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
