While we have all been looking elsewhere, the bull has been hoofing balls into the back of the net. The JSE All Share index has even pierced the 28000 level after a quiet and unnoticed 10 day climb which included a public holiday and a close-out. The dollar gold price is nosing northward and exploring new territory. The rand has outperformed both the euro and the pound sterling quite markedly so far this year – although it is reasonably steady versus the US dollar.
If you need something to fret about have a look at what the bear is up to in the Chinese stock markets where he has clawed 20% out of it in the past two months. Are we wrong to be placing too much hope on China leading the world out of recession with its insatiable demand for raw materials? Another worrisome feature is that despite eighteen months of the official interest rate being held at almost zero and bucket loads of supposedly stimulatory cash being tipped into the economy, the US is not yet looking all that lively. US citizens are still rightly worried about getting and keeping a job, paying the mortgage and reducing debts incurred at much higher levels. Consuming is not on their agenda.
However, back here in the kingdom, the harbour strike is over, the ships have docked and the containers have been unloaded and unpacked just in time to satisfy a surging demand for symbols of patriotism. Tons of non-FIFA licensed colourful flag-bedecked trash for decorating your car, house, dogs and children have engulfed the nation. Visitors too are catered for and every back-pack has a dreaded vuvuzela in home strip poking through the flap. Wooden giraffe sales are nowhere. Clothing retailers must have been smiling this week too with the surge in demand for winter wear from visitors who arrived believing that old line about “Sunny South Africa”. The nasty cold snap that swept over the southern tip is a suggestion that the global warming models are still short of some good science. We may have set a record for the coldest venue for a SWC match ever played.
My earlier contention that there was not going to be any beer available in the stadiums was confirmed. The official supplier of the alleged globally branded beer-like beverage was so worried that 20 fake Dutch fans in sponsored orange dresses might be threatening his insipid brew that he ran off bawling to FIFA. Humour and intelligence played no part in that self-important organisation’s response and armed police were used to deal with the problem. Without that magnificent misjudgement the pretty lovelies would have raised no more attention than any party of girls in short skirts deserve. Now the whole world wants to see the pictures and taste the beer they were promoting
Is this really the base of another bull run? The factors which make that seem unlikely include the fact that the historic price earnings ratio of the All Share index is rich at 17.5. At the start of 2009 it was on 9. Very few company announcements in the last few months have been bubbling with excitement about their business prospects in the near future. The plus side of course is that some companies have tried to slim down during the recession in preparation for a speedy recovery when the orders begin to flow. The dividend yield of the same index is also a very meagre 2.2%. Some of this parsimony has been the result of attempts to restore reserves and increase dividend cover but that is still not a great yield even when compared to taxable interest at around 6%pa. Generally this is not value territory and not a typical starting level for a major bull market.
It will be a relief to watch the oval ball again even if the ‘bokke and the Italians will have to trek westward to Witbank for the game. And the sardines have arrived. May you also have a great weekend.
James Greener
17th June 2010.
