Incredible amounts of wealth have been destroyed by the decline in the prices of almost every asset as we descend into this deep and terrifying depression. One exception has been government bonds where the so-called safe-haven status of a piece of paper issued by the same legislature that was responsible for overseeing the aforementioned crash is in great demand. Investors apparently feel that the guarantee of getting back their capital and a tiny bit of interest is meaningful. But I worry that the repayments will be made in currency that in most cases will be freshly printed.
This explains why people are eager to believe that the share market bull is back, fit and well. There is no doubt that the bear market has to end sometime but I am certain that now is not that time. It will take a while before the massaged and tardy official numbers confirm it, but most wage earners who are not employed by government are increasingly worried about keeping their jobs and paying their bills. Prudent people are certainly not interested in borrowing any money – even at near-zero rates – for flat screen TVs and overpriced cars. And it seems that the banks have at last learned that it is unwise to lend to imprudent people!
Governor Mboweni is off to London to attend a G20 meeting and his speech in Cape Town today was delivered by a flunky. It reportedly warned that “portfolio flows are fickle”. Presumably he suspects that foreigners invest in our markets in order only to make a profit. Just as soon as losses threaten they flee for the exits and callously take their money with them instead of steadfastly leaving their cash down here on the southern tip to turn into manure and trickle down among the grass roots. If he thinks that the ebb and flow of foreign money has something to do with his and his cronies stewardship of the economy he is right but he should not take it personally. Switzerland surprised a few folk this week and dropped interest rates. Money promptly left the shadow of the Alps (some may even have popped up here) and the Swiss franc swooned. It is down more than 4% against the euro. This must be a great worry for anyone with a secret horde in a numbered account. Lichtenstein also announced that in future they will be more hospitable to foreign tax collectors who call round for a chat. Times are getting tough for anyone who believes their money needs privacy.
Privacy is certainly already lacking for Mr Madoff, who the authorities speedily put behind bars for stealing $65billion. In the rush however, there was no opportunity for the judges to ask him where he stashed the cash he nicked. Is there any truth behind the rumour that Bernie’s people have been seen talking to Shabir’s people about how to arrange a suitably impressive sick note? Just a couple of years in the prison hospital and Bernie will be off to join his loot.
The news that SA is responsible for 40% of the carbon dioxide emissions in Africa is not surprising. Recall that the gas is exhaled unceasingly by every one of us. But the country groans under the weight of an excessive number of politicians who never stop talking in order actually to do something. And now it is election season. May I suggest to those attending the conference on Carbon Capture in Joburg this week that it is not this non-poisonous gas that needs to be controlled.
The only cricket to concern us this weekend is the equally embarrassing squabble that has broken out between the selectors and the managers.
James Greener
13th March 2009.
