I have to say that I have tried pretty hard to see what’s so beautiful about this game. Admittedly, I have not remained glued to the TV for all of the 24 hours of play that has taken place in Germany this week so far. I have personally witnessed no more than half a dozen of the 40 goals scored. Some, I probably missed because I dozed off after being exhausted by the miraculous recoveries from the apparent limb-destroying injuries. I have enjoyed the grand theatre that attends the incidents of yellow-card waving, and I am appalled by the scenes of jersey-biting, leaping, sliding, mobbing and praying that follows one of the rare scoring events. I am however sympathetic towards the astonishing inaccuracy of the hugely acclaimed and remunerated stars. Here in the securities business we have exactly the same thing. Hoofing the ball over the cross-bar is identical to buying stocks just as the market begins to tank.
Since the bull went off in early May for his winter break, amazing and unprecedented intra-day volatility has tried to disguise the fact that actually we are now about 15% off the peak. Daily trading ranges in the All Share Index of 500 points or 3% have been common and investors calling for a chat in the morning have often been shocked when checking the closing levels in the evening.
Obviously, a correction of this magnitude has pushed some shares into the limelight of “possibly reasonable valuation” and bargain hunters are starting to get excited. However, I don’t think that this bear is in any way finished with us yet and would prefer to be using moments, such as today’s close-out, when the market is on the up, to ensure that one has taken profits in the overweight holdings and to thin-out the illiquid shares. There is no shame in earning more than 7% tax-free while waiting for the really mouth-watering valuations that I am sure will present themselves in due course.
Diligent readers may be familiar with the so-called BRIC emerging markets. These are Brazil, Russia, India and China and compared to the first three, South Africa’s market correction is an infant. India is more than 35% down from its peak.
For a number of reasons, which would take an article of their own to explain, I have become very suspicious of the figures that purport to show net foreign buying and selling of our share and bond markets. Once upon a time, I was a firm believer in these stats and produced clever charts to look for correlations. But I now think they are deeply compromised and corrupted. Because the financial rand mechanism is long dead and buried, the normal currency market is the sole indicator that we have for foreign investment. And it is in this market where we on the southern-tip have seen particularly large recent declines. In particular, the rand has taken a severe beating versus Sterling and a pint of warm beer will cost the South African tourist 20% more than it did at Christmas time. I reckon that non-residents have done some substantial selling of this market. And they are not yet finished.
Thank goodness for some test rugby to watch this long weekend. And the next time I write Tidemarks, the winter solstice will have passed and we will be on the way to summer. Fantastic.
James Greener
15th June 2006
