As I write these words, the mysterious futures close-out event is about half-way done. The volumes going through the market are massive but there has been no significant impact on share prices. These were already looking weak before close-out began, driven largely, I suppose, by the rather scary drop in the gold price. This event in turn was probably a result of the gullible and chronically hopeful punters believing that the Fed’s latest dose of rescue remedy will fix the US economy. I am sure that merely reducing the price of money to below the rate of inflation will not remove the waves of suspicion and distrust that are presently washing over the financial beaches. No one who has any cash is remotely interested in lending it to anyone except to someone who will undoubtedly be able to repay it even if they have to crank up the printing presses to do so. Hence short term US government bond yields are plunging but rates for all other categories of borrower are soaring. When one of the best known banks in the world can go from hero to zero in just a day – what other nasties are coming down the road?
Back here on the southern tip, the after-tax-and-inflation rate of return for cash on call is perilously close to zero if not negative. This explains why there is a ceaseless search for something of value in the share market to buy. On the simple raw data, the metrics suggest that there are some tempting offerings in the financial sectors of the JSE. But if another big bank somewhere in the world were to follow Bear Stearns into oblivion, that would surely spark jitters about whether our own money lenders are as safe as they and Governor Mboweni claim. Therefore I would I not yet be betting the farm on this idea but perhaps just a small vegetable patch.
At ten minutes to eight this morning the planet passed through the southern hemisphere autumnal equinox and so it is now decidedly downhill to winter. Here in the big smoke an unusually cold and astonishingly wet spell coincided with the resumption of power blackouts. It is also the season of short working weeks. Yesterday the government caved in to workers (?) pressure and created one of only two working days duration at the end of April. Fortunately, I am a veteran of such events having lived in London during the UK miner’s strike in the early 70s and my advice is to keep a bottle opener, corkscrew and small torch about your person at all times. In South Africa, you can die of many things but boredom and thirst should not be among them.
For example, did you see that we have added a new word to the English Language this week? Dzonga. The government is calling for people to serve on a Digital Dzonga. It appears that this is a council that will oversee the implementation and monitoring of the switchover to digital broadcasting. As usual, as well as inviting ridicule, the state is way behind private enterprises that actually will make money from this switchover. Last week, in the wilds of KwaZulu Natal, I noticed a cell phone company team laying a fibre-optic cable near the unremarkable and very analogue village of Mtubatuba. Wait until the Dzonga hear about that. And my old friends, the Gauteng Provincial Government, forever in the dark about what they are for, are requesting proposals for Service Providers to develop a Gauteng State of Development Report. It would be all the more funny if I wasn’t paying for this nonsense.
Please enjoy a safe and happy Easter break. Sadly, I think that the Lions will go the way of all the chocolate bunnies this weekend.
James Greener
20th March 2008
