This has to be the way forward. Here I am scouting about for an idea on how, where and when I should retire and yesterday’s paper carries an advertisement for the perfect position. It seems that the Kwa-Zulu Natal Department of (Local) Economic Development is looking for “Short Term Experts” in just about every sector and service under the sun – and hopefully near some warm fish-filled ocean. Now if there one thing any stockbroker can claim it is that he is a short term expert. What an opportunity. There are acronyms and buzz words and partnerships with stakeholders and all the good gravy train stuff. Best of all, the cash is coming from an EU grant. This STE in LED is just padding out his CV and he’ll be aboard in a heartbeat. And if there’s any air travel required, then a seat at the sharp end please.
While I await their reply I’ll just demonstrate my short term skill and tell you that July has been a pretty good month for the market with the all share delivering slightly more than 7% total return. This brings the year-to-date figure well above 20% - a number that not even long term experts were expecting at the start of the year. In this kind of bull market just about any buy recommendation makes one look like a genius.
Genius, however, is not the word I would use to describe the announcement that the government has identified 10 000 unroadworthy vehicles which will be removed from the roads by December 2006. Why wait? Surely just boot them off as soon as you identify them? At least it would give those of us who own slightly safer vehicles a bit more space to drive in.
Getting back to the market, I have to express surprise and delight that the markets seem these days by and large to ignore the lunacy of politicians and other extremists. Remember when Minister Manuel declared support for any team playing against the ‘bokke? That put several points onto bond yields and scared the rand. Today, however, our president’s claim that corrupt politicians had no part in Zimbabwe’s debt crisis had no effect on the markets. “(The problem)”, he went on, was simply that “the government of Zimbabwe spent more money than it had.” As a graduate of a rival English university to the one that Mr Mbeki attended, I can only say that economic theory of this standard is all I could expect. As far as I know there are very few countries which don’t run a budget deficit. We will begin lending them money too? The SARB as the new World Bank? Eish!
So is this the top of the equity market? I have no idea. I certainly have no clever buying suggestions – short or long term – at these levels. The industrial index earnings base annual growth rate is starting to back away from the record 40% level. The index, now a heroic 140% up since early 2003, certainly anticipated this growth brilliantly. I have once already erroneously identified the substantial rerating that accompanied this rise as overdone. Maybe my education is just as suspect as the president’s. However, I am going to plunge in again now and say that I don’t think there can be much more upside to industrial share prices from these levels. Can we really expect another season of 40% plus earnings growth? Many people think the answer is yes. I don’t.
Important rugby at Loftus in Pretoria this weekend. Can the ‘bokke do it again without Madiba there? Just 80 minutes of short term expertise like last week please chaps.
James Greener
29th July 2005
