So that’s another week that saw a 3% trading range in the All Share index. The low point almost wiped out all of this month’s gains. This kind of back and forth behaviour in a market always reminds me of a Golden Retriever shaking himself vigorously after climbing out of the water with a stick firmly clamped between his jaws. The water drops fly off in huge arcs and everyone nearby gets soaked. In my analogy the investors are the water drops desperately trying to cling on but getting dislodged by the shaking shaggy dog of a market. The folk getting soaked are the pundits and analysts trying to pick the winners. The dog feels nothing and waits for someone to toss the stick back into the water.
It seems to have been a bad week for personal freedoms – or a good week if you believe that authorities know what is best for everybody else.
Firstly, we had the Financial Services Board complaining that not everyone had collected their FAIS licence certificates. These lax businesses would therefore be unable to display them on their wall and so would be breaking the law. Just what we need – bureaucrats as interior designers.
Then the JSE proudly announced a renaming of the Insider Trading Levy as the Investor Protection Levy. Despite a welcome reduction in the rate of this levy the fact remains that it is designed to take money from honest citizens to mitigate the losses of those who deal with dishonest ones.
The scariest event of the year is taking place in Addis Ababa where 100 participants are attending the Forum of Value Added Tax Administrators in Africa. Reports emerging from this Forum suggest that this rather Euro-centric tax needs to be “adapted to the social, economic and cultural norms, values and levels of development of African countries”. What this means, is unclear but it is doubtless bad news for the diligent and honest.
Also bad news is that parliamentarians share President Mbeki’s concern “that the best land close to the best facilities was always available to the rich”. Just how many of those “norms” listed above are challenged in this piece of foolishness is hard to say.
Several things happened this week to suggest that interest rates will indeed not go down again before going up. All the various inflation numbers are starting to tick up as the petrol price makes its presence felt. And the second quarter GDP growth rate was published as 4.8% pa. This rather impressive number is one of the highest seen in a long time and suggests that the economy doesn’t need any further stimulus from cheaper money. One has to wonder if the growing acceptance of this belief is not the reason why some heavy bouts of profit-taking have wracked the market twice this month. Of course we are now deep into the dividend season and some sellers are reluctant to jump until they have seen the shares go ex-div. Maybe the big thumps will be felt only in October once all these tasty special dividends have been pocketed.
Early tomorrow we will be urging the ‘bokke on to squash the House of Pain myth. After watching the day traders this week I am ready for all the violence it may need.
James Greener
26th August 2005
* I have written a short article about this GDP growth number. Please email me if you would like a copy. It will be sent as a .pdf file that will need the Adobe reader program to open it.
