It seems to have been a week of denials, doubts, warnings and excuses. There is a great deal of bluster about how difficult it is to understand what is happening at the moment and how hard it is to forecast what is going to happen. Therefore it is exactly like any other week when as usual we have no idea why the market did what it did and equally no idea of what it will do next week. I will admit that being the dry season for any kind of company reports does leave us sucking air for facts to hang a story on, There have been the occasional trading statements with what seem like outlandishly excellent expectations for business and earnings but it will be a week or two yet before the big boys start to let us in on their secrets. Right now, I suspect the accounts departments will resemble the witches scene from Macbeth with the eyes of newt being hunted up to bring a lustre to results.
The largest topic of disagreement is obviously about whether or not economic activity is slowing down. I think it matters little to people who are struggling to meet the bills that most significant economies have not yet to reported two successive calendar quarters of negative growth and are therefore technically not in recession. People are less well off than they were a short while ago and that feels pretty darned recessionary to them. Similarly, the argument about whether or not the JSE is in a bear market is academic to those folk who have seen more than 15% wiped off their portfolio values in less than 2 months. That’s bear enough for me. And I don’t think it is over yet because there people around who are trying to buy the bottom. Reportedly, true market bottoms are signalled when there are absolutely no buyers for weeks and months on end. In other words it is marked not by a price or a percentage but by a sentiment.
The news from the US continues to terrify and amaze me in the extent and severity of its awfulness. It seems as if at last the Freddie Mac and Fannie Mae time bombs have reached zero on the clock and the already technically bankrupt US government will need to mount a heroic rescue with money borrowed from their taxpayer’s grandchildren to rescue that nation’s largest housing lenders. Our own Landbank’s problems with missing money are trivial by comparison. The world’s once greatest car maker may be about to go under along with another Wall Street bank. Their bear market too is not yet out of nappies.
Denials and excuses have also flowed from the Gautrain management after a large crater appeared in Oxford Road, exactly over the route of their metro train tunnel. Apparently “adverse geology” is the culprit and astonishingly, no danger or delay will result from the presence of the hole. Aggrieved road users and residents have been unable to locate any of the hordes of camera-friendly champagne-drinking hard-hatted worthies who flocked to witness the start up of the tunnelling process a few months ago.
Here in Durban the effects of the COSATU stay away in protest at high prices were very marked, but as usual what their leadership failed to explain is exactly what remedy they would offer for this global problem of soaring resource prices. The carping on about the alleged cases of price collusion between suppliers is irrelevant to this debate. My advice to anyone who moans about companies who appear to make too much profit is to boycott their goods but buy the share.
I believe it was the great Len Hutton who said that any captain, who won the toss and had any thoughts of fielding first, should think again and then bat. Please will someone read this advice out to our man leading the Proteas into the Lords quagmire?
James Greener
11th July 2008
