Wolves at the door
Money Morning | 12 July, 2010
Dear Money Morning Reader,
Thousands of prospectors rushed to the Witwatersrand after gold was discovered there in March 1886. They begged, borrowed and stole to stake their claims in a dusty triangle known as Ferreira’s Camp – and were soon burrowing into the earth in search of one of the richest gold reefs in the world. A few fortunes were made, but thousands more were destroyed and summarily dumped with the rest of the mine tailings. Even in the late 19th Century fortune favoured those with money. If your claim looked promising you could borrow against it… And – provided you could keep your mills running at full power – you could indefinitely keep the wolves from your door.
Today the wolves are howling across Europe – camping outside the city gates of Portugal, Italy, Ireland, Greece and Spain. But these wolves aren’t the only threat to economic stability. As governments take extraordinary measures to keep the hunters at bay –raising taxes and cutting benefits – they risk revolt from within their walls. Citizens in Romania have already overturned pension cuts, while Greece is bracing for ongoing civil unrest as the extent of its cost-cutting measures hit home.
As we trawl through this week’s economic data we couldn’t help but wonder whether South Africa’s manufacturing sector was strong enough to keep the circling vultures at bay. Standard Bank Economics summarises the feeling in their recent economic update titled: Annual growth masking underlying weakness in manufacturing production. They’re not surprised with the latest PMI number, which slumped to below 50 despite positive manufacturing statistics. The strong improvements across a number of producing sectors are due to the extreme lows achieved through recession – something economists refer to as a ‘base effect.’
*************
Nic Best could bank you R35,000 this year
If - and ONLY if - you meet four strict conditions then you too could start using Nic Best to sneak into the financial markets in your spare time...
And FORCE them to pay you R35,000-R40,000 a year.
Discover Nic Best today.
*************
Output fell by 22.6% year-on-year in April 2009 and by 17% y/y in May. So the 8.7% claw back in April is nothing to write home about. “The base effect is exaggerated by weakness in the indices of motor vehicles parts and accessories, iron and steel, and the petroleum sector last year,” observes Standard Bank. On a quarter-by-quarter assessment South Africa Inc is actually going backwards, with a 0.9% contraction over the first three months of 2010. The manufacturing sector felt the pinch at both exporters and importcompeting manufacturers. South Africa’s trade partners are clearly suffering from the lasting impact of the global economic crisis. Export markets have less to spend on our relatively – thanks to a strong rand – expensive goods, while imports remain cheap as foreign manufacturers try to keep their heads above water.
Can you really trumpet an economic recovery under such conditions? Were the industry to surge 20% next month we’d still lag yesterday’s volumes… Under the ‘recovery’ mooted by so many economists we’re not yet producing at pre-recession levels! With both industrial and hard commodity shares taking strain, you might have to turn to Mother Nature for future profits. Land is the subject of ongoing debate in South Africa, as the ruling party struggles to redistribute farm land without Zimbabwe-like side effects. In the interim farmers are propping up the economy. “Two years ago food shortages caused riots in several developing countries,” writes James McKeigue, in today’s feature article. Now they claim surpluses could make the agriculture sector unprofitable! Turn to page 16 to find out why McKeigue believes agriculture shares will outperform regardless of how the supply/ demand equation pans out.
PS. There’s an incredible program out there that uses a scientific 100 year old secret to find the next big movers on the JSE by looking at the past “cycles” of the stock market. To find out how it can turn your portfolio’s performance around… just carry on reading…
***************
Market update
Click here for the latest stock market news and charts.
Market Data to go here.
---------------------------------------------------------------------------------------------------------
Looking for the Best Investment Opportunities in South Africa & the World Today?
------------------------------------------------------------------------------------------------
Our aim is simple: to give you intelligent and enjoyable commentary on the most important financial stories, and tell you how to profit from them. Learn how to grow your wealth and protect it. Learn how to make it, keep it and spend it. Click here to visit MoneyWeek Online.
--------------------------------------------------------------------------------------------------
More Money Morning classics and recent rants...
Take a look at some of our most popular past articles:
Email me and let me know which articles are your favourites. matthew@fsp.co.za
*************
Did you know that you can have immediate online access to MoneyWeek Online? You will qualify instantly to receive 3 FREE issues...Don't miss out visit www.moneyweekonline.co.za
*************
Know someone who'd like to receive the Money Morning email themselves? Simply forward the following link to anyone you think could benefit from our daily service: www.moneymorning.co.za
PRIVACY POLICY: “We HATE spam, possibly more than you do. That’s why we will never, EVER pass your details on to any third party companies. That’s a promise.”
Since Money Morning is completely free email, we necessarily fund our operation with occasional – and carefully selected- advertising and offers. All of these opportunities are ones we believe you will find interesting. However we will keep our promise and NEVER give your email address to any other companies.
*************
Copyright (c) 2010 Fleet Street Publications Pty (Ltd
You are receiving this email because you have given us permission to contact you.
Do you have a query? Please do not reply to this email. Messages to the sending address will not be seen by customer services. All email correspondence should be sent to: queries@fsp.co.za Customer Services 0861 114 365
Disclaimer: There is no magic formula to getting rich in the stock market. Like all forms of investment, success in selecting stocks with the best prospects for price appreciation can only be achieved through proper and rigorous research and analysis of publicly available company and industry filings and news releases. The opinions in this advertisement are just that, opinions of the author.
Warning: Stock/option trading involves high risks and you can lose a lot of money-you may even lose all the money you invested. So please, do not invest with money you cannot afford to lose. Past Results are not necessarily indicative of Future Results
The information in this email is confidential and may be legally privileged. It is intended solely for the addressee. Access to this email by anyone else is unauthorised. If you are not the intended recipient, any disclosure, copying, distribution or any action taken or omitted to be taken in reliance on it, is prohibited and may be unlawful. If you are not the intended recipient please return the message to the sender and delete it from your records. Alternatively, please contact Fleet Street Publications Pty Ltd on Customer Services 0861 114 365.
Enjoying this article? Sign up for our free daily email, Money Morning, to receive intelligent investment advice every weekday. Sign up to Money Morning.