Friday 24 December 2004

COMPLIMENTS OF THE SEASON


I do not want to write and you, certainly, have no interest in reading about the markets today. So I shall just wish you a very happy and peaceful Christmas time and a wonderful, healthy, safe and prosperous 2005.
Thank you for receiving these weekly waffles. I have had lots of fun writing them. For those of you who go so as far as actually to read them, an extra thank you.
Thank you to my friends and clients who supported me this year in my move to Watermark. I trust you have found this firm to be as good as I have.
I shall be away from the office for a few weeks and Tidemarks will not appear for a while. Please contact Paul Davis or Charmaine Marcia by phone (011-325-4228) if you have any queries or orders that you wish to place. Please don’t send emails with these requests as I shall not receive them until I return to the office on the 10th January.
With best wishes.

James Greener
24th December 2004

Friday 17 December 2004

PREDICTING DELIVERANCE?


There is very little to write about in the market this week. Even the expected 25 basis point rise in the US rates has had no noticeable impact on our lives. Yet. As you all know by now, my tedious view – long overdue for fulfilment – is that the spectacularly large US debt position is a millstone that gets heavier with each increase in interest rates. Perhaps my expectation of an enormous splash when the victim (US consumer) topples beneath the surface of the liquidity lake is over-optimistic. Maybe all that we shall see will be expanding circles of ripples with just a faint gurgling noise from the centre. However, it’s those ripples that worry me, as I think they could look like tsunamis by the time they reach our markets.
So far this month the JSE is down a bit, but only because of the mining shares. Almost all the other sectors are still stumbling and lurching upwards. The rand has gained against all currencies except the Pound so far this month and the US dollar has been taking a caning from everyone – particularly these last few days. The price of gold is a very good indicator of how deep in the dollar is.
There is a distinct holiday feel to the market with wide price spreads and negligible volumes. The day before the public holiday we enjoyed quite a bit of turnover because of futures close out. This is an arcane ritual that takes place four times a year, usually on the afternoon of the third Thursday in the month. For 100 minutes the market is dominated by duelling computer trading programs – I’m sure I heard the sound of plucking banjos – and mere mortals watch in horror or glee, depending on their position. These programs should carry age restrictions.
To make up for lack of action, and probably readers, analysts and reporters are now churning out their predictions for 2005. It seems that most are sure that the market will go up, the rand will be strong but unpredictable and the Proteas will beat England. Another of my, hopefully well known, scepticisms is that on average exactly half of one’s forecasts are correct. I have already admitted to one of mine which this year was wrong. This is therefore not a good moment to put down on paper any ideas that I may have. Statistically you will now be expecting it to be accurate. Come to think of it, I have very few ideas at the moment anyway. I know what I’d like to happen but that should not be confused with what should happen or indeed with what will happen.
But enough of this lyrical word play; there’s some test cricket to watch and Christmas presents to wrap. I’ll be in the office next week should you feel the need to impress the folk next to you on the beach with a call to your stockbroker to discuss the portfolio. The week after that, it will be me on the beach next to you.
Remember the hat and the sunscreen.
James Greener
17th December 2004

Friday 10 December 2004

US DOLLAR: FLAVOUR OF THE WEEK

The end of my week in the Kruger Park was somewhat marred by returning to a house that had been burgled. Fortunately an alert neighbour heard the sound of breaking glass and the alarm siren, which prompted him to peer over the boundary wall and spot the felon loitering in the garden waiting to see if there was going to be a response from the security company patrols. The neighbour issued a few good old fashioned threats and imprecations in the so-called language of oppression and the thief vanished in a flash having had very little time other than to make a bit of a mess and pocket a few small items.
With this experience fresh in my mind, it was with some interest that I read that the police themselves make use of private security companies to guard some of their police stations. Since our response guys failed to show up I would suggest that the police ensure that they have good alert and civic-minded neighbours instead. A lot cheaper too. Just a bottle of wine and a note of thanks for each foiled robbery attempt. Of course they must ensure that the wine is not from one of those KWV cellars where they have been adding synthetic flavouring to the fruit of the vine.
There will have been quite a call for relaxing beverages of every flavour in dealing rooms world-wide this week as suddenly everyone fell in love with the US dollar again. This showed up as a 5% correction in the price of gold from its recent 22-year high of USD 457/oz. Our own rand has given up more 3% against the greenback since last Friday. Now all of this was rather unexpected since pundits had been calling the death of the dollar in ever louder and frantic tones. As I have written many times before, the science of predicting the future in financial markets (and probably in other fields as well) has a rather poor track record of success.
Yet another example of this was Thursday’s decision by the SARB not to change the repo rate. I have read at least one commentary which complained that the 15 minute pre-announcement speech seemed to hint strongly that a cut was forthcoming. However, when the Governor turned to the final page and told us that the committee had decided to do nothing, these hints were shown to be mere teasers.  What that commentator must realise is that the speech part of the announcement is surely written some considerable time before the speech and probably even before the meeting of the committee. It therefore has to be pretty agnostic on the decision. I anyway have a suspicion that the final page is picked from the top of a pile of paper containing random “cuts’, “raises” and “do nothings”. It is slipped onto the bottom of the speech as the Governor enters the press conference and the announcement is as much of a surprise to the Governor as it does to the rest of us.
So next week has just four working days, less one for luck, so I would imagine that the market will be pretty quiet, perhaps just drifting south on lack of interest. It’s hard to believe that there are any situations of compelling and outstanding value that are not to be missed right now.
I trust you are getting these good rains too.
James Greener
10th December 2004