Seize these three “breakout stocks” – NOW!

On Friday, our penny share guru, Greg Lecoq, will unveil his latest penny shares picks

Getting into just one of them could be one of the smartest investments you make this year!

But you must hurry.

Once prices run up, you’ll have missed the chance of a lifetime.

Read about how to get Greg’s three new share tips now.

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From Gareth Stokes, MoneyWeek editor,

Dear Money Morning Reader,

The domestic economy rests on two key pillars, namely resources and consumer-driven expenditure. South Africa Inc won’t avoid recessions’ choking grasp if either of these pillars crumble. Right now the columns are near bursting point. Volumes have been written about the state of the domestic consumer, and you need only turn to the latest National Credit Regulator report if recoverybusting is your game. Close to half of the country’s 18 million credit-active consumers are struggling to meet their debt obligations. Retail sales, motor vehicle sales and house prices are all linked to consumer health and will stutter along until the consumer credit picture improves. 

The US consumer is under pressure too. The country’s retail sales fell by a disappointing 1.2% month-on-month in May 2010. “After improving noticeably from February 2010 to April 2010, consumer activity disappointed in May,” says Kevin Lings, economist at StanLib. He believes US consumer activity will struggle to reach its previous peaks due to sluggish growth in private sector employment! The only good news is excess inventory has mostly washed out of the system.

Local investors’ obsession with world markets – where the major threat is from the sovereign debt crisis in Europe – could count against them. Truth is the JSE is gyrating up and down on fears of a monster in somebody else’s closet! The real danger to local equities is closer to home, hiding in the latest mining volumes. “Mining production volumes (seasonally adjusted) in April 2010 were down 3.3% month-on-month and up only 2.9% year-on-year,” observes Standard Bank Economics. Commodity giants BHP Billiton and Anglo American make up a huge slice of the JSE All Share index and analysts are banking on strong earnings improvements through FY2010/11 to carry share prices higher.

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But according to Statistics South Africa, six of 12 mining activities reported month-on-month declines, including platinum group metals (down 8.6%), coal (down 2.6%) and gold (down 1.8%). The statistics also shed light on the contribution of various mined commodities. For example, platinum group metals account for 27% of total mining volumes, with coal accounting for a further 25%. Anyone who thought South Africa was all about gold will have to think again! May 2010 could provide equally soggy numbers due to the massive impact of the Transnet strike on mining company operations countrywide. Coal and iron ore producers were particularly hard hit as their product stacked up at ports and rail sidings. 

Can South Africa prosper against the double whammy of declining mining volumes and a stretched consumer? “Mining production is by its nature volatile from one month to the next,” continues Standard Bank, trying to generate some enthusiasm for the sector. You can calm your initial concerns by considering some of the prevailing macroeconomic trends. The leading economic indicators from the world’s largest economies still point to 5% GDP growth worldwide for 2010. And much of this growth centres in Asia, which consumes 39% of SA mining exports. Provided Chinese GDP growth (forecast at 10% through 2010 and 9.2% for 2011) remains robust, there’s reason for cheer.

We’ve injected some ‘cheeriness’ into this week’s cover article. James McKeigue takes a look at how the robotics industry will assist in maintaining living standards into the next millennium. If you want to learn how to make money from the coming “robot revolution” then his article (turn to page 16) is a ‘must read’!

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Market update

Click here for the latest stock market news and charts.

The JSE all share index slumped 1.03% on Friday. The gold mining index gained 0.21%. Resources fell 0.41%. Banks and financials weakened 2.57% and 1.68% respectively. Industrials pulled back 1.6% and the platinum mining index rocketed 3.14%.

London's FTSE100 climbed 0.6%. The Dow Jones traded flat, up 0.07% and the Nasdaq closed up 0.17%.

Tokyo's Nikkei closed down 1.27%. Hong Kong's Hang Seng lost 0.26%.

Brent crude is currently trading at $86.17 per barrel.

Spot gold's trading at $1,148.43 up 0.05% and platinum was last quoted at $1,748.00.

And here's how the rand is performing against the major currencies:
R/$ 7.42
R/₤ 11.44
R/€ 9.95

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