I did warn that my leave commitments in August would probably mean a lengthy break in the production of Tidemarks. However, there is so much happening now that I could not resist popping in to the office to jot down a few thoughts.
Naturally, the premier story is about the markets where eye-popping price moves have seized everyone’s attention and some people’s wallets. It seems that my long-standing suspicions that things were going bad in the US housing and debt markets are turning out to be correct. I am a bit embarrassed to admit that I am really enjoying the stories and reports of astonishment, anguish, apoplexy, and arrogance that are increasingly coming to light. Unfortunately, there are innocent victims at the end of the food chain who are now finding out that they had been paying too much attention and far too many fees to investment “experts” who knew no more than anyone else what the future held in store. In an alarming number of examples, it seems that investors were being encouraged to buy instruments of such dazzling complexity that no one knew what they were or especially what they were worth. Almost nothing is the answer to the last question in most cases. And my greatest glee is reserved for those asinine comments from glib spokesman who assure us that the $20bn loss that they have (so far) admitted to have taken in this or that department will have no impact at all on their overall business. If this is so, why were they involved in that area of activity in the first place?
These announcements display the same level of contempt for their audience that our own state-owned airline did with the news that they would in future not serve any alcohol to passengers on domestic flights before noon. This move, the statement smoothly assured us, “was aimed at improving customer service and comfort”. I beg your pardon? Just how does the denial of a comforting service improve that service? That outfit is doomed.
Why is it that innovative investment instruments are launched in the market at the very moment when most investors are thinking about running away? In the next few weeks, two interesting new Exchange Traded Funds (ETFs) will be listed. One will track the SA Listed Property Index (J253) and the other the Dividend Plus (J259) index. One can spend an unprofitable few hours researching the construction and behaviour of these indices in order to decide whether they suit your portfolio, but the reality is that they will pretty much deliver what they promise. Readers know that I rather like these things, with the proviso that there are occasions when one would choose not to increase exposure to the markets in any way at all. There is an opportunity to climb aboard these funds at their launch and so avoid dealing costs. This is always a tempting offer but should not prevent you first thinking if now is when you want to buy them. For me, the Dividend Plus is the more intriguing of the two, but its price will still fall if, as I think, the present market corrections are still far from over.
Before leaving on my trip to view the living and vibrant spring flowers on the West coast I invite you to consider the following challenge thrown down by a political group yesterday. It concerns the invitation to identify “untouchable deadwood” within the cabinet and “to provide evidence to any dereliction of duty by any deceased or current serving minister.” Might I be so bold as to suggest that any deceased minister is no longer doing a good job and is undoubtedly deadwood? Don’t get me started on the living ones.
James Greener
15th August 2007
