Governor Mboweni seemed rather distracted yesterday when he rambled his way through the speech and finally got to the bit about cutting rates by a half percent. His heart was clearly not in the task and he almost failed to read out the crucial bit. Perhaps he, like the rest of us, has no interest in the long list of meaningless numbers and alleged facts and statistics that someone has laboriously copied onto the page for him. Or maybe he is looking forward to a spell in a garish shirt on the beach close to a supply of drinks with fruit and little umbrellas in them.
In fact no one was that worried by what our central bank governor had to say but strangely later in the day everyone panicked on the news that the US government decided that it was not keen to hand over cash to the chaps who make cars that US citizens don’t buy. The issues about supporting that once great industry are deep and complex and I am sure that other areas of manufacturing will soon also be getting on their bikes to Washington with a hard-luck story. Understandably these metal-bashers are aggrieved that the bankers were right at the front of the queue and received considerable state-support for their anxiety about their vulnerable bonuses. They just can’t understand why no one will send Ben Bernanke to hover over Detroit with large sacks of notes
For most of the week JSE investors chose to declare that the bear was dead and that they could see nothing but value wherever they looked. Resource shares enjoyed particular attention. The All Share index made a determined run at the 22 000 level. But the aforementioned news has reversed things a bit as we start the silly season. Next Tuesday’s public holiday really sets the mood until about the middle of January!
It would be interesting to compile a list of events that are alleged to have caused a noticeable reaction in the markets in these last few months of overall collapse. I suspect that there has been no predictable response in the various markets to items which were apparently broadly similar. One day a failing bank is bullish the next day a flailing regulator is bearish. One day tax collection shortfalls are good news but then the next day the rising government borrowing requirement is bad for interest rates. But through all this noise there shines one crystal clear signal. Business is slowing down quickly and profit growth if not profits themselves are under severe threat.
One day of course this economic cycle will reach the bottom and a recovery will start. It is alleged in some circles that the market’s recent recovery is an example of its ability to forecast the future. In other words the market now judges that the worst is over and it can see that bottom if not the recovery already. We bears are never sure about this. We fret about pessimistic trading statements and rising unemployment and are doubtful that the prime interest rate at 15% rather than 15.5% will have any effect except to make income earners feel poorer and less inclined to spend. We also are horrified by having one’s neighbours dying of thirst and illness and feel that denial is an appalling response. I therefore see no need to rush about buying into this run which I believe will soon become exhausted. Just wait for those pull back periods and new lows and resume the nibbling and topping-up program.
The next edition of Tidemarks will I hope be written while gazing at the Indian Ocean over the keyboard. When that will be is hard to predict, however, as the forthcoming house move is not unfolding as a smooth and well-marked highway. Internet connection is one of the many potholes to be negotiated. Getting the fridge plugged in and the Castle quarts into it enjoys a much higher priority.
James Greener
12th December 2008.
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