There are several big stories from the markets this week. But I think the most interesting one is that it looks as if people are exiting our currency. We are all accustomed to watching the rand/dollar exchange rate. Indeed, there are illuminated displays alongside the freeway that allow travellers to keep in touch with the number. One such display alternates the rand/dollar rate with the ambient temperature, which in this recent cold spell has been causing more dismay than the currency.
But the complication is that the US dollar is fighting its own war and is sustaining some nasty looking wounds that may one day prove near fatal. While the rand’s decline versus the USD is attracting attention, it is against other mega money such as Yen, Pound etc. where some alarming action is starting to unfold. A need to understand relativity is not confined to cosmologists.
In fact, action is unfolding all over the globe. In the US, the scheduled meeting provided the expected hike in interest rates and the accompanying statement provided the usual rich pickings for economists to squabble over. This time it seems the excitement hangs on the appearance of the word “yet” in some otherwise insignificant paragraph. The gold price has soared through the $700 and $725 levels without pause and the copper price is now so high that the threat from cable theft to our phone conversations and data transmissions is also increasing.
Folk who find fascination in round numbers will have noted that the All Share index is having trouble clinging to the 22 000 level. “Is this the beginning of the end?” the cry goes up. Chartists have drawn my attention to the fact that the JSE has recently been rising at a rate last enjoyed just before the 1987 melt-down event. My own work on this phenomenon was to see what it looked like in real terms (i.e. after correcting for inflation) and an even more dramatic picture emerged. The present bull market is actually more similar to the one that preceded the decade-long bear market that began in the late 1960s. But of course, each time it is different. The market will eventually, pause or decline or perhaps even crash. But when and why is unknown.
Soon after I joined the young and exciting team here at Watermark I was introduced to the alliterative phrase “Turnaround Tuesday” In the past ten dozen Tuesdays us bears in the office have chanted these words while shuffling around the trading room. So far it has not worked. Perhaps next Tuesday is the ONE?
Readers may have noticed a number of developments among the shares listed in the property sector. Investors are being invited to request a copy of the prospectus for Madison, and at last, ApexHi have decided what to make of their new “C” units. While I am agnostic about the Madison business idea and listing, the Apex C units seem to me to be unlikely to be paying any distributions until the end of 2007 at the earliest – and that is based on a generous growth model. The sole slightly good news is that of all the C units that will be issued to current holders of the As and Bs, 30% will be bought off them at 200cps by the BEE partner. This partner is presumably not concerned at the potential lack of return for the next few years.
Crunch time in the Super 14 and will a German win the Spanish GP in an Italian car?
James Greener
12th May 2006
