In the ongoing and seemingly limitless confusion about what is
happening and more importantly what may happen in the European markets and
currencies, the talking heads have seized with relish on the very obvious fall
in the price of gold. At last there is a significant number to waffle about and
“definitions” of bear markets have been dusted off and draped around the
shoulders of the yellow metal. Of course it depends entirely on which currency
you are pricing the stuff in and here in SA the fall has really not yet been severe
enough to attract the term bear. This is because the rand has sagged a lot in
response apparently to some heavy selling of our shares and bonds by
non-residents. For those who feel they
don’t have enough insurance coverage against politician stupidity and currency
weakness this is a handy dip for some more accumulation.
It is not difficult for bears to find sustenance just about anywhere
one looks. My own particular favourite at the moment is the news that all sorts
of bubbles may be bursting in China.
Reportedly the property market there is plummeting and credit is becoming
harder to obtain. One commentator remarks that the “BRICS are falling like
bricks” but despite our effective self-nomination and election to this club our
markets have not followed suit and the JSE will probably be among the smallest
losers of the year. Nevertheless if every Chinaman consumes just one fewer item
than the world was hoping for, then producers are in for a less than merry
Christmas. Perhaps, however, the news from the USA, still by far the biggest and
most important economy, is on balance rather more bullish. Sure, the debts and
cut backs in public services at all levels of government continue to provide
satisfying stories for us to gloat over. But there are signs that the worst may
be over and the less visually challenged bulls claim to have sighted some
indicators of returning jobs.
As matters stand, going into the last few days of the year the All
Share total return for 2011 is around two and a half percent. This is
disappointing and quite liable to be erased (or doubled) in a short burst of now
commonplace excitement between lunch and tea on any day between here and Hogmanay.
It definitely isn’t the 20% pa that we need to re-establish that wonderful
trend that we enjoyed for so long. Equity investing has become defensive and a
tad boring. Bonds, however, do seem particularly risky as both interest rates
and inflation are edging upwards.
One of the JSE’s big ideas driving their takeover of the Bond Market
was to make it more accessible and friendly to individual and small investors. While
the merger is now a fact, I am not surprised that the private investor has yet
to surge into that market. It was not that long ago that bond yields here were
well above 10% and some of us can remember 20% This would destroy a bond
portfolio bought at present levels. For the insistent there is a very
satisfactory ETF that tracks the government bond index and also be aware of the
newish ETF that buys just the so-called inflation linked bonds also issued by
the state. Both of these instruments offer almost risk-free (but not
necessarily loss-free) investing. In passing, it is amusing to read about the
dismay and panic that has followed the news that bond rates in several euro
zone nations are now above the allegedly disaster level of 7%!
Some of the earliest of the renamed streets here in Durban are back to their original names
following the unearthing of some legal glitch in the original process. Nothing
was said about that process being insensitive, unnecessary, costly and stupid.
The argument against changing a name from one now unremembered and possibly dubious
dignitary to another whose fame is equally mystifying has nothing to do with
disrespect for the newcomer but everything to do with continuity and history.
Surely the number of roads being created in this ever expanding metropolis far
exceeds the number of folk deemed worthy of being remembered by a length of
tarmac.
But now it’s time to go and watch some test cricket.
James Greener
Day of Reconciliation 2011.
