I am sending this off early today because I am going fishing!
What, if anything is driving the market? Of course the classic but true and pretty unhelpful thing to reply is “more buyers than sellers”. Or the other way round as the case may be, as it was last month when the All Share’s Total Return was -1.39%.
And what in turn drives the buyers or the sellers?
Rather too many years ago when I was a bond dealer on the secretive so-called Gilt Floor way up in the JSE’s Diagonal Street building, the answer was the gold price. Some of the smarter and richer firms proudly owned Reuters screens that could be made to display in shiny green numbers the latest gold price from London. They tried to not let the rest of us catch a glimpse of that data for it was precious stuff. If the gold price climbed a cent or two the bulls got excited and rushed around shouting to buy bonds (Who else remembers the E154 and the R124?) and so yields went down. If the gold price looked poorly then the bears did the shouting and yields went up. It was all so simple.
As time went on, more and more of us installed Reuters screens and spent idle moments looking to see what other data we could find that we could use as an excuse to stimulate a deal. And we started to fret about things like money supply (just a measure of how many ATMs have been robbed?) and reserves (the ones without the lions and elephants) and many other numbers that most of us had no idea what they meant. This is when we asked the economists to explain them to us until we got a headache and went off for a drink.
And now we ALL have ALL the data in the world pretty well instantaneously. As I write, CNBC gurgles on in autobabble mode, up on the trading room wall. And we also have legions of regulators who get fierce if for a moment they suspect that someone got some news before anyone else. But we don’t get the market right any more than before. I mean what IS a non-farm payroll and what should I do before and after it is announced this afternoon?
Oh right, I’m going fishing, so you can tell me on Monday please.
