global growth forecast for the aerospace market 3 percentage points (13-14 percent), and expects global growth in the automotive (3-7 percent), commercial transportation (1-5 percent), packaging (2-3 percent), building and construction (2.5 - 3.5 percent), and industrial gas turbine (1-2 percent) markets."

Errr, soft landing, hard landing this or that, these are the people that see demand from their real customers. People who make aeroplanes and motor vehicles. People who sell products packaged in tin cans, beverages and food. Products used in building and construction. This is not huge demand that they see, but this is good enough for me where the mood has kind of soured in the last two weeks. For the record Alcoa has ramped up 6 percent to 9.9 Dollars pre market. 47 Dollars plus in July of 2007. Just above 5 Dollars in the lows of March 2009. Too cyclical but one of my favourite indicators.

Currencies and commodities corner. Dr. Copper is lower at 368 US cents per pound, the gold price is flat at 1660 Dollars per fine ounce. The platinum price is lower at 1593 Dollars per fine ounce. The oil price is last at 101.59 Dollars per barrel. The Rand weaker this morning. Last at 8.01 to the US Dollar, 12.75 to the Pound Sterling and 10.52 to the Euro. We are actually better, after having started worse. Good thing, a bounce.

Sasha Naryshkine and Byron Lotter

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Lots of money for those businesses

"No need to speculate, there is a Chinese GDP release for their first quarter as soon as Friday, well, late Thursday in China. Expectations are for 8.3 percent growth. Fixed asset investment is expected to grow 20.8 percent. Retail sales, those are expected to have grown at 15 percent. Those two numbers will be useful."

Jozi, Jozi. 26^o 12' 16" S, 28^o 2' 44" E. Thursday. A long time ago. Mr. Market gained nearly a percent after having been much lower at Lunch time. The Jozi all share index closed out ahead of the long weekend 327 points to the good, 0.98 percent gained to 33732 points. Leading the steer were the resource stocks, which bounced back nearly one and a half percent. Banks added a percent. Retailers as a collective were slightly lower, Sasol was ex div dragging "their sector" lower, whilst general industrials were just a little better on the day.

Beijing central. 39^o 54' 50" N, 116^o 23' 30" E China post a surprise trade surplus is the headline this morning, I always ask myself, surprise from what? From expectations clearly, because it is not like QPR beating United, that did not happen, that would have been a surprise, this surprised economists expectations, because let us face it, I had none and I am guessing you had no expectations either. However, before you get excited about anything, imports slowed and exports are not that hot either. But hey, it was the month of March. The month that Europe finally got serious about dealing with the sovereign debt issues stinking up the joint, dealing with them with a bigger firewall and a bigger fund to help, should it be required. Time will tell if my theory is correct, for the time being we are still reminded that youth unemployment in Spain and Greece is 50 percent, as the king of pop said, you are not alone.

But, that does not detract from the fact that March imports were higher by only 5.3 percent. Now folks are talking about a policy response, the relaxing of the reserve ratio requirements of the banks. Just last week the Chinese said that they thought their own banks should liberalise themselves. That is almost like our government saying that the state should be less involved in the economy, and not more involved. Inflation beats expectations, but that was more likely higher energy costs weighing on almost everyone globally. So, policy response is likely to be muted for the time being. And the idea of internal consumption being able to offset manufacturing growth, we are a long way away from that. No need to speculate that, there is a Chinese GDP release for their first quarter as soon as Friday, well, late Thursday in China. Expectations are for 8.3 percent growth. Fixed asset investment is expected to grow 20.8 percent. Retail sales, those are expected to have grown at 15 percent. Those two numbers will be useful.

New York, New York. 40^o 43' 0" N, 74^o 0' 0" W. The nonfarm payrolls data weighed on US markets last evening. Read that line again, the Americans were open for business yesterday. You know my feeling about public holidays, although *nice* they do very little for the economy. How about nothing. We have too many, stick them all on a Friday or a Monday, even better, celebrate the day on the closest Monday to the event. That way people know to work until Friday evening. From what I can tell, the Chinese have 11, with two sets of holidays (Labour day is three days and National day celebrations are also three days), whilst Germany has ten. There are also ten public holidays in the USA. We have twelve, not that many I guess. But disruptive ones are coming up here locally. My gripes aside, I don't want to be the Grinch that stole the public holidays, let us dive into the nonfarm payrolls number.

120 thousand versus the 200 thousand odd expectations, and as I have learnt over the years, the number on the day matters. Because if the number was so darn important, you would remember it much better than you do. Too much hype placed on a number that is too prone to revisions. Still, it should be noted that this is THE NUMBER that everyone looks at, employment creation in the US means that there are more consumers doing what they do best. Consuming of course inside of the worlds biggest economy. So, until we get similar data out of the Chinese on a regular basis, this will be the go to number for the short termers globally. The futures market was open and did not take kindly to the news on Friday. Here it is, straight from the horses mouth so to speak: Employment Situation Summary.

Retail trade lost jobs. Perhaps the online slash Amazon.com effect. You know the old line, Best Buy is a showroom for Amazon.com. Essentially you can get stuff online cheaper at Amazon, new or used, but check them out at your local Best Buy. Yeah, you wonder why people still have to buy at a physical store location in some geographies. In fact, general merchandise stores lost 32 thousand jobs, indicating exactly what I am thinking.

The average work week lower, that was because of manufacturing. That sector saw a gain of 37 thousand, but the sector that continues to outperform is actually leisure and hospitality, people do not lie about eating out. But, overall, a miss is a miss you say. Well, a bit of context is needed I always think. Take the last 60 years, from the beginning of 1952, post world war two and the beginning of industrialized America and their dominance that has spilled over into the worlds biggest economy that we know today. What I am trying to point out here, before the graphic grips and distracts you, is that this bloodletting and huge firing in 2008 and 2009 is unprecedented over this time period. Check it out, courtesy of TradingEconomics.com, thanks so much for all the data:

That is pretty telling. When you check out the last six years, from 2006 April onwards to this number, the real bloodletting is clear. And ugly.

Everybody wants to see job creation in the region of 200 to 250 thousand plus. I suspect that many of the old jobs are not going to come back, but that is the natural progression. People who had built horse carriages found themselves without jobs over 100 years ago. There are new jobs in the form of social media jobs that did not exist in 2005. The economy evolves, new jobs are created. Oh, and for the record, the collective revision upwards for January and February was 22 thousand better. That ought to help I guess. But like I said, this number is volatile, prone to revisions, but for better or for worse is taken as the number.

And on this basis, market sold off globally, the Americans were first of the majors, the Dow closed down 130 points to below 13 thousand points, 12929.59 to be exact. The broader market S&P 500 lost over a percent (1.14 percent), down to 1382. The nerds of NASDAQ lower by a percent to 3047. But there was action elsewhere.

Who spent (invested) the better billion? Three deals yesterday, around one billion Dollars each, all very different companies. Being bought and sold of course. First things first, AOL are either going to be selling or licensing their patents to Microsoft for 1.1 billion Dollars. 800 odd patents for 1.1 billion Dollars? Microsoft's investor relations pages don't have anything for me to snack on, AOL of course have a whole lot more information available here: AOL to sell more than 800 patents to Microsoft; Microsoft to license more than 300 additional patents and patent applications from AOL.

I really wanted to know what patents could be worth this much. It was not a surprise to me that someone had done that analysis already: Insight into AOL's Patent Portfolio. Borrowed the picture, here courtesy of EnvisionIP:

And does that leave you feeling a little wiser? I guess. AOL had some value after all. But the question is of course, what can Microsoft do with these important patents and what will become of AOL? AOL did buy Huff post, some peoples favourite website. Not mine, it is an occasional read. So, buying vanilla patents is my view of it.

The biggest one, the one attracting all the attention is Facebook to Buy Photo-Sharing Service Instagram for $1 Billion. WHAT? 13 employees. 76 million Dollars an employee. Not even two years old. WHAT? I have downloaded Instagram, but have only used it once. I was unimpressed, but that is probably because I post pictures using "the Twitter thingie" or Tweetdeck (using Twitpic). But as Paul said this morning, Facebook is all about pictures and sharing them with the community, or friends only. So, to buy someone who has an application for photo sharing, and as the last line of the article points out, Facebook is so much more in the mobile space with this acquisition. Whether or not they are taking the opposition out, this is a crazy amount of money to spend or invest. Google bought YouTube for 1.65 billion Dollars in October of 2006. YouTube had 65 employees at the time. The amount of money paid was nuts at the time.

In the press release at the time, Google had this to say: "The acquisition combines one of the largest and fastest growing online video entertainment communities with Google's expertise in organizing information and creating new models for advertising on the Internet. The combined companies will focus on providing a better, more comprehensive experience for users interested in uploading, watching and sharing videos, and will offer new opportunities for professional content owners to distribute their work to reach a vast new audience." Perhaps it is just a case of substituting Google with Facebook and videos with photos. The advertising or monetizing part of this transaction, that is tricky to ascertain. A tech mortal like myself scratches his head, but is not completely sceptical.

The last one which makes absolutely no sense is this one: AT&T to sell Yellow Pages stake to Cerberus. I can see why AT&T would sell it, but why Cerberus would want to buy it is beyond me. Unless they want to then on sell it to someone else in the digital era. I have not used the yellow pages for a search in a couple of lifetimes in a technology sense. I used it in the pre smart phone era. No need to pay the Yellow Pages when you can target your audience with Google ads. Right? Or am I wrong? I would love to know what you think about all of these acquisitions.

Currencies and commodities corner. Dr. Copper is last at 3.76 US Dollars per pound. Lower on the day. The gold price is slightly higher on the session, last at 1645 Dollars per fine ounce, the platinum price is lower at 1607 Dollars per fine ounce. The oil price took a drubbing last evening, 101.93 Dollars per barrel. The Rand is getting weaker, the old risk off trade I guess, 7.93 to the US Dollar, 12.57 to the Pound Sterling and 10.43 to the Euro. We started lower here at the beginning here today, but have turned higher here, banks leading the charge.

Parting shot. Whilst cricket season is finished my favourite season is about to start. Earnings season, which is kicked off with what always seems like the worst starting point, Alcoa. Probably the last stock in the Dow 30 that I would ever buy. OK, maybe HP too would be on the avoid list. And AT&T. Anyhow, earnings season starts, this is exciting, the rump normally comes in the coming weeks.

Sasha Naryshkine and Byron Lotter

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At least they have Barca and Real Madrid

"Commodities sold off heavily as the Dollar gained a whole lot more support, resources as a whole here in Jozi yesterday lost three percent, phew it was tough going. The gold stocks were trounced, down four and a half percent as Bernanke and the FOMC minutes revealed that he had thought said, 'read my lips, no more stimulus'."

Jozi, Jozi. 26^o 12' 16" S, 28^o 2' 44" E. I guess it was no surprise that we sold off aggressively yesterday. I agree with that mad fellow, Cramer, who on his show last evening said that this was a rain delay. Using a baseball analogy that is equally apt for cricket, a rain delay, although this looked more like a heavy downpour that saw the match cancelled for the day, at least that was the case for the bulls. The IPL started yesterday. Nice. Levi thrashed some quick runs in his sides win, the Mumbai Indians. I am a Royal Challengers Bangalore guy, AB de Villiers, Chris Gayle, my current favourite, Virat Kohli a future Indian legend. That is my team for this tournament, partly because they started out with a whole lot of South Africans. They have enough.

Enough cricket talk, back the basics of markets all falling down yesterday. And the reasons were pretty simple, I could find three, firstly the hangover from the Federal Reserve no more stimulus interpretation, that possibly was the main reason. Secondly, a Spanish debt auction that went off worse than anticipated, possibly on the talk from the upper echelons of Spanish government that perhaps a bailout rather than more austerity could be a "better idea". Hmmm, would you rush to buy Spanish bonds? No. Well, at least Cristiano Ronaldo dos Santos Aveiro (I mean Ronaldo) put that right for Real Madrid and Spain last evening. Thrashing that little team from Cyprus, Apoel FC that is sponsored by MTN, that was two from two for MTN yesterday. Reason number two, the market getting sold off yesterday, Spain and their struggle with the budget and their debt woes.

Reason three, the ECB had an interest rate decision yesterday, which obviously saw no change to their interest rates, but was revealing with the commentary. I am a huge fan of the new governor, Mario Draghi, who has been at the helm since November last year. I thought that Trichet walked away with a bruised close, the fact that he could not admit fault and lower rates after having raised them. But other than that, I have an enormous amount of respect for all central bankers. The ECB yesterday said that it was a little too early to talk about the central bank exiting its emergency loan program. So, expect more central bank intervention. See this Bloomberg BusinessWeek story: ECB's Draghi: Premature to talk of loan exit. European banks were told that on top of the cheap money lent back in the LTRO program, they would still need to raise more money for reserve requirements. Eish. Banks sold off solidly. Upon reflection, too much and too little stimulus talk seems to have the same impact on Mr. Market. Send out a search party for Goldilocks please, she can identify baby bears porridge, that would probably help everyone make up their minds.

Commodities sold off heavily as the Dollar gained a whole lot more support, resources as a whole here in Jozi yesterday lost three percent, phew it was tough going. The gold stocks were trounced, down four and a half percent as Bernanke and the FOMC minutes revealed that he had thought said, "read my lips, no more stimulus". Banks lost two and a half percent. Industrials two and a quarter percent. The overall market landed with a thud, down 788 points or 2.3 percent to end at 33404. Wow. The sellers are aggressive. The giant sell button was pushed hard.

New York, New York. 40^o 43' 0" N, 74^o 0' 0" W. Bam. Markets sold off heavily all the way through to midday, and then bounced off their worst levels, BUT still closed down a percent for the broader market, and a percent and a half worse for tech stocks. There were ADP employment numbers, those clocked 209 thousand jobs for the month of March, but that seemingly was a sideshow. I am not too sure why it did not get the excitement that is associated with the jobs report (due for release Friday), perhaps the fact that the number was a fairly good meet had something to do with it. An ISM services index release came in lighter than anticipated, that was disappointing, but in reality, the number clocked 56, which is comfortably above 50. Although lower than the prior months read.

It is quite fun to read through these releases, I don't know how many people are surveyed in this particular one, but often there are anywhere between 500 and a number of thousand respondents. Reliable ones at least. March 2012 Non-Manufacturing ISM Report On Business, check it out. You will see improving employment, inventories and imports. You will see backlog of orders moving in the wrong direction. But other than that, you can see that all the directions are either growing, faster, increasing or too high. I guess all you need to know is that this was the 27th consecutive month of non-manufacturing sector growth. That sounds like a good thing, even though it did not meet expectations. But of course, I always get accused of sugar coating and being too optimistic. It almost always turns out better than you think. Unless you are Turkey and Egypt. Who used to be the centre of the universe. What happened to those countries? Another debate entirely.

When I read this via one of my most bullish aggregators, Carpe Diem, U.S. apartment vacancy rate falls to decade low, I wondered whether it was good, or bad news. Because you might have heard me say often enough that the same data can be interpreted by two separate parties according to their sunny or sad outlook on life. I suspect that the fact that rental vacancies are scarce are good for the rental unit holders and indicate that the market is tightening, but at whose expense? Are the folks moving into the rental units those folks forced out of their homes?

Perhaps, I can't see anything or any report suggest that, remember that American home ownership under Bill Clinton ticked up to nearly 70 percent, for native Americans, the highest that it had ever been. I could not find any recent data from the US census website, but guess what, in my web search, none other than Prof. Mark J Perry (the Carpe Diem blog guy) popped up with a graphic that he managed to obtain from the US census website. Which pointed to the lowest US home ownership since 1997 at the end of 2011, 66.15 percent, check out the blog post from the beginning of the year -> Homeownership Rate Falls to Lowest Level Since 1997; The Homeownership Bubble Is Still Deflating. So, without being too cute, it is easy enough to see that home ownership falling and rental shortages forming, the two are of course linked. What is bad for some, is good for others.

Currencies and commodities corner. Dr. Copper is trading slightly higher at 379 US cents per pound, the gold price is higher after having taken a drubbing, last at 1626 Dollars per fine ounce. The platinum price is also on the up, after equally having taken a drubbing, last at 1603 Dollars per fine ounce. The oil price is last at 102.26 Dollars per barrel. There is recent news of a pipeline closure, that may impact on oil prices through the weekend. The Rand is weaker, last at 7.79 to the US Dollar, 12.39 to the Pound Sterling and 10.25 to the Euro. We are flat, after having been slightly better. I did notice that Spanish bond yields have weakened again, the weakest point since the last LTRO. Hmmm, perhaps too much anxiety, perhaps warranted.

Parting shot. OK, this is perhaps the most tech interesting story of the day, Google: Here's What Our Sci-Fi Glasses Look Like. I often say to my daughters, perhaps you won't even have to learn how to drive, because by then, cars would have learnt to drive themselves. Perhaps that is a little further out. But watch the video, as Paul said to me, this is actually not really new, the methods, available to all of us via our smart phones are not new, but how we all use them, that is actually what matters. See, life will be so much better for the new generation, whether or not the old generation embraces it or not, that is another question entirely. And that older generation includes me too. I am quite receptive to technology changes and embracing them, I am also quite receptive towards chocolate. On that note enjoy your Easter weekend. Be it filled with rugby festivals, Easter egg hunts or prayer time, enjoy it all. Hopefully those activities have family involved too!

Sasha Naryshkine and Byron Lotter

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Meat and potatoes Fed

"Perhaps reflective of caution which is now ingrained in consumers minds as a result of presentism. Today is what the future will be (or so you think), that is the curse of presentism."

Jozi, Jozi. 26^o 12' 16" S, 28^o 2' 44" E. We have started today much worse, in part a weakening Wall Street from where we left off, we will explore the Fed announcement at length and see whether or not their next approach is a good one. I think so, anyhow. In Jozi yesterday we had bad traffic of course, that is a daily event (twice a day), but the markets did OK, quite well, industrials did really well, a percent and a quarter better. Retail stocks took a bit of a breather after having rushed northwards in the prior session. At the end of the session here in Jozi, the all share index had added 218 points or nearly two thirds of a percent to 34192. Banks are roaring. Gold and Platinum stocks are not. Not at all. Today the gold stocks are down three and a half percent, the platinum stocks are off a percent and a half.

New York, New York. 40^o 43' 0" N, 74^o 0' 0" W. Believe it or not, or perhaps we should just say Ripley, but the Fed thinks that there is little or no need for new stimulus. I am pretty sure that we said as much. Anyhow, in their minutes release last evening the expectations were for the Fed to reveal some or other plan to embark down another round of quantitative easing, you know, QE3. But my contention has always been, the Fed knows that no ship builder ever built a ship with that name. So therefore it is not possible. No, that is not the reason. The minutes of the March 13 meeting were released last night, yesterday afternoon, and are available to view over here -> Minutes of the Federal Open Market Committee March 13, 2012.

Read them. You see, economic activity is expanding at a moderate rate, labour (or labor) market conditions are improving and the unemployment rate, although elevated is coming down. Weekly jobless claims are a good indicator of where you see the unemployment rate going, that has improved to around a four year low, the weekly number. And consumer price inflation has been subdued, although the minutes noted that crude oil prices and gasoline heading higher were (and are) of some concern. Manufacturing continues to improve. Real personal consumption remains flat, even as households real disposable income increases. Perhaps reflective of caution which is now ingrained in consumers minds as a result of presentism. Today is what the future will be (or so you think), that is the curse of presentism.

The housing market is improving, but is still pretty much nowhere where everyone want it to be. And guess what, the US government is spending less on defense (defence) spending. Exports and imports are improving, and the Fed notes that on the ground in Europe, economic activity is starting to improve. My latest line is as follows, if everyone was waiting for the Greek moment to pass (which I think they were) before making strategic business decisions, then you would think that the coming numbers will improve. And be better than anticipated, that is what I am looking for, improving European economic data to back up my simple theory. Because perceptions lead to reality because someone takes the plunge.

The bond markets, the Fed goes into some pretty detailed stuff around sovereign bonds, municipal bonds, corporate issuances, on balance it all looks OK I guess, the municipal market is described as follows: "Gross long-term issuance of municipal bonds was subdued in the first two months of this year. Meanwhile, spreads on credit default swaps for debt issued by states were roughly flat over the intermeeting period." So, as the risk of taking a swipe at Meredith Whitney, no multiple defaults, and not completely distressed for the muni bond market. Ah well, right once, not right again, for now anyhow.

OK, and then into the meaty (and potatoes) part of the minutes, what the Fed actually thinks about the economy. In my experience, what I have viewed over the years, these forecasts are only valuable for the moment, the economic outlook changes quickly, for better or for worse. So, if the Fed says that their March outlook for this year and the next has improved, that means their outlook has got a little sunnier. Less fog. This is good too. Back to that gasoline and oil prices, the Fed noted that the much lower gas prices, as a result of a warmer winter, lower energy bills on the home front are helping cushion higher gasoline prices. In home energy is cheaper, out of home energy is not.

Economic activity is improving, the unemployment rate is coming down. Inflation is not a problem. But Mr. Market saw no new Fed programs. And that caused a selloff of sorts. The way that I interpret it is that the Fed see that they no longer have to be all present, and have stepped away. Which means that they think their extraordinary participation is nearing an exit point, that is coming soon. In fact, this is the reason that Jeff Lacker keeps dissenting, because in his mind, there is no need to proceed down this path, he probably thinks that the Fed should raise rates before 2014. Check it out:

"Mr. Lacker dissented because he did not agree that economic conditions were likely to warrant exceptionally low levels of the federal funds rate at least through late 2014. In his view, with inflation close to the Committee's objective of 2 percent, the economy expanding at a moderate pace, and downside risks somewhat diminished, the federal funds rate will most likely need to rise considerably sooner to prevent the emergence of inflationary pressures. Mr. Lacker continues to prefer to provide forward guidance regarding future Committee policy actions through the inclusion of FOMC participants' projections of the federal funds rate in the Summary of Economic Projections (SEP)."

Well, you might view as dissent, I view it as slightly optimistic. But then again I would, that is my nature. Which leads me nicely into my next piece.

Human beings can evolve and do evolve (the opposite of presentism), in particular in their spending habits. If a commodity, that you almost have to use becomes expensive, then we adapt, by becoming more efficient in our usage. Think how around the house that you have replaced the old bulbs with new ones. Think of how you have also adapted with fuel prices increasing. I am pretty sure that we will see more motorcycles on our roads as the petrol prices here on the Highveld reach nearly 12 Rand a litre. People will just evolve and deal with the cost escalations in different ways. What I am getting to is simple, March auto sales in the US turned out to be the best month in years. What? Across the Atlantic, motor vehicle sales in Italy are falling off a cliff. Volkswagen sales jumped to a 29 year high. Yes, I am not kidding you, the last time that VW had such a good month in the US was back in 1973. Driven (ha-ha) by sales of their Passat brand, which clocked the same for the month of March that they did two years ago. Amazing. Those Superbowl adverts with Darth Vader must have worked!

Toyota clocked their best month in four year, over 203 thousand vehicles sold. Phew. Fuel efficient motor vehicles led the charge as higher gasoline prices started to make American consumers downsize their vehicle size. Even the little Fiat 500 subcompact is a hot seller, gone are the days of a monster truck to get you around. GM sales were lower then their competitors, but still clocked 231 thousand units. Ford had sales of 223 thousand, whilst Chrysler (owned by Fiat) managed to add 163 thousand. Just to put it into perspective, NAAMSA reported aggregate sales of 572241 units last year. GM, Ford and Toyota sold more vehicles in the US last month, than South Africa clocked for the whole of last year. Smaller cars, easier credit, that sounds like a good outcome to me and signs of an improving economy.

Currencies and commodities corner. Dr. Copper is lower at 385 US cents per pound, the gold price started to show signs of stress as the Fed were less present, last at 1632 Dollars per fine ounce. The platinum price is also lower, last at 1625 Dollars per fine ounce. The oil price is last at 103.24 Dollars per barrel. The Rand is weaker this morning as we see quite a significant sell off here, 7.78 to the US Dollar, 12.35 to the Pound Sterling and 10.25 to the Euro.

Parting shot. A Spanish bond auction this morning seemingly went off badly, that is weighing on markets today. There is the small matter of the ADP report, which excites all and sundry. And because the nonfarm payrolls falls on Friday, which is of course a holiday in the Western World. So the ADP thing will be big, I have no doubt about that!

Sasha Naryshkine and Byron Lotter

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Rocking retailers

"The Turkcell allegations are very detailed, so I assume that they are based on a high-level leak at MTN. However, MTN management have denied it all, so are these memos fakes?"

Jozi, Jozi. 26^o 12' 16" S, 28^o 2' 44" E. We turned up sharply in the last hour and a half, thanks to the US markets opening higher. The US futures market had been mixed through the day, up at one point, down at another. Resources led the charge, perhaps the better PMI not only in China, but also in the US, an ISM manufacturing release around four our time beat expectations. And as you know, in the world of the short term, all that matters is whether you beat the expectations or not. Earlier in the day a United Kingdom and German manufacturing PMI had beaten expectations. Some of the rest of the European PMI's were less than appealing. Hello austerity. That argument between austerity and stimulus will no doubt be answered over the coming years. Although to be fair, European and US growth have never been the same really. America is always seemingly ahead of the curve as far as entrepreneurial spirit is concerned. Less government, more private enterprise. But don't tell anyone here.

The Jozi all share index closed at 33975, up 420 points or 1.25 percent, resources added nearly a percent and a half, the retailers added a whopping 3.55 percent, Byron will look at this a little later in the message. MTN was a huge laggard on the day, we also explore that a little further too. The stock was down four and a half percent on a whopping 1.8 billion Dollars worth of trade on the day. The closing deal was for around one million shares. Also in the losing column were the steel makers, ArcelorMittal sank 1.9 percent yesterday, Evraz Highveld Steel since Valentines Day has lost nearly one third of their value. Wow. That has been a hard year for them. More on that later.

OK, many people have been asking us, when do we sell MTN, what do we do now, dump them and run, and so on. Paul sent an email yesterday to a client on one of these concerns, here we go, we will share it with everyone:

For now, we are just watching this nasty situation develop. We are disinclined to be sellers into this bout of weakness.

The Turkcell allegations are very detailed, so I assume that they are based on a high-level leak at MTN. However, MTN management have denied it all, so are these memos fakes?

The bribes paid to the SA ambassador and the Iranian deputy minister are more problematic, if true. The other allegations about military aid and help with the IAEA look like a red herring to me, especially since these did not materialise.

I doubt whether a US court will hear this matter. The Hoffman committee will likely dredge up some dirt and some heads might roll.

The bigger issue is how the anti-Iran sanctions will affect MTN directly and indirectly. The Iranian government is in dire straits, and might need to offer up some concessions.

Does that answer all the questions? If there are more, keep them coming as ever. There is no way that the fellows from Turkcell are making all of this up. Equally important to ask, who is feeding them (Turkcell) with all this information, as Paul implies above here? No really? Where are they getting all of this from? The stock got crushed yesterday, it is doing better today, but clearly this news is weighing on the share price.

Byron's beats tries to understand the strong run up in prices of the retailers yesterday.

Yesterday the retailers rallied over 3.5%. A journalist asked me why I thought this happened and I was a bit stumped. Sometimes coming up with a clever answer to daily moves can be really difficult. The best answer I could come up with was that foreign investors had more appetite for risk following some decent data coming out of the US and China. Boring. There were suggestions that foreign investors were actually selling out of MTN and buying into the retailers to keep their African exposure.

For me, daily moves are not relevant. Of course it's nice to see your stock picking up 4% in a day but at the end, as a long term investor, it is about the collective consensus over your holding period. Whether you have more up days than down is what is important and that will be deciphered by detailed fundamental analysis, what we do on a daily basis.

Back to the daily moves and one of those stocks that shot up 4.7% yesterday was Woolworths. Wow this stock is just reaching new heights all the time. I know you cannot base an entire investment on personal experiences but every Woolworths I walk into is packed with people buying both clothes and food. The stock now trades at R50. At the beginning of 2011 it was around R26 and at the beginning of 2010 it was at R17. During the crisis it reached as low as R8.80. A great return for anyone brave enough during that period that follow their instincts.

But do not forget about the Woolworths dividends over this period which has been very generous. They actually announced their dividend for this interim period yesterday, this is why I am babbling on about them. Now remember that companies used to pay the STC tax before it got to the client. Now the client pays before it even gets to them. Different method, same result except for a slight increase in the rate. The dividend paid per share equates to 63.5c net of the withholding tax (75c before tax). The company made 135.7 cents a share. That is a dividend cover of 1.8 times.

But in their last results presentation they had this to say. "It is anticipated that the group's full year dividend cover policy, previously 1.5 times headline earnings per share, will be adjusted for the impact of the new tax, resulting in a lower dividend cover ratio." This means that the dividend for the next period should be much higher than this so as to get the overall cover down. At current elevated prices the yield is decreasing but still very healthy, especially if you got in at lower levels. We are happy with the dividend and still happy to add at these levels.

The business of steel making is cyclical at the best of times. Having your inventory valuations moving this way or that depending on which way the economic activity in the local economy is going. I remember a time when both Highveld and Mittal were literally leaking dividends. You were getting so handsomely rewarded. Of course the two big shareholders in those businesses, Evraz and Mittal global were very happy with their dividend flow. And it was happy days. But sadly, since then it has all been backwards. Over the last five years, the ArcelorMittal share price is down 54 percent, Evraz is down 66 percent. Check out this story from MiningMX yesterday: Amsa, Highveld face collusion charge.

But it gets worse for ArcelorMittal, because BusinessDay ran another story yesterday, Mittal fury over state's local content policy snub. I am not too sure that anyone gets preferential treatment? Right? I am not even sure we want to go into any of that. I am very confused, we get ministers Davies and Patel talk about beneficiation and then, those who do it, then get told that they are getting no special treatment. There are those folks out there who are saying stuff like, well, they benefitted already for all those years, not now. Steel making. That is hard. And to rub salt into their wounds, ArcelorMittal was downgraded to underweight at ABSA Capital yesterday. Errr..... well spotted guys.

New York, New York. 40^o 43' 0" N, 74^o 0' 0" W. Markets managed modest, no, very decent gains, the nerds of NASDAQ added nearly a percent, the broader market S&P 500 added three quarters of a percent exactly. There was some deal related activity in the background, Avon being approached by Cody, with the small(er) fry (Cody) trying to swallow something much larger (Avon). Avon, as far as I can understand it, continues to see sales slow, has no real leadership and most importantly (at least in the short term) is involved in some pretty bad allegations about bribery in a foreign territory. Avon used to be at the top of their industry, but that was a long time ago. So, Cody are probably being opportunistic here. But, as usual, the Avon board thinks that the company is worth more. Always. So, like the Yahoo! board when approached by Microsoft, something is always worth more in your eyes. But, if it were actually worth more, then the stock price would be trading at a premium. Let the suffering shareholders decide.

Currencies and commodities corner. Dr. Copper is last at 391 US cents per pound, the gold price is lower at 1676 Dollars per fine ounce. The platinum price is higher at 1656 Dollars per fine ounce. The oil price, the one that we use the most, is last at 104.42 Dollars per barrel. I mean, I last bought myself a piece of gold in 2002, I filled up my vehicle this morning. The Rand is steady to firmer, 7.64 to the US Dollar, 12.24 to the Pound Sterling and 10.19 to the Euro. We have started better here today, the Jozi all share in back through 34 thousand. Time to make a push to 35 thousand, come on!

Sasha Naryshkine and Byron Lotter

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Don't be a sucker fool

"Because I for one do not believe that the Europeans want anyone to exit the region, but separating the entities from the weak (Greece, Portugal and Ireland) to the others, potentially Spain and Italy apart. Bigger economies, perhaps the too big to fail versus the worst case scenario, exiting the zone. That is my reading of it right now anyhow."

Jozi, Jozi. 26^o 12' 16" S, 28^o 2' 44" E. First quarter of 2012 is over folks, cricket season is finished and we are already deep into the Champions League and the Super 15. So how did the overall markets do in the first quarter? The winners were (drum roll) the construction stocks, up 19.79 percent, wow, and the banks, which were up just over 13 percent for the first three months of the year. Retailers added nearly twelve percent, financials around 11 and one quarter, and industrials just shy of nine and a half percent. The overall market however added just 4.9 percent, mostly as a result of the resource stocks having shown a negative 4.44 percent for the first three months of the year.

The poor gold stocks got whacked, down 15.78 percent for the quarter, not good. I suspect that in light of an improving outlook for the global economy (not everyone convinced I can assure you) that the allure of gold as a hedge against inflation/disaster is starting to wane a little. Also, in light of less full blown Fed intervention, the short termists are starting to lose their short term love with the yellow metal. Or so that was what I thought, but it turns out that the yellow metal gained 6.6 percent on the quarter. Higher margin rates are seeing open interest levels fall to multi year lows, who knows what the fundamentals are for gold, with any great deal of conviction. I don't, at Vestact we cannot find any clear answer and as such avoid the companies which have very variable and patchy earnings records. Platinum stocks, with their well documented problems printed a 4.91 percent loss for the quarter. They have had a tough time, in particular Impala Platinum.

On Friday the Jozi all share index managed to register a 71 point or 0.21 percent gain to end the session at 33554. Around 1000 points or three percent off the best level of the quarter. Banks on Friday lost around one fifth of a percent, but MTN still was the most highlighted stock moving one way or another, down 1.73 percent on the day. At one point it was a whole lot worse than that, the stock was at 13156, but closed at 13502, close enough to the days high of 13650. The stock traded a whopping 1.375 billion Rand on the day, enough to tell you it was crazy busy, strangely (or perhaps not that strange) the last trade of the day accounted for around one quarter of all the deals done on the day. Dare I say it, window dressing? But all for the sake of 52 cents, it hardly seems worth it, not so?

Oh wonderful, wonderful, Copenhagen, you know the Danny Kaye son? Well, either your parents listened to it, or your grandparents. Danny Kaye was a musician and actor, who's great works were just after world war two, so that tells you how old the music is. The salty old girl of the sea, he called Copenhagen in that song. Not so salty on Friday, perhaps crusty, as the fellows involved saw the bailout system, or the size of the central fund as I like to see it increased by 500 billion Euros.

The new 500 billion Euro fund is in addition to the 200 billion Euros that has been set aside for Greece, Ireland and Portugal, at least that is what I am reading in the FT this weekend. Interesting that those are separate. Because I for one do not believe that the Europeans want anyone to exit the region, but separating the entities from the weak (Greece, Portugal and Ireland) to the others, potentially Spain and Italy apart. Bigger economies, perhaps the too big to fail versus the worst case scenario, exiting the zone. That is my reading of it right now anyhow.

South Africa recently saw a ratings outlook downgrade (no change in the actual rating, just the outlook) from Standard & Poor's. Everyone seems to take these things so badly and personally. I remember chatting to a market anchor, one of South Africa's finest and he said that he had read that including government debt issuances and parastatal debt, the number was much higher than we were lead to believe. In fact I caught reference to a very short piece that mentioned what he was referring to, by a fellow by the name of Rob Wilkie, who said in this piece: Rob Wilkie's Food for Thought 4, written back on the leap day this year:

"Do we really know the extent of government debt? South Africa’s debt to GDP ratio as listed by Eurostat is 34%. However if you include parastatal debt (the likes of Escom, Transnet, Denel etc) it is said to be more like 70%. Above 60% requires real caution so as not to fall into a debt trap. We are still in great shape when you consider Greece whose most recent round of debt restructuring was to bring its debt to GDP ratio down to 120%."

He means Eskom of course. Not Escom. Which immediately leaves me sceptical about his thoughts. Why I was interested in this is because I saw a SENS announcement on Friday that suggested that Eskom had been placed on negative watch too by Standard & Poor's. I am urging everyone out there to try and find the debt numbers of the parastatals, I shall try and get a list myself, so that we could get a bigger picture view.

Telkom. Always trying to touch tomorrow. Pity, they should worry more about the issues that are happening right now. Both Paul and I are trying to get line installations. I succeeded quicker than Paul, he is still waiting after a number of weeks. Your customer always knows best ultimately. And on the customer services stakes Telkom treat the customer worst than most. But any business who treats their clients better than their peers makes sure that the clients are around for longer. Telkom have amongst the worst client service levels, even if they are getting better. But lets face it, why stand in a six person queue to get a line installed at your house, when you can go to .... err .... you could use .... ummmmm, well that is the real problem. The last mile is still owned by Telkom and nobody else. So even if I am going to use uncapped ADSL from Mweb, I still need a simple line from Telkom. That is the huge challenge that South Africa lives with, awful service from the only real supplier. De-regulate the last bit, that would benefit the consumer.

OK, but personal gripes aside, even though I think that it is important ultimately, the consumer votes. The trading update on Friday looked ugly. I remember reading in the Benjamin Graham book that you should be careful of companies that have recurring once off events. Because then clearly they are not once off events, they are recurring and perhaps provide valuable insight into the company's management. Not good. "Headline earnings per share from continuing operations for the year ending 31 March 2012 are expected to be at least 25% lower than the prior year. The net loss on disposal of Multi-Links and iWayAfrica impairment do not impact headline earnings."

Yech. OK, but what do those Multi-Links and iWayAfrica not so once offs come to? For starters, "R950 million on the disposal of the Multi-Links foreign operation, mainly due to the cumulative amount of exchange differences previously recognised in equity, now recognised in profit and loss" Sis. And then "the impairment of iWayAfrica of approximately R550 million." Wow. Well sold Naspers, MWeb Africa was part of that, in April 2009 Telkom bought that for 624 million Rand. It must be going well {dripping sarcasm}. Ah man, we actually laughed, we shouldn't, because the South African government are 40 percent shareholders. So, that means they should be held accountable by their citizens.

And it does not end there sadly. 8ta -> "the EBITDA loss incurred by the mobile business of approximately R2.2 billion" Whoa! And then the network that makes business work -> "higher depreciation of approximately R670 million as a result of the review of the useful lives of existing network equipment as the Company invests to transform to a commercially led next generation network." OK, I won't hold my breath. All these factors will impact earnings by as much as 90 percent. So expect basic earnings to be 48 cents, whilst HEPS from continuing operations is expected to be around 363 cents per share. Either way, all these once offs are becoming far too frequent to even think that the investor community should do anything but discount the share price. Sis. We are not going to be buying any, in fact this is a giant avoid on our side.

Beijing central. 39^o 54' 50" N, 116^o 23' 30" E I thought as much, I said last week when everyone got worried about the HSBC flash PMI that before you jump to any conclusions, you should wait for the official release. Marketwatch says: China PMI data paint mixed manufacturing picture. Yes, but the data is also about the best that it has been in a year. I am going to continue to stick my neck out and say, right, we know that there has been a slowing in trade between Europe from China, but now that the Europeans have resolved their short term problems, trade should stabilize. Pleasing at one level, I have already seen the concerns at another.

New York, New York. 40^o 43' 0" N, 74^o 0' 0" W. Friday was the closing of the best quarter for stocks since 1998, the S&P 500 managed to gain 12 percent. Wow. Even more wow is that the S&P 500 is up 28 percent since the lows of October last year. And as Bloomberg points out, in this article -> U.S. Stocks Rise as S&P 500 Posts Best Start Since 1998, the S&P 500 valuation is around 14.6 times, still less than the average 16.4 times earnings. That measure of 16.4 times is all data since 1954. Nearly 50 years worth of data here, and the market still trades at around a 13 percent discount to the long term averages. Ah well, snore to that, some good times and some bad times since 1954.

Byron's beats looks at the recent Apple anxiety.

On Friday the US market was on the up yet Apple fell 1.7%. Of late this is almost unheard of. Apple have been extremely resilient regardless of any economic data. Apple was down on company specific news this time as worker demands in China hit the spotlight. This is not a new phenomena, Apple have faced criticism about the condition of the workers who assemble their products for years.

This forced Apple to allow an outside audit of its Chinese factories which found a whole host of breaches. For the record the factories are not actually owned by Apple but outsourced to a company called Foxconn. When you are on top however everyone wants to bring you down and Apple are no exception.

Following the report certain recommendations were made to improve working conditions. This includes less working hours per week and increased compensation. Interestingly The FLA (Fair Labor Association) who are doing the audit are headed by a South African fellow with a long pony tail called Auret van Heerden.

I'm pretty sure by now that you know how I would feel about such an organisation. Getting involved in labour practices of countries around the world sounds very noble but in my opinion it does more harm than good. China is already starting to lose some of its competitiveness because of pressures on wage increases. Yes, people have rights and deserve to be happy but if Apple had not chosen China to manufacture their products, none of these people would have jobs. Taking a job is a choice. You sacrifice your time for the money you get. If, according to your own subjective choice, it is not worth it then you may quit.

I am well aware it is a very sensitive issue and situations may arise where large corporate companies may take advantage of the individual and regulation is required. But an NGO which is not even domiciled in China getting involved does not slide with me. Regardless, Apple have a very important reputation to uphold and are dealing with the audit very diplomatically.

As an investor I would not be too worried, rising costs is a challenge faced by everyone and Apple are no exception. They have the margins to absorbs this in the short term. I just hope they do not decide to cost cut and lay off thousands of workers. I doubt this because their demand is still so strong. However companies like HP, Dell and Nokia who may not be in such a strong position, also have production plants in China and are all expecting audits from the FLA.

Currencies and commodities corner. Dr. Copper last traded at 385 US cents per pound, the oil price was slightly lower at 102.97 Dollars per barrel. The gold price is trading lower at 1663 Dollars per fine ounce, the platinum price is also lower at 1635 Dollars per fine ounce. The Rand is firmer today, 7.63 to the US Dollar, 12.25 to the Pound Sterling and 10.19 to the Euro. Looking better at the get go here. OH, strange one here, nonfarm payrolls will be released on Friday, but most markets are closed for Easter. And those not observing Easter, will be closed for business. Amazing.

Sasha Naryshkine and Byron Lotter

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