Jozi, Jozi. 26o 12' 16" S, 28o 2' 44" E. I guess it was no surprise that we sold off aggressively yesterday. I agree with that mad fellow, Cramer, who on his show last evening said that this was a rain delay. Using a baseball analogy that is equally apt for cricket, a rain delay, although this looked more like a heavy downpour that saw the match cancelled for the day, at least that was the case for the bulls. The IPL started yesterday. Nice. Levi thrashed some quick runs in his sides win, the Mumbai Indians. I am a Royal Challengers Bangalore guy, AB de Villiers, Chris Gayle, my current favourite, Virat Kohli a future Indian legend. That is my team for this tournament, partly because they started out with a whole lot of South Africans. They have enough.
Enough cricket talk, back the basics of markets all falling down yesterday. And the reasons were pretty simple, I could find three, firstly the hangover from the Federal Reserve no more stimulus interpretation, that possibly was the main reason. Secondly, a Spanish debt auction that went off worse than anticipated, possibly on the talk from the upper echelons of Spanish government that perhaps a bailout rather than more austerity could be a "better idea". Hmmm, would you rush to buy Spanish bonds? No. Well, at least Cristiano Ronaldo dos Santos Aveiro (I mean Ronaldo) put that right for Real Madrid and Spain last evening. Thrashing that little team from Cyprus, Apoel FC that is sponsored by MTN, that was two from two for MTN yesterday. Reason number two, the market getting sold off yesterday, Spain and their struggle with the budget and their debt woes.
Reason three, the ECB had an interest rate decision yesterday, which obviously saw no change to their interest rates, but was revealing with the commentary. I am a huge fan of the new governor, Mario Draghi, who has been at the helm since November last year. I thought that Trichet walked away with a bruised close, the fact that he could not admit fault and lower rates after having raised them. But other than that, I have an enormous amount of respect for all central bankers. The ECB yesterday said that it was a little too early to talk about the central bank exiting its emergency loan program. So, expect more central bank intervention. See this Bloomberg BusinessWeek story: ECB's Draghi: Premature to talk of loan exit. European banks were told that on top of the cheap money lent back in the LTRO program, they would still need to raise more money for reserve requirements. Eish. Banks sold off solidly. Upon reflection, too much and too little stimulus talk seems to have the same impact on Mr. Market. Send out a search party for Goldilocks please, she can identify baby bears porridge, that would probably help everyone make up their minds.
Commodities sold off heavily as the Dollar gained a whole lot more support, resources as a whole here in Jozi yesterday lost three percent, phew it was tough going. The gold stocks were trounced, down four and a half percent as Bernanke and the FOMC minutes revealed that he had thought said, "read my lips, no more stimulus". Banks lost two and a half percent. Industrials two and a quarter percent. The overall market landed with a thud, down 788 points or 2.3 percent to end at 33404. Wow. The sellers are aggressive. The giant sell button was pushed hard.
New York, New York. 40o 43' 0" N, 74o 0' 0" W. Bam. Markets sold off heavily all the way through to midday, and then bounced off their worst levels, BUT still closed down a percent for the broader market, and a percent and a half worse for tech stocks. There were ADP employment numbers, those clocked 209 thousand jobs for the month of March, but that seemingly was a sideshow. I am not too sure why it did not get the excitement that is associated with the jobs report (due for release Friday), perhaps the fact that the number was a fairly good meet had something to do with it. An ISM services index release came in lighter than anticipated, that was disappointing, but in reality, the number clocked 56, which is comfortably above 50. Although lower than the prior months read.
It is quite fun to read through these releases, I don't know how many people are surveyed in this particular one, but often there are anywhere between 500 and a number of thousand respondents. Reliable ones at least. March 2012 Non-Manufacturing ISM Report On Business, check it out. You will see improving employment, inventories and imports. You will see backlog of orders moving in the wrong direction. But other than that, you can see that all the directions are either growing, faster, increasing or too high. I guess all you need to know is that this was the 27th consecutive month of non-manufacturing sector growth. That sounds like a good thing, even though it did not meet expectations. But of course, I always get accused of sugar coating and being too optimistic. It almost always turns out better than you think. Unless you are Turkey and Egypt. Who used to be the centre of the universe. What happened to those countries? Another debate entirely.
When I read this via one of my most bullish aggregators, Carpe Diem, U.S. apartment vacancy rate falls to decade low, I wondered whether it was good, or bad news. Because you might have heard me say often enough that the same data can be interpreted by two separate parties according to their sunny or sad outlook on life. I suspect that the fact that rental vacancies are scarce are good for the rental unit holders and indicate that the market is tightening, but at whose expense? Are the folks moving into the rental units those folks forced out of their homes?
Perhaps, I can't see anything or any report suggest that, remember that American home ownership under Bill Clinton ticked up to nearly 70 percent, for native Americans, the highest that it had ever been. I could not find any recent data from the US census website, but guess what, in my web search, none other than Prof. Mark J Perry (the Carpe Diem blog guy) popped up with a graphic that he managed to obtain from the US census website. Which pointed to the lowest US home ownership since 1997 at the end of 2011, 66.15 percent, check out the blog post from the beginning of the year -> Homeownership Rate Falls to Lowest Level Since 1997; The Homeownership Bubble Is Still Deflating. So, without being too cute, it is easy enough to see that home ownership falling and rental shortages forming, the two are of course linked. What is bad for some, is good for others.
Currencies and commodities corner. Dr. Copper is trading slightly higher at 379 US cents per pound, the gold price is higher after having taken a drubbing, last at 1626 Dollars per fine ounce. The platinum price is also on the up, after equally having taken a drubbing, last at 1603 Dollars per fine ounce. The oil price is last at 102.26 Dollars per barrel. There is recent news of a pipeline closure, that may impact on oil prices through the weekend. The Rand is weaker, last at 7.79 to the US Dollar, 12.39 to the Pound Sterling and 10.25 to the Euro. We are flat, after having been slightly better. I did notice that Spanish bond yields have weakened again, the weakest point since the last LTRO. Hmmm, perhaps too much anxiety, perhaps warranted.
Parting shot. OK, this is perhaps the most tech interesting story of the day, Google: Here's What Our Sci-Fi Glasses Look Like. I often say to my daughters, perhaps you won't even have to learn how to drive, because by then, cars would have learnt to drive themselves. Perhaps that is a little further out. But watch the video, as Paul said to me, this is actually not really new, the methods, available to all of us via our smart phones are not new, but how we all use them, that is actually what matters. See, life will be so much better for the new generation, whether or not the old generation embraces it or not, that is another question entirely. And that older generation includes me too. I am quite receptive to technology changes and embracing them, I am also quite receptive towards chocolate. On that note enjoy your Easter weekend. Be it filled with rugby festivals, Easter egg hunts or prayer time, enjoy it all. Hopefully those activities have family involved too!
Sasha Naryshkine and Byron Lotter
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