Good morning

The headlines:

  1. The Oil price rose dramatically yesterday after a rumour of an explosion on one of the Saudi oil pipelines. Apparently – the rumour came from an Iranian source. The Saudis deny it. Did anyone else realise that the Saudis and the Iranians don’t see eye to eye? It’s Sunni versus Shiite in the Islamic world. But despite the corporate/sovereign sabotage, it highlights the sensitivity of the oil price to fluctuations in supply. According to US Energy estimates, global demand already exceeds global supply by around 500,000 barrels per day. Once Iran gets excluded from the equation, thanks to the US-EU-Iran nuclear spat, that figure is expected to jump to a difference of 3 million barrels a day. Buy black gold. Link: Oil Rises.
  2. The Investor Lawsuits over the LIBOR price-fixing scandal have started. At this stage, they’re being told to slow down until the government anti-trust investigations are completed (they’re being denied access to some documents until the investigation is completed). But still – there are two groups suing. The first group are doing so on the basis of direct transactions with one of the accused banks based on LIBOR. The second group are doing so on the basis of indirect transactions on exchanges with prices based on LIBOR. The potential for this to be crippling is huge. Link: Civil LIBOR case denied documents until Criminal Probe completed.
  3. Despite the excitement around emerging markets, and their success while the first world has gone haywire, investing in BRIC State Firms would have been a disappointment. The trouble here is that state-controlled firms have fundamentally different objectives to the bigger and better profit goal of the private sector. In many situations, the state entities have aligned their strategies to bring about campaign promises for politicians, or they’ve been used to manage the impact of external economic influences. For example – fuel caps will effectively subsidise a country’s fuel consumption – great for controlling inflation and votes, but very bad for investors in the state-oil company. It then comes down to how big a fan you are of the free market. But personally, I like de-nationalisation. Link: BRIC investors losing as state companies forgo earnings.
  4. Impala Platinum is having a very rough start to the year. There’s that business with the indigenisation laws in Zimbabwe (the Zimbabwean mines account for about 43% of Implats production). And then, there’s the issue on the Rustenberg mine (which accounts for about 12% of Implats production). Implats has announced that it has rehired 13,500 of the 17,000 employees that it fired, but the plant is still lying idle. Protesters are continuing to cut off access to the mine, maintaing that it does not benefit the local population. Which frankly sounds like a lie. These workers have to come from somewhere. What they’re really saying is that they’re not paid enough when you compare it to Implats profits. Which is envy, plain and simple. The moralistic stance that somehow the poor have entitlement to the riches of the wealthy is absurd. Do I have entitlement to the bed of my friend’s wife because she’s prettier than mine? Should he feel guilty about denying me her pleasure? Of course not. In the same way that some people are prettier, cleverer, or better at running, wealth is just a fortuitous accident of genetics and timing. Rant over. Link: Impala Platinum continues rehiring workers.
  5. And finally, the Africa Business News in brief. Link: ABN Briefs. The highlights:
    • Implats says it won’t leave Zimbabwe, despite the indigenisation laws.
    • South Africa’s Purchasing Managers Index (PMI) increased to a 2 year high in February. The index has strong weightings in favour of increase in business activity and new sales order indicators (which means that these two factors will have the greatest impact on the movement of the index). The improvement suggests that the South African environment will be quite supportive of business activities in the next few months.
That’s all for now.
Have a great Friday and weekend!