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I trust this finds you exceptionally well the first half of the year is now (already) over and we are into the home straight. The pace seems to be picking up and, if possible, getting faster.

On the international front, Europe is continuing with the brinkmanship and looking for a solution where no easy choice exists. It is a case of when Greece defaults and Europe is trying to give everyone time for the debt to somehow magically normalise, which it cannot do, in spite of the Greeks having passed the austerity bill. Right-wing parties are gaining prominence in “wealthy/ Northern” Europe with the electorate as their politician’s ideas of letting the profligate periphery swim by themselves are gaining currency. Expect to see the incumbent (more moderate) politicians being sidelined as events unfold. I keep referring to this as Europe is South Africa’s biggest trading partner and the Greek and (and its impact on the) European situation will have an impact on South Africa, if not directly, then on our business counterparties.

Anecdotal evidence has it that in Greece credit cards are not accepted and ATMs do not have cash to dispense. The credit card “non-acceptance” policy indicates that tax evasion is running rampant – the simple “no trail, no tax” principle applies and the disappearance of currency indicates a banking/ confidence crisis – i.e. people don’t want to put their money in the bank in the event of the bank folding and them not being able to get it back again.

Below follows an e-mail thread from Richard Yamarone, chief economist for Bloomberg. It is part of an email thread where a number of parties were commenting on the swoon in the market and how much of it could be tied to Greece:

“When Greece folds like a wet gyro, and it will, the real game begins. It’s no different that when Bear was taken over by JP Morgan, the markets ignored the Bear Stearns story (the media didn’t). When all business television and newspapers did stories about the $2 price tag on Bear, investors were saying ‘who’s next’’ The fact that Bear went down was old history – most knew it was going to happen. The focus was where do we turn next’

“The Greece story is like the sick uncle at the annual family picnic…Mom would say, go take a plate of food to Uncle Larry, he’s really sick. This goes on for three, five, ten years. Then Uncle Larry dies. Everyone turns to each other shocked, ‘I can’t believe that Uncle Larry died!’ What’s so surprising’ Everyone knew, he was dying for over a decade. That’s what’s going to happen to Greece…The financial press will say Whoa, Greece folded, defaulted, whatever. But the markets will say, ‘Who’s next’’ Then the entire EU will come under pressure. I don’t believe they will exist in two year’s time. –  Rich”

Joan McCullough (an American (this will shortly become apparent) market commentator) had the following observations to add:

“Lemme tell you something right now. All these warring factions in Europe went from a hardcore game of “chicken” to blinking. Each and every one backpedaled. And the spin became “broad-based cooperation” to get it done. Because they were facing meltdown. And I’m thinkin’, the next thing we’re gonna’ see is the Greek Army and then it’ll be all over. I am sure all this was not lost on the rest of the world’s leadership who are watching Greece unfold from the edge of their seats.

“That same backpedaling baloney has continued to where Merkel is tryin’ to smooch it up with the ECB. They’re talkin’ Vienna-style resolution. Again. (That’s the one where the paper matures but the banks have formed a consortium and have agreed collectively to let the bet ride, i.e., roll over. I guess a roll-over at gunpoint does not count as a default. Whatever. We are so far into delusional, I’m actually enjoying it now. You’)”

“There are no good choices. It is between choosing between pretty bad today and really bad in a few years and a disastrous choice forced on the world after that.”

The above comments are comments from seasoned market professionals. I would be inclined to listen.

The situation in America is not much better as both the Republicans and the Democrats are effectively deadlocked and blaming each other for the woes that exist, but no-one is actually doing anything about it.

On the local front, the new Companies Act and the CIPC (replacing the erstwhile CIPRO) has been a complete disaster. There are some new matters coming to light in terms of operating protocols going forward such as the fact that in terms of the Companies Act 71 of 2008 a corporate structure that has a Trust as a shareholder is not deemed to be an owner managed company. Likewise a close corporation that has a Trust as a member is also not deemed to be an owner managed close corporation. One of the criteria for being deemed an owner managed business is that the shareholders and directors are the same natural persons. There are audit implications attached to this and this is a surprise change from the final draft to the gazetted legislation.

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