Friday 29 December 2006

END OF THE YEAR. TOP OF THE MARKET?


Apparently, there is a new approach to drawing money from an ATM. In the event that you have forgotten your PIN or perhaps your card or maybe even you do not actually have an account then a wad of explosives comes in handy to get the machine to dispense some cash. This is a much simpler method than the old one where one had first to hijack a bulldozer before digging the ATM out of the wall. I haven’t yet seen the minister’s response to this “bang for a buck” development but presumably it will be the fault of the banks for not installing sufficiently bomb-proof auto tellers.
This is of course the final Tidemarks of the year and the JSE will shut at noon so I shall be brief. Despite the very quiet conditions of this shortened holiday week, the All Share index scored another record high. But in the last few days some really shocking statistics have been published. Money supply growth is soaring again and the massive trade deficit was as unexpected as a tsunami on the beach at Plett. The poor governor of the Reserve Bank. He has repeatedly told us how our profligate spending habits worry him. Doubtless, he is right now pouring himself a stiff one from the selection of bottles received from grateful bankers at Christmas time. Thereafter he will be off to the laptop to peck out the text of a thunderous speech at the end of which he will hike interest rates. Probably by more than 50bp. Fasten your seatbelts.
I would like to wish you a very safe and happy and healthy and prosperous New Year and look forward to continuing this contact between us in 2007.
And just think what awaits the Proteas in the West Indies.
James Greener
29th December 2006

Friday 22 December 2006

REINDEER SIGHTED CHASING A BEAR


The future’s close-out was quite an event and the All Share index scored another new all-time high on the day. The 25 000 level is a mere skip and a jump away now. There’s no doubting that we have enjoyed an exceptionally long and powerful bull market with few missteps along the way. One occurred in May and June of this year when we bears could be seen chanting that the index was about to plunge below 18 000. It never did and so this merry Yule tide is upon us; provided one tries not to pay any attention to the state of Proteas cricket.
I was bemused to read that the auditor general reported that (he) “had found so many significant material deficiencies in the government’s accounting systems that…” (he) was  “unable to express an opinion” on the financial statements. Now this is the season of goodwill so let me tell you this report was about the USA. Terrifying isn’t it? But it does help when you can print the currency that can be used to balance the books.
Just in case you feel that I am going soft on our local legislators, however, may I ask if you know that the local Road Traffic Management Act allows political leaders (now, there’s an oxymoron and a topic for debate) to disobey traffic signals in the execution of their duties? To my knowledge, the only duty a political leader ever has to fulfil is to be somewhere, shake a few hands, deliver a speech and accept a few gifts and of course refreshments. Sometimes a little dancing is called for. Certainly most of the speeches are liable to induce terminal boredom but otherwise there is nothing vaguely life-threatening in those duties and so I do not accept that the rest of us need to face even more peril on the roads than that already provided by the felons and taxi drivers going about their own duties.
Just think, if the political leader, like the rest of us, was stopped at the red traffic light he too could add to his collection of exquisite beaded wire gifts or get the wife some more coat hangers for Christmas. But maybe he is a sensitive soul and he does not wish to have to share my despair at the plight of our fellow citizens begging at the roadside. It is obvious that governments of every kind are totally unable and unsuited, not to say inept at managing and distributing wealth, except to themselves. When it comes to being Robin Hood, they have mastered only the bit about robbing the rich. The skill of giving to the poor evades them. The burden of choosing who to reward is costly and tiresome and just as they select one deserving case, either the cupboard is mysteriously bare or an even poorer relative comes in sight gathering winter fuel and promising not to speak to the press.
The JSE’s Christmas spirit failed it this year and this, the last trading day before the holiday, did not end at noon as in the past, but will trudge on to the bitter end at five. By then though, even the skeleton staffs will be down to just the odd bone or two. Next week there will be just two and a half days of trading and I imagine that only the extreme bargain hunters will be prowling the screens. One of them will be me.
I wish all readers and very safe, happy and merry Christmas.
James Greener
22nd December 2006

Friday 15 December 2006

THE STAR AT THE TOP OF THE TREE


I suppose that by this time next week we will have shut the doors and wandered off in search of Christmas cheer and some last minute panic buying. Of presents that is, not shares. Anyway, it is pretty difficult to find shares to buy when the index is once again probing record highs. Unless Armageddon hits in the next few days, the All Share index is going to deliver a total return for the year of almost 40%. Not as good as last year’s 47%, but still strirring stuff. This will be the fourth year in a row of such excellent performance from the JSE. It is the sort market that makes us all look like investment experts.
Another area of my expertise is the punching of calculator buttons. So I flexed the  digits when I saw that the National Treasury plans to spend not a penny more than R15.1bn on hosting the soccer world cup. This parsimony appears laudable if unlikely. However, if the format is similar to this year’s tournament, we can expect to welcome 32 teams playing between them, 64 games. The taxpayer’s largesse therefore, works out at spending almost R40m per player who is coming here to boot a ball. Or, put another way, we shall be paying around R2.5m per minute of soccer played. Neither of these figures appears to me to be a great bargain.
But I am just an old curmudgeon who is wondering how the business folk of Rosebank are coping with the morass that their precinct has become, now that the digging for the Gautrain has begun in earnest. I still don’t recall seeing which selfless public body committed their ratepayers to guaranteeing that the contractors will get their bills settled, but there needs to be some significant value delivered for all the expenditure and inconvenience we are suffering.
We are at that time of year when bold and foolish analysts succumb to flattery and offer predictions of what the markets have in store. These flights of fancy can do no harm and often generate amusement, particularly when another pundit vehemently rejects the first and supplies his own guess. Such a case unfolded this week when no less an authority than the World Bank (those lenders of last resort to the basket cases of the world) suggested that next year SA would achieve GDP growth of no more than 3.6%. I think this may be rather pessimistic, but if that is all we achieve as we get fully underway with the aforementioned preparations for the footballers, then the share market is going to get messy.
As expected, the US held short term interest rates steady and this put more downward pressure on the US dollar. Our own humble rand improved to better than 7 per USD and the main reaction has been a ratchetting up of the shopping frenzy to gather imported gizmos. By contrast, it will probably be very quiet next Thursday when a particularly late in the year futures close-out event will happen. Many practitioners of this arcane trade will by then be clutching a cool beverage at the braai on the beach and the only close out to worry them will be when the bottle stores shut. Which brings us back to the panic buying story.
I trust that many of you too will be somewhere pleasant and peaceful and friendly by then. Have a great weekend. Do you remember when we called it Dingaan’s Day?
James Greener
15th December 2006

Friday 8 December 2006

HOT BEAR


I am very fortunate to have spent the last 10 days in and around the Kruger Park. We enjoyed many spectacular sightings of wildlife. A rhino calf and an elephant calf suckling, ground hornbills on a nest, quarrelling hippos and a yellow bill kite attacking a martial eagle are among the more interesting.  Some of the game appeared to be bipedal and with opposable thumbs but their behaviour was not described in any of the books that I had. What I did not spot were any newspapers, internet connections or TV broadcasts and so it was only this morning I began to get in touch with the markets.
The first poster I noticed suggested that the good governor had rewarded us with a Christmas present. For a moment, I was amazed to think he might have cut interest rates, but then it turned out to be just the opposite. Some headline writer’s idea of a joke I suppose. Only savers are likely to regard this move as a present. Some of the variable-rate-dividend preference shares will now be paying a R10 annual dividend. Interest payers are clearly going to much less delighted at the prospect of their debt repayments be going up. Regardless of what the money supply growth numbers say, or the news that retailers have failed to get in enough stock to cope with Christmas demand, there are certain to be many tales of hardship resulting from this increase.
It is reported that even after the governor had doled out this rather dubious “present” he then lectured the banks about their behaviour. It seems that he does not approve of them lending money quite as readily as they have been doing. This waving of the big stick was not a surprise to bank shareholders who have been marking prices down in the last few weeks. The banks index is comparatively weak.
The All Share this week all but set a new high somewhere well above the 24 000 level, but the rate hike has temporarily (?) cooled things off a tad. Cool, however, was a word not much used in the lowvelt at the moment. One fellow tourist sprawled in front of the air conditioner in the bar assured me that he had recorded 45 Celsius on the car thermometer while driving through the park. My own observation was less scientific and relates to the fact that the swimming pool water was warmer than the shower. It’s a tough life here on the southern tip, but someone has to do it. Supporters of the global warming theory gained converts this week, that’s for sure.
Similarly, I suppose that us bears on the US dollar are growing in number as well. That dollar looks like one very vulnerable currency. It has already gone off a cliff versus the euro, even if so far, only a small one. The US 10 year bond yield is also dropping fast. Keep a very careful watch on these developments folks.
There was the usual large number of emails awaiting my return after a few days out of the office. However before attending to them I first need to catch up with the amazing wave of all the new listings that have appeared since I last updated my models and spreadsheets. Some of the newcomers are tiny. There are companies higher up the boards whose annual loss is greater than the total market cap of some of these babies. I do hope none of us have too many of the ones that inevitably will not survive.
Keep Cool
James Greener
8th December 2006