Pensioners sucked GM Dry

“I recall a story about a General Motors employee who received benefits long after they had finished and retired from the company, I am guessing that it is no different for the country. General Motors, as per what I read on the web (of course you can always believe it) had global worldwide pension obligations of 134 billion Dollars at one stage. To appease the unions, the largest manufacturer of motor vehicles increased retirement benefits. Eventually the company could not afford it and hey presto, people had to accept that their promises were broken, simply as a result of the company not being able to meet them.”

To market to market to buy a fat pig. Up, up and away yesterday, from Stockholm to Sao Paulo, Madrid to Mumbai, through to Brussels, markets were sprouting. The humble and horrifying at the same time, Brussels Sprout is cultivated mainly in the Netherlands and the UK. Temperate climates in those parts. Eat them with something more delicious, which in most kids opinion is about everything. So why the global rally? A small country by global economic standards that has been capturing the imagination of Europe for half a decade, for all the wrong reasons, is on the brink of receiving their next round of cash. Yes, Greece. And seeing as the EU headquarters are in Brussels and that butter is another option for Greece (grease), perhaps the two do actually go with one another.

So what is the skinny on Greece? The Greek proposals presented to the other EU members was more favourable, more favourable with the people sitting with the cash. Meaning more reforms that have to be implemented in Greece in order to get the next round of funding. And the European Commission president, Jean-Claude Juncker said that he is confident that after the overnight meeting that he is almost certain that a deal will be reached before the week is out. Higher taxes for ordinary Greeks and changes to rules with regard to early retirement.

I recall a story about a General Motors employee who received benefits long after they had finished and retired from the company, I am guessing that it is no different for the country. General Motors, as per what I read on the web (of course you can always believe it) had global worldwide pension obligations of 134 billion Dollars at one stage. To appease the unions, the largest manufacturer of motor vehicles increased retirement benefits. Eventually the company could not afford it and hey presto, people had to accept that their promises were broken, simply as a result of the company not being able to meet them.

At the time of the bankruptcy in 2008, General Motors had 234 thousand people on the work force and an astonishing 493 thousand retired workers, all reliant on the company for their health and pension benefits. It was OK in the 1950’s to offer free healthcare for life, times were amazing back then, as the market became bigger and the Japanese had better vehicles, GM lost their place as king of the castle. It is a reminder that there are many unintended consequences to offering people too much today, once the bar is raised there will be eternal bitterness when it is lowered. Apparently around 2 out of every three families in England depends on the state for welfare in some way or another.

Remembering that a lot of people earn the benefits whilst being a forced saver inside of formal employment for many years, not necessarily for the government. The fact remains that whilst rich countries have an obligation to look after the needy in society, where do you draw the line, or is that insensitive? I recall a Mad Magazine piece of two high street types looking disparagingly at a homeless person, one of them said: “Why can’t he make his money the good old fashioned way, like me”, to which the other one quipped “What, inherit it?” Whilst the world seems at times very unfair, you can “make it” from extreme circumstances even if the odds are stacked against you.

Getting reelected, offering too many benefits, that is what politicians do without thinking beyond their term in office. Not celebrating the human spirit enough, that is a fault that too many ordinary people make, celebrate excellence and aspire to be something “special”. People solve people problems, not organisations or governments. To end off with, the Greek “situation” is now heading towards a solution, which is actually what everyone wants to see. Can kicking is a loose description given to extending the problem, I prefer using the expression, buying time. It turns out that we may well have to wait until Thursday for a “full deal”, there is still work to be done.

Thanks as ever for your feedback, it is much appreciated. Here is an email sent from “agent Smith” down in Durban, when we spoke about older companies in South Africa:

… you might be interested to know that Adams & Co a Durban bookshop which is still trading in what was the main street of Durban and has several branches in the Province. It is 150 years old this year and Peter Adams is the present owner and who from time to time you can meet and be served by in one of his stores. He is a polite approachable gentleman and like his forebears a sagacious businessman.

For all you ignoramuses like me, who are less skilled in the English language, sagacious is as per the online definition wise or shrewd. I guess the biggest risk to their business is the internet and the changing environment from a technological point of view. You know that South African born Elon Musk is wildly clever, he pulled his kids from a school for gifted kids and stuck them into his own school, called Ad Astra. The school has so few pupils and most of them are from SpaceX. I agree that we continue to teach our kids in the same way for decades, it is time for a revolution in learning, we have the best tool at our disposal, where you can learn anything, the internet. What does that do for Mr. Adams’ bookstore?

Company corner

Another thing about that Mediclinic deal to acquire nearly 30 percent of Spire Healthcare, and I only thought about it after the newsletter had departed our shores, is this a precursor to injecting bigger assets into Spire for a bigger equity stake, a controlling stake at some point? I was shocked when I did the snooping to learn that in 17 years since SABMiller listed in London (I am told they had actually listed in London 100 years prior, a couple of years before listing here), the share register, in terms of percentage is skewed at 84 percent in London and 16 percent here. It boggles the mind to think that ownership can change at that sort of rate in a relatively short period of time.

For the time being Mediclinic and Remgro, via the Spire Healthcare release (Acquisition of a 29.9% stake in Spire), are not allowed to make a further offers for all the shares inside of the next six months. That is how British company law works. And as the seller of all, bar for 8.4 percent of the rest of Spire, Cinven could well wait for the expiry date to finish before Mediclinic/Remgro buys the balance. After all was said and done, Mediclinic can buy more, they just need approval from the Takeover Panel. I guess that this is a cooling off period of sorts.

Two SENS announcements out this morning for companies that we hold.

The first is from Omnia, who have struggled of late. The Audited Results for the Year Ended 31 March 2015 were better than the market expected. The stock is up 7% as I write this. HEPS were up 2.6% and the dividend is up 3%, which isn’t huge but I think the market was expecting those numbers to go backwards. Being linked to the mining and agriculture industries has not been easy, a saving grace for them has been the weaker Rand. We will cover them more tomorrow.

The second stock was Famous Brands, who will Acquire 51% of Retail Group (Pty) Ltd, Botswana. This is not a huge acquisition but it does give them more control of the operations in Botswana and more importantly it gives their (Famous Brands) huge amount of cash a place to work a bit harder. In their recent results they had R 126 million sitting in cash on the balance sheet.

Fact of the day

I wondered over the weekend what the origin of the Dollar was, the word and currency of course. The word Dollar is derived from “thaler”, which is short for Joachimsthaler, according to Wiki. Which in turn was close to the name of a silver mine in the town of Joachimsthal, a place in Bohemia, modern day Czech Republic near the Ore Mountains. The Ore Mountains border Germany and the Czech republic and are often regarded as the place that modern day mining and by extension the industrial revolution started.

Silver coins were minted from this specific mine at Joachimsthaler. And Thal, according to Wiki is German for either a thing or a person from the valley. So the Dollar was a silver coin, the Thaler. In three years time, the first minted silver Thaler will be 500 years old. The size of the coin minted here became a standard of sorts and the Dutch produced something called the leeuwendaler, the lion daler (thaler/daaler). The Dutch East India company (which eventually became the Dutch West Indies company) set up shop in and around modern day Albany, which was far more hospitable. And guess what, they began using their coins, the lion daaler/daler. The Dutch had three coins, the aforementioned leeuwendaler, the rijksdaalder and the gulden, the modern day Dutch Guilder. Which was the precursor to the Euro, of course. Jeroen Dijsselbloem, the Dutch Finance minister remembers it well.

The coin was adopted amongst the Thirteen Colonies of the United States, the rest as they say is history. So the origin of the US Dollar can be traced back to a small area of Bohemia, where there was once a famous silver mine. And two parties, Georgius Agricola who hailed from Germany and was the pioneer in mineralogy, as well as a doctor, and the Counts Schlik family, who owned the silver mines from which the coins were minted. Hazy origins and not what you would expect, there you go. Today the US Dollar is the top reserve currency in the world, all commodities are priced in Dollars, so until that changes, it will stay the same.

Linkfest, lap it up

Every now and then you stumble across something non market related that you just have to share. Cape Town based, and on Instagram (she has 186 thousand followers) her miniature paintings are incredible, make sure you take a look: Postcards for Ants, Lorraine Loots. What talent, see her Instagram page to appreciate more.

Facebook is going to use all their data on you to add power to the Instagram advertising machine – Facebook is about to turn on the money jets for Instagram. The forecasts are for Instagram to have revenues next year of over $1 billion (same as they paid for it), the investment looks like a great one 3 years on. Going back to when they originally purchased it many people said they grossly over paid and others said that they got it for a bargain.

When was the last time you added photos on Facebook? I did over the weekend and I was pleased and surprised to see how many of my friends faces, Facebook could identify without me having to do anything. The result is that advertises know your face and will use it for better targeted adverts in the future.

While we are talking about Facebook – Facebook is now worth more than Walmart

There is still a huge luxury market in China, being able to sell 500 Maybachs a month is no easy feat – Mercedes-Benz’s Maybach Sales in China Are Soaring

Have you seen the new Jurassic movie? Someone went and calculated how much it would cost to bring a Jurassic world to life today – Here’s how much it would cost to build a real Jurassic Park. The number comes in the region of $23 billion, now all we have to do is find all those Dinosaurs DNA.

Home again, home again, jiggety-jog. Our market is marginally higher. I have a question, why do we never tell people how awesome they are when they are alive? Where is this going? Read Jamie Dimon of JP Morgan’s eulogy for his mate Jimmy Lee. Do yourself a favour, tell your favourite people around you how awesome they are. Rather than when they are no longer around, ok?

Sent to you by the Vestacters, Sasha, Michael, Byron and Paul.

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