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

25^th 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

18^th 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

11^th 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

4^th November 2005