The Preamble
For the background to this series of posts: here, here and here. And the summary:
- Small investors have some investing options.
- You can invest occasionally in lump sums (the once-off investors) or monthly through debit orders (the monthly investors).
- As for things to invest in, I’m a general fan of low-cost equity-index-tracker ETFs (as is Warren Buffett). But there are other possibilities as well.
- This series of posts is there to see which would work out well.
- Then there are some indicators at the end. Because why not.
This last week has not been a good one for South Africa. I mean – in terms of pure physical comfort, we’ve had an opaque Eskom making life even more opaque. On Friday night, I was on twitter, watching everyone flip off the wall. Which is understandable – and yet, at the same time, not.
It’s one of those awkward moments:
- We were up in arms about electricity prices going up (forcing Eskom to operate at below what it needs);
- So Eskom didn’t have enough money to go all the way around;
- We were also up in arms about new power station delays;
- And so instead of maintaining its current plants, Eskom pumped most of its R&M budget into Medupi (hoping, I guess, that bringing the new power plant online this December would give them breathing space to re-divert funds toward the necessary repairs on the existing power plants);
- Only, that bet didn’t quite come off;
- So here we are, in the dark, waiting for critical maintenance and new capacity all at the same time.
At this point, people love to point out CEO salaries that are millions of rands. Which is almost an entirely nonsensical point – Eskom’s requirements for maintenance and additional capacity are billions of rands. The CEO salary is, like, 0.002% of that*.
*Some figures – I’ve read about R10 billion being spent on maintenance on some plants. The CEO took home R15 million this year. His salary? 0.0015% of the maintenance budget. Sure, it may seem morally reprehensible. But in real terms, his/her salary is NOT causing the load-shedding.
And if you want to take a look back at the ridiculousness of the past, try this Moneyweb article from earlier this year.
On one side, you have Eskom saying “We need this to operate. We have these shortages. Here is our maintenance plan. We need this 16% tariff increase.” And you have bureaucrats saying “No – you can’t do maintenance ‘at all costs’. You can have an 8% tariff increase. And best you work better with that.”
Collectively, we’ve insisted on highly-subsidised electricity, but we also want it to be entirely reliable. And we’re complaining now as though, somehow, someone else could have done this better? Not a chance. The private sector would have delivered us electricity at a profitable price – never mind recoverable cost.
The thing about free lunches is that that they’re rare. In this case, we’re going to pay for the older subsidies in one of two ways (or both):
- Buying a generator;
- Sitting in the dark, being uncomfortable, not able to sleep because of all the generators running in the complex reverberating against the high security walls.
Economics, eh?
Back to the investments.
Once-Off Investors
In numbers, the bearish investors for the win:
In pictures:
Monthly Investors
In numbers:
In pictures:
The Indicators
The Exchange Rate weakened (not surprising):
The Stock Market tanked a bit (also not surprising):
In real terms (even worse):
10 Year Government Bonds sold off:
But there are some silver linings!
Oil prices fell off even further:
In ZAR terms, muted by the weakened exchange rate:
Gold and Platinum Prices recovered:
In ZAR terms, even more!
Of course, it doesn’t help local mining companies if they have no electricity with which to mine…
But anyway. It’s still a bit of positive.
Until next week!
Rolling Alpha posts opinions on finance, economics, and the corporate life in general. Follow me on Twitter @RollingAlpha, and on Facebook at www.facebook.com/rollingalpha.
