More crystal-ball gazing

SOME well-informed readers have criticised and differed substantially from my three main predictions last week. Thanks for your views - they are greatly appreciated.

Readers didn't agree with my prediction that the rand could weaken to R14$ in 2009. I now also doubt this, following the recent exchange rate recovery to below R10/$.

However, I stick to the prediction that there will only be marginal interest rate cuts in SA in the foreseeable future. A prime borrowing rate of 14% is going to be around for some time.

The third prediction was that the price of fuel - petrol and diesel - would remain below R10 per litre for 2009. Everybody agreed with this and the good news is that we can probably lower this prediction to R9 per litre, at least for the next couple of months.

The petrol price will drop to below R9 a litre on Wednesday and even at this price there is an over-recovery of nearly 150c per litre, according to the Department of Minerals and Energy.

All of us who still practise the useless art of prediction must read the following:

The Bank Credit Analyst (BCA), a much-respected publication, in a special report entitled "Peering into the Void: Knowns and Unknowns" identifies five key issues "where we have a high degree of confidence".

These are:

• The global economy is in recession, and the recovery will be slow;
• Deflation is a bigger near-term threat than inflation;
• The role of governments is set to increase;
• The golden age of the financial sector has ended; and
• The US dollar's status as the global reserve currency is safe for the foreseeable future.

No comment from me, other than to say that this does not bode well and despite my grey hair, I have never experienced anything like this.

The BCA also says: "Of course there are many critical issues where the outlook is shrouded in fog." It discusses the following three:

Where are we in the deleveraging cycle?

What will it take to restore trust and confidence in the credit markets?

How long will the equity bear market last?

On equity price and the current rally, BCA writes: "Equity prices are likely to move higher in the months ahead, but it seems more likely to be a trading opportunity rather than the start of a new bull run."

"When in doubt, stay out" is old and sage investment advice. I am going to pull my remaining buy orders - at least until I have read the full report on "Knowns and Unknowns". The latter dominates my views at the moment.

Get the full report on www.BCAresearch.com