I am rather bemused by the number and tone of the current advertisements that urge me to get down to the task of completing my tax return. As I mentioned last week the gap between the income and expenditure numbers for the government is large and getting larger. There would seem to be a spot of panic creeping into the suggestions that we should tot up what we owe and get the cheque in the mail to Mr Manuel soonest. It’s not cheap this business of supplying board and lodging to democrats whose electorate put the x in the wrong box.
Now can you name the country – no let’s make it easy – the continent, that is referred to in this part of a newspaper story about a speech made by that nation’s leader?
“……his countries USD 30bn external debt was “burdensome, unsustainable and unpayable” and appealed for leniency from its creditors.”
Mind you, this kind of money is trivial compared to what seems to be owed by all the good folk of the US of A. And it is this huge debt bubble that is the main basis for my bearish sentiment towards the local stock market. I have neither the skill nor the inclination to prepare a well reasoned treatise on how it will all unscramble. My simple view is that inevitably higher interest rates in the US will cause great hardship to the hugely indebted folk and government. A consequence of this pain will be a fall in Wall Street (irretrievably overvalued in my view) and …….. Well you know the story. I warned you it was simple.
I believe that symptoms of this forthcoming showdown are already visible in our own market. The index leaps about all day with apparently random reactions to data such as the rand or the inflation rates or GDP or whatever the panic of the moment might be. It is impossible to decide beforehand what news might be good or bad and come to that – why it should matter very much to investors. The trouble is that an investor can get badly whipsawed when his carefully researched action that’s planned to take him through for a few years, suddenly deposits 15% of egg on his face the next day – or even the next minute.
So rather than stock picking this weekend I think I’ll apply my mind to a short note to the tax man that will make good use of words like burdensome, unsustainable and unpayable. I might even try leniency too.
James Greener
4 June 2004
