Friday 28 July 2006

SUMMERTIME, AND THE BULL IS EASY


Although some of the short-term traders will disagree, there is some evidence that the market is steadily returning to an upward trend. As I warned you last week, this has occurred because of my suggestion that the bear would amble back into the frame. Naturally, he has not done so. His reluctance may also be due to the rand improving to better than seven per US dollar, which could be taken as evidence that some foreign buying of our markets is taking place. The frenetic turnover that we experienced and enjoyed in June has also tailed off and things do feel a lot calmer.
However, the recovery has not yet been sufficient to allow the overall index to boast a positive performance for July. The gold mining shares in particular have taken a hammering. Company results for the June quarter-end are starting to appear and it will be interesting to see if the record-setting gold price has brought some cheer to the sector.
Very few shareholders, however, will be delighted by the prospect of next month’s seemingly inevitable interest rate rise. The most recent inflation numbers have apparently surprised those pundits who clearly have never been to the shops and tried to buy any of life’s little luxuries lately. So alarmed are they, that predictions of at least a 100 basis point increase are being published. From my own standpoint of economic ignorance I don’t understand why pushing up the cost of money should reverse the impact of the ever-increasing price of energy for everyone on the planet. The strikes in support of higher wages taking place around the country suggest that most people are a bit short of income. It also feels as if there is acceleration in the number of people feeding both informally and officially from the public purse. Not only is crime speeding along unabated and undeterred but officials who could be doing something about it are off to parts north to supervise elections and the like. Don’t those countries already have enough corrupt officials of their own to ensure the appropriate outcome?
I was unsurprised when a global survey of the banking sector showed that their biggest risk is to become submerged in regulation and legislation. My own experience of being informed by my bank of the last three decades that they could not use my passport as proof of my identity is yet another small example of the lunacy swamping us. On Tuesday, another new government organisation will begin its task of checking on the estimated 6000 privately owned organisations that grant credit and lend money. The state believes that they can not be trusted to lend only to folk who can afford to repay the loans. Just who is being protected from whom is unclear. But it is clear that a new tax is being levied on the financial industry.
And it is hard to find any good news in the sports pages either. It seems that the Tour de France this year was won by an American with maybe too much testosterone. For the last seven years, it was won by an American with almost none. The All Blacks’ new haka format is scaring everyone and the Proteas in Sri Lanka are wilting. I wonder if there is any need to renew my season tickets at Wanderers?
It is probable that there will be no Tidemarks next week. I need to go to the coast to see if summer is arriving. Keep safe and happy.
James Greener
28th July 2006

Friday 21 July 2006

IT’S ALL IN OUR GENES


For those of us still reeling from last weekend’s rugby result, here is the good news. Since Monday, the rand has improved by 3% against the Aussie dollar. And it is back below seven per US dollar. So there.
Our green and gold money has also put in a great showing against most other currencies and is line for the yellow jersey for the month of July.
This has not necessarily been stunning news for the share market and the All Share once again demonstrated its penchant for roller coasters. The week’s range has been over 700 points, which is not healthy for those of weak disposition. So far the index has remained north of 20 000, at which level it would be just 10% below the May 11th all-time high. As always, calling the move from here is a foolhardy exercise but with my record, I shall do all the bulls a favour and say that I think that it should go weaker. I am quite amazed that the Middle East conflict does not yet appear to have undermined confidence to any real extent.
Technology allows everyone to follow, in graphic and distressing close-up, the pain and anguish caused by the nasty and brutish conflicts being caused by so-called leaders pursuing their ideologies.
But it is all getting rather pointless as we shall soon be merely provinces of China. An advertisement placed in the local paper by a retail store in Springbok – a small town about 500km north of Cape Town (and we all know how remote that place is) – is seeking a shop assistant fluent in Chinese. And if the Orientals don’t take over the world, the bureaucrats already have.
Another notice, posted by some doubtless already under-funded research institute, warns the public that it is planning to plant some potatoes. Said spuds allegedly boast a rather special pair of genes. Namely, the firefly luciferase gene and the cassava granule bound starch synthase gene. The possibility that this information means anything at all to more than six people and their pet hamster is zero. The only jeans that we could recognise would be Levis or Soviets. However, it seems that we have something called the Genetically Modified Organisms Act on our statute books. This legislation apparently does more than just describe the people who promulgated such nonsense. It gives them powers. And the prospects for the potato planter are poor, because elsewhere in the press I found the news that a similar trial with sorghum has been rejected by government. Some committee has decided that the greenhouse in which the plants were to be reared was not sufficiently secure to prevent the genes escaping. After all, our record with jails is not good either!
Muttering about interest rates has begun to be heard again. US big bank boss man Bernanke said something that could suggest that he won’t again soon be lifting rates. Or maybe he meant the opposite. Nevertheless, his testimony provided enough ambiguity for traders worldwide to buy, or was it sell? Back home, money market interest rates in particular are ratcheting upwards presumably in anticipation that our own big man Mboweni will tug the UP lever at the next meeting in August.
I hope there’s some beach volleyball on TV tomorrow morning.
James Greener
21st July 2006

Friday 14 July 2006

BULLS STILL STORMING THE RAMPARTS


Bastille day. The French are everywhere these days. Bike races, football and tennis champions, grands prix, head butting; it’s all happening for them. But soon the spotlight will move on to our southern tip. SA’s preparation for our own world cup tournament in four years time is reportedly much further along than were the previous hosts at the same point. We have a logo. We have chosen which cities will be used to stage the games Was the selection all that tricky? AND we have negotiated the sponsors and discussed the dreadful crime of ambush marketing with them. As was the case when the cricket shindig was here, spectators can expect to have their persons and parcels frisked for the slightest sign of scorn for the supreme sponsor. Woe betide anyone who dares display the banned brands. I can’t wait to see who will get the job of explaining to a stadium of thirsty Black Label consumers that only Bud Lite is on sale.
That will be worse than explaining to the perma-bears like myself that whatever the oil price, wherever the wars are and whoever is in charge, this market just wants to keep on going up. Sure, there have been a couple of scary down-days when some punters have felt the bear’s breath on their necks. But after each of those sessions, the buyers swarm in, and most prices edge back up. One sector, however, worries me more than the rest. I have often commented on the waves of interference and regulation that keep on crashing onto the shores of the financial sector. Today we had the latest foam- crested breaker, when no less than the Registrar of Banks made free with advice on how the banks should run their boards of directors. The fact that last year he warned them that the good times were over (prematurely as it turned out) and they should brace themselves, reveals that he has little confidence in his customers running their businesses correctly. 
I have also noticed that the industrial share earnings base is now not growing at anywhere the rate it was enjoying just this time last year when companies were boasting of at least 40%pa increases in profits. Now the growth rate is down to just 15%pa. This is of course still a very tidy number. Most of us would be very pleased if our own annual incomes were improving like that. However, the market prefers rising growth rates; so if the forthcoming season of result announcements does not reverse the trend, the price reactions will be worth following.
And yes, I did have a wonderful trip to the arts festival. I managed to avoid those plays where deeply committed actors shout insults and abuse at the (paying) audience and accuse them of being responsible for all the suffering that has and will happen in the evil society we live in. Instead, I enjoyed a lot of music from ABBA to ZZ Top by way of Mozart and Bach. And there was a trip to the Blaaukrantz Bridge where, almost 100 years ago, of one of the country’s worst rail disasters took place. It was disappointing to learn that, even then, brigands appeared on the scene and looted the belongings of the victims and the rescuers.
And talking of victims, who will be brave enough to watch the scenes from Brisbane at noon tomorrow?
James Greener
14th July 2006