Yet another year and my invitation to attend the Davos shindig went astray in the post. Despite the discussions apparently wandering off track and delegates fretting about climate change rather than interest rates, I think I would have managed to get through the week. The catering has been of a sufficiently high standard even to merit a mention in the local papers. Next to a picture of chefs slaving over hot stoves was the news that prawns have been the food of choice for the visitors to the snowy wastes of Switzerland. Between mouthfuls of crustacean and slugs of bubbly I am sure I’d have been able to slip in enough complaints about hot it can be in Joburg at this time of year, not to feel out of place.
Another meeting that caught my attention was the gathering of the nation’s number crunchers. No one, it seems, is satisfied with the current methods of calculating just how much money a company has made (or lost). This appears to be a never-ending problem for accountants, taxmen, regulators and even the JSE. And so the worthies assembled and argued about what is a basic earning and what is a headline earning and other such bewildering concepts. Naturally, the rest of us in blissful ignorance of these distinctions, have been happily dividing the P by the E to help us decide if we should buy the shares or not. Just shows what we know.
I am also woefully ignorant of why someone found it necessary to buy a full page colour advertisement proudly to announce that the IDC (a government sponsored entity) had posted a Performance and Retention Bond (and I don’t know what that is either) for the sum of R220m for the Gautrain. This large display, for what in context is a rather small sum of money, is puzzling. Just imagine how big the ad will need to be when someone eventually comes clean and reveals the full amount that us taxpayers are pouring into this particularly large wheely bin.
The year is now well underway. Business Day has returned to two segments and the corporate tombstone notices are gathering in size and number. Sadly, many of them relate to the imminent disappearance of yet another listing from the JSE boards. The number of Unit Trusts (sorry – collective investment vehicles) now far exceeds the number of different shares one can buy. So in theory it should be more difficult to choose a unit trust than to choose a share to buy.
The market rumour today is that the managers of these funds have been sniffing around looking for derivative products to provide protection for their portfolios in the event of the market falling. This perennial story should not surprise or worry anyone. One would hope that any professional manger worth his fee would always be considering the appropriate downside protection that the cash, the mandate, and his judgement will allow. The problem for the market will not arise from this sort of prudent action. The market will fall when large numbers of investors decide more or less simultaneously that they wish to exchange their shares for actual cash money. What the trigger for that occurrence might be, none of us know, but we would like a week’s warning, please
Of course, the All Share index set a new high this week again.. The Easter bunny had better keep looking over his shoulder. This bull is on steroids and charging into 2007. And I am slinking down to the ‘berg for the weekend. Hence an early tide.
James Greener
26th January 2007
