Month: February 2021

Stats SA recently published its Quarterly Labour Force Survey for quarter 4 2020, reporting that the unemployment rate amongst 15 to 64 year old South African’s is 32,5%. Yeah right, we know that the data is much worse than that. Stats SA also publishes ‘expanded unemployment rates’ which reflects that 42.6% of South Africans were unemployed during the last 3 months of 2020.  The impact of the COVID-19 lockdowns did not help matters, reducing the number of those with jobs by 1.4 million people during 2020. RSA now has 15 million people of working age with jobs, and 11.1 million without. The trend pre lockdowns was bad but 2020 was horrific. You may notice in the graph below that the number of unemployed individuals has been increasing for the past 12 years, from 5.9 million in 2008 to 11.1 million at the end of 2020. For those of you who are not numerically adept, that’s an increase of 5.2 million people plus their dependents who need to rely on family, friends and the state for support.

Charts tell stories, and sometimes more effectively than words. Look at the chart below depicting RSA’s expanded unemployment rate over the period 2008 to 2020.

28.7% unemployment back in 2008 was not good but 42.6% in 2020 is inhumane. Talking about humanity and some interesting countries globally, I googled (yes, it is a word) unemployment rates globally. The World Bank had data for most of the 192 odd UN recognized countries although I am not sure about the accuracy of their data. For example, they claim that unemployment in Zimbabwe is 6%. Perhaps most able, work ready Zimbabweans are in South Africa, London or New Zealand and hence, do not rank as unemployed in Zimbabwe? Or perhaps those statisticians up north are beholden to politicians who would hate for news to slip out that economic conditions are far worse there than on Mars.

The World Bank uses the narrow unemployment definition, and according to them, RSA has the worst unemployment rate on the planet. Sports lovers, how about unemployment rates in some of these democratic upstanding countries globally? Argentina is apparently a basket case but its unemployment of 12% is most respectable compared to the Rainbow Nation. Ethopia at 3% would appear to be paradise. Greece is problematic at 17% but that poor country has been in terrible nick since their politicians lied about the extent of government debt. The IMF marched in there in 2010 and it has never been the same. Our neighbors Eswateni and Lesotho are not faring so well either, but are still below our levels. Did you notice Venezuela only has unemployment of 9%. Bollocks.

Stats SA is kind enough to provide an Excel file on its website with all the unemployment and employment data. That makes it easier to work with the data and extract relevant statistics. Thank you! The Department of Basic (sic) Education (DBE) is not as kind, providing only a 96 page report on the most recent National Senior Certificate (NSC) results. Have a look at this table which appeared on page 56 of their report. I suffered a bout of vertigo trying to read this page.

To be fair, the DBE had not yet released the Western Cape’s matric results by the time of publishing the NSC report, so an Excel or Numbers file may in the offing. Talking about NSC results, I was deeply disturbed by the raw data. Perhaps I should not have read the report and examined how poorly our 18 year olds (some may be younger and some may be older) performed in their final written assessments. Approximately 40% of the total cohort took mathematics in grade 12 and wrote the exam. Of those, 22% managed to obtain a mark of 50% or more. Sadly, only 3.2% achieved a distinction. I am not sure how employable you would be in the future smart city around Lanseria and amidst the Fourth Industrial Revolution without a reasonable mathematics foundation.

South Africa increased employment by circa 255,000 over the period 2008 to the end of 2020. President Ramaphosa speaks of creating millions of permanent jobs and 800,000 temporary employment stimulus jobs when the reality is that far too few jobs have been created. I researched which industries created jobs and which destroyed livelihoods.

The manufacturing sector has been a blood bath with a loss of 607,000 jobs over the past 12 years. Employment conditions in the construction and trade (I assume retail) sectors have not been great either. Interestingly, the finance sector has created 543,000 jobs whilst the ‘community and social services’ sector added 720,000 odd jobs. I am guessing that the community and social services jobs entail mostly public sector employment, those fine people in parliament and in education and in healthcare. The latter hare to be applauded for their efforts amidst this pandemic. The educators less so.

I am going to end this blog with a disturbing chart. It displays the horror of all unemployment horrors.

The expanded unemployment rate amongst 15 to 24 year old South Africans was a staggering 74% in the last quarter of 2020. Amongst 25 to 34 year olds, it was 51%. It seems the older are less afflicted. The median age in South Africa is 27 and 54% of our population is under the age of 30. I would opine that we have a humanitarian crisis in South Africa with regards to employment and unemployment levels.

Be safe and all the best from BeechieB.

Do you know who the guy in the picture below is?

Picture courtesy of the New York Times

The guy’s name is Keith Gill and he lives in Wilmington, Massachusetts (close to Boston, USA). He is also known by his nickname on Reddit as DeepF##kingValue (apologies, I can’t use the full nickname since that may offend younger readers). I am not on Reddit but apparently it is frequented by amongst others, day traders – those people who discovered trading on stock markets during hard lockdown. Gill is a chartered financial analyst (CFA) and until recently worked for a life insurance company in marketing. Unbeknown to his employer at the time, he also masqueraded as an investment guru who has his now youtube channel called “Roaring Kitty”. He recently resigned after much success on the stock market. Gill has been trading in all sorts of unpopular shares such as GameStop, the bricks and mortar video games retailer. I have not frequented a GameStop store but there are over 5,500 outlets, mainly in the USA. Apparently, you can find everything you need to embark upon a gaming adventure. You can buy video games hardware, software and accessories in their stores. GameStop has been in decline for some years and has been badly hurt by the lockdown. We know what is happening to the retail industry globally as many larger groups have gone asunder. Companies such as Sears, JCPenny and J.Crew are no more.

I would have thought that GameStop was not a good share to purchase for various reasons. Its business model is being fundamentally challenged by online channels. It has been making losses for the past couple of years. The numbers don’t look good – I have attached an Excel spreadsheet GameStop analysis (Feb 2021) analyzing their numbers if that’s your thing. Mr. Gill has thought otherwise for some time. On 28 July 2020 he posted a rather lengthy rant on youtube about why GameStop is a compelling share to buy. He backed his convictions by apparently investing over US$50,000 of his own money in this unloved share called GameStop. The share price was US$3.94 on 28 July 2020. The GameStop share price doubled in value by 15 September 2020 and then surged in January 2021 reaching a record high of US$481.99 on 28 January 2021. That is a staggering surge in the share price. If we had invested US$50,000 on 28 July 2020 following Mr. Gill’s advice, we would have been up US$23.9 million if we sold out on 28 January 2021. I would have been thinking about retiring and setting up my own foundation called “HowtoWhackthoseHedgeFunds”.

There have been wild gyrations in GameStop’s share price over the past month. After reaching a peak of US$481.99, it declined to US$325.00 a day later. It closed at US$100.00 yesterday. The other remarkable thing about the trading in GameStop’s shares has been the volumes exchanging hands. On 26 January 2021, 178.6 million GameStop shares traded hands. That in itself may be unremarkable to some except when you consider how many GameStop shares are in issue. At 31 January 2020, its latest reported financial year-end, there were 64.5 million shares in issue.

Ordinarly, we would have congratulated Mr. Gill and his followers on Reddit for being brave enough to invest in GameStop and fair change for making many millions. However, the plot thickens. It transpires that there were some hedge funds that had shorted the GameStop shares. Without getting overly technical, short selling involves borrowing GameStop shares from some investment bank and then selling these shares on the stock market. The investment banks would require some collateral from you and would charge you some juicy fees for engaging in this unusual behavior of selling something you do not own. Short sellers would then pray that the GameStop share price would decline as they then could purchase shares at a lower price than they had sold for, making a nice profit. Hedge funds are known for identifying unloved shares such as GameStop or seemingly overpriced shares such as Tesla and engaging in short selling. Imagine that we ran a hedge fund that had engaged in short selling GameStop shares. Let’s say we had sold 1 million GameStop shares that we had borrowed from an investment bank for US$5.00 each in the firm belief that the share price will plummet to zero. The likes of Mr. Gill and his fellow day traders then unfortunately arrived and drove the share price up to US$400 per share. The hypothetical hedge fund would be in a world of pain – some US$395 million of pain since to purchase those 1 million GameStop shares would now cost US$400 million in order for us to honor our promise to return those shares to the investment bank.

It seems as if stock markets have gone mad and the man in the street can now topple the mighty financial giants such as hedge funds. Is it a game changer? Me thinks not. These hedge funds are going to spend some money lobbying Washington to ensure that the rules change to prevent these unfortunate incidents from ever happening again.

Stay safe and all the best for February 2021 – I am now thinking in months as opposed to years given this COVID mayhem. All the best from BeechieB.