A frisson of excitement roused us bears this week, as the All Share index swooned more than 3% between Tuesday morning and Thursday tea time. But the cheering and smugness came to an end pretty swiftly. At the time of writing it looks as if we will end this week better than where we started the last one. No one knows where all the selling came from but, if they are to be believed, the JSE statistics suggest that the foreign investors have, for the moment at least, stopped buying. Mind you, in the past 12 months they have spent net, almost R60bn in the equity market and around R10bn in the bond market. This is record-setting stuff.
I was pecking at the computer keys this week and came up with the market capitalization of the JSE at something like R2 630bn! More pecking suggested that in the last 12 months the listed companies have reported earnings of about R180bn and paid dividends of R73bn. Long suffering readers will know that my ignorance and suspicion of accounting methods makes me wary of that first number and that I prefer to concentrate on the actual cash distribution figure. I am concerned that it converts to an average dividend yield of just 2.8% pa. This is rather low, especially given all the special dividends being dished out these days. I have to conclude therefore that the market is too pricey – but I have been doing that all the way up through this bull market. So best I shut up now.
This would be good advice also for the poor souls appearing on the TV screens around the dealing room this afternoon. In the absence of any Ashes cricket (where the big question is which side do we most want to see lose) and in the presence of a very quiet market, the sets are tuned to a station showing wannabe pop stars all of whom are definitely not tuned. Dire stuff.
The oil price continues to be the dominant number in forming most people’s view of the future. It has easily outstripped the price of that other commodity – gold – which also has been rising. The ratio of these two prices is a wonderful currency-free parameter that works wherever you are. Current value is almost 14oz of gold per 100 barrels of oil. This record high is about twice what it was at the beginning of last year and deserves a moment’s thought – especially if you are aware of how much effort goes into extracting the yellow metal from miles below the surface. It takes just a couple of months to drill a well into an oil reservoir and with luck the stuff flows to the surface under its own pressure at a rate of thousands of barrels per day. No wonder the rumours are spreading that the oil producing nations, now drowning in a sea of dollars, are seeking other currencies to convert their loot into.
This sort of news must be among the reasons for the US dollar being quite weak this month. And my other pet indicator, the US 10 year bond yield, is edging higher. The rigging is creaking louder and louder.
Loud is what we will all need to be tomorrow at noon when the ‘bokke take on the Wallabies in Perth. A good tech idea would be a two-way TV sound system that allowed all us experts to relay back to the ref our opinions of his decisions that we sometime can hear all too clearly. Which brings us back to those musically challenged tin-eared hopefuls.
James Greener
19th August 2005
