ARTICLES

The Coming Blow-off

At the start of 2021, it is as well to stand back and consider the context of where world markets are as they slavishly follow Wall Street up to new record highs.  Consider the 12-year chart of the S&P500:

The chart shows that the great bull market which began in March 2009 is on-going. It is moving within a clearly defined channel. The upper channel line is established by no less than 8 touch points (marked with the red arrows) - and the lower channel line is exactly parallel to it. What is interesting is that this lower parallel channel line precisely connects the initial low of March 2009 with the COVID-19 low of March 2020. This is not just a coincidence, but a strong confirmation of the validity of channel lines as a method of analysis.

Fundamentally, the strong upward trend is being driven by Biden’s clear win, both of the presidential election and now of control over the US senate. This clears the way for further massive stimulation of the US economy and share prices are eagerly anticipating this.

The bulls have taken heart from the fact that the market has, once again, made a startling recovery. If you consider the COVID-19 downtrend as a technical aberration, rather than a bear trend (which is our position), then this bull market is now almost 12 years old – an all-time record by some distance. The bears have been consummately beaten into submission.

Alan Greenspan’s 1987 innovation of pumping cash into the economy every time there was the possibility of a severe downward trend has established a pattern which now dictates economic policy. It has become politically impossible for the US Government (either Democrat or Republican) to countenance a recession. Every time one threatens, monetary policy stimulation supported by lavish quantitative easing (Q/E) becomes the order of the day. There can be little doubt that the new Biden administration will conform to what has become the unwritten economic policy norm.

This, of course, makes a huge bubble in shares not only possible, but virtual certainty. For many years now we have been predicting an unprecedented blow-off in equity prices based on the excessive printing of money in the world economy. As the bulls gain confidence, the bears retreat into obscurity and investors begin to believe that recessions and bear trends have been eliminated by new and ingenious economic policies.

The JSE Overall index, despite the parlous local economic conditions and the overwhelming second wave of the pandemic, has now also made a new record high:

It has been well said that, for the next Kondratiev wave to occur, investors must first forget about Kondratiev. In 1987, after the crash, everyone was talking about the Kondratiev wave. Today, 33 years later, nobody even knows who Kondratiev was.

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PDSNET ARTICLES

Sibanye Revisited

In these uncertain times, when nobody really knows to what extent Trump will back down on the international trade war which he has initiated, many investors are moving into precious metals as a hedge against the weakness of paper currencies (especially the US dollar) and paper assets like equities and bonds.

The problem

Smart Local Investors

The last two months have been wild on the markets – mainly because of Trump’s ill-advised, on-again, off-again tariff policies. The issue now is:

Will this morph into a full-blown bear trend? Or is this correction almost over?

From his election victory on the 6^th of November 2024,

Jerome Powell

The Federal Reserve Bank (“the Fed”) is completely outside the control of the President and Executive Branch of the US government. The chairman of the Fed is appointed for a renewable 4-year term by the President. The President cannot remove the Chair without cause. The current chairman, Jerome Powell was appointed by Trump during his first term as President and reappointed by

Uncertainty Soars

Investors are by their very nature risk takers, but they are always trying to reduce the risk which they have to take to a minimum. Donald Trump, with his threat of an international trade war and his on-again, off-again tariffs has significantly increased the level of risk in markets across the world. This can be seen in the extraordinary volatility in the S&P500

Liberation Day

Trump has done the unthinkable. He has deliberately engineered the collapse of the US and world stock markets in the nonsensical belief that somehow an international trade war will make Americans richer. Nothing could be further from the truth. His actions have taken the S&P down from its all-time record high of 6144.15 on 19^th February 2025 to Friday’s

The Creation of Money

The money supply of a country is a symbol of the goods and services of that country. Obviously, if the size of the money supply is increased more rapidly than the real growth of its economy, then you have more money chasing the same goods and services, resulting in rising prices. Since, over the long term, the only organisation that can create money is the government,

V-Bottom is likely

The 10% collapse of Wall Street, which is a direct result of Trump’s random policy of on-again, off-again tariffs, is very similar to what happened to Wall Street in February/March 2020 when investors tried desperately to accurately discount the impact of the COVID-19 pandemic.

Normally, corrections in the market

The Trump Correction

It is relatively unusual for the activities of American presidents or what they say to have an impact on the New York Stock Exchange, especially during their first 100 days in office. Trump, however, is the exception. His confused, on-again, off-again rulings on tariffs have rattled the market. Markets hate uncertainty and even Trump himself doesn’t appear to know exactly

Dividends

Investors know that the return on a share is made up of a capital gain plus the dividend. Private investors are mostly attracted to the prospect of making a capital gain on the shares which they buy and do not often consider the dividends. What they perhaps do not realise is that a capital gain is actually just the dividend in a different form.

Quarterlies

One of the major differences between the US equity markets and the JSE is that listed companies in America are required to report every 3 months, not every 6 months as they are on the JSE. The quarterly reports of the S&P500 companies are closely followed by investment analysts and predictions are made for their profits.