Live from Greece

“In Athens you can definitely see the battle scars of the boom to relative bust scenario, there are shops boarded up, a few political spray paintings and signs (some look communist), generally people are going about their business. The infrastructure looks really good in some places, and really poor in others.”

To market to market to buy a fat pig. The US markets were in the green yesterday on a better than expected ADP jobs report number which came in with 237 000 new jobs added compared to the 218 000 expected. The big number expected today is the non-farm payrolls from the US labour department, which is also expected to be good. This comes with a solid chance that the official unemployment rate may come down another 10 basis points. This is the number that all the traders are looking for before putting positions in the market come the long weekend. It is Independence day in the US also known as the the 4th of July which means the markets are closed tomorrow. The day celebrates the US’s adoption of the Declaration of Independence, where they declared independence from the British empire all the way back in 1776. It is scary to think that this house in London is almost 200 years older than the age of the US – 41 Cloth Fair – The oldest house in the City of London. For me it puts time into perspective, how old is truly old? What is long term?

Other good news from that part of the world is the further warming of relations between Cuba and the US. Obama officially declared that the US is renewing its relations with Cuba and will re-open their embassy on the 20 July. The hard part now is convincing congress to lift the embargo on Cuba. It will probably take years before relations will normalise but I think with things normalising their are big opportunities for businesses and many positives for the people of Cuba.

From Sasha (in Greece) with Love

It is always difficult to get the sense of a country when you see it through tourists eyes, everything always seems amazing when people are running around you. I have chatted to a few different people, with different answers. Santorini, as a very charming and handsome Greek restaurant proprietor told me, is rich. How can the people on the mainland with limited resources get by on low government stipends by global standards, he asked. I guess he is comparing them to the richer northern neighbours.

I have no idea what the education system is like in Greece, I presume that it is good. Most of the locals that I have chatted to are in the hospitality industry, they of course speak English (exceptionally well I might add). According to Wiki, the Greeks spend 4 percent of GDP on education, English seems to be a basic subject, electives include subjects like History, Geography, Physics and the social sciences. It seems like you have to go to school all the way through to the age of 15, three years of high school are compulsory. I did notice that Greece has the highest enrolment in private schools across Europe, at 6 percent of school goers. Education has suffered at a Tertiary level as a result of the austerity cuts. I guess long term this is not good.

In Athens you can definitely see the battle scars of the boom to relative bust scenario, there are shops boarded up, a few political spray paintings and signs (some look communist), generally people are going about their business. The infrastructure looks really good in some places, and really poor in others. The public transport systems look a little tired and messy, in fairness it is the dry season and it is a little dusty. The tourist infrastructure is well marked, relatively cheap for seeing something as amazing as the Acropolis and ancient ruins of Akrotiri (here in Santorini), at 5 and 6 Euros a pop for adults (children are free) to see something that special is pretty awesome. Unlimited time and pretty much unlimited access to everything. There are pensioners and student discounts everywhere, of course. The places are open real late at night, the summer and tourists definitely help to sway the officials.

With regards to low level compliance you get the sense that the Greeks are definitely as compliant as people in the rest of Europe, Northern Europe that is. Perhaps it is also a lack of resources to pick up the litter, to clean up the streets, that is not something that is completely foreign to South Africans. Plus, one thing that amazed me is that if you do not feel like wearing a helmet when you are riding a bike, no worries, let it go. I am guessing that if you sweat the small stuff, you may well be inclined to be compliant everywhere, including being honest. I did see a fracas between a motorbike rider and driver of a vehicle outside our hotel in Athens, that was entertaining! A lot of gesticulating and loud “speaking”.

On the Islands, that restauranteur is right, the island is for rich people. There is migrant labour, there are people searching for better lives for their kin back home. Bulgarian, Albanian and even a Filipino works at the place I am staying. In the case of the Filipino lady, she could not go home for a 9 year period, she missed her kids growing up. Those are real hardships too. The tourist season is 7 months on and five months off. 7 months on each and every day, no day for breaking, the staff here basically are less than 1 per room and they do everything from pour drinks, cook breakfast, make reservations to clean the pool and rooms. Obviously the higher paid folks can do more. I asked the lovely front desk lady, she is from Crete originally, she said that they had seen a more diverse tourist guest list over time, more people from all destinations. That ultimately will save this beautiful place, the sooner the crisis ends, the better for the locals. All they need is a little more clarity.

Signing off now, the restaurant proprietor winked and hoped that Greece defaulted in their entirety, the whole lot, that would be the best outcome. I could have said that each and every German, Italian and French person would be out of pocket for 900 odd euros (a citizen), perhaps that would be lost. I will return to interrogate hime some more, before my trip is out, his food was out of this world.

Company Corner

Vodacom’s share price was up over 3% yesterday on the news that the PIC has bought governments stake in the company but also on the news that the Neotel merger has been recommended for approval. Here is the media statement from the Competitions Commission – Commission recommends approval of Vodacom/Neotel merger with conditions.

There are a number of very stringent conditions to the merger. The normal restriction of not retrenching workers due to the merger is in there. I think intentionally making a company inefficient is short sighted. The next requirement is a R10 billion infrastructure spend over the next 5 years. The comment given is “The conditions also contain unprecedented investment commitments that will go a long way in improving telecommunications services in South Africa”. It shouldn’t be too hard for Vodacom to reach the conditions as they spent R13.3 billion on CAPEX last year. Part of the reason for the huge spend from Vodacom is due to the African continent mostly skipping fixed line internet due to poor service from the fixed line operators. Basically Telkom dropped the ball, putting the consumer on the back-foot, allowing Vodacom and MTN to take over and empower the consumer. We are still in a place where our internet is shocking compared to developed world standards but mobile internet is very quickly getting faster and cheaper and is not far away from overtaking fixed line on both metrics.

The condition that I totally disagree with is the limit of Vodacom not being able to use Neotel’s spectrum. “Vodacom shall not directly or indirectly use Neotel’s Spectrum for the purpose of offering wholesale or retail mobile services to any of its customers for a period of 2 (two) years from the Approval Date or 31 December 2017, whichever is earlier.” Neotel have access to spectrum that MTN and Cell C don’t which means Vodacom could offer a better quality mobile internet service on their new less crowed spectrum. So in the name of competition the consumer is going to suffer because the regulator has been slow in allocating more spectrum to everyone.

Linkfest, lap it up

Much has been said recently about the debt in China and bubbles that are forming in their property and stock markets – With $21 Trillion, China’s Savers Are Set to Change the World. Not enough has been said about all the savings that form part of their system. I think this saving culture is a big reason why China can grow like it has and why they can sustain having lower interest rates.

This is probably the best article I have read all weekWhat if Risk-Free Returns Slowly Go Away?. The article focuses on what could be low interest rates going into the future. The result is that you will continue to get very little for keeping cash and that the stock market will stay at these levels but the returns going forward will also be lower.

Private companies are delaying IPO’s for a longer period now days. The result is that there are fewer companies that you can own that will shoot the lights out in a very short period of time. Many of these businesses also go bust, so a couple of speculators will be saved. I think the reason for this is that there is a larger pool of private money out there looking for a home which means you don’t have to IPO to get access to the capital needed to grow – How Private Markets Are Impacting Public Markets

Netflix is a great service and will be a serious competitor to Multichoice when they get to South Africa, here is a Netflix competitor in the US – Analysts: HBO Now already has about a million subscribers. One million subscribers is nothing compared to Netflix’s 40 million but HBO Now hasn’t been around for very long. If I had a choice between the two HBO Now would be my pick, they are the makers of Game of Thrones and have more up to date content. Netflix is still has more shows you watched when you were a kid. Why not have both (Netflix $10 & HBO Now $15) ? Now you just need a way to watch your favourite sport.

Home again, home again, jiggety-jog. The very bumpy ride in China continues, the Shanghai is down 3.5% today. Given all the capital controls in China there are very limited assets that the man on the street can buy which results in a premium on those asset prices. As more and more people climbed into the stock market so the premium grew resulting in the index doubling in a year! Adding fuel to the fire is the use of margin, which isn’t out of line with world markets but has been added over a very short period of time. Our market is slightly up, Vodacom is down 1.7% after its very strong day yesterday and the gold shares are still feeling the heat, down another 2.8%. The R/$ has been steadily weakening since the strong jobs numbers out of the US, now sitting around the R/$ 12.30 level.

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

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