I received a surprising number of comments from readers who wondered if they had been dropped from the mailing list when Tidemarks failed to arrive a few weeks ago. Now most of the recipients are folk who are not or ever will be clients so I had a brief but wicked thought about whether I shouldn’t consider a subscription fee. The idea soon vanished. If people actually paid to read this nonsense, they would then start to expect it to be regular, useful and accurate and then none of us would be happy. This weekend I shall be celebrating my younger daughter’s majority and I am about to depart for the land of the giant pineapple. In view of the way this week is panning out, I offer you this early comment and expect to receive no more complaints.
Naturally, the sole question is whether we have at last arrived at the beginning of the end of the long and powerful bull market. Of course, no one knows the answer to that question yet but some rather interesting parts of the plan are starting to come together. Firstly, on Monday the all share index set an all time record high within a whisker of 27 000. Since that moment, it has been falling almost vertically and at its worst was 5.6% lower.
Several triggers for this swoon have been identified, with one of the most popular, but to my mind inapt, being a story that the government is thinking about extending the so-called “windfall tax” to all resource companies and not just the oil suppliers. Given the facts that a.) They haven’t yet managed to decide how to squeeze the oil companies; and b.) It will be a nightmare of accounting to extend the idea to miners; and c.) The ministry concerned, denied the story; I don’t see this as being important enough to cause a huge collapse across the boards.
I am much more anxious about the contagion from the weakness being experienced in other emerging markets, especially China where in the second half of 2006 they enjoyed a bull on steroids. And then my old favourite suspect, the USA, has been releasing all manner of data which does not take much imagination to convert into good solid bear food. The poor-credit sector of the mortgage market has all but slipped into oblivion. Hordes of families who should never have been granted a mortgage in the first place, let alone ones with frills that obscured the fact that they required repayment, are handing their house keys to the bank and walked away. Many business indictors have recently turned amber and Sir Alan even mumbled a speech that contained the word “recession”.
Returning to the local markets, I note the large number of small investors who have decided just to sell because after all they do mostly have excellent profits to pocket. It is ironic that the selling so far has been happening in the dying moments of the current tax year. It is only from tomorrow that the welcome clarity of a definition for a capital gains event will come into effect! Perhaps new sellers will appear then. Other news this week included the amazing 4th quarter 2006 growth figure of 5.6%pa for SA. The JSE market has utterly ignored this news.
I shall be tuned to Radio Oranje for much of the journey tomorrow. They punctuate their unique offering of wrinkly rock music with announcements of the rand and the gold price. Obviously maize farmers battling the drought – there’s another piece of bear news for inflation – have little need for the share market index. I shall be in the dark about the market. Maybe I ought to leave it like that until I return to the office on Monday.
James Greener
The last day of the 2006/7 tax year.
