Market Talk by monkey6


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									Market Talk
ISSUE 5: November 2009

If you are not sure what the markets are doing... Don't worry, every week Greg gives a weekly market update.
Good buy October: Phew! We made it through the 2 worst seasonal months in the markets and we came out ahead, by close on 4.5%. That’s a fantastic return and really there were only a couple of days in the two months that shook our confidence. Perhaps I should say your confidence because I was more of a sceptic than most and I did warn of possible road bumps ahead in my quarterly blog about “the Grinch who stole Christmas”. I did say that if we didn’t get an October pull back we might not enjoy what is often called the “Santa Claus Rally”. However when we plan a journey we don’t let pot holes in the road make us cancel our trip. We just keep a look out and drive defensively. So when we plan our investments we take the same precautions and map out our route ahead. As an aside I am often asked: What is a bull and what is a bear? So often when we hear or read about markets the jargon that is used is very confusing and so I would encourage those of you who are still learning about investing to use the Investing Dictionary that is on the FNB site. As for a Bull he is an investor who buys something with the anticipation of it going up in price so that he can sell it at a higher price and so profit. A Bear is an investor who sells something that he doesn’t own with the anticipation of it going down in price and so enabling him to buy it back at a lower price and so profit. Now after 30 odd years of trading experience I have learnt that both Bulls and Bears have their place and there is a time for both to be respected. However experience tells me that in being a bear we lose out on far too many opportunities. It’s like cancelling that trip because of the pot holes. So I guess we look to invest in anticipation of the Santa Claus Rally. In looking at areas that might be of interest let’s look at last week. In his mini budget the finance minister made mention of the fact that he felt the rand was too strong and

if he could he would like to intervene. This perhaps indicates that given the chance the Treasury would like to see it weaken. The dollar tried to rebound and we did see some weakness in the Rand. If we look at the Rand price of Gold it was higher in spite of the fact that Gold did pull back a bit. Thus a weaker rand is going to benefit those companies who are principally involved in exports. In this line the commodity stocks stand out and for those that are still driving defensively something like British American Tobacco is highly influenced by movement in the rand. We also had GDP data out in the US which showed that the US economy grew at a massive 3.5% in the 3rd quarter. That is a huge number for the world’s largest economy and technically it means that the US has come out of its recession. Look a lot of that growth was stimulus induced but they should still be able to follow up with another positive quarter. This helps build confidence and as we know stock markets thrive on confidence. Shares are by no means cheap but if we get signs of the other economies emerging from recession, then we can expect earnings in general to start improving. We also had Inflation data out which both the CPI and PPI numbers were encouraging and with demand for credit falling precipitously it does have economists starting to talk about the chances of a rate cut on at the next Monetary Policy Committee meeting on the 17th of November. A cut here would be a real bonus because at this stage the market is certainly not factoring this in. With South Africa’s jobless rate at such a high level a rate cut would really help and because we are running behind the global recovery. So a rate cut really isn’t out of the question, here’s hoping. A cut in rates would benefit the whole market but perhaps Financials would benefit most. In summary the Santa Claus Rally can still happen but plan your trip and don’t forget your stops. Let me leave you with another trading rule: Bulls make money, Bears make money but Pigs get burnt. {So temper greed in your planning.} Cheers and trade well. Greg Volkwyn.

Did you know...
That you can now set up a scheduled transfer to your Share Investing account? This way you can always maintain your account balance and build up a greater cash balance to buy more shares! HOW? Log in to Online Banking and click on the ‘transfers tab’.

First National Bank - a division of FirstRand Bank Limited. An Authorized Financial Services and Credit Provider (NCRCP20)

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