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

30^th 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 27^th, which makes me suspect that we have been gypped out of a holiday somewhere. Best wishes.

James Greener

23^rd 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 14^th 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

15^th 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

9^th 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 5^th 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

2^nd December 2005.