In Washington, Governor Bernanke showed that he is just as addicted to tugging the lever as was his predecessor, Sir Alan. Right on cue, he popped interest rates up another quarter of a percent but apparently the order of words used in the accompanying statement was music to the bulls. Conveniently and magically, the bad news became good news for equity markets. Here in Joburg at least, the All Share return in the last month of the first half of the year will be positive. As too, will the performance for the quarter. This is surely a huge surprise to just about everybody. And of course it is also an embarrassment to those of us who foolishly have declared in writing that we thought that the end of the world was nigh. In our defence, I will point out that most consumer and financial sectors will be down for the month. It has been only the stellar showings by the exporters that have skewed the overall index above the zero line.
As the week progressed, the market chose to interpret any information as bullish. Even the speculation that our own central bank might call an extraordinary MPC meeting and prod the repo rate up by as much as 150bp was soon discounted and forgotten. Despite the rand remaining north of seven to the US dollar, folk began to push the “Buy” buttons, even for the financial shares which had earlier taken fright when the rand turned runt. My inclination, however, remains that one should be using recovery opportunities such as these to take profits and reduce overweight holdings.
And talking of overweight, reminds me of the news that foreign diplomats are becoming anxious about the crime situation. I am unimpressed by the suggestion by Deputy Foreign Minister Pahad that my tax money could be directed towards extra security for this corps. Why should not everyone in this country benefit from official concern for our wellbeing? At least the foreign fellows can retreat to the safety of their home countries if they find it too dangerous in their Pretoria enclaves, VIP lounges and darkened limos.
May’s inflation figures were published this week and the bad but unsurprising news is that life is getting more expensive. The average consumer (whoever he or she may be) is spending about 4% more than a year earlier to keep body and soul together. However, further up the supply chain, manufacturer’s inputs costs were almost 6% higher. These increases inevitably filter down to the consumer in a few months. And today we learned that petrol will go up 25cents per litre next week. So it seems reasonable to predict that spending on non-essentials could come under further pressure in due course. This helps explain why the general retailer sector on the JSE has been under so much pressure recently.
The bitterly cold snap that has draped itself across the country just in time for the National Arts Festival will provide an excellent excuse to stay in front of the TV this weekend and supervise the many different sports events that will take place. Fortunately, the ‘bokke will not be out embarrassing us, but there is plenty to make South Africans anxious. Have you seen the standard of the stadia and organisation in Germany? We have much to do in the next four years.
There will be no “Tidemarks” next week. I shall be in Grahamstown taking my dose of culture and trying to get warm.
James Greener
30th June 2006
