That R99 million fine that has been imposed on a bakery because it admitted that it had been chatting to its competitors about the price of a loaf, is a lot of money. Why the government is going to pocket the loot is not explained, although I do understand that doling it out fairly amongst the folk who have bought bread these last few years is a tough task. Would I, for example get a greater refund on my exorbitantly priced Ciabatta this weekend than the chap who is about to lunch on a Bunny Chow? But once again, I am puzzled that the state feels so strongly about ensuring free markets in some things while it simultaneously insists that it alone can decide on the correct price of money itself. Governor Mboweni has been very clear this week that he believes that the stuff is still too cheap and he will be pressurising the committee of great and good next month to raise interest rates some more. The sound of the pips squeaking is clearly not yet loud enough for him.
At last, the share markets appear to be noticing the cries of pain coming from the credit markets in the US and other large economies. Even two of our own local banks have been affected by these euphemistically named sub-prime loans. No-sign (of the money coming back) loans is a truer reflection of the situation. Things are already much worse than any forecast that I have read. The only people who are not feeling the pinch, are the departing bank chief executives whose main problem is wheeling the truckloads of farewell-present cash out of the door. It’s an odd system.
Inevitably, the picture is not unambiguous, however. The gold price has plunged below $800 per ounce which is another way of saying that the greenback has strengthened. With so many experts calling for its collapse, I suppose a recovery was probable. It has this week gained against every major currency except the Yen and this last anomaly may have something to do with these mysterious “carry trades” [Not the same thing as the aforementioned CEO’s wheelbarrows].
Reporting season on the JSE is in full swing and with the notable exception of a dismal set of numbers from the fixed line phone monopoly, most companies are doing fine. Understandably, earnings growth is sometimes lower than a year ago but no calamities have yet come to light in the industrial and financial sectors. As we have discussed many times, the miners have their own special set of problems.
I maintain my attitude that a well-balanced portfolio of solid dividend-paying shares does not need to be radically adjusted even at this time. If one is exceptionally worried and bearish then certainly postpone putting any extra cash into the market and maybe allow the income account to accumulate for a while. I am fairly sure that cheaper prices are on the way.
I do hope that the weather in Cape Town is fine this weekend. When the mother city puts on her party frock, she is one of the most attractive places in the world to visit. It will certainly be warm since there are right now plane-loads of G20 conference delegates arriving at the foot of the mountain and once they get going, the hot air will be flowing in torrents. May they nevertheless be delighted and beguiled by the place. Please watch your wallet at all times and especially when chatting to estate agents in Clifton.
On Sunday, thousands of cyclists will once again encounter that strange Highveld summer weather phenomenon. No matter in which direction you pedal, the wind is always in your teeth.
James Greener
16th November 2007
