So that’s the end of the month and the third quarter. Was that storm last night a cover-up for Santa’s practice laps around the circuit? The All Share index is skulking around its all-time high and a total return in September of nearly 5% looks likely. That nasty little 15% “correction” that scared us in August has been completely erased along with the credibility of us bears who thought we had spied the beginning of the end.
I was interested to read that the official view on inflation is that it will be tamed only next year. As this statement is so clearly an optimistic wild guess (sorry – considered carefully researched opinion) I wondered why it was offered. Perhaps they too have noticed the sharp upward spiral of commodity prices – especially oil and wheat – and also conclude that bad inflation news is inevitable. Now the approved (but in my opinion, incorrect and ineffective) official weapon in this fight is the cost of money. I think we can expect it to be increased at the next meeting of the MPC in two weeks time. The present strength of the rand may also be anticipating such a move.
The end of September sees the first step in the changes to the way that the tax man seizes a portion of the money that companies pay out as dividends. The rate for the secondary tax on companies (STC) will fall from 12.5% to 10%. In principal that should be good news. Shareholders ought in future to get the loot that in the past was flowing to the National Treasury. Maybe this is one reason for the particularly frisky nature of the bull on the JSE of late.
However, the variable-dividend preference share market would appear to be reacting in the opposite way to this change in the tax. Prices of those shares have softened noticeably in the past few weeks. I am puzzled by this move. This class of pref shares undertakes to pay a specific amount of dividend (related to the prime overdraft rate) per share per year to the shareholders and issuers have had to adjust their prospectus conditions to cater for this tax change. If that amount remains unchanged despite the tax rate decrease, why should the prices now fall? The average implied dividend yield of the shares in this category is now well above 10%pa. Maybe it’s the expected repo rate rise they are anticipating and nothing to do with tax.
I never realised that it was necessary to apply for a job as a member of a provincial sports team. I thought that if you were any good at the game someone would tap you on the shoulder and invite you to pop in for a try-out or something. So I was surprised to see the ad in the paper placed by Western Province Rugby (Pty) Ltd who are apparently in need of a tight-head prop. Perks of the post include a blue and white hooped jersey with your name and the number 3 tastefully embroidered on the back. Perhaps the most surprising part was that the ad felt it necessary to state that academic qualifications are not essential but great natural strength would be useful. My CV will stay in the file.
We can’t be certain that the ‘bokke wont again take the long way round to beat the USA in Montpellier on Sunday evening. It is not easy to watch this sub-prime sort of stuff. And then I suppose we will wake up on Wednesday morning to learn that one of the chaps has been cited for an alleged and unseen misdemeanour just minutes before the cut-off time. Unsettling. Someone out there fears the ‘bokke almost as much as the two McLaren drivers distrust each other.
James Greener
28th September 2007
