So there is the All Share index above 30 000, offering a slender 2.28% dividend yield - assuming everyone maintains last year’s dividends of course - and a rather off-putting 17.2 price earnings ratio. This index is now fewer than 3000 points below the all time high and if and when we breach that level there excitement will be high with few bothering to point out that it has taken about two and a half years to get back here. I can’t see a good case for any but the most timid of buying programs at this stage.
Further revelations about the foetid mess that is the US mortgage-backed securities business have come to light. Substantial fraud and gross negligence aside, the key issue in this debacle is that a very large number of people who borrowed money to buy a home in recent years are now faced with the unsettling fact that the current resale value of their house is very much lower than the outstanding mortgage debt. Under these circumstances and with a government inclined to be sympathetic to their plight, the urge to stop paying is strong. This really messes up the cash flows down the food chain and now some of the folk in that chain don’t want to play anymore. These threatened sell-outs are only helping reveal the extent of the administrative mess which has failed to keep track of who owes what to whom.
The bureaucrat who came up with the idea of “Multi-disciplinary Roadblocks” will be in line for a big fat bonus. The plan is that a motorist pulled to the side of the road is in a near defenceless position that provides a wonderful opportunity for the agents of the state to probe their victim on any number of topics other than mere driving and vehicle fitness. Modern communications technology will be used to beam down to the roadside officer your most intimate details. Just imagine the amount of the bribe needed to dissuade him from checking on your tax status, your citizenship, your indebtedness, or your wife’s photo against your passenger. They will probably also be able to embarrass you further by revealing how long it was since your last dental check up.
The news channels are trying to get excited about the rumour that President Zuma is in the midst of a cabinet reshuffle. There certainly are a number of ministers who should be removed from power as soon and as far as possible but it is unlikely that Mr Nice Guy will do much to bruise egos or offend friends. My own view is that it far more likely that the Christmas liquor special catalogues have caught the president’s eye and he is rearranging the booze cabinet to make space for that Macallan single malt at a mere R150 000 a bottle. With only three available he had better move quickly if he going to be a good host at the party after next week’s medium term budget which may or may not make changes to exchange controls.
There is lots of talk about something called a “currency war” in which the next battle will take place during this weekend’s G20 meeting in South Korea. It is not easy to understand what this means but it entails people claiming loudly that theirs ought to be weaker than yours. Adding to the confusion is the fact that within each country there is also a difference of opinion about whether their currency unit is actually over or undervalued and even worse whether or not that is a good or a bad thing. The Economist has their wonderful Big Mac index that tries to help mere mortals make some sense of it all. On that basis it turns out that our dear rand is undervalued. A burger in SA costs almost $1.00 less than in the USA. In China, it is $1.53 cheaper. This really annoys American politicians and prompts them to lecture China about how to run their economy. Lectures that the Chinese wisely ignore. In fact this week they nudged their interest rates up a notch.
With a week to go before the Currie Cup final there has been space in the press for the apparently shocking news that some FIFA officials can be bribed and someone called Wayne no longer wants to play for Manchester United. Troubling stuff indeed.
James Greener
22nd October 2010
