The rather
spectacular collapse in the price of Bitcoin has had some interesting repercussions
on the value of other securities which also depend a lot on being worth what
their originators and custodians say they are. As the Steinhof debacle shows, the
valuation of even ordinary shares depends upon the trustworthiness and honesty
of the people who run the businesses and more importantly in the ability and
professional integrity of those we expect to audit them. The view that a
Krugerrand in the hand is worth more than a dematerialised share certificate in
a central share depository is certainly archaic and the JSE has a proud record
of converting to a paperless securities market with minimal glitches. However,
nothing is really risk free and it’s important to recognise that and price it
accordingly. With the almost 10% pull-back in many share markets experienced
this week, breathless commentators have been calculating gleefully how much the
vile capitalists have lost. Unfortunately for their narrative, the bounce back
suggests that those capitalists just added to their holdings at the lower
prices
One of the
difficulties for believers in free markets is the presence in high office of
people who think they know what the price of everything and especially money, should
be. These central bankers (for it is primarily, they) fiddle incessantly with interest
rates, adjusting them up or down in tiny increments, in the hope that the
gigantic economies they think they command will respond appropriately. The very
simple fact that we still experience periods of boom and bust, shows that
either their measures are largely ineffective or else they don’t know what they
are doing. If all the expert advice was just that, shouldn’t we all be educated,
employed and content?
Astonishingly,
there is a monthly periodical named Central Banking (what else?) which is apparently
essential reading for the sort of people who wear a suit AND tie (or smart
frock) to work. This is the journal that has declared our very own SARB
Governor Lesetja Kganyago to be “Governor of the Year”. An accolade of which he
must be very proud. But it doesn’t explain why citizens are being warned to expect
very serious tax hikes in the forthcoming budget. Obviously taxing the proletariat
into perdition is not a bad thing in Central Banking circles.
It should be admitted that experiments with
letting the markets set prices have not all worked. Often, powerful players (e.g.
individual traders with dozy and greedy managers) contrive to operate a cartel
and move prices to their own advantage. [viz. The LIBOR scandal!] This is a
failure of the supervisors and regulators to exercise their powers with
sufficient scepticism and diligence, not of the market.
The only
people to be disappointed by the postponement of Number One’s State of the Nation speech are those who have
been taking their credit cards for strenuous outings around the malls. SONA has
grown into a lavish social event for the P-list[1]
celebrities to display their trappings earned as servants of the people. This
gathering in parliament has during JZ’s term revealed little except sycophantic
adulation of the benefactor of most of the cast. The real story in the
postponement is that, to no one’s surprise (well maybe a few), having two
different people as presidents of the ruling party and nation respectively is
not working. JZ reportedly has agreed to an early departure from his post but
first he wants to say good bye to some people like his cabinet. Since there are
more than 70 of them and each will doubtless be very keen to get assurances
about their place in the cash flows this farewell might take some time. Like
through to 2019 perhaps, which is anyway the scheduled date for JZ to retire.
My
understanding of winter sports appears to be similar to the knowledge the
Proteas have of the ODI record at Newlands. Bowling first is as dangerous as putting
on skis on with the pointy end backwards. And now that Alistair Coetzee has
been asked to return the poisoned chalice to SARU who will they find to give it
to next?
James
Greener
Friday 9th
February 2018
