I would not be surprised if it turns out that the JSE has just scored its greatest ever one week gain. With a leap of almost 10% in just five trading days it certainly justifies today’s headline that we are enjoying a rally. I do not, however, think that it signals the end of the bear market. Nothing fundamental has changed in the global picture this week. Despite the frantic actions by many overseas central banks, who are hosing down their financial sectors with great streams of cash, the fact remains that the balance sheets of everyone from the city dog catcher to the great Citibank itself are in poor shape. And confidence is in tatters. My belief is that these things will take respectable periods of time to repair and it really doesn’t help anyone (except perhaps banker’s bonus cheques) to see money supply growth soar into the stratosphere. Word has it that the price of cash in the US may fall to zero next year. The only help that will be in the short term probably will be to make the compound interest formulae so much simpler. It may also prove to be a fatal blow for the dollar which perhaps already is showing signs that its 2008 rally has reached the end of the road. Who will want to own a currency that pays no interest?
Back here one can with luck persuade a bank to pay you double digit rates, but that of course is still below inflation and so lacks very much appeal. In less than two weeks the Big Shy Man of Pretoria will plod up to the podium and reveal his final ideas about the repo rate for 2008. Some analysts have claimed that inflation is yesterday’s problem and expect that SA will join the rest of the world in pushing rates down. While I must admit that I seem still to be living in yesterday, I do agree that a rate cut is possible. That would probably cheer up the share market bulls.
It should be noted, however, that the current recovery is not widespread throughout the sectors. There is a distinctly resources-only slant to the bounce and my guess is that BHP Billiton is nearly solely responsible for getting the All Share index from 18 000 to almost 22 000. The market just loved the news that it was giving up on its attempt to buy Rio Tinto.
I am intrigued by the stories that gold coins have become virtually unobtainable. This has had the effect of pushing the price of Krugerrands as much as 10% above their intrinsic value, but the easily traded NewGold exchange-traded securities are at a discount. It is alleged that hedge funds who owned these latter assets are big sellers of them in order to cope with redemption requests from exiting investors. This is a much neglected corner of the market. Sell Krugers and buy NewGold?
The most amazing fact to emerge from an interview conducted at a Sandton hotel with some luminary from the accounting profession, published in today’s paper is that she and her interviewer sat down to a cup of tea and a few eats and coughed up R300 (excluding tip) for the experience! The interviewee’s mission is to attract the young to the profession. Catering like that should have them queuing up.
Thank you to those of you who noted that my birthday must have been far happier than anticipated in view of the wonderful ‘bok performance at Twickenham. Sadly now until the Super 14 starts in February(!) all we can do is stare in horror and amazement as politicians and other malignant organs fret about which breast the ‘bok emblem should grace. Well, how about awarding it to only those who have earned it, who can decide for themselves where to place it and are not inclined to vomit on it? If you want proteas, go to Kirstenbosch.
James Greener
28th November 2008.
