Enormous amounts are being written and said about the likely economic consequences of the dreadful tragedy unfolding after the passage of hurricane Katrina across the Southern Sates of the USA. It seems that the human consequences alone are nowhere near yet understood or countable and so it is perhaps both heartless and premature to discuss the impact on our portfolios. The clean up cost will be astronomical, but the US is a very rich country. However, I am certain that things will develop quite differently than they would have without this very serious event. The world’s economy is inordinately dependant on the US consumer buying things that the rest of us supply in one way or another. Watch the debate about whether political pressure will make the Federal Reserve postpone their program of steady interest rate increases.
This idea helped the US dollar to weaken and the gold price sniffed at $450. This in turn caused the rand to get below 6.20 per USD at one stage, and I reopened the discussion in the dealing room about whether we would next see a big figure of 7 or 5 for this number. There were still no votes for 5.
The All Share index enjoyed another week of teasing the bears and got within a hair’s breadth of 16 000. Thursday sees the dreaded close-out event and the first concern is whether the JSE computer system will cope with the anticipated trading volume. It does not have a good record in this area. A meeting has been called where the JSE will promise to do their best and the dealers will threaten mayhem if they don’t. The next little hassle is whether is Joburg City Power will come to the party – and not with candles for the cake. Numerous power failures in recent days have not helped calm the nerves. In the worst case the trade would be to go short JSE (Pty) Ltd (unlisted, but quite tradable on the OTC market) and go long pharmaceutical and liquor companies.
This morning’s headline about “property prices (coming) off the boil” must have been written by a fellow bear. In the text it turns out that price growth has slowed to a mere 19.2% pa. In my book that’s still a tasty return. And in the same paper I was amazed to learn that Joburg “council is very strict about the number of people it allows to live in a flat.” The article was silent on the council’s attitude toward the number of people that may ride in a taxi. Substantially more than may stay in a flat by my reckoning.
I am intrigued by the news that Governor Gono of Zimbabwe took the $50m owing to the IMF with him when he went to Washington recently. Images of briefcases stuffed with grubby banknotes in the best movie traditions come to mind. I wonder if he booked his luggage through or popped it into the overhead locker for the journey. Everyone must be very grateful that the plane suffered no incidents. It must have taken the chaps in Washington a while to count that sort of cash. Did Gono ask for a discount?
There’s tennis and cricket to get us through the weekend, which up here on the highveld is looking set to be more of those stunning spring days. But some rain would be nice. Any chance of Shane Warne retiring before the summer?
James Greener
9th September 2005
