You may have noticed that I didn’t send you a “Tidemarks” last week. That is because I was attending a 150th birthday party in Grahamstown. My old school was holding a jubilee celebration and I went down there to help. It was a great occasion with plenty of long-standing friends, some of whom were old too. Food, drink and words were plentiful, with rather a lot of sentences beginning with “When I was here...”. Many of the old boys are farmers and I was struck by how in touch with economic developments like prices, currencies and interest rates they were. The power and ubiquity of the internet reaches even onto distant maize farms in the Free State!
Another observation, after spending 20 hours on our national road network, is the enormous number of huge trucks and buses rumbling up and down the country. And yet at Noupoort – once the hub of the railways – I saw very few trains on the tracks. As a nervous flier who rather enjoyed the glory days of cheap British Rail services in the early seventies, I have long thought that a reliable comfortable overnight intercity service between our business centres would be a good idea.
While I was away, the market powered on northwards – this time it was the financials and industrials doing the heavy lifting. Anyone who hoped for a buying opportunity in SAB following their news of a substantial cash raising exercise to buy most of South America’s beer was disappointed. Similarly the threat of official investigation of undoubtedly high cellphone costs did nothing to dent the telecoms sector. Resources slowed a little as the rand recovered against most currencies.
A strong rand should be welcomed by taxpayers who this week have been told to chip in with a loan to Zimbabwe of one billion USD dollars. Just what the terms of this loan might be has not been released (why ever not?) and some of us are a tad sceptical that we will ever see it repaid. However, we also appreciate that hungry neighbours are definitely unwelcome.
Still on the topic of the rand but slightly more technical, it is interesting to note that at approximately 3%, the cost of 1 year forward cover (the price of dollars for a deal to be settled this time next year) is at its cheapest in the memory of most dealers in the market today. What this means is that the foreigners who are currently buying copious amounts of the JSE share market can very cheaply insure themselves against the rand collapsing and wiping out their profits. This may provide a useful bolster and impetus for yet more buying by those fellows. Another underpin may also be forthcoming from the Barclay’s cash that must eventually seep into the market as the ABSA shares get paid for. All in all, it’s a bad time to be a bear.
It’s a bad time to be a ‘bok supporter too.
With all the good news on the business front these days, people are changing their newspaper reading habits and starting at the front pages instead of with the sports pages at the back. But I am pleased that it looks as if Lance Armstrong will clinch his seventh Tour de France title this weekend. A wonderful triumph on behalf of all former cancer patients.
James Greener
22nd July 2005
