Friday 30 December 2005

HAPPY NEW YEAR

It is a while since I last spent the period between Christmas and New Year at home in Joburg. Goodness! It is really really quiet. Except of course for the wailing sirens and alarms as the cops and robbers take their turn to visit the homes of those who are away. In our small office block we appear to have been the only business to have been open every day this week. Of course the roads are a pleasure, although I was surprised at how full the parking lots at some of shopping malls have been. These days there are fewer numbers of  seriously sunburned, sensible-sandal shod senior citizens shuffling around the shops. The granny-run is now replaced by the flying visit from the adult children who have taken a brief break from their task of keeping the pubs and banks of London running smoothly.
From noon today the markets will stop running altogether whether smoothly or otherwise. The JSE All Share came pretty close to gaining 50% on the year – a performance I don’t think was predicted by too many people, and certainly by none of the experts! Similarly, most forecasts of the rand the dollar the gold price and the Dow were well wide of the mark so let’s not spend too much energy trying to guess what will happen in 2006.
Please enjoy a safe and happy New Year celebration. I look forward to all the new things that 2006 will bring. Like the Proteas holding onto some catches.

James Greener
30th December 2005


Friday 23 December 2005

A MERRY CHRISTMAS DIRECTIVE


I rather enjoy reading those huge “tombstone” pre-listing announcements, though I will admit to usually skipping over the bits with the numbers. They have certainly been thoroughly burnished and scrubbed to such a shine that there’s nothing else to see. Instead, it’s the list of directors that claims my attention. Firstly I look to see how many are younger than me – alas these days the answer is most of them. Then I marvel at how many seem to live in bleak office parks, often several of them in the same block. I presume that the requirement to provide one’s residential address on these documents (a la FICA) still stands? And finally, I peruse the qualifications column to check what foolishness the much praised corporate governance standards have produced. Worldwide, legislators and bureaucrats, most of whom I am sure have never actually run a business, are dictating that a company should have squads of non-executive directors who should be independent. This dubious tenet of independence (remember who appointed them in the first place) seems to suggest that no knowledge of, or background in the company or industry is a good thing. Here in SA we of course have our own extra chapter in the standards guide. Directors must further be categorised by reflectivity, sensitivity, mobility and history with scarcely a word about capability or suitability. Recently a 27-year old man with a marketing certificate joined a 35-year old holding a health diploma on the board of a mining company. I wonder how much help they will be to the chairman, who is to be congratulated on putting his MA in Political Science (oxymoron?) to such good effect.
Now this particular non-yuletide themed rant was brought about by the extraordinary quarter-page full-colour invitation from Parliament that asked all citizens to answer the following question: “Corporate governance in South Africa. Where do we stand?” I shudder to think what answers they will receive and how that extra chapter in the standards manual might be expanded in the future. Surely the only thing any of us, including the state, can expect of anyone else – including a corporate – is that they don’t steal anyone else’s assets. That would include the health of its staff and customers. And if they do, then they get punished. If the board is incompetent it will soon show up in the company’s products and it’s share price.
But enough humbug. The JSE all share index has soared right through 18 000 and next week we shall see how it intends to end the year. Most of the heavyweights, with the exception of Sasol and SAB have moved up sharply. Odd that. All that fuel both we  and our cars need at this time of year.  Despite the passing of close-out, when a record R11.5bn turnover was recorded for the day, and the current summer holiday fever, volumes have still been very chunky this week, never falling below R4bn a day. This week’s feature has been the strength of the rand, which once again dispels that old myth about an inverse correlation between the currency and the market. Interestingly the US dollar has also been very strong, presumably a response to their rate increase.
Please have a wonderful, peaceful, rewarding and merry Christmas. The market reopens on Tuesday 27th, which makes me suspect that we have been gypped out of a holiday somewhere. Best wishes.
James Greener
23rd December 2005

Thursday 15 December 2005

RUNNING ON EMPTY

The headline on the news screen reported a claim by the SA Communist Party that the working class will be hit by the current fuel shortages in the country. I trust that the party members feel that they are getting value for their subscriptions when the leaders come out with gems like this. More statements of the obvious have come today from the forensic auditors sifting through the remnants of the records of companies once controlled by the late flamboyant Chairman Kebble. They warn that previously published figures might not be reliable and that they have found evidence of misappropriation of company assets.  Wow!
I welcome the news that government is considering reducing the number of provinces from the current nine.  Fewer offices and officials spending our money for us is a very good idea. I hope that the planners will actually ask residents where they would like the boundaries to be and avoid the dreadful skirmishes that are taking place over the imposition of  bureaucratically decided ones. Obviously people have very strong views on which provinces they do not wish to live in. I wonder why? For my part I would be pleased to be excluded from being expected to pay for the Gautrain boondoggle but I doubt anyone would agree to a provincial boundary running down Jan Smuts Avenue.
Last week the local markets were taking sides about whether Governor Mboweni would change interest rates. After a bit of a rambling speech that hinted at just about every possibility, he didn’t. This week, to no one’s surprise, the US Federal Reserve popped another 25 basis points on to their interest rates and not much happened unless you count the gold price sagging below $500 per ounce in the last few hours. Nevertheless this, the 14th such increase, may just be the proverbial straw. Keep watch.
Statistics SA announced the inflation figures for November and it seems that we have no need to worry.  Nothing costs very much more than it did a year ago. So that’s fine then. It must be my profligate lifestyle that depletes my wallet so much quicker than ever. More good news is that the government deficit is rapidly closing, as the lads down at Revenue are tightening the screws tighter and tighter.
SARS joined the complaints about copyright theft saying that they were missing out on VAT income. I have mentioned before my fascination with the speed and ruthlessness of  the impact of  the digital wired world on life styles and business plans. Whether the internet delivers threats or opportunities the variety of responses is breathtaking. Predictably, the dinosaurs, including government, are resorting to litigation to keep progress at bay. I think they are doomed.
The JSE itself has been worrying about the final future’s close-out event of the year which took place today for 100 minutes over lunch time. The earlier than usual timing was chosen in an apparently successful attempt to avoid glitches and to allow time to solve any train smashes that might occur. Tomorrow is of course a public holiday so from now on the trading offices will empty swiftly with migration firstly to the watering holes and then to the beach, bush and mountain haunts of the species. Look for the returning survivors only in January.
This particular member of the working class will hopefully not be affected by the fuel shortage as he is not intending to leave town for at least another month.
James Greener
15th December 2005

Friday 9 December 2005

GOING UP IN SMOKE

The customs department enjoyed a late bonfire this week when they burned 1.2m “illegal cigarettes”. Their self-satisfaction extended to issuing a warning that “consumers (should be) wary of cigarettes being sold below the normal price.” Aside from the possibility of an unpleasant demise, what exactly is it that the said consumers should be wary of? Not paying tax to a deserving and worthy government? As an idle and wicked aside, one wonders how many civil servant smokers are delightedly buying the cheaper “illegal’ cigarettes and so depriving themselves of their own salaries?
Not to worry though. Some of the excise shortfall will have been made up with the R31.6m “administrative penalty” that was extracted from the nation’s motor dealers, who, it was decided, were not at fault for the fact that South Africa has about the most expensive cars in the world. But wait a minute. If there is any money coming back from these dealers for an administrative error or any other reason, surely it is the car buyers who should be receiving their share of the rather derisory fine? The state, after all, has already trousered the VAT on the high prices.
Back in the markets, it seems that the Insider Trading Inspectorate has morphed into the Directorate of Market Abuse with greater and wider powers than ever before. The word “abuse” sidesteps the worry that I have long held about the concept of “insider” which proved very difficult to define precisely. Nevertheless the new term is a little fierce when it really refers to those who feel unhappy upon learning that they have  just bought expensive and sold cheap. Those who achieve the reverse transaction never feel abused I am sure. It really worries bureaucrats that investors could be gullible creatures who fall prey to their own greed and believe things which are very unlikely to be true. Like for example the “guarantee” that this share will go up or that there are no hidden costs.  Quite why it is the state’s business is not clear. But now, merely by paying a small levy, the punters are assured of the ever-present vigilance of a guardian angel who will slay the dragon and retrieve their money. Well, sometimes so, perhaps.
Please don’t take this view as an expression of support for dishonesty of any kind. Because of the sums of money involved, this industry attracts more than its fair share of dodgy characters, some of whom are also to be found in the layers of regulation that are piled upon us. I merely observe that the truly deceived and deserving are rarely rescued from their plight which may have been caused by a mixture of naivety on their part and knavery on the industry’s part. Nothing is risk free – especially when it comes to money.
That’s is especially true in this sadly confused and abnormal society in which we are living. A wonderful restaurateur was murdered on Monday for the contents of the till and a cellphone. For more than a decade his pub has been the haunt of people in the markets and the media. Our shock and sympathies to his family and staff join thousands of fellow customers and friends. Ian Gillies’ death is an impossibly tragic affair. RIP my friend.
James Greener
9th December 2005

Friday 2 December 2005

WEIGHED UP BY GOLD


A week ago the All Share Index stalled within a hair’s breadth of the 18 000 level and I slipped away to the bush. And the moment that this bear turned his back, whoosh. 650-odd points down and plenty of muttering about program trades and other exotic hedging strategies that curiously seem to have produced more sellers than buyers. One particularly interesting deal was the personal purchase by Director Mittal of R461million worth of shares in the company that shares his name. Aside from the JSE apparently condoning a very belated SENS announcement of this giant trade, the turnover statistics also appear to have omitted this deal. Odd. I have long been wary of buying these shares as I don’t feel that the minority shareholders are always accorded the respect they expect.
A few pundits have also used the word odd to describe the action of the gold price which has been testing the waters north of $500 per ounce. In their view this is premature and well ahead of what they had decided was a proper schedule for such an excursion. “Sooner faster and further” is a home-grown aphorism that I have quoted before when an unexpected market move develops. Neither I nor anyone else knows where the gold price will go. It is of course even more difficult to factor in the currency and predict the price of a Krugerrand. The most recent peak four years ago at about R3700 is not far off from today’s  R3450. I am intrigued by the thought that we may be witnessing a flight from certain paper currencies to something that at least feels like money. Remember the rumours of the emigrants in the bad old days shuffling on to the planes at Jan Smuts Airport  with their clothing coming adrift at the seams with the weight of Krugerrands? That was before the metal detectors and the body searches. Don’t forget the NewGold exchange traded fund (just like Satrix) if you’d like some exposure without having to collect, haul and hide the actual metal discs.
It’s the time of year when the newspapers get plainer and slimmer while readers set out for the beach to get browner and fatter. Fortunately, the state and it’s vassals have stepped in to fill the advertising gap with generous gifts to the industry like a full-colour page to mark the 5th birthday of the new system of local government (gosh), a quarter page from Telkom to remind us that it has provided 10 years of affordable internet access for the nation (really?) and of course Joburg city’s ever amazing calls for tenders. This time for a “digital red-light and speed law enforcement system” (to stop kerb crawling in Oxford Road?) and for someone who can bind library books (The city does not employ librarians?). No word on who is actually going to do their job and ensure that the country just does the simple things properly. Like keeping its citizens and visitors safe and getting their own paperwork done efficiently and effectively. It’s a wonder that it has taken this long for a frustrated taxpayer to resort to threats of violence just to get noticed and served. If  the black market can issue an ID book in hours for R200, should we not get them to do the job anyway?
There’s been plenty of very welcome rain in Joburg and the place is looking good. Perhaps we could offer the visiting travel agents a safer alternative to Cape Town – and there’s the (multi-) Million Dollar Golf taking place at Sun City, just up the road. Reports are filtering in that the beer being served there is properly cold.
James Greener
2nd December 2005.

Friday 25 November 2005

THE INTERNET RULES

Have you heard about NERSA? It is not an association for the nerds of the country but yet another darned regulatory body. This one will, it is alleged,  oversee the electricity, gas and petroleum pipeline industries by ensuring “a level playing field” – yes another one – and “prevent(ing) monopolistic abuse” which will avoid the “unacceptable outcomes” of unregulated markets. Oh dear. The headline to the story described the idea as a “boon” for private industry, but I suspect that the only folk really to have benefited will have been the caterers who arranged the inevitable launch of this latest folly. Hopefully the first matter of business for the nerds will be to determine why we are selling electricity to neighbouring countries cheaper than we sell it at home.
Never one to rest on their laurels, the cabinet also this week approved a radioactive waste management policy, with of course,  a committee to be established to oversee its implementation. I’m rather alarmed that this implies that hitherto no one has been paying much attention to all our toxic waste. And goodness knows the securities research industry alone produces truck loads of it every week.
Of course today’s equivalent of the old “thud” report (so named for the noise it made on landing on your desk) is the multi-megabyte inbox clogger. Fortunately a dab at the Delete button disposes of this menace and forests of trees are spared only to be used by the supermarket and estate agent full-colour tabloids that slip from the pages of the morning paper. Nevertheless, especially in those countries where the citizens are not prevented from having decent broadband access, newspaper circulation is dropping.  The replacement news source of choice is  the internet. This is sowing terror amongst the politicians and other shady characters who have decided reservations about just how much freedom the proletariat should have to discuss their exploits.
The economy and the markets go through cycles and today the immediacy of news, information, lies, data, opinion and conjecture will ensure that this time it really is different.  Investors believe that they now must surely know so much more than they ever did before. However, purported inside-information has a very limited life-span as leaks can now take place at the speed of light throughout the globe. So too can rumours and dis-information whether malicious or not. Many folk who thought this week that MTN was about to be taken over, will sadly confirm this!
This excitement aside, the market was pretty dreary, as the good citizens of the USA devoted their energy away from the markets and towards the ordeal of travelling back home to attend to their Thanksgiving turkeys. Myself, now sated on cherries (have you any idea how many cherry liqueurs there are?), I am off to the Kruger and hopefully some tiger fishing in the Komati. Due to anticipated heat down there I must now go and stock up on cooling beverages.
Don’t forget the match against Wales tomorrow. It’s difficult to think about rugby when it’s summer time and the living is easy. And there’s someone else doing the worrying about all those level playing fields too.

Keep cool and safe.
James Greener
25th November 2005

Friday 18 November 2005

RIDING THE RUMOURS


The market must have employed one of those exciting teams of so-called event co-ordinators. You know – a good looking young woman or perhaps a slightly scruffy young man who plans and manages a function so that it achieves maximum impact for all concerned. The recent weeks have been marked by plenty of noise and fireworks. The biggest bang has been perhaps the dollar gold price, setting what I heard called a “generational high”. Presumably this is a time unit longer than a “multi-year”, but shorter than an “all-time” or even a “since records began”. In rand terms the gold price is at merely a three year peak thanks to the rand which looks determined not to try on the “7 to the dollar” big figure.
No less diverting and entertaining have been the cautionary notices, big fat rumours, wild guesses and red herrings that have swirling around as the silly seasons gets into gear. In particular, following the Vodaphone / Venfin offer, the other telecoms listings have been basking in the spotlight of speculation, with Telkom itself being characteristically inept at handling the issues. Looming largest amongst the idle chat is the thought that just about every good company left on the JSE boards is the target of a takeover. While I am sure that is an unlikely scenario, it is certainly true, that in the last few year many choice companies have disappeared from the JSE. And I am not too excited by some of the new offerings that include, for example, a secondary listing for a Nigerian oil company.
It is also reporting season and with few exceptions the earnings growth numbers that crowd the pages of the newspaper look spectacular. Today, for example, there’s the Mr Price clothing store chain boasting of 54% growth. Faithful readers know that my total ignorance of the alchemy of accounting make me wary of this sort of claim and when the experts warn that the new accounting standards will “shock investors” I feel justified in my fears. However, when the earnings are accompanied by chunky dividends then I feel much happier. Less enjoyable, however, are when the distributions are labelled as “capital repayments”, as these are not tax-exempt in the hands of the recipient and cause all kinds of hassles when the time comes to fill in one’s tax return. Of course the outrageous share confiscations that have become so popular amongst the companies who are setting up black empowerment deals also raise a number of tax complications for the losing shareholders.
Despite all the good news, the All Share index has not been a one way journey this week and has settled down somewhat. Because I am tapping this out early in the day before popping down to Ficksburg and its Cherry Festival I shall avoid the temptation to interpret this hesitation as a turnaround. Who knows what will happen later.
I hope to find a TV in amongst all those cherries to watch the ‘bokke face Wales. And of course there’s the ODI in Bangalore. The other reason to be out of town this weekend is that about a million cyclists will close down the throughways of the city on Sunday as they try to pedal as many kilometres as a local radio station has megahertz. That’s 94.7 of them. Good luck to all.
James Greener
18th November 2005

Friday 11 November 2005

BEWARE SLOW DATA AND FAST MONEY


A fascinating spat has broken out between the Reserve Bank and National Treasury over the need to retain exchange controls. The former have their doubts that the controls are relevant, while the latter – whose job it is to decide upon the matter – splutter that  they are perfectly happy and we shall just have to wait for the budget speech to see if they will change their mind. I think that the sole sufferers of these controls are now just emigrants and their so-called blocked rands. Everyone else seems to be able to “make a plan”.
And making a plan is what all these BEE deals are about. Another swarm of them left the hive this week moving so fast that it was hard to see where the money came from although we can guess where it’s going to. One day all this undoubted misallocation of capital will haunt us – and provide plenty of material for several academic theses.
The currency spiked a tad weaker in the fuss that followed and that, plus an all-time high for the price of  platinum, gave the mining shares a solid boost. Elsewhere the buyers were not as excited and the All Share index moved only a short distance north of the 17 000 level it breached last week. It is, however, without a doubt, a bellowing bull market. Now that unambiguous statement should see prices plummet presently.
Once upon a time I earned petrol and beer money by working through the night monitoring the antennae, receivers and recorders of a small radio telescope observatory. The heavenly bodies of interest were the planet Jupiter and its satellite Io. The data was captured as inky traces on long rolls of chart paper which we took back to the lab and tried to make sense of. It was pretty crude but not that different from the data capture system now in use at SALT, the hemisphere’s largest optical telescope now operational at Sutherland in the Karoo. Because of insufficient local telecommunications bandwidth, the data can not be squirted out through the internet but instead is captured on little Compact Discs and then carried by hand to observers around the globe. Isn’t that really embarrassing for the country in general and Telkom in particular?  This is another example of how urgently we need to lift the dead hand of bureaucracy off the important levers in the economy.
Today, I believe that there was a ceremony in Pretoria where the Postal Regulator issued the first batch of licences to courier companies wishing to transport items weighing less than 30kg. I suppose that includes the CDs from SALT. The licensing regulations are being “introduced mainly to protect the Post Office from unfair competition”. Our business, like many others, has no choice but to use the postal service for client communication every month, We would all agree that the service seriously needs loads of competition, whether fair or not. My invitation to that ceremony must have got lost in the post. A pity, I’ll bet the catering was lavish.
Opulent, however, is probably the word needed to describe the government offices in Pretoria on which R10bn (yes – billion!) will be spent in the next 25years (compare the R36m bill for the telescope). Also consider that an audit has revealed that the Mpumalanga education department was defrauded of a mere R26m through non-delivery of toilets and water tanks. These guys are getting out of control.
James Greener
11th November 2005

Friday 4 November 2005

NO DROUGHT AT THE TALKING SHOPS


This incredibly hot and rainless weather must be to blame. Folk are flocking to conferences in droves where they can doze in the cool of a darkened auditorium while some luminary drones on with his presentation up in front somewhere. And at regular intervals there are refreshment breaks where the caterers are trying to impress. The downside to these gatherings is that they often provide a platform for politicians to flap their jaws and say things even more foolish than usual. For example Deputy Minister Padayachie speaking at a meeting – which itself was a follow up to a colloquium – said that collaboration between telecommunications companies and the state would lower the cost of telecommunications and encourage investment. While this is a dubious proposition, I wonder if had any inkling of the massive investment that was announced just a few days later? Vodafone of the UK has offered to take out Venfin at a huge and tasty premium in order to get its hands on 15% of Vodacom. My guess is that it is the great profitability of Vodacom that attracted the predator’s attention, not the desire to help lower the cost of cellphone calls or provide handsets for the homeless.
Other gatherings of the chattering classes included a derivatives conference in Cape Town; a mayoral business week in Joburg (where complaints about the rather chunky salaries paid to city managers received a curt dismissal); a housing conference attended by the already well housed; a governing council meeting to prepare for the country’s Peer Review (nothing to do with jetties) and some shindig in Germany to which President Mbeki has already jetted off.
More ominous news came from yet another deputy minister who felt that we in the financial sectors are still not doing all that we should do to satisfy FICA. It seems that the bad guys are still managing to launder their money and not pay their taxes. So prepare yourself to be asked to supply verified copies of every document you have ever owned as well a blood test result from the family hamster. On the topic of data, a fine row has broken out about just how many poor people are actually out of work how many jobs are being created. That has coincided with the news that another minister is to lead a scouting party to India to sign up skilled workers. This will not be the first time that the country has raided the sub-continent for help with a sticky problem.
As a scientist I distrust dodgy data but I would have thought that records of sales of both cars and petroleum products would be quite reliable. What then do we make of the fact that 50 697 new cars joined the road in October (most of them on my route to work) but petroleum product sales are pretty well unchanged? Are the proud new car owners just polishing them up in the driveway to impress the neighbours?
Irrefutable data, however, shows that my view on the market was quite wrong. The All Share index has broken above 17000 and into new high territory. The October weakness was a bear trap and I am wounded. So I offer you the forecast from a good friend who is a roaring bull who expects the market to add another 8% or so before we get to wish each other a happy 2006. He’s been really right so far this year.
I do believe that it’s raining right now. Wonderful. It’s traditional that the Centurion ODI gets rained on. And how about them Pumas?
James Greener
4th November 2005

Friday 28 October 2005

STARTING TO FLAG


As you may recall, the first Twenty 20 international between the Proteas and the Black Caps was a dreary affair. This is doubtless due to the feelings of horror and despair that swept the local crowd when they unfurled their free 100% polyester South African flags. Almost as large as the colourful and proud pennant itself, was a label that offered stern instructions about how to launder the product and also the assurance that the manufacturer of the attached flag was “Officially Licensed”. The sting came in the three words that proclaimed: “Made in China”. Which dumb government department is using my money to employ people who issue licences to the Chinese to make my national flag? Desperate stuff.
A lot of people announced a lot of things this week.
Minister Manuel boasted about how much money he had collected in revenue this year which means that he will have to borrow less than budgeted to cover a smaller than expected deficit. In principal this falling demand for money ought to reduce its price. i.e. interest rates should go down. However, the worst kept secret in the market these days is that Governor Mboweni intends very firmly to raise interest rates just as soon as he can. He’s fretting about inflation and the interest rate lever is the only one that most central bankers have protruding from the floor in their 27th floor office with private washroom. He’s dying to give that lever a tug.
Anglo American’s secret was a lot better kept and the news of their major restructuring probably caught many investors unawares. It seems likely that we will  need to change our view and rating of this giant corporate as it undergoes this metamorphosis, but initially the market liked the news. Especially the bit about returning a billion dollars to shareholders. Am I alone in thinking it odd and sad that some one like Anglo can’t themselves find projects to spend that money on?
Probably they were thinking that we poor taxpayers are going to need loads of extra cash soon to help meet the terrifying new R20bn cost of constructing a special train in Gauteng. Leaving aside the fact that there is already a court battle raging between some of the partners in the construction of this baby – and R20bn is worth squabbling over – one does sort of wonder how anyone thinks they will get this kind of cash back, even over 20 years. We certainly won’t expect the answer to this sophisticated project finance calculation from the official who claimed that the escalation in the cost from R12bn over three years was due to inflation. That works out at an inflation rate of about 18%pa! But to be fair, he also admitted that the previous estimate omitted VAT! I wonder if the new wild guess leaves out the cost of money or some other small detail. I have little faith that anything other than the actual construction (no engineer will ever refuse to build something challenging and expensive e.g. Channel Tunnel) will turn out well.
My claim that the market will not again in this cycle, challenge the early October peak has come under pressure this week. Prices have shown a quite spirited recovery that fortunately has not yet blown the forecast out of the water. Nevertheless, the JSE month-end portfolios will be produced tonight and things will look a lot brighter than they did just a few days ago.
James Greener
28th October 2005

Friday 21 October 2005

BEARS FIND FISH


We are all now only too familiar with the host of rules and regulations that apply whenever we want to do something as simple as open an account or carry out some other mundane financial task. There must be computers world-wide stuffed full of records of  my mother’s maiden name, proof of my home address and the number of times I have spent exorbitant sums at angling supply shops.
This morning I discovered that my cheque for R72.00 made out to the City of Johannesburg, for a trailer licence, had been deposited into an account named Kolgans Visserye. This looked a bit fishy. The bank’s reaction on being told of this potential fraud was quite disappointing. My report was not the first to alert them to the possibility that a fishmonger appeared to be acting as the city treasury. And when I told them that I had received the licence, they lost interest completely suggesting that the city would not have issued it unless they had received my payment successfully. I am not comforted by this view, especially when we get yet another headline that R1bn has been written off by the city in unpaid accounts.
Investors in and clients of the New York broking firm called Refco, have also been obliged to write off very substantial sums. It seems that major fraud may be to blame for this, the fourth largest bankruptcy in US history. This collapse adds to my growing unease about the situation in the largest market in the world. The US long bond yields are again on the up and all those innovative mortgage schemes will surely begin to hurt the vitally important US consumer’s ability to spend. The Dow has ricocheted about a bit this week, driving the technical analysts into a frenzy of speculation about head and shoulder formations and the like.
But when it comes to bouncing, our own all share index has been giving us a foretaste of the unpredictable behaviour that we will see in the struggle at Loftus tomorrow. With moves of almost 5% from one day’s high to the next’s low, followed by a near complete recovery, the “timing is everything” school of investment has been getting a thorough testing. I hang on to my view that we have seen the top and that down is now the main trend for sometime.
Governor Mboweni has returned from an overseas junket and has been hogging the headlines with startling doubts about his performance in his previous job as minister of labour. And while we were trying to digest that one, he slipped in a hint that he thinks interest rates are too low. This had little impact on the equity market this morning which has lost scores of people to their half-term hideaways in the bush and on the beach. Turnover today will be about the lowest recorded this month.
Fortunately, other records this month include some decent rainfall in Gauteng and our new colleague from the Cape has been suitably impressed by the ferocity of the highveld thunder storms. We just don’t need one tonight please when I stroll down to Wanderers to watch SA take revenge on the Kiwis for lifting the tri-nations. It will be my first time at a 20-20 cricket game so I am interested to see it all.
Only two shares (Lonmin & Reunert) in the top 50 list are up so far this month. Who got that one right?
James Greener
21st October 2005

Friday 14 October 2005

GROWTH – BUT NOT AS WE KNOW IT

I would say that the question we posed last week has now been answered by the market. This action is not a mere buying opportunity but the birth of a pretty impressive bear market. So far, just the hair and the claws on one paw are visible. The teeth we have yet to see. And its eyes are not yet open. Almost every share has been wounded. None yet fatally so. The largest one still standing, is PPC. And Krugerrands are at a two and a half year high. If this is the start of a significant market melt-down then I don’t think it will do much for the cabinet’s grand plans for the economy. All kinds of fancy schemes to transfer assets will slip underwater if market prices dip significantly.
Suddenly the GDP growth story has become a mantra with everyone chanting their own favourite number. If only it was that simple. Most of us will have been puzzled by the news that the government this week have approved a “blueprint for 6% growth by 2010”. Why didn’t they approve a “blueprint” like that five years ago?  Could we see the current plans please? Will it involve government appointing and paying for more  legislators, regulators, inspectors, advisors and consultants? If so then it would seem unlikely that the rest of us will have much opportunity after filling in forms and preparing reports about what we thought of the forms actually to get much work done.
For example, the new National Credit Bill promises to “register consumer credit providers, conduct inspections, monitor compliance and investigate systemic market conduct problems…” Apparently the present system is “dysfunctional”. This view hardly fits with the 18% pa growth in personal credit extension reported last week. It seems as if everyone is already borrowing plenty of cash without even more folk coming along to monitor them.
Reserve Bank Deputy Governor Guma, pitched up at the podium yesterday to deliver the interest rate decision. He was so nervous, poor chap, that he surpassed the previous record for monotonous delivery. I gather that towards the end he said that there would be no change, but by then I was fast asleep. The market was already charging southwards and also paid no heed.
It is tempting also to ignore the JSE’s data on net foreign buying of equities. Do you believe that, with the exception of a very small amount (R22m) of net selling yesterday, every day so far this month the overseas investors have never bought less than R300m worth of shares. Last Friday – when the first signs of panic began to appear – the net buying is said to have exceeded R1.1bn worth! This really does not feel right.
I managed to publish some proper research this week and on the website you will find a discussion of the likely impact of interest rate increases on the prices of the banking sector preference shares. In short, I don’t expect them to decline by very much at all. But now that I have written that down, as well as the view that we now have bear market, you can be sure that I will turn out to be wrong on both counts.
Why does the market collapse only in October?
James Greener
14th October 2005

Friday 7 October 2005

BEING KEPT IN THE DARK


Our internet connection went on the blink this afternoon just as I was  about to press the SEND button on this edition of Tidemarks. The news from Telkom was grave. Technicians, they said, were being dispatched. I had visions of encampments of those candy-striped shelters being erected over manholes around the suburb and the blow torches being pressed into service as water heaters for the coffee. Chunky men in corporate t-shirts sitting on low stools with large blue handsets pressed to their ears. Black leather tool boxes snapped open and small cardboard note pads snapped shut. Our communication with the outside world depended on these guys. On a Friday afternoon. It looked bleak. But then, as you can see, we suddenly rejoined the globe, caught up with the markets and completed this letter.
There are half a dozen theories as to why the market at its worst point gave up almost 5% of its value this week. The word from the big institutional brokers is that there has been considerable foreign selling. These wicked overseas sellers are always a favourite bogey man and there is a little evidence to support this. The full picture provided by the JSE data will become clear only next week. Another favourite is that there is a “huge structured deal being done”. Usually this explanation is offered to the dealing room with lowered eyelids and knowing nods after a long whispered phone call. Screen watchers claim to be able to spot the “waves of stock” surging across the ticker.
Other more prosaic reasons may be found in the opinion that there has been a quite sudden turnaround in consumer sentiment and the main story in Biz Day this morning ran with this theme and gloomy quotes from some tame bears. This kind of thing can quite easily spook local sellers who almost all will have substantial book profits that they suddenly feel like banking. That petrol price is really starting to make its presence felt in the pocket of almost everyone who doesn’t walk to work.
I have no idea if this is the beginning of my long awaited decent sized correction. So far, the pull back has not yet erased even a fortnight of the All Share’s gain, although there have been some spectacular falls in certain shares, particularly Sasol and BHP Billiton. I think we shall need to be very vigilant next week to see if this action is either going to continue or whether we are just being offered a buying opportunity.
All this excitement in the market has quite diverted my attention from preparing my proposal for a Competitiveness Action Plan for the Local Competitiveness Fund of the Kwazulu-Natal Local Economic Development Support Programme. I have picked on this particular flock of tax-consumers before. There seems to be no end to their optimism that bureaucrats can make people’s lives better by spending their money for them. They are unlikely to accept my proposal for their Plan. It is short, cheap (free in fact) and contains suggestions like: resign, get real jobs and give the money back and come out here and see what actual competition is all about.
I am afraid I can’t get enthusiastic about this cricket series of Australia versus the rest of the world. As well as being uninteresting it also increases the chance of injury for players whose skills and fitness we are so sorely going to need later in the season.
May it rain on us this weekend.
James Greener
7th October 2005

Friday 30 September 2005

A VERY BUMPY RIDE


After spending a superb but extremely hot long weekend in the bush in Umfolozi I unfolded the free map that I had been handed at the petrol station. Emblazoned with the proud claim to have been published by the tourism board of The Zulu Kingdom, it proved to be no more accurate than my guess of how many wives that King might currently be supporting.
The promised tarred road from Hlabisa to Hlobane fell far short of what the loyal subjects of the Kingdom deserve. Even as dirt roads go it was pretty shocking. There was some evidence of a desire to tar the route sometime during this decade. Graders and lorries cluttered the scenery in places. Most obvious, however, was a government make-work project. Every few miles, four glistening new orange traffic cones, placed according to taste by the accompanying squad of three safety-bibbed women, warned of work in progress.  The most astonishing of the tasks in hand was the construction, entirely by hand, of small stone spillways at short intervals across the width of the wide drainage channel that sometimes appeared alongside the track. These seem to be some sort of anti-erosion device. It was gratifying to see one’s tax-dollars going to something more basic than bean fests for the bureaucrats.
So like most free information, the map was worth its price. But we got home in the end and the car’s suspension has been given a good thrashing.
And that’s also what the bears have again been receiving this week; a week that will be remembered for the dreadful murder of one of the market’s more colourful mining personalities. It somehow seems symbolic or perhaps ironic that the gold mining index will be the top performer this month with around a 30% return. At the other end of the scale the sober-suited and staid life assurers will be down about 4% in September.
The third quarter of the year is now history and I am sure I caught sight of tinsel and plastic snow in a shop window. Certainly the party season is hotting up and as the weather overseas cools down one can spot flocks of migrant merchant bankers in dark plumage coming in to land. They are being lured not just by the weather but by the news that R8bn worth of non-core assets belonging to Eskom and Transnet could be going up for sale. Just imagine getting a piece of the V& A Waterfront in Cape Town for your portfolio. That could just rank higher than a house in Clifton.
The various inflation figures were published this week and seemed to surprise only non car-owning economists with their uppish tendency. The press have managed to fill a good few column inches with the conjecture that this means that interest rates will have to rise. If I say that I agree, it will ensure that nothing will happen when the wise men and women of the SARB meet in a fortnight’s time.
The state has announced a competitor for Tidemarks in the form of Vuk’uzenzele, a free magazine that will supply “information on socioeconomic opportunities” and “enhance awareness about government programs”. I am flattered by the imitation and may well have to concede defeat to the 32-page bimonthly in all official languages and Braille. No word yet on their expected circulation though.
James Greener
30th September 2005

Thursday 22 September 2005

WHAT HAVE YOU PLANNED FOR HERITAGE DAY?


I am very heartened by what I saw described as “the worst possible German election result”. That fact that no one has emerged as a clear winner is excellent. The voters have shown that they don’t care who runs the country and actually prefer it if no one does. It means that the politicians will all be so busy squabbling about who has power that no one will be able to exercise any, and the population will be able to get on with living without interference. Add this development to the news that Germany does seem to be slowly clawing its way out of the economic morass brought on by unification, and you wonder if there might not be an interesting investment story developing there. Keep an eye on the JSE’s new Itrix fund based on a European share index.
One of the best performing securities in the last few months is the JSE (Pty) Ltd unlisted share that has trebled in price since its appearance in July. Those who have long been involved with the exchange and its services failed to realise what sense it makes to buy into a monopoly. (This is the same reason so few of us bought Telkom.) Turnover in the equities market has recently been regularly exceeding R9bn per day; numbers previously seen only at close-out events. The JSE must be making plenty of cash. I wonder if they are contemplating a dividend.
But to return to that trading volume. Some really big trades have been going through the market. Some evidence points to fairly large foreign selling – particularly in the bond market. This means that local buying is eagerly absorbing the stock as prices have certainly not been plunging. Neither has the rand. The experienced amongst us feel we can smell big changes a-coming. But maybe it’s just the long awaited rains that we so badly need.
Mind you, my bearish nature was cheered by the front page report of a portfolio manager seeking to reassure investors that small cap shares “will not take (a) dive again.” Such public confidence has a terrible way of biting back. Just ask me – writing this note every week.
I have received a kind invitation from the South African Post Office to attend a Corporate Breakfast, during which their 2004/5 financial results will be presented. This can mean only that the results are likely to be a whole lot better than their ability to deliver a letter. The puzzling bit is that the invitation carries a large colour sketch of a Krugerrand falling to the bottom of a wineglass filled with sparkling water.  The significance of the image eludes me but presumably this promise of largesse is what elevates the meal to “corporate” status.
The woes brought by Hurricane Katrina failed to soften Sir Alan’s heart and he cranked US interest rates up another notch. With the even stronger Rita now bearing down on President George’s own state, the folks in the USA must be starting to worry about who they have offended to be getting into all this trouble.
This edition of Tidemarks is going out a day early because the public holiday, rather inconsiderately, is not.
James Greener
22nd September 2005 (The Vernal Equinox)

Friday 16 September 2005

JUST HOT AIR – NO HURRICANE


The JSE did a good job. No glitches anywhere during their presentation of 34 slides explaining how prepared they were for the volumes associated with Futures Close-out. It was clear that if there were going to be problems (and there weren’t) they were ready to sidestep any blame in a slick and well prepared manner. Just one thing bothers me though. How come that even the slides showing the computer links with The London Stock Exchange carried the “Proudly South African” logo? Is the LSE, like the England cricket team also heavily infiltrated with ‘bokke?
While the market did peak just as the 100 minute close-out event began yesterday afternoon , that record was quickly  erased in today’s trading. Fueling the buyers is the gold price now confidently well north of $455 and the gold shares are doing the heavy lifting. Nevertheless industrial companies’ reports out this week continue largely to boast of solid earnings growth.
In defence of their limited and costly broadband access to the internet, Telkom’s Business Market and Government Executive (whatever that  may mean) claimed that the cost of PCs (currently at an all time low) and lack of compelling content (currently at several billion pages and growing faster than ever before) were also to blame for SA’s lack of connectivity. I wonder if this fellow has ever actually Googled anything.
While reeling from this piece of ill-considered waffling I noted the story that any company trying to obey every rule and regulation needs to keep up to 170 different types of records. Some of these must be archived indefinitely. From New York comes the news that The Federal Reserve has called in 14 of the world’s largest banks for a little chat about a backlog of paperwork in the $8.4tr market for credit derivatives. It seems that everyone is far too busy doing deals to bother with recording and confirming them. Is there a storm far worse than Katrina brewing in the wings?
Back home, our own Reserve Bank is planning a big refurbishment and is seeking “gender and disability sensitive” contractors able to supply it with office furniture.  Meanwhile the Governor, presumably making do with his insensitive old desk, offered the observation that the SARB would not allow second-round effects from the oil price to develop into an inflationary spiral. While this suggests that the next interest rate move (possibly in December) will not be down, it also makes one wonder how he believes business will absorb the transport price shock.
Another SARB initiative called Labour Market Frontiers was published this week. It reportedly offers the tentative research conclusion that the lower the level of education of the work-seeker the more likely they were to inquire directly at the workplace. Those who can read and write are more likely to respond to job advertisements. Presumably the research is a bit clearer on the issue of how brain surgeons look for work! It is high time we stopped wasting public money on this kind of rubbish. Even the BBC used their licence payer’s money to do a survey that shows South Africans to be amongst those nations that most trust politicians! Surely these are not the same politicians that have presided over a doubling of the number of people living below the poverty line in just six years? Not to worry. Just this week SA won the “African Country of the Future” award. Can anyone remember who won the previous one? That might give us an idea of how long the future will last
James Greener
16th September 2005

Friday 9 September 2005

WILL THE GULF CAUSE A CRACK?


Enormous amounts are being written and said about the likely economic consequences of the dreadful tragedy unfolding after the passage of hurricane Katrina across the Southern Sates of the USA. It seems that the human consequences alone are nowhere near yet understood or countable and so it is perhaps both heartless and premature to discuss the impact on our portfolios. The clean up cost will be astronomical, but the US is a very rich country. However, I am certain that things will develop quite differently than they would have without this very serious event. The world’s economy is inordinately dependant on the US consumer buying things that the rest of us supply in one way or another. Watch the debate about whether political pressure will make the Federal Reserve postpone their program of steady interest rate increases.
This idea helped the US dollar to weaken and the gold price sniffed at $450. This in turn caused the rand to get below 6.20 per USD at one stage, and I reopened the discussion in the dealing room about whether we would next see a big figure of 7 or 5 for this number. There were still no votes for 5.
The All Share index enjoyed another week of teasing the bears and got within a hair’s breadth of 16 000. Thursday sees the dreaded close-out event and the first concern is whether the JSE computer system will cope with the anticipated trading volume. It does not have a good record in this area. A meeting has been called where the JSE will promise to do their best and the dealers will threaten mayhem if they don’t. The next little hassle is whether is Joburg City Power will come to the party – and not with candles for the cake. Numerous power failures in recent days have not helped calm the nerves. In the worst case the trade would be to go short JSE (Pty) Ltd (unlisted, but quite tradable on the OTC market) and go long pharmaceutical and liquor companies.
This morning’s headline about “property prices (coming) off the boil” must have been written by a fellow bear. In the text it turns out that price growth has slowed to a mere 19.2% pa. In my book that’s still a tasty return.  And in the same paper I was amazed to learn that Joburg “council is very strict about the number of people it allows to live in a flat.” The article was silent on the council’s attitude toward the number of people that may ride in a taxi. Substantially more than may stay in a flat by my reckoning.
I am intrigued by the news that Governor Gono of Zimbabwe took the $50m owing to the IMF with him when he went to Washington recently. Images of briefcases stuffed with grubby banknotes in the best movie traditions come to mind. I wonder if he booked his luggage through or popped it into the overhead locker for the journey. Everyone must be very grateful that the plane suffered no incidents. It must have taken the chaps in Washington a while to count that sort of cash. Did Gono ask for a discount?
There’s tennis and cricket to get us through the weekend, which up here on the highveld is looking set to be more of those stunning spring days. But some rain would be nice. Any chance of Shane Warne retiring before the summer?
James Greener
9th September 2005

Friday 2 September 2005

EBONY AND IVORY

Now, who would have ever thought it? Some research outfit has discovered that “Black South Africans prefer paid jobs.” To have a job in a city beats the alternative of sitting on 100ha of rural land. Unless that land boasts a trout stream, sea view, golf course or interesting wild life I can only agree wholeheartedly with my fellow citizens.
Orlyfunt Holdings is reportedly a consortium that believes it would like to spend R1.4bn on a portfolio of assets currently held by JCI and Randgold. Aside from the delightful name there are several points to ponder in that particular statement. In the meantime it reminds us of the French plan to add a levy to airline tickets to fund aid for Africa. This thoughtful gesture to help their passengers in their charitable duty is worrying. It won’t be long before every business will be relieving customers of the tedium of remembering to make donations.
Back home, Minister van Schalkwyk showed a firm grasp of his Environmental Affairs and Tourism portfolio with the observation that climate change posed a major danger to the tourism industry. What he believes he can do to reverse these forces of nature was not explained. I suggest he taps “Katrina” and “New Orleans” into Google to see what bad weather can do for tourism. And then begin promoting the Karroo.
He and his cabinet colleagues also approved The National Freight Logistics Strategy which seeks “to ensure that the freight sector responds to the imperative of higher rates of economic growth”. To be fair I have not read this doubtless worthy document that was 18 months in the making. But I am deeply sceptical that any government can ever make lorries go faster or railways work. As I recall the last official word on this matter was to try and ban big trucks from the roads of Gauteng during rush hour.
Similar breathtaking insouciance was shown by the Western Cape Premier Rasool who claimed that unless business followed government prescriptions, the county’s growth target will not be met. I submit that just reading and filling out the forms he will want completed will knock several points off productivity and growth. No bureaucrat ever had a better way to do something than the guy who is trying to make a living from doing it.
One piece of state calumny that was good news, came from north of the Limpopo where the unexpected discovery of a stash of cash in Bob’s bottom drawer means that our own possible loan to him could be less than originally anticipated.
The JSE computers had a few bad hair days this week and trading was halted while the mechanics lathered up some fresh shampoo to get things going. Nevertheless we have seen a 600 point bull market that has taken us back to within 100 points of the all-time high set on the 16th August. Aside from the all too simple explanation that there are more buyers (and judging by the rand’s strength, overseas ones) than sellers, I have been told that the forthcoming futures close out on Thursday 15th will be a HUGE event. In preparation of that affair, traders are adjusting their Greeks, and this is at least one cause for recent volatility. No – I don’t understand either.
Nor do I understand how I can possibly support the Aussies when they meet the All Blacks in Auckland tomorrow. It will be a grim day.
James Greener
2nd September 2005

Friday 26 August 2005

THE SMELL OF WET DOG


So that’s another week that saw a 3% trading range in the All Share index. The low point almost wiped out all of this month’s gains. This kind of back and forth behaviour in a market always reminds me of a Golden Retriever shaking himself vigorously after climbing out of the water with a stick firmly clamped between his jaws. The water drops fly off in huge arcs and everyone nearby gets soaked. In my analogy the investors are the water drops desperately trying to cling on but getting dislodged by the shaking shaggy dog of a market. The folk getting soaked are the pundits and analysts trying to pick the winners. The dog feels nothing and waits for someone to toss the stick back into the water.
It seems to have been a bad week for personal freedoms – or a good week if you believe that authorities know what is best for everybody else.
Firstly, we had the Financial Services Board complaining that not everyone had collected their FAIS licence certificates. These lax businesses would therefore be unable to display them on their wall and so would be breaking the law. Just what we need  – bureaucrats as interior designers.
Then the JSE proudly announced a renaming of the Insider Trading Levy as the Investor Protection Levy. Despite a welcome reduction in the rate of this levy the fact remains that it is designed to take money from honest citizens to mitigate the losses of those who deal with dishonest ones.
The scariest event of the year is taking place in Addis Ababa where 100 participants are attending the Forum of Value Added Tax Administrators in Africa. Reports emerging from this Forum suggest that this rather Euro-centric tax needs to be “adapted to the social, economic and cultural norms, values and levels of development of African countries”. What this means, is unclear but it is doubtless bad news for the diligent and honest.
Also bad news is that parliamentarians share President Mbeki’s concern “that the best land close to the best facilities was always available to the rich”. Just how many of those “norms” listed above are challenged in this piece of foolishness is hard to say.
Several things happened this week to suggest that interest rates will indeed not go down again before going up. All the various inflation numbers are starting to tick up as the petrol price makes its presence felt. And the second quarter GDP growth rate was published as 4.8% pa. This rather impressive number is one of the highest seen in a long time and suggests that the economy doesn’t need any further stimulus from cheaper money. One has to wonder if the growing acceptance of this belief is not the reason why some heavy bouts of profit-taking have wracked the market twice this month. Of course we are now deep into the dividend season and some sellers are reluctant to jump until they have seen the shares go ex-div. Maybe the big thumps will be felt only in October once all these tasty special dividends have been pocketed.
Early tomorrow we will be urging the ‘bokke on to squash the House of Pain myth. After watching the day traders this week I am ready for all the violence it may need.
James Greener
26th August 2005
* I have written a short article about this GDP growth number. Please email me if you would like a copy. It will be sent as a .pdf file that will need the Adobe reader program to open it.