At some point, a trade will take place in every share at a price that will not again be attained for a very long time – perhaps even years. For some shares, that point may have already happened, for others it may take place even this afternoon. When that price is recognised, the seller will congratulate himself on his skill at spotting the top of the market and the buyer will berate his broker for not warning him that this was the all-time high price. My expectation of the arrival of this mysterious top for most of the shares in the JSE has been around a long time. How wrong I have been. We have not yet experienced anything that could be identified as the start of the “correction” or even the “crash” depending how quickly and how far prices fall. Some will claim that such an event will never happen and that all we will suffer is a “soft landing”. Perhaps.
I draw your attention to the fact that quite a few of the Wall Street indices have been going down steadily this week. It is far too early yet to claim that this is the beginning of the end. But it is interesting to note that even the mainstream press in the USA is starting to mutter about the liquidity problems that consumers are facing as the housing market craters. As we have been told ad nauseam, the world’s economy is apparently rather dependant on the US consumer doing her duty with his credit cards. The US published a surprisingly poor GDP figure this week and Detroit car manufacturers are still looking for ever more outrageous ways to persuade people to buy their cars. However, the bulls are confident that the approaching holiday season will see the American shoppers back saving the planet from recession.
Back home in SA there are few reasons for disquiet on the spending front. Occasionally one notes a result that suggests that consumers are not quite as busy as they were earlier this year. However, the evidence that there has yet been a significant reaction to the recent interest rate rises is not clear. The roads, the shops, the resorts and the jails are all full. Even if the traffic is not, the economy is speeding along. The National Treasury has more money that it needs, but still the taxman pursues his mean-spirited program of seeking ways to squeeze ever more cash from the easy targets. Bureaucrats and politicians will never cease to come up plans to waste the stuff. Like deciding that the word “Union” when applied to a 100-year-old Building has less meaning for the nation than the name of one of their predecessors.
I don’t remember any news about the funding for Gautrain being finalised so I hope that the folk already digging up the streets in this part of Joburg have enough money to see them clean up the mess. Even more chaos is expected later this month when the 94.7 bike race will close the main roads around Wanderers stadium on the same day as the ODI against India takes place! Cricket fans versus men in tight shorts and lurid jerseys? Hmm.
Precious metal prices have made very impressive price gains this week and the shares have improved nicely. Naturally, the Top 40 index has set a new high. After quite a spirited recovery in October, the rand seems to have lost its way. Various talking heads have been up on platforms and behind microphones, saying things that encouraged the rand bears for a while.
As for the rest of the week, we saw the ripening of an airline named Mango, dismal bowling by the Proteas, taxi drivers going slowly and the army disagreeing with its own report that it has lost most of the toys we have given it. Some good rains fell here in Joburg.
James Greener
3rd November 2006
