It would be odd if a broker’s letter this week did not make some reference to the market’s haemorrhaging, so here’s some thoughts about it. The JSE had only a four day week with which to play follow-my-leader behind the ups and downs of the Dow and it made for some very exciting moments. Wall Street opens each day just two hours before we close – which is plenty of time for traders to react to what is going on over there. Then of course our markets close and we go home and eat supper in front of the TV, glued to the financial news channels (often indistinguishable from the Cartoon Network) and get ourselves suitably worked up about what will happen in the morning here in Gwen Lane. If, as has been the case recently, the US markets are all over the place, then we can suffer a double whammy from just a single day in New York. And furthermore a local public holiday gives us a whole extra session to fret over. I suppose that we really should get out more.
Our market tends to overdo any international trend in both directions. For example our June 2004 to March 2005 bull was bigger than most and our bear since then has also been hairier than most. Our day-to-day moves can similarly be quite scary. Thursday’s 326 point fall in the All Share index is (fortunately) quite a rare event, seen on average only about a couple of times a year. It is my view that this year we may experience more than our average quota of such days. Just wait and see what happens when the Dow breaks below 10 000!
This month the All Share total return will be a miserable -4.5% with the Resources index coming in with about -8% – which illustrates where the major pain has been. Without dividends the overall market would be in negative territory for the year to date. I don’t believe that it is too late still to get some more liquidity into portfolios.
The problem with liquidity of course is that declining interest rates are ensuring very meagre interest income streams which are fully taxable as well. Let me remind you of the Investec preference share, trading today at 12215 cps and which I estimate will pay a 411 cps half year dividend in July. Not fantastic, but tax-exempt.
And while on the topic of tax have you yet encountered Ms Khanyisile Khumalo (KK for short)? She has been enlisted by the tax man to “promote awareness among taxpayers of their obligation to comply voluntarily (oxymoron?) with all tax…laws”. This lady really is a comic book character.
The week began with one of those particularly hard hailstorms in which cars and houses out here in the northern suburbs got pretty hammered. A similar experience may be in store for ABSA shareholders with the news that the very long awaited bid from Barclays is now imminent. A dawn raid that’s turned into a midnight feast for the advisors?
It’s too late to wish the Cats success; they have already lost this weekend’s game. The cricket from Antigua should compensate. Do enjoy the long weekend.
James Greener
29th April 2005
