Sometimes it’s best to do nothing

FOUR days removed from the clamour of news feeds, market tickers and analyst updates, and what do we see? Mainly, relentless selling pressure on high-value US stocks — biotech and internet names in particular — which has sucked 25% off some growth-chasing momentum portfolios.

It is pointless listing the “reasons” for the meltdown: each macroeconomic excuse is as fatuous and thumb-sucking as the other. The crash concerns the oldest adage of all: more sellers than buyers.

But is it really a play on sentiment? All about asset managers getting a skrik?

Albert Botha, a portfolio manager at Atlantic Asset Management in Cape Town, puts a nice spin on the question:

“By far the vast majority of trade on the US stock markets now rarely involves an actual person or active portfolio decision; most of it is institutional trading by computers or small reweighting trades towards a model. One computer buying or selling to another based on a formula. This drives up volumes, increases costs and exacerbates market volatility.”

However, on lesser exchanges such as the JSE, humans play a more active role in chasing markets downwards.

“In South Africa, we have not yet reached [the US] level of computerisation, but the urge to act, whether due to doubts or investors’ fears, has many of the same effects,” says Botha.

Hence the sea of red on my PC’s I-Net watchlist on Friday: the amorphous

There are 4 billion people in Asia who have got a very old-fashioned view of gold

market, whether human or android, hammered everything from Standard Bank to Anglo American. Grim scenes.

As private investors, we have no option but to let our institutional money managers in charge of our pensions ride out the storm as they see fit. One assumes many of them will follow Botha’s advice, and that many small traders will, too:

“Sometimes the correct action is no action at all. Watch and wait for your moment, for your plan to play out — and stick with it.”

This column has, over the years, made no secret of its gold fetish. If ever there was a momentum play right now, South African bullion miners — with a 51% gain in the year to date — are a red-hot buy.

Zerohedge.com on Thursday posted a piece that said we should forget about asking Keynesian or Austrian economics to explain gold’s appeal in China and India.

“There are 4 billion people in Asia who have got a very old-fashioned view of gold, and they have become wealthy over the last 20 years. And their view is likely to prevail against the billion of us in North America and Western Europe. It is as simple as that. We’re outnumbered.”