Some politico offered his opinion, reported earlier this week, that “Winning wasn’t everything … (and that a) united SA was a more important goal”. He was, sadly, talking about sport, a topic that is clearly not his speciality. If he really wanted to unite South Africans he should ensure that our teams beat everyone in sight. He could come and ask the fund management industry who will show him how even just a short record of superior performance will attract new money like bees to the aging grapes that are now hanging off the vine on my patio. Nothing catches attention like the sweet and sticky aura of success and the chance that if you hang around you might just get lucky yourself.
Why did the Reserve Bank think it necessary to spend almost R6m to advertise the new series of bank notes? For very much less than that they could have rented a few choppers and hovered over the people dropping samples of the new folding money and achieved instant recognition and delight and a great deal of free publicity. But I suppose those old killjoys over at the tax department would have said “No.”
The market has continued to power ahead. So much so that the dividend yield of the Top 40 index is now at 2.4% -- a level last maintained briefly in early 2001, shortly before the rand really started to slide. The smaller shares are better with the mid-cap dividend yield at 3.23%. Folk who are not perma-bears like me, will cite the Top 40 index’s p.e. ratio at just 15 as a mitigating factor. This is not an all time high, but it is also not that common, so I’ll resume my gentle siren of warning that this market is getting fully priced again and selling rather than buying should be the action of choice.
I know that many of us have a few bets on the possibility (inevitability?) of the rand sliding quite substantially and providing some fun in the resource shares. But a simple comparison of the JSE mining index with the price of krugerrands (a useful rand denominated proxy for commodities) shows that mining shares are at their relatively most expensive level in at least ten years. An increase in the price of krugers (arising from a decline in the rand) would make the relative price of the shares even higher and the situation would be exacerbated if the shares themselves rose as well. So on a historic basis, our bets might not pay off as much we might wish even if the rand does tank. But it is hard to sell one’s gold and platinum shares.
One reason that I am starting to hear for this market’s strength is that investors have nowhere else to put their money. This is an old and entirely discredited excuse and its reappearance makes me fret. Given the massive and apparently surprising surge in the credit growth numbers published recently could I suggest that paying off the debts could also be a place to put money? Real interest rates in SA are still jolly high.
And to return to that politician’s view. Can you just imagine the excitement and unity that will happen when SA fields teams that soundly and repeatedly thrash the Aussies at cricket? Or the All Blacks at rugby. And the world at every other sport (except of course baseball, since we don’t want to attract America’s attention). But it will never happen while the politicians select the sides.
The Cats for the Super 12!
James Greener
4th March 2005
