Another week. Another new high for the All Share Index. Unless there is a huge calamity in the market this afternoon, when I shall be down at the Wanderers ensuring that the Proteas are behaving sensibly, the index will end the month up nearly 8%. Biggest contributions to this return will have come from the Basic Materials sector (principally the platinum shares plus Billiton and Anglo) and the Financials (banks and assurers). While I suppose that spotting the first group was not that difficult if you believe in the commodities run, I am uncertain why investors are buying the money sector. There is the ongoing background hum of speculation about the probable buyout of another local bank by a foreign suitor. But there is also the frequent sound of sniping from the legislators and regulators who have targeted the assurers in particular. No aspect of their business is immune to prying bureaucrats who are full of suggestions about how to reduce margins and increase risk.
And talking of risk, don’t you wonder how, these days, several years after you and I had to supply our banks and brokers with all kinds of personal details, the frauds continue unabated? Everybody dodgy seems to have any number of accounts in any name they like and no questions are asked until it all blows up.
Blow up, is what the gold price has done. Patient readers will know that I am always fretting about how long the US economy and currency can maintain their pre-eminence in the global markets. Both are enormous – the largest in the world by far – but I think this gold price strength is indicating that there is a major shift in allegiances taking place.
The new Fed Governor followed his predecessor Sir Alan and raised US interest rates by the expected 25 basis points. This was likely the reason that the very important US ten-year bond yield lifted to new highs last night. Surely all those debtors in the States are starting to find that their repayments are getting painful and will cut back on purchases? Most new car loans over there are now being taken over five years or more! The car could quit before the loan does.
Our own Governor Mboweni gave a clear indication that he is feeling left out of the club of central bank governors. He hasn’t tugged at the “Rates Up” lever in his office in ages and he said that his palms were itching. Rather impudently, however, the market so far gives no sign that there is a need to increase the price of money. The last time when he warned us that he had a hand on that lever, rates ticked up – only to see him make no change at the next MPC meeting. Is he bluffing again this time? I don’t see much need for a rate increase at this point.
A high priority task next week will be to prepare my tender documents to the Receiver of Revenue, who is in need of someone to manage his “data storage infrastructure”. I shall omit the part where I plan to use a deep and waterlogged disused mine shaft as the primary infrastructure for storing tax records. Everything will be indexed under M for Missing.
I hope I see more runs than wickets this afternoon.
James Greener
31st March 2006
