From Gary Booysen on the top floor,

Dear Money Morning Reader,

Most of us know it’s a great time to buy. So, what’s the problem? This year has presented us with some great opportunities but people are just too fearful of a further slide to become seriously invested. It doesn’t help matters when you hear the likes of Andrew Smithers saying he has no time for “those who claim that US equities are cheap”. He thinks, after looking at earnings and asset valuations, “US equities are 40% overvalued”.

But there are always places to make money!

I always laugh at the guys who’ll paint all equities with the same brush. In every market there are amazing opportunities. While the cyclical shares may be presenting a risky play at this point, inflation linked investments look set to run.

The rocketing gold price shows the level of fear out there – especially in the dollar based currency. And as currencies begin to lose their value we’re going to see inflation come back with a vengeance. Gold is an inflation hedge and trust me we’re looking at serious inflation in the longer-term (unless central banks have the guts for some serious sterilization policy).

So, whatever you’re looking at, bear in mind inflation.

Eskom is proposing further tariff increases over the next three years on top of its already excessive hikes. The supply of electricity in South Africa is tenuous at best. And when supply is short; prices will rise. Unfortunately the ubiquitous nature of electric power will filter through to almost every product on the market.

Add to that the ongoing labour difficulties. Strikes threaten to cripple the economy permanently and the response so far has been to hand over massive increases at levels well above inflation.

This is all without mentioning the higher oil price. A few years ago people would have shuddered at $75.20 a barrel. But after touching $146.12 halfway through last year we’re grateful to be sitting at these levels. 

So what should we do?

Any number of asset classes will perform well in inflationary environments but the one I like at the moment is property. The JSE property index has only risen 1.6% this year to date. This is compared to the Alsi’s 20% gain. The property sector is lagging in this recovery. Get into physical property, listed property, holiday homes, time share... anything that will get you into the market.

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Turning to the market...

The JSE all share index closed up 0.66% yesterday. The gold mining index gained a huge 5.19%. Resources added 1.66%. Banks and financials weakened 0.8% and 0.45% respectively. Industrials lost 0.13% and the platinum mining index bounced 2.82%.

London's FTSE100 jumped 0.51%. The Dow Jones shed 0.31% and the Nasdaq traded flat, down 0.09%.

Tokyo's Nikkei lost 1.29%. Hong Kong's Hang Seng closed down 0.63%.

Brent crude is currently trading at $78.59 per barrel.

Spot gold's trading at $1,093.31 and platinum was last quoted at $1,361.00.

And here's how the rand is performing against the major currencies:
R/$7.67
R/₤12.69
R/€11.39