Here Be Dragons...

In late US trade yesterday, stocks on the Dow Jones and S&P500 surged in excess of 6% as President-elect Barack Obama picked New York Federal Reserve Bank chief Timothy Geithner to replace Henry Paulson.

I don’t follow US people too much, but judging from the market reaction, he comes with a good reputation. But on the subject of whether one man can stop what is fast looking like a protracted financial crisis – the jury is still out.

What I thought was an interesting ‘leading’ indicator was the difference in price movements in the platinum and gold prices yesterday. Gold the traditional safe haven, platinum the industrial and ‘luxury’ metal for jewellery.

The gold price shoots up to US$801 an ounce while platinum is marginally firmer around US$824… So in other words the ‘safe’ metal has gone up while the industrial metal (or luxury metal – depending on how you look at it) – which is supposed to indicate that consumer and business confidence may be returning hasn’t got near the same level of ‘emotional’ support from the markets.

Hhhhhmmmmm wonder if the real market is telling us something there>

Don’t get me wrong, I think at these levels the market may be offering some value for long term investors. I’ve been buying index tracking funds for some offshore exposure as well as some SA equities for a while now – but those have got a longer term investment horizon. The point is – if you’re planning to buy in on the rally in the US – I get the sneaky suspicion on my investor map that it should be marked with the Here Be Dragons (HBD) symbol.

Just something else that is worrying me around short term shocks to the SA market… Maria Ramos has just been appointed as the new CEO of Absa (As of 1 March 2009). Ramos and Gill Marcus have denied that there will be any conflict of interest with Trevor Manuel (Ramos’ partner). There is some concern that Ramos being appointed to a major bank may indicate that Manuel may step down next year – we all remember what happened the last time rumours started circulating that he had resigned with all the other cabinet ministers….