Buy on rumour, sell on fact

Last week proved to be a good one, with trading volumes picking up nicely and some decent local corporate action to ignite all the punters’ attention.

We also had some fun and games with Aquarius Platinum dropping 25% in one day after word that the government had called its chief executive away from an analysts site visit on Thursday after a fatal accident at its Marikana mine.

There’s never a dull moment with government officials and mines in South Africa. Luckily with its inward listing status, very few locals own the stock.

We also had the earnings season kicking off in the United States, with Nasdaq heavyweights Google and Intel pushing the tech sector higher. But the better than expected earnings were slightly overshadowed by some of the economic data that has started to look rather shaky and certainly points to a global economy that appears to be slowing.

Not even the news that BP had managed to cap it’s blown-out oil well managed to ease the growing anxiety in the market. There has even been more and more talk about a possible double-dip recession and with the yield on the two-year US Treasury bond touching a record low of 0,58%. This tells us the bond traders are certainly factoring that in. And I’ve always said the bond traders are the clever guys.

So what do we do? We’ve been net long on the portfolios and continue to run it for the next week as I believe that corporate America will continue to surprise to the upside.

Goldman Sachs are reporting earnings on Tuesday and who would want to bet against them shooting the lights out. I mean, you borrow at zero and lend at one, it can’t be too difficult to make money.

After the earnings season is over, then it will probably be difficult to find a reason to push these equity indexes up another level and then we can rebase the portfolios accordingly. More a case of “buy the rumour and sell the news”.

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