Friday 24 June 2005

PUFFING OUT MY CHEST

The winter solstice occurred this week but here in Joburg we are have not yet had anything serious in the way of cold weather.  But I’m sure it’s coming. Just as I’m sure that US markets will succumb to the bear.  On present form, however, the bird bath in my garden will freeze overnight long before the Dow breaks below 10 000! It’s a humbling experience this, trying to forecast the future. On average half of one’s calls should be correct so it does mean that I can boast about the odd success and draw your attention to the NewGold ETF which has now reached 3000 cps. This instrument is a play on a weak rand and a strong dollar gold price.
Despite a slew of  economic statistics released yesterday by the Reserve Bank which allowed the talking heads to get all gloomy about the prospects for the rand, our currency appears to have given up trying to get above 7 to the USD. This in turn has brought some bearishness into the share prices and returns in June now look unlikely to challenge the wonder days we enjoyed last month. Some mutterings about consumer spending slowdown has seen profit taking in the retailers. Nevertheless recent industrial company results still seem to be very healthy.
For two grand a head you can pop along to a seminar next week that promises in just one day to reveal the secrets to “Cracking the Obstacles to Funding BEE Deals”. For considerably less than that, in fact for free, could I suggest that a satisfactory return on investment would do the trick? The detail that the venue for this shindig is a casino makes me suspicious. But then the problem with one of the popular alternative venues is that they may not have recovered from hosting this weekend’s attempt to build the ‘Longest Sausage Roll in the World’ nor from another record-setting event entitled ‘Most People to Attend a Course in CPR at One Venue in One Day’.
I am trying to decide if either of these proceedings have been planned deliberately to precede Monday’s party when the great and good and also the not so great and possibly the downright dishonest will be in town to celebrate the Freedom Charter’s origins. The first ever session of Parliament outside Cape Town can look forward to watching the President light a flame of freedom and hearing addresses from a number of dignitaries. Doubtless, substantial snacks will be provided, for which a giant sausage roll could be a useful contribution. And delegates overcome with emotion or boredom may be pleased to have an abundance of CPR skills nearby.
I am delighted to have so many loyal readers who are disappointed when Tidemarks does not appear. However, I should warn you that our imminent office move from Hyde Park to Fricker Road in Illovo (yes, I’m disappointed too) relies upon Telkom providing appropriate lines and wires on time. Disruption to normal service is possible, but when we get back on line there could well be some great stories to tell you. In the meantime prepare for the barney at Boet Erasmus (is it still called that?) and have a another glass or two in recognition of the Bangladesh victory over the Aussies.
Keep warm
James Greener
24th June 2005

Wednesday 15 June 2005

CLOSE-OUT BLOW-OUT

As usual at the end of last month I was playing around with the national revenue and expenditure numbers released by National Treasury. In the last 12 months they have collected R351bn of income and spent R375bn. So that’s a shortfall of R24bn or R2bn per month. By now most of us would have received a rather anxious call from the bank manger. But governments worldwide seem always to be confident that someone somewhere will lend them the cash to bridge the gap. And astonishingly they are right! Bond yields are way down; in some cases at multi-year lows. These low rates have of course caught the eye of other borrowers and this morning we learned that Eskom will soon be looking for R56bn so they can build some sorely needed new power stations.
Lenders must be confident that this debt is not of the African sort that is being asked to be forgiven. Some USD300bn of it if the Archbishop is to be believed. I do hope that the forgivees will be writing polite notes to the taxpayers of the G8 thanking them for their very kind gifts.
Actually SA has these past dozen years been rightfully increasing its credit rating as a borrower in the international markets. So much so that the new boss of the World Bank, who popped in here after calling in at a few less comfortable places up north, stated that his organisation would really love to lend to South Africa. I’ll bet! People who understand interest collect it, not pay it.
But to get back to those Treasury numbers. As I have commented before, the combination of a consumer spending splurge and an ever more nosy tax man has seen the state’s income growing currently at 11.6%pa. However, Treasury have been doling the stuff out at a rate approaching 12.6%pa. There’s little wonder that wage negotiations for single digit increases are not gaining widespread support. After all suddenly there are these 7000 new mouths to feed as the prisons throw open their doors.
Here in the JSE market there was a complaint from one of its executives that not enough companies were coming to seek a listing. The very next day the JSE’s computers failed to cope with the long anticipated June futures closeout and the market was suspended right in the middle of this very critical session. Tempers in the dealing rooms are getting short and I expect that shareholders of the newly demutualised JSE will want to go short of them as well. To-night’s close out party could get messy.
The government very courageously went short of its vice-president this week and this news almost certainly helped the rand back off from breaking through the R7 per USD level. However, the currency is still weak enough to keep the resources shares cooking.
Wise investors will wait until the long weekend is over before looking to see where the survivors are.
The long weekend is of course the reason why this week’s jottings are going out early. Early jogging will be the preoccupation for all the Comrades marathoners clogging the road to Durban tomorrow. And on Saturday the ‘bokke will be trying to silence the crowing of the French.
James Greener
15th June 2005

Friday 10 June 2005

A WEEK FOR THE TELE-CHUBBIES


There’s another long weekend coming up. Well yes, I know that the holiday is on Thursday only, but what self-respecting hard-working South African financial professional fails to add in the Friday and make a decent break out of it?  It’s not as if the three days before that will be easy. On Wednesday the market will be holding one of those futures close-out events. When the previous one occurred in March, the all-share index peaked at levels not again reached in more than two months. Now we are again at record highs and one idly wonders if history will repeat itself. I can be sure, however, that turnover will be chunky and could well surge over R10bn. Exhausting.
Once again it is the currency sensitive sectors which are responsible for getting the bull all fired up, and this is despite the rand backing off from its recent weak points. All this talk of a “natural” level for the rand makes me wonder how such a level might be determined. Does the dollar price of commodities – especially gold and platinum – have an influence on determining that level? I am sure you have seen that the price of Krugerrands and that cute gold price proxy ETF called NewGold have made medium-term new highs in the last few days. Frankly I believe that the rand’s exchange rate with other currencies is one of the more reliable economic indicators that we can watch. Think of it as the country’s share price. It is set in a reasonably transparent and very liquid market with multiple participants. I also believe that for that reason it will be volatile and will rarely settle at any level for long whether or not that level is deemed “natural” or not. It is pleasing to think that the market has been sophisticated enough to shrug off the knowledge that we too now probably have a dodgy vice-president.
I wonder for how much longer are the telecoms companies going to manage to get away with such incredible profits? Both Telkom and MTN announced results this week and showed combined profits of over R16bn. That’s serious money. Enough to enable every one of us in SA to make more than 200 calls each, even at the current obviously exorbitant charges.
And in case you missed it, Governor Mboweni’s performance on Thursday included the announcement that there would be no change in interest rates for the present. Oddly, despite everyone professing that this was exactly what they expected, the equity market ticked down quite sharply after the news as if it had really been discounting a rate cut. Once again the Governor’s TV show was preceded by interviews with hapless pundits who had been persuaded to forecast its outcome. Not good viewing. I trust that the sport this weekend will be more exciting.
The confident predictions that the ‘bokke will hand a thrashing to the Uruguayans this weekend fills me with dread. Humility is not SA rugby’s strong suit. Have you been considering going along to the celebration dinner for the 10th anniversary of our world cup win? At two grand a head I am surprised that the organisers need to assure guests that they will receive a 5 star dinner on a plate!
James Greener
10th June 2005

Thursday 2 June 2005

CLEAR THE ROAD – MARKET COMING THROUGH


There was a great deal of excitement out there in the major traffic intersection near this office yesterday evening. Plenty of whooping sirens, hooters and flashing hazard lights.
There’s this belief that having all four of one’s indicator lights blinking can be used not only to signify that the vehicle is stationary but also the exact opposite. That the car is moving as fast as possible while ignoring as many road rules as necessary. I suppose that occasionally this may be a useful (albeit illegal) device for a driver with a genuine emergency, but these days it is used by convoys of luxury cars with darkened windows and tax-spending passengers still without the clout to summon a helicopter. I am disheartened by the world-wide trend of politicians and bureaucrats to assume powers and privileges beyond those they allow their employers – the taxpayers. I rather think that the citizens of Europe with their “no” votes are showing signs that they too feel that they have quite enough legions of legislators laying down the law and lapping up the loot.
At first I the thought commotion in the road was being caused by investors clamouring to reach their broker and participate in the bull market.  The news that the rand was threatening to climb above 7 per US dollar triggered some serious buying fever in the resources shares. The gold index has gained almost 7% in just two days and Krugerrands have climbed to a 1 year high despite the dollar gold price of the yellow metal looking soggy. The New Gold ETF is doing OK too. So also is the New Rand ETF of rand-hedge counters.
Not enjoying the same buying enthusiasm are the shares in the Life Assurance sector, which was the only sector to record a loss last month. Some of this is due to what appears to be a large seller of Sanlam. This trade is probably related to the imminent closure of the Barclays/ABSA deal, but the other heavyweights in this industry are not doing well either. My theory is that baby-boomers like me, now entering retirement, are beginning to totter in to the offices to claim their pensions and other maturing financial products. There, to their horror, they discover how little is left for them after the company has paid for the advertisements of yachts and exotic companions that lured them to that same office all those years ago.  Recently a slew of uncomfortable regulatory decisions and unfavourable press comments have been making things nasty for the assurers and I wonder if the share holder is going to lose out to the policy holder for a while. Just a thought.
When I last skipped a Tidemarks because I was out of the office on a Friday, there was an alarming but gratifying outburst of complaining. Hence I offer this scribbling a little early before nipping off again. I do hope there’s no TV where I am going, as I am not really a tennis fan – especially as some of the more intriguing players at Roland Garos have been eliminated already. For those who enjoy their televised sport to be a little slower there was the three day Durban judgement this week.
James Greener
2nd June 2005