Last night I attended the BoE / JSE showcase that had directors from Raubex, Keaton, Chemspec, and Metmar talking.  Besides all the background company-specific stuff that came out, there were two extremely interesting macro-economic comments made.

Firstly, Raubex noted that they have seen little recovery in the local private residential sector.  Only around 5% of their business comes from this sector, so they went to great pains to point out that this doesn't really effect them too much.  Despite this, a continued lack of growth or volumes in the private residential sector is a critical fact in a lot of other construction businesses and, in the listed small cap world, implies continuing tough times for Wearne, RBA, FinBond and other construction-related / housing-related businesses.

Secondly, David Ellwood, CEO of Metmar, spoke about his interesting company.  He made an interesting point how the commodities world is currently sitting in a strange position: high commodity prices and large stockpiles.  He went on to point out how the size of these stockpiles implies that it is probably not fundamentals holding the commodity prices so high.

Chatting with him after the event I reiterated what Cobus Loots, the FD at Pan African Resources Plc, told me.  Cobus Loots and I were discussing the recent gold price run during the last couple years and he pointed out how the majority of gold stockpiles were actually held as the underlying in commodity traders trades.

The current lack of fundamentals for high commodity prices coupled with the high stockpiles across all different markets that David Ellwood showed us makes me think that we're currently seeing the same paradox: huge volumes of speculation driving commodity prices higher, rather than market demand for the actual commodities driving the prices.

Overall, though, it was a fun and informative evening and my thanks goes out to the JSE, BoE, and the directors presenting.

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