Friday 25 June 2004

NO BULL HERE


Yesterday I went to the JSE building on Megabuck Mountain (aka Exchange Square) for a meeting. Immediately after wafting through the large electrically powered revolving door and into the foyer I was confronted by an almost life size plastic cow. Glorying in full Friesland colours and splattered by some incongruous logos and slogans, it suffers the indignity of headgear in the form of a yellow hard hat and bafflingly, a soccer ball affixed to its nose.

After submitting to my own indignity of the typical office block entrance security requirements, I wandered over to take a closer look at this astonishing sight. It is, it seems, art.  The poor beast has a future under an auctioneer’s hammer to the benefit of some charitable cause and the good news ends there. I can just picture the scene of well lubricated over exuberant traders, disguised in black ties, vying with each other to pay too much to own a three quarter size model hollow plastic cow. Just what the sober buyer will tell his wife is less easy to imagine. I fear it will not be welcomed as a nursery ornament.

A covert glance confirmed that it was indeed a cow and not, as one might have hoped in such surroundings, a bull. What message can the JSE be trying to send, by permitting the installation of such a maligned bovine. Surely the brief to the artist should have hinted at the need for something a little more – shall we say – bullish? After all, in the immediate surrounds one will find the well known bronze of bull and bear in battle and outside there’s the rather more stylistic rendition of the same contest in a stainless steel and rotating fountain format.

And it rained on midwinter’s day in Johannesburg.

If ever there was a sign that the bull market is finished it has to be this!

I guess that another phenomenon that we all wish we could understand is the rand. Its strength has been amazing.  This week it re-visited multi-year record highs. Only against the Pound in December was it a bit better than it is now. The business papers and websites have been full of theories and explanations for this performance and some of them may be true. Whether any of them lead to an accurate forecast of how it goes on from here we shall have to wait and see. But what is certain is that there are very few exporters making more or even the same profits that they were a year ago and that the forthcoming reporting season will have many unhappy stories.

And there may not be just the same enthusiastic bidding for their shares as there will be for the cow.

James Greener
25th June 2004

Friday 18 June 2004

A BEAR IN THE BUSH


As those of you who have visited me here know, we work in the office tower above one of Joburg’s rather more upmarket shopping malls. This has a number of benefits including the quality of what my younger colleagues refer to as the “stock” on view flitting from boutique to boutique. Certain tables in the watering holes are noted for their prime viewing.

Another feature of the centre is the cost, size and power of the motor vehicles that fill the parking levels through the day. Sadly these two entities do not make a happy combination.

Admittedly the ramps are narrow but the nicks and gouges in the rails and parapet walls are numerous and impressive. No sooner do the owners of the mall apply plaster and paint to these wounds than another sleek number rearranges its bodywork with a clash of car and cement work. I have mulled the idea of opening a pub in the Centre named “The Chrome and Rubble” – but perhaps not.

As in life so in the markets.  You construct a really good looking portfolio with all the right statistics. You gun it down the ramp and into the market and then some fool bear causes you to lose concentration, and bang, the headlights are smashed and your poise is rubbish. It’s on to the cell phone to explain to the folk back home that you’ll be a little late while you sort out the mess and please can they send some more money.

Despite being a four day week (or perhaps because of it) it does seem to have been busy. The forthcoming Standard Bank preference share issue has deservedly excited a lot of interest. I have also been working on a chart that helps me see what is going on in the currency markets. I mean how do you know if the rand is getting stronger or if it is just the dollar getting weaker?  More on this later. So you will understand when I tell you that I am looking forward to sneaking off tomorrow to the Kruger Park for half term.

Which brings us back to the game viewing at the waterholes.

James Greener
18 June 2004

Friday 11 June 2004

BULLS AND BUFFALOS AND PREFERENCE SHARES AND THINGS


I stayed at home on Tuesday and watched the rare transit of Venus. My solar telescope was a lash up of a pair of binoculars, a work bench and vice, and a computer monitor turntable all held together with a mess of cable ties. For a screen I used the back of the October page (the buffalo picture) from last year’s wildlife calendar, taped to the bread board. With this kit I managed to project a wonderfully clear image of the serene and stately progress of our sister planet across the disc of the sun. The buffalo didn’t seem to mind.

The bull in the market was this week similarly unmoved by events.  A contented looking Reserve Bank Governor made the predicted “no change to repo rate” announcement and this too failed to stir the oxpeckers perched on his mud-smeared flanks. The bull’s flanks that is. Most indices will end the week perhaps just a tad above where they were a week ago.

Regular readers will know that I am continually searching the US news for evidence of the bursting of all the various bubbles that I believe to be rife in those markets. But this week they were busy entertaining a crowd of poor people from Africa at a working lunch and preparing to say good bye to Ronald Regan. Remember that for us, next week will also have just four working days.

On Monday, Standard Bank will be publishing the details of the retail placing leg of their new preference share. Already we do know that they have exploited their premier rating relative to the other two banks that have already come to the market with such an issue. The dividend rate on the Standard Bank pref  will be a mere 70% of the current prime lending rate (11.5%pa), not the 75% that Investec and Nedbank are paying. My back of the envelope sums suggest that with a dividend of 8.1%pa on the 1000cps offer, the price of the pref, after listing, could rise to around 1050cps. I shall keep you informed on how to go about applying. I believe the minimum application could be as large as R100000.

There’s no rain forecast for Bloemfontein so I guess that muddy flanks will not be a problem when the ‘boks meet the Irish there tomorrow. A party of my colleagues are attempting to travel to the match via the dubious approach of floating a bus in beer. But I think that “It will get untidy”.

Have a warm weekend.

James Greener
11 June 2004

Friday 4 June 2004

THE TAX MAN COMETH


I am rather bemused by the number and tone of the current advertisements that urge me to get down to the task of completing my tax return. As I mentioned last week the gap between the income and expenditure numbers for the government is large and getting larger. There would seem to be a spot of panic creeping into the suggestions that we should tot up what we owe and get the cheque in the mail to Mr Manuel soonest. It’s not cheap this business of supplying board and lodging to democrats whose electorate put the x in the wrong box.

Now can you name the country – no let’s make it easy – the continent, that is referred to in this part of a newspaper story about a speech made by that nation’s leader?

“……his countries USD 30bn external debt was “burdensome, unsustainable and unpayable” and appealed for leniency from its creditors.”

Mind you, this kind of money is trivial compared to what seems to be owed by all the good folk of the US of A. And it is this huge debt bubble that is the main basis for my bearish sentiment towards the local stock market. I have neither the skill nor the inclination to prepare a well reasoned treatise on how it will all unscramble. My simple view is that inevitably higher interest rates in the US will cause great hardship to the hugely indebted folk and government. A consequence of this pain will be a fall in Wall Street (irretrievably overvalued in my view) and …….. Well you know the story. I warned you it was simple.

I believe that symptoms of this forthcoming showdown are already visible in our own market. The index leaps about all day with apparently random reactions to data such as the rand or the inflation rates or GDP or whatever the panic of the moment might be.  It is impossible to decide beforehand what news might be good or bad and come to that – why it should matter very much to investors. The trouble is that an investor can get badly whipsawed when his carefully researched action that’s planned to take him through for a few years, suddenly deposits 15% of egg on his face the next day – or even the next minute.

So rather than stock picking this weekend  I think I’ll apply my mind to a short note to the tax man that will make good use of words like burdensome, unsustainable and unpayable. I might even try leniency too.

James Greener
4 June 2004