This letter comes to you from darkest Illovo. We are enjoying another total power failure, but hopefully the battery in this laptop will survive long enough for me to arrange a few words in an interesting order. Unfortunately the peace that usually descends when the electricity goes off, is shattered by the roar from the beast of an emergency generator that has kicked in at the building next door. Presumably they have the crucial appliances such as kettle and fridge connected to this supply so we can wander over for a brew if normal service is not resumed soon.
Readers will be hoping that one day I will offer searing insights into the markets. But what else is there to say than that the market is still strong? Extraordinarily strong in fact, with the All Share index becoming quite boring now in the way it sets new highs almost every day. One day it will stop doing so. Perhaps only once the expectations of the R12bn spend on the 2010 World Cup have cooled off. Or maybe when Wall Street crashes. Have you noticed that almost every day another company gets a listing on the JSE boards? Once upon a time, a rash of new listings was an indicator of the market’s peak. But perhaps not this time. We are all experts in recognising market tops and sell signals, but only long after they have passed.
Consider for a moment that R12bn figure cost of getting the country in shape to host 32 football teams in 2010. Couple this with the report that FIFA expects SA to be ready for just 55 000 foreign fans and you find that the plan is to spend about R200 000 per visitor. Isn’t this slightly more than we expect them to spend per head on beer, boerewors and a bed? Who, exactly, is going to pick up the tab for all this?
Today is the 19th anniversary of a previous spectacular global market meltdown, but I am sure that the markets care little for such historical precedents. It certainly cares little for series and cycles and patterns and predictions. A recent piece of research attempted to illustrate the uselessness of analyst predictions and found a mere 36% success rate for a well-respected research house over several years. I find that figure very interesting. It means that an investor who did the opposite of every recommendation would now be delighted with his performance, especially against the poor sucker who followed the recommendations faithfully.
Perhaps you too were alarmed by the use of the phrase “Zimbabwe model’ being used in connection with the governments possible plan for an acceleration in their land allocation meddling. Certainly several overseas commentators picked up on it and have been less than bullish on the currency as a result. Where could a South African seek protection from a collapsing currency and the rampant inflation that might result. Well, offshore of course, which explains the strength of the rand hedge shares recently. Krugerrands are also still popular but difficult to store safely, so I still like the New Gold ETF product that is listed on the JSE. Each unit is priced very nearly at the exact value of 1/100th oz of the actual metal.
Tidemarks is appearing a day early this week because I shall very shortly be leaving for the Okavango swamps to hunt tigers among the barbel who are right now indulging in their annual “run”. It’s a tough job, but someone has to catch those fish.
Shout for Schumi on Sunday for me please and for your health’s sake avoid the Proteas for the moment.
James Greener
19th October 2006
