From Gary Booysen on the top floor...

Dear Money Morning Reader,

All across the globe, policy makers are patting each other on the backs and sticking feathers in each others hats. Congratulations all round for a job well done. Financial disaster avoided thanks to their brave, money minting, efforts. They’ve managed to put a bottom on the most gut wrenching crisis since the Great Depression. But this back slapping powwow could be about to come crashing down. Stephen Roach, chairman of Morgan Stanley Asia, has identified three signals that could mean this fragile recovery will go up in smoke.

The first, while asset prices have risen spectacularly over the last year, the toxic debt that needs to be written off by banks and other lending institutions hasn’t vanished. The economic data has improved, and the stock market has rocketed, but the International Monetary Fund reckons $3.4trn in troubled assets still needs to be marked down. So far we’ve only seen about half that amount wiped off the books. This means that credit providers are going to have a tough time releasing the stranglehold they have on borrowers throats.

While business’ and consumers alike turn blue in the face, government isn’t in much better shape. Greece’s recent debt trouble is just the first wave of national crises we’re likely to see. In fact, the sheer breadth of the global recession was staggering, with 75% of the worlds economies thrown into reverse.

After widespread government failure, the final signal, in Roach’s trio of apocalyptic predictions is the inequality of global production and consumption. It’s an accident waiting to happen. Asia, centered on manufacturing powerhouse China, continues to churn out goods, but the western world, and more specifically the debt riddled US consumer, is unable to foot the bill. This cataclysmic imbalance must eventually come to a head and so Roach predicts a second collapse of international markets.

With such a bleak outlook there’s only one place to have your money: Investment Solutions Superior Cash Unit Trust Fund. This fund seeks to out perform Money Market funds while maintaining a high degree of liquidity and capital preservation. Ranked nine out of 36, this fund has still managed to return a 8.41% return over the last year and is super low risk. For more info check out: www.investmentsolutions.co.za.

Grab your slice of 48.58% performance for the year…

It’s more and more difficult to find value in the markets these days. Some think the rally of 2009 was a little bit steep. We know the defensives have run hard and most of the retailers, pharmaceuticals and food producers are hitting all time highs. So where to find value? Well the Top 40 is still trading some way off its all time highs and as Warren Buffett, possibly the greatest value investor of all time points out: “It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

This is exactly what Dr Adrian Saville’s Cannon Core Companies Fund is all about. The funds objective is to grow wealth over the long-term by investing only in top 40 blue chips. The idea is, by increasing the portfolio’s exposure to certain “outperforming” sections of the Top 40, the fund has the opportunity to eat its benchmark: The Alsi top forty tradable index.

Saville, Cannon Asset managers Chief Executive Officer, has thrown down the gauntlet to all passive trackers, putting his own reputation on the line. Finally, we have a fund manager that will take on the passive tracker mano-a-mano. The rules of the contest are clear. He must have at least 75% exposure to the JSE. In his belt he has but one blade, he can use derivative products to reduce risk but the weapon is blunted. His mandate is clear: No gearing is allowed to enhance profit.

He aims to prove himself over three to five years by delivering superior capital gains as well as high dividend yield. The results speak for themselves: Over the last three, six and twelve month periods he’s beaten the Alsi Top40 by 6.61%, 3.54% and 6.90% respectively. An amazing victory when you consider that over one year the All Share Index has risen a massive 41.68%.

For more info you can contact Cannon Asset Managers on 011 463 3140 or email info@cannonassets.co.za.

Turning to the markets

The JSE all share index grew a colossal 3.32% yesterday. The gold mining index gained 1.46%. Resources added 2.15%. Banks and financials grew 0.51% and 0.87% respectively. Industrials bounced 0.26% and the platinum mining index jumped 2.79%.

London's FTSE100 shed 0.33%. The Dow Jones traded flat, down  0.09% and the Nasdaq fell 0.11%.

Tokyo's Nikkei closed down 1.05%. Hong Kong's Hang Seng lost 1.44%.

Brent crude is currently trading at $78.63 per barrel.

Spot gold's trading at $1,135.92 and platinum was last quoted at $1,570.00.

And here's how the rand is performing against the major currencies:
R/$7.52
R/₤11.31
R/€10.27