Alec Hogg: Video bulletin – PPC, Japan, platinum and airlines
We've launched my daily video "vlog" this morning – have a look (or read the transcript below) and let me know what you think. Today it looks at the boardroom battle at PPC, a snap election in Japan called by Shinzo Abe; more distressing economic data from China; exciting news for platinum as Fuel Cells could be an alternative to electricity power plants; and why airlines haven't dropped their fares despite the plunge in oil prices. – AH
ALEC HOGG: Hi there. It's the 18th of November, it's Tuesday, and its cold in Johannesburg, as you can see. We're in the Southern Hemisphere. It should be warm, but it isn't. This is an update for you on news around the world. We'll be doing this every morning, so come in, come and have a look, and maybe we'll be able to encapsulate the 'going's on' not only here in South Africa, but all over the earth.
The big stories coming out of Asia this morning are from Japan and China. I also need to tell you first, before we get there: we have a really, cracking CNBC Africa Power Lunch program coming up. If you haven't joined me on that yet, please do. It's at noon. Today, we have both protagonists in the PPC saga. That's the Chairman, Bheki Sibiya (right) and the ousted Chief Executive, Ketso Gordhan. They will be on either side of a break. They won't come in together. There's a Special General Meeting, which I'm sure you're aware of by now that will be held on 8th December, where Ketso wants to get rid of Bheki and his entire Board. He has the support of shareholders to call the Special General Meeting. Whether he'll have the support of the shareholders to oust the Board and reinstate himself…I guess we'll only know, but we'll bring you up to date on that and today, we'll be hearing both sides of the story. We're also going to try to sneak a camera into the Green Room to see how the two of them are interacting and what the body language is like there.
Anyway, let's get onto the news now. Big stuff coming from Japan where Shinzo Abe (the Prime Minister) who swept to power two years ago, has announced a snap election. He believes (clearly) that he can be re-elected. He has about 50 percent popularity rating, at the moment and he needs more because in the Abenomics – the three arrows of abenomics, the first one is quantitative easing, which he's used and for a time, it's worked well. The second one is easy money (cheap money), which he's used and for a time, it's worked well but it's sliding back again because as we know, yesterday there was the announcement that Japan has gone back into recession – a contraction in that economy, of one-point-six percent. That sent jitters all around the world, particularly in the Japanese Stock Market. The third arrow, which he hasn't been able to use terribly well, is structural reforms in Japan.
If Abe can get reelected with a good majority then he might have the confidence to actually, employ it. Let's hope. Let's hope, for the rest of the world's sake, that the world's second biggest economy will be able to achieve that. Well, the second/third biggest…China/Japan…we're not too sure at the moment, depending on which numbers you're using but Japan is still a very big economy. About one-eighth of total global economic activity comes from that country.
Talking about China, there things are not looking that great. Today, they brought house prices out, which were sliding yet again – six months in a row. Only 0.4% in October, but it is relevant enough to send a few jitters through their stock market. The Chinese market was down this morning. It is also 10 months in a row that house sales have been lower than in the corresponding period last year and indeed, house sales in China are now 10% below where they were one year ago. Is it one of the last straws to break that camel's back? Let's hope not. China is still growing at about 6.5% GDP growth there, and so they are a locomotive for the rest of the world but…well, we have to watch and hope that the Chinese story can continue.
Other stories that we have on Biznews this morning that we picked up from the overnight wires…one, in fact, is a South African piece, and a very interesting one. It gives hope to people like Piet Viljoen (right) and others who've been going heavily into the platinum stocks. The big hope, long term, for platinum is fuel cells because platinum reacts very well with hydrogen. It generates energy and it is anticipated that at some time in the future – if you use the fuel cell technology, which needs a lot of platinum – you will then be able to transform motor vehicles. Get rid of the internal combustion engine and replace it with fuel cells. Well, that's down the line and of course, there's a lot of vested interest to overcome there. Right now, what is being used in the fuel cell side by Anglo Platinum – the biggest platinum company in the world – is a test of turning it into electricity for rural areas.
The tests, so far (and indeed, if you read the Bloomberg piece, it was written from South Africa and published on Bloomberg at about 2:00am our time this morning), it suggests that it's actually starting to work. So, holding thumbs for all platinum investors and I guess, another long-term bullish signal that platinum could be an alternative to nuclear. Wow. We do know in South Africa there's quite a debate going on about that subject, but if fuel cells come in, it can only be good for those who produce platinum and no doubt, for South Africa, which relies on platinum as its biggest single export earner. The platinum price is up a little bit today. Gold's still struggling below $1200.00 per ounce so we're going to need all the help we can get.
The other big story that came from the international markets this morning is on airlines. It's a lovely piece from Associated Press, which you'll also find on Biznews questioning why airlines around the world are not dropping their prices, despite the fact that the oil price is down from $100.00 per barrel to $80.00 per barrel. I went to my daughter's graduation in Dublin last week so clearly, I flew SAA to London and flew back (SAA) from Munich. I was trying to get an upgrade, but you know that these Voyager Miles are impossible when you have such busy flights. It's impossible to transfer into Business Class seats. Anyway, I can tell you one thing. Economy class is as bad as ever on SAA – those of you who have forgotten what it's like to turn right when you walk into an aeroplane. Two/three hours of sleep if you're lucky – whatever. The fact of the matter is that all of the planes are now chock-a-block full.
In the United States, despite the drop in the oil price (and remember that the jet fuel is the biggest single input cost for airlines)… Despite the oil price falling, there's been no change in airline tickets. The reason: the planes are full. If the planes are full, who needs to compete to put more passengers on the plane? I can confirm this. The only planes that weren't full on my journey was when I flew Aer Lingus from London to Dublin. It was very early in the morning so I guess most people were smart enough to take a later flight.
The AP story has a look at another rather strange thing, and that is that airline prices in fact, were up by three-and-a-half percent in the last year, but I wouldn't rush out and start buying airline shares. As Warren Buffett (right) says 'if there was a capitalist at Kitty Hawk when the Wright brothers decided to invent the art of flying, he would have shot both of them – Orville and Wilbur' – because the one single industry that has destroyed more value and more wealth over the last 100 years or so, has been airlines. It's just something to remember and to steer clear of.
I'll be back again tomorrow. Join me then. Cheers.