There’s a photograph whizzing around the internet today which shows an orderly but lengthy queue. The line begins inside the London City branch of one of Britain’s largest mortgage lending companies and winds down the street. This morning the company was reported to have been turned away empty-handed from the Bank of England when it asked if it could borrow a few quid. I doubt that the people in that and other queues reportedly forming elsewhere outside other branches of the company are rallying round to offer bundles of cash to the beleaguered institution. I would rather think they are trying to do the opposite and leave the premises with folding stuff that they will pop under the mattress for the time being. These are amazing scenes. That allegedly “small and contained” sub-prime debacle in the US is spreading its tentacles.
It is now quickly dawning on people who actually have money that considerable numbers of their fellow citizens who have been borrowing it are really unable to meet the interest payments. More seriously, they are also not in any position to repay the principal amount either. This is because in the worst cases they have consumed it or because the assets they “invested in” have plunged in value. The intermediaries in this whole sorry mess are now suspected of being rather too cavalier in their promises to the lenders and rather sloppy in their evaluation of the borrowers. The fact that many of those intermediaries have been seen to be standing up to their navels in fees and commissions during these last few years of alleged plenty is not improving tempers. The fear and greed pointer is sliding towards the F word.
In the US, the problems for the savers and investors is compounded by the fact that the dollars themselves that they are extricating from the ruins are falling in value against oil, gold and other currencies. The demand for “safe” US treasury paper has been so large that interest rates have been pushed down and that too is putting pressure on income. It is a mess.
I do believe that I am not being naive and complacent when I claim that domestically in SA there is no crisis of comparable size or severity lurking. Nevertheless, the banking shares on the JSE are being smashed and are leading the whole market away from the local peak it attained this week. The September futures “close-out” event takes place on Thursday afternoon and may be seen as a reason to ratchet up anxiety levels a notch or two. These are exceptionally interesting times.
Only the largest three gold mining companies of the dozen or so that are listed on the JSE seem actually to be making any money. This week I saw news of another one that hopes to get permission to reopen the ancient workings that used to define the southern edge of Johannesburg city. Mining is not for pessimists or sissies. But I suppose this is another of those opportunities to “Unleash Your Investment Potential’ – whatever that might mean.
As well as trying to cope with unfolding events in the markets there are at last two international sporting tournaments clamouring for my attention. Now let’s get this straight. If England beat Australia this afternoon then the Aussies go home early. Come on England! But tonight we need to beat England ourselves so we don’t meet Australia in the semis. Whew! The marketing geniuses down at SA Breweries have replaced the old six-pack with the eight-pack. Not a moment too soon.
Have a wonderful safe sporting weekend and may your teams win (but not against us).
James Greener
14th September 2007
