There’s both a rugby AND a cricket test tomorrow. And perhaps you are planning to ride a bike all over Joburg on Sunday. I can see that this will not be a relaxing weekend, so I suppose that I should try to give you some pleasant reading here.
I could start by telling you that there was a rumour in the market that Governor Mboweni was going to call a special meeting of the MPC (the worthies that decide interest rates) with the intention of springing a surprise rate cut on us. The problem, it seems, is the rand. You probably saw the report that Minister Manuel expressed some dismay that it now required only six of them to buy a dollar. Good news for those of us shopping for imported goods, but a becoming a bit a problem for the exporters again, despite the short respite afforded by the previous cut in August. And it’s not just dollar weakness that’s the cause. While we are up more than 10% versus the USD this year, we are also more than 7% up on both the Yen and the Euro and up even 4% against the venerable Swissie! People out there want to own the rand. And one reason for this is to buy the equity market. There has been R10bn worth of net foreign buying in the last six weeks. When the American market dividend yield is a skimpy 1.9% pa, yields of around 5% from shares as chunky as Liberty Holdings are seen as a steal.
However, as I write, there is no sign of any truth to the rumour about the meeting and those of us who need interest income to buy biltong, beer and fishing equipment (life’s little essentials) can relax. Actually, if you think about it, the chance of collecting together anyone for a meeting on a Friday summer afternoon is slim. Even if you do promise five star catering.
Another rumour doing the rounds is that some institutional investors have started to take profits, especially in the retail shares. That index is up more than 12% this month alone, so you can sort of see the thinking there. However, the excellent results continue to pour out from these companies and the earnings and dividends in most cases support the prices for a ‘hold” I just wouldn’t want to do a lot of buying here, that’s all. In the meantime I am getting old waiting for the US markets to wake up to the fact that they should be going down. The worse the news, the more they buy. Disturbing.
You may recall me picking on the Fannie Mae mortgage securitization business (second largest financial company in the US) a few weeks ago. Well, they are getting a lot of news coverage recently, with auditors getting sticky and possible losses in the billions. And then this morning we learn that they are down here on the southern tip teaching our chaps how to do things. I wonder who will learn the most? And while on the topic of people in trouble how about getting an adjusted tax assessment requesting an EXTRA six billion dollars? Aren’t you glad you aren’t Yukos, the Russian oil company?
There, you must be much happier and ready to turn to the sports channels on the TV now. Have a great weekend, and I hope the rain starts only after you pedal across the finish line.
James Greener
19th November 2004
