I was planning all week to start this piece with some lame comment about going off with a bang or shooting up like a rocket or some similar reference to the date. But in the end I decided not to, as we have had more than enough excitement, what with US elections and exploding rands and soaring dollar gold prices.
These last two numbers can be combined to yield the rand price of gold. And this week saw the listing of NewGold. Despite not trading yet in any large volumes, its pricing has been very efficient. It has been consistently at a very small (around 0.5%) premium to the price of the actual metal. The Krugerrand premium is sometimes above 5%, so NewGold should give the coin a bit of competition.
A few months ago a client advised me that we should all be buying shares in Sappi – the paper company. His research was based on looking around any office to see to what extent the so-called paperless society had failed. These last few weeks of trying to comply with the FICA regulations have hammered home the point, and I would add copier supply companies to the list. These days just about everyone that you deal with is obliged by law that you confirm that you are who they think you are and that you live somewhere. Failure to do this will result in all sorts of sanction and freezing of things. In the current heat wave a freeze sounds rather welcome but will doubtless prove inconvenient. So I am just warning you that we here at Watermark – despite our privileged location at the centre of Joburg’s shopping universe - are also in the hunt for paper and copies of paper that we can collate and file and store. There is no escape.
Now FirstRand have joined the confiscation party. Around March next year they plan to plunder 7.6% of each shareholder’s holding, at a price of 1228cps and pass the booty on to some folk they have identified as worthy of this generosity. Until then of course we won’t know whether this is a good or bad price but I think the idea stinks. Now we know what FirstRand will be doing with the cash they raised from placing their new preference share. Two much smaller pref share issues have also been recently announced by Sasfin and PSG. Unfortunately they are too small to be likely to enjoy much liquidity, but we’ll keep an eye on them.
The Americans have made their choice of President. So what happens next in the markets? Well just this afternoon one of those dreaded non-farm payroll numbers came out much higher than expected and knees jerked everywhere; in particular US interest rates went up. This will just serve to irritate the debt monster and his bulk is making itself felt in a relentlessly weakening dollar. The flip side of this is a stronger rand. As I watched our currency try to get below 6.1, I began to wonder if Governor Mboweni was watching as well. And whether he might not feel moved to spring a surprise interest rate cut upon us before the scheduled meeting of his committee in mid December? Just a thought, but that bang would make the consumer shares rocket even more.
Dragons and leeks for the ‘bokke tomorrow?
James Greener
5th November 2004
