North Pole News

Due to a global slump in the markets and a hike in the interest rates, Santa has decided to ”let Prancer and Dancer go” for a brief season to save on fuel costs. Rumours are that they were planning to blow some of their savings in Cape Town but after viewing the ANC conference, they opted for NZ, where they’re hoping to be “discovered” and act in the next Peter Jackson movie.  

Christmas

I love conspiracy theories but there are times when we need to draw the line. I came a cross a site calling Christmas time a ” ho, ho hoax”, because religious peops and historians alike have come to agree that Christ was born no where near the 25 of December and the day is affiliated with many pagan festivities. WELL, WELCOME! WHERE ON EARTH HAVE YOU BEEN ALL THIS TIME!!!! NO DUH! If you don’t actually study your own religion or traditions and check out their roots — why bother practising? Christ says “…learn of me and ponder these things in your heart and I will make them known unto you.” Now I know all that, but I’ll celebrate Christmas anyway coz it’s not the day but the remembrance of the sacrifice which was made, especially for me and you… And yes, it was revealed over 100yrs ago that Christ was born on the 6th of April. The most important thing though is not when he was born and remembering him only then, but to keep his memory and his words in our hearts and minds always, as he has engraved our names on his hands and feet and in his heart.

Zuma – Yes I know he’s overdone…

But there’s some worthwhile news on this front. While some of our riotous others made a significant noise over the weekend at the ANC conference — investors may make their own noise which will come to hurt the economy as they become a bit nervous on what the country’s future fiscal policies will be after Zuma’s victory. No country is without a divide but after crying out for a Rainbow Nation – A unified South Africa – The best democracy in the world- and the Proudly South African Campaign, one should worry about the petals falling from the rose. Instead of moving forward (especially into 2010) in a unified voice – tensions in South Africa mainly from the ANC are set to make the Motherland’s footsteps a bit shaky. Unfortunately the ANC does set the mood of the country in general. So what mammoth task does the party have moving forward?  Reassure investors and from Standard Chartered economist, Razia Khan — their immediate task is to heal the recent rift and underscore a firm commitment to market principles. One of which would be — to keep your hand on the right side of the cookie jar.

FISCAL POLICY:  The use of government spending and taxing for the specific purpose of stabilizing the economy.(campbell r harvey’s hypertextual finance dictionary)

Where there’s angels, there’s demons

Our previous post had some comments on how Bataung is to help us in the energy crisis through coal bed methane mining. It’s already been said that the US, Canada and other states are into the move big time. One thing we failed to mention is that there are some unhappy cats meowing in the alley, mainly around the west in the US — Communities have opened up websites and community blogs on how the coal bed methane developments are upsetting their way of life. This is mainly around rural areas, and if you read the previous blogpost, the coal seams that have been identified by Bataung are around the rural areas of the Eastern Cape, Mpumalanga and KZN.

So firstly, how is this gas produced? It’s  produced from underground coal seams, through a borehole that allows gas and water to be produced at the surface – the volume of water used in this process is enormous. The problem is that in the US the water used is usually underground drinking water. We know that this is also coming into a shortage — SCREEEAMM!!! One magazine that is taking a stand is ORION MAGAZINE. They lament a tale that can be found in good ol’ western songs and movies and it goes something like this:

While the coal bed methane mining brought on good business and much job opportunity, a few demons lurked into the ground — “…each well has to have a road and a pipeline, plus a compressor, probably a sump for the foul liquids that the drilling generates, plus maybe a pump jack, a dehydrator to separate gas from water, and a tank for still more foul liquids that come from the dehydrator once the well is producing” - Orion Magazine

Now our buddies here have to take measures to make sure that these foul liquids don’t find their way into the environment but you know — we’re mortal and there’ll always be a slip here and a slip there. And just what will a little bit of a slip do you dare say? Well let’s just explore that a little…

So in the slip ups we get some of the good stuff into the soil, then the rains come, and they pour down hard, little streams trickle down and carry contaminants to regularly used bodies of water. So what did this cost the ranchers in the west? Livestock drank it — they then aborted, lost hair or died. Not a pretty picture. So that land can’t be used no more, cowboy! Never mind the wildlife that partook of that deadly drink, and have no place else to go . For more on this you can read William deBuy’s article ‘A quirk in the law‘.

Of course, people from the industry say that there is no proof that the pollution described above has ever occurred — but apparently no real investigation has been conducted into the matter either.

In Garfield county, 3200 wells have been made in the past 5yrs and 10 000 more are in the pipeline, that gives one an idea of what the drilling can do to the landscape. In the US this is called “national sacrifice areas” by the government in order to meet the demands of energy from the US populace.

“[In] 2005 Congress passed the Energy Policy Act, which exempts hydraulic fracturing from complying with regulation or water quality monitoring under the Safe Drinking Water Act, the principal tool EPA would have used to regulate it. Current EPA rules concerning flaring allow companies to release hazardous air pollutants like benzene into the air” – Orion Magazine.

In her article, “Voices from the Gas Fields”, Rebecca Clarren comments on some of the labels that are on some of the containers and other surfaces in the gas fields, such as… “Danger! Extremely Flammable. Long term repeated exposure may cause cancer, blood, and nervous system damage. Contains benzene. Overexposure may cause eye, skin, or respiratory irritation or damage, and may cause headaches, dizziness, or other adverse nervous system effects or damage, including death.”

While we may find these warning signs on many containers around our cities, Clarren quotes some residents of the Garfield County, in her article who have developed these symptoms due to poor safety measures from the companies who dig these wells.

So what happens to the wells once the work is done and the band moves on? Well nothing can grow there except weeds. So you see, where there’s angels, there’s demons.

The first two links are about developing methane wells responsibly, then you’ll get your Q&A’s etc.

OTHER LINKS
northern plains resource council
water beyond methane
coal bed methane in south africa
msu bozeman – q&a
orion magazine
mt.gov
energy justice network
right health

New Solution to Fuel Crisis?

Just when you think you’re falling a hand catches you. At least this is what we’re looking toward from our new Energy saviour,  The Bataung Empowerment Group. The Bataung Empowerment Group announced a R80billion plan to extract gas from coal deposits too deep to mine with our current technology. Our frontman in this endevour is managing director, Kinesh Pather. Now these guys did what any smart person should do, see the future, plan ahead and dive in when the opportunity opens itself. These guys saw that we’re going to be in the fix that we’re in now - one lovely energy crunch that goes ”crrrrrr in your mouth” that’s only probably going to get worse - So they found an alternative source. Bataung did some research and found that coal bed methane was being used overseas as alternative source of energy – so the coal bed methane was christianed product of choice - basically it is stored in deep seated coal seams, that are too deep to mine. The gas is retrieved through drilling holes into the coal and hydraulic fracturing (faccing) it with water – the gas is then absorbed into the water, then the water is extracted and the two are separted. SO WHERE DOES THE 80BILLION COME IN? In the words of Mr. Pather himself, “…the capital will be really in terms of infrastructure development. Once we’ve proven up the reserves in terms of all the properties that we have – once we know exactly the amount of gas. We believe we have approximately four to five TCF (trillion cubic feet) of gas – our estimates are South Africa has upwards of seven to nine TCF of gas. By comparison one TCF of gas can run Mossgas for twenty years – that will give you an understanding… The R80billion has really been calculated around the infrastructure that will be developed from this project.”  So there you have it boys and girls, you don’t have to tear your clothes, wear your sackloth and cover yourself in ash — then cry out in a loud voice, “we’re damned, we’re damned!” For the energy gods are smiling down on us

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Property Boom

10 pnts to the one who guesses where it’s going to be coming from —– u guessed it, Soweto and other townships! Okay, no prizes here, if you’ve been watching the trends and putting your ear to the ground  you’d know this is very much expected. To add some support to this we have some comments from John Loos, property strategist from FNB. Other areas that could be worth a fortune in years to come, as South Africa speedily develops are; areas around business nodes, such as the northern suburbs and around the Gautrain. I mention Soweto mainly because it is in such areas that the property performance has been quite high. Loos believes that though house price inflation could dip, they will go to double digit inflation in mid-2008 and growth in the market will continue. The market which has been quite strong has been the affordable market  – where house prices range between 300k to 700k, these babies are having great returns, but the gap between these and the high end are going to narrow in the foreseeable future — the demand is far greater than supply so this is a good place to be, residential property wise. Supply constraints are still there —- even in downturns the situation isn’t too bad because of constraints — decline in prices only in some areas. SO THAT’S GOOOOD $$$ BUT  WHERE’S THE BIIIIIIG $$$ GONNA BE MADE????? Our man Loos believes that the retail market in townships is still gathering momentum and while the best part of consumer boom is slowed down —- the downturn will just be mild. WHERE ELSE IS THE BIG $$$$$ GONNA BE MADE??? Industrial property and offices — these have a low vacancy rate and there will be more demand for it. SO TO THE MEMBERS OF THE BOARD, WHO ARE OUR WINNERS???? The star performers are going to be in the retail and industrial sectors because economy is growing. Superior returns  in townships will be in industrial, office and residential properties around business nodes —- in former white areas, where accessibility is great and that’s around business nodes —- and around the Gautrain route. 

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Catch – 22

We have more insight on interest rates and the recent figures of our current account deficit. Basically, the US Federal Reserve and The SA Reserve Bank aren’t doing too much to make the market very happy. There could be a rocky path ahead, not only for the dollar but for the rand as well. The USFR’s decision to cut interest rates by 25 basis points instead of 50 (as required by the market) is upsetting a few good ol’ fellas. Investment Solutions’ Chris Hart comments that the USFR is more focused on inflation rather than currency stability. The rand’s strength on the back of the recent interest rate hikes, however is attracting yield seeking capital – Hart feels that while this might be good for the currency (because the lack of it leads to a currency crisis) – we’re moving into a catch 22 situation  – the capital that  we’ve been having of late has been from low interest rate seekers - so if that goes, especially with our 8.1% deficit….. - you guessed it! CURRENCY CRISIS. I love a class that pays attention . So to keep -a - we need high interest rates but then we lose – b – and another thing, the high interest rates are an obstacle for business growth. So basically we’re screwed and Hart thinks that 2008, just might be a candidate for currency crisis – so ring in the new! - and KONFES who of you thought you were far removed from all of this?

Warning signs to look out for from Hart- shift from shares to money market – current account deficit widening further – growth dip mainly from interest rate hikes.

You can’t change your Reserve Bank much like you can’t change your spouse so what needs to be done  -  tackle economic inefficiencies in a big way — these are some problems that need to be resolved — inflation is high because there is no competition in telecoms, and growth in that sector (in this respect) is very slow, mainly due to government protection – car prices are too high – bank charges are too high, in fact, in a survey we were rated as amongst the most expensive in the world, bank charges wise - of course there are various other aspects of the economy that need to be looked at -but the bottom line is – the plebs are paying – and they’re paying big time.

So stuff Uncle Sam’s “Don’t ask what your country can do for you, ask what you can do for your country” shamizzle- coz heck, you’re keeping it on its legs already, now it needs to steady yours!

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In construction? Take note

Cannon Asset Management’s Adrian Saville shared a few thoughts on the number of construction company listings we’ve had this year. Of course this sector is seen as a great one to invest in because of 2010 coming up and the great demand of infrastructure by the country in general. But Saville warns between betting on the sector and  betting on the actual companies that are listing on the Exchange of which many are actually sitting on very demanding ratings. Saville compares it to the the IT boom at the end in the late 90s, which didn’t end as sweetlty as it started. In fact, he’s betting that only 25% of the construction companies will still be around in 4 to 5yrs. So waht’s the trouble? Although the companies are underwritten – have a lot of governm
ent support – unlike our IT buddies – government won’t always be there – there’s a cycle, as for all businesses and the test for alpha corp will come when it comes to a dip - and the recent healthy margins of the sector are going to attract more competition so you’ll get bitten where you’re most vulnrable.

So what do you have to do as a company? Keep delivering value and keep strong  when the cycle dips – this sector is dependant on both government and private spending.

Tips from an Saville – generally don’t invest in new listings – the company must be listed for at least 3yrs to take a steak in it – what does our asset manager look at in a company – structure and business systems and management’s performance over various cycles in that 3yr period.

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DEFINE
MARGINS – profit margins

Al’s got the Nobel Peace Prize!

NOW THAT’S A FACE!!! So the guy who actually won the US presidency – never mind who the president is – has won the Nobel Peace Prize! Al’s our man! Al’s our man! In his acceptance speach he said”. . . we have begun to wage war on the Earth itself. It is time to make peace with the planet.” There is some debate in the scientific world over the methods and global warming stats and figures he and his budies are using, all I care about really is the great measures he’s going through in order to better the situation. So there ye are mates!

Sirens

Credit Guarantee’s Luke Doig isn’t taking a cavalier attitudeto recent news on the country’s current account deficit or interest rate hikes. He says both businesses and Consumers aught to get ready for a TIGHT SQUEEZE! In fact, he thinks that if things get bad enough, retrenchment might be on the cards for some employees. So the most recent economic developments are going to hurt across the board – business-wise. It’s relative consensus that although growth will continue, it will most definitely slow down, Doig is forecasting 4% which would be the slowest we could go in 5yrs and this is infrastructure driven as opposed to consumer driven, as has been the case.  So what can you do – well one thing that’s stressed is if you have a business and  debtors books, make sure you don’t keep your eye off the ball – if you haven’t considered debt insurance you could be one of the many businesses that are expected to fail within the next several months.  

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