With a superb sense of timing, researchers in Britain announced that sunbathing was good for you just as the clouds rolled back to give us a teasing peek at what summer should be like. The IFSC was awash with market aficionados looking for spaces to sit out and catch a few rays without worrying about lathering up with Factor 45. The climactic conditions really suited the builders on site best - they were able to wander around in the Bruce Willis string vest look, while the unfortunate suits of the centre had to make do with rolling up their shirtsleeves and loosening their ties. Actually, the burst of sun made the IFSC seem even more like a resort city than ever. Everywhere you go you find people chatting in a selection box of languages which makes things really international - all we need now is for the Spar to start hiring out sunbeds around the dock for a true sense of the Mediterranean - pity it only lasted a few days.
The sense of joie de vivre generated by clear blue skies didn't extend as far as the markets, though. Once again, bonds look sickly although equities maintain a level of equanimity that I'm sure bonds wish they could emulate. I suppose summer should be a good time for the pharmaceutical sector, although I'm not sure whether suncreams come under the heading of pharmaceuticals or cosmetics. At the prices they charge for a tiny tube it should come under the heading of extortion. Naturally, the telecom sector is the one which the Irish punter is going to follow more closely than any other. I conducted a straw poll of non-market people this week - four out of six bought the shares but most, despite the urgings of their banks, didn't borrow any money and will not be selling soon. My friends were working on the assumption that they'd make more money holding Telecom than in the bank deposit account, which isn't a bad assumption.
Better than holding gold too, right now.
Personally, I've always preferred sparkling diamonds to glistering gold and, since the Bank of England's sale of 25 metric tonnes of the stuff, it's just as well. Anyway, gold is now trading at 20-year lows, at less than $260 (€256.44) an ounce. The Bank of England managed to get $261.20 an ounce for it so I guess it's reasonably happy even if it was at a 0.4 per cent discount to the market at the time. But holders of Australian gold mining shares can't be - the Australian Stock Exchange's index of gold shares tumbled by 7.6 per cent immediately afterwards. It's now less than half the level it was three years ago which is not a very comforting situation for anyone who prefers gold bars to cash in hand. Right now it looks as though people are actually shorting gold in the expectation of further falls.
I wonder, though, will we see prices of gold jewellery come down? Somehow, I think not. What will happen is that you go into a jewellery store, pick out a piece and they'll tell you that this is white gold, or red gold or some other sort of gold that has miraculously escaped the drop in price!
On the other hand, oil prices continue to stay firm. Brent crude has been trading at over $18 dollars a barrel. Back in December you may remember it was below $10 dollars. There is a fear, though, that if it goes much higher the countries which agreed to cut back on oil production - the reason the price started to go up - will suddenly start increasing output to try to take advantage of higher prices. Supply and demand - the perfect economic theory battling it out in practice!
As far as commodities are concerned, oil futures have been the ones to be long. Crude oil futures are up 60 per cent year to date, heating oil up 41 per cent and gasoline up 40 per cent. But trees haven't been doing too badly either - lumber futures are up almost 49 per cent. Presumably if they don't get the oil they'll just burn the trees.
On the litigation front in the US, though, things aren't quite so rosy. First of all the tobacco companies saw price declines on the news that they'd been defeated in the first part of a class action trial in Miami, although a couple of days later they were cleared of blame in another case involving the death of a Louisiana smoker. Nevertheless, the litigious atmosphere which surrounds the tobacco industry has meant that it's lagged markets overall. I can't say I'm too unhappy about that as I'm a serious anti-smoking person. When myself and my cousin visited the Dominican Republic a couple of years ago our guides were very disappointed in our unwillingness to wander around a cigar factory. (And if you ever get within shouting distance of a cigar factory you'll appreciate why, - leaving aside our moral qualms, the smell of tobacco leaves is absolutely disgusting!).
Bad news, too, for General Motors as a jury awarded $4.9 billion to six people burned when the petrol tank of their Chevy exploded in a car crash six years ago. This was the largest US product liability award ever. The size of the award was based partly on the fact that GM apparently kept back some documents in which they calculated that the cost of payouts in possible lawsuits was less than the cost of changing the design of the car to combat the problems. (It's hard to defend capitalism when companies do things like this.) Initially, the shares fell but have since popped up again because the case will take years to get through the appeal courts and the market doesn't think that the awards will stand. Can't do GM's reputation any good but maybe they think that they'll sell enough cars not to have to worry about their reputation. The lawyers acting for them should float their own firm if it's not already public - years of litigation, lots of fees . . .
And, just to keep us on our toes, the week started very badly in Latin America. Things had been bumping along quite nicely there, markets weren't exactly soaring but had stabilised to some extent. On Monday, the Argentinian stock exchange dropped 8.6 per cent to hit its lowest level in three months. It seems that a radio interview by presidential candidate, Eduardo Duhalde, might have sparked some of the concerns. He said that he would ask Pope John Paul to support debt relief for Argentina - Duhalde wants a one-year moratorium on debt repayment.
When the power of prayer just sends markets down, we're in real trouble.
