Stop whining and follow the big bucks

Jeremy Thomas No matter how rotten the state of the globe, there is still enough money sloshing around to chase up the price of even the most unlovely asset.

From the graph of the Dow Jones industrial average, you would think nothing concerns investors in the 30 largest companies in the US. The same goes for the FTSE index of the 100 biggest groups listed in London.

Look closer, however, and you may start to glean some sense from what outwardly appears to be bizarre behaviour. We all know how bad things are in the developed world, so what is keeping their markets afloat?

In the case of the US, buyers may be less interested in the domestic performance of Coca-Cola, Microsoft and Procter & Gamble than they are in the potential of these and their fellow multinationals to grow in hot-ticket emerging markets. Just watch Walmart to see where it thinks its next growth spurt is coming from.

And in the dear old UK, investors probably care little for the performance on home soil of listed companies - what matters to them is that the planet's biggest miners choose London for their primary listing, and that commodities remain the sexiest growth assets around. Add a bit of corporate action to shake things up, thanks to Glencore, and the resources sector has never looked juicier.

Of course it will all come crashing down - the only question is when. In the meantime, one suspects that the biggest moaners are the ones who aren't busy making a killing.

Here's a typical whinger, one Giuseppe Macondo Fionda, reacting to another great piece of polemic by Matt Taibbi on rollingstone.com:

"America now looks like some kind of bizarro nu-Warhol work that blends elements of the neo-Russian oligarchy, a Soviet gulag that kills people by spreadsheet rather than by labour camp, 1930s Italian corporatism, Gordon Gekko on crack and Apocalypse Now, maybe with Charlie Sheen as the leading role. All the while, a majority of Americans seem to be comatose or have given up entirely the fight."

Fionda has lost the plot. This is not the time for whining. By all means beef up your short positions, ready for the big shred, but for pity's sake realise that markets right now are in one huge macro trend sweeping all before it.

The fundamental economic problems facing the US won't go away. Reuters on Wednesday reported that the US budget deficit is estimated to hit $1.65-trillion this year, or almost 11% of GDP. US borrowing could reach a legal limit of $14.3-trillion by mid-May unless the ceiling is raised, "potentially triggering a US debt default".

Obama's officials warned that failing to lift the debt limit could cause an "Armageddon-like" collapse in financial markets, said Reuters.

Boo-hoo! Do you think the fat-cats at Goldman Sachs or JP Morgan are running scared at the sight of these statistics? The hell they are! They're knee-deep in "frontier" economies and resources with the best of us. Check out the Dow and the FTSE, never mind the MSCI emerging markets index.

Certain Sad Sacks may think we're still in a global recession. Think again. Nearly $22-billion was paid in fees for global investment banking services in the first three months of this year, the largest first-quarter amount since 2007, according to Thomson Reuters data.

There is an unbelievable amount of cash in the financial system, thanks to the emergency bailouts made by central banks in the US, UK, eurozone and Japan. If it's not being paid in fees to banks, it is going straight into the highest-yielding assets to be found.

This week two big SA fund management houses, Sanlam and Investec, said they found little of value in the local market. I'm sure they don't, since the forward earnings of most companies hardly justify their current prices. Theirs is a sober and responsible assessment, which is quite correct under the circumstances.

However, I don't think many asset managers would be surprised if the JSE continues to bubble upwards. Waves of fresh dollars, euros and yen may well keep chasing the siren call of commodities producers and emerging markets in general.

In this scenario, look out for a run in gold shares, and it's about jolly well time platinum joined the party too.

Platinum was the second-worst- performing sector on the JSE (after construction) last quarter. If you're wary of chasing winners and look to buy low, you know what to do. Maybe.