In rand terms the gold price is probing new highs and in the scramble to own something trustworthy there are even buyers of short dated US government bills with negative yields. There is growing awareness that the suits and talking heads actually have no ability to bring back the good times that many folk in the west recall from the second half of the 20th century. In his speech recently Fed Governor Bernanke almost admitted as much. He did boast that there were at least three levers he could still adjust to bring about instant happiness but neglected to point out that none of them had actually worked as promised when he pulled them last time. The US Minister of Finance even warned his citizens to prepare for a long period of hard times! The fact is that most old and developed nations have run out of the resources necessary for the all the programs of state employment, handouts and entitlements that have for so long been used to buy votes.
Official response has been mostly to try to gather more resources. Report after report tells of some talentless satrap who has a scheme where everyone bar his cronies and fans will contribute towards either worsening a mess already created or fixing a non-existent problem. This is not just a local issue. The biggest but most boring squabble is happening in the USA where they are having their annual joust about something called a debt ceiling. It will, as always at the eleventh hour, be raised so as to extend the lives of the sacred cows of entitlements and tax cuts, simply because the notion of that nation defaulting is unacceptable. The notion of the nation being bankrupt is somehow acceptable. In Europe the bureaucrats are going through the most amazing contortions to disguise the fact that many nations there are also bust. Back home the list of who wants more money is endless. From distributing Lotto money to a trade union to hold a party, through hiring more labour inspectors to enforce regulations that destroy employment, and on to scams like RICA and schemes to raise property rates. Although the National Treasury’s exchequer numbers are, on face value, benign enough, the bearish analyst can discern signs that the expenditure side is lacking discipline. For example why the need for the moratorium on state spending for budgeted capital projects? This is killing the construction industry. Government revenue is taking its time in returning to pre recession levels – another sign that the private sector is still struggling.
And now there is CRISA. This is a set of 5 principles – Code for Responsible Investing - compiled by a very big committee of worthies (many of whom I hoped would know better) -that allegedly ought to be applied by institutional investors and their clients when making decisions. A 13 page guide has been published, but secretly everyone knows that the only thing that counts for every professional investor is that the total return achieved must exceed your competitors. Watch for the term “CRISA Adjusted Returns” to explain poor results. The Code is heavy on the ridiculous fallacy that a portfolio manager or a member of a pension fund or the owner of an endowment fund or unit trust is a deep and knowledgeable source of advice on how to run the companies in which their savings are invested. “Stakeholders” is these days a grossly overused term that I am sure evokes feelings of dread in the average CEO when it appears in his diary.
Why doesn’t the government just come out and say that they do not want anyone to open a business in this country which “doesn’t understand how we do things here”. The poor chaps at Wallmart/Massmart have been told to assemble yet again for questioning as a number of cabinet ministers wish to hear different answers to last time. Good Grief Charlie Brown, has no one seen that company’s estimates of what they plan to spend in order to enter the markets they are targeting? Billions.
We shall soon know if the ‘bok side sent to the antipodes for the Tri-Nations deserves the name and jersey. There’s a great deal of humble pie to be consumed if they do notch up some wins and just think what it will do for the selection pool if these youngsters deliver what we expect Springboks to do.
James Greener
22nd July 2011
