It was another week when inflation as a topic captured far more headlines space than it deserves. First off some one announced that prices in Zimbabwe are going up by about 5% a day and a picture of a rubbish bin filled with bank notes in denominations of as much as Z$500 000 was doing the rounds. It makes one wonder just what it is that keeps alive the fragile trust that a citizen has in a piece of paper printed by a central bank. The only good news from that mess is that we have all learned what comes after a trillion. Then from Euroland came mutterings that inflation was starting to get way too high. And finally the National Treasury seems to have decided that they will soon be able to discard the CPIX statistic that was created especially for them several years ago with the sole reason of making an easier target to hit. As we all know their record in hitting that target has become as tattered as the baton-passing record of the relay team. Presumably between themselves and Stats SA they have hatched a number that might be more obliging, even if it bears no relation to the spending experience of the consumer.
From what I can discover this is a very popular ploy used by governments world-wide. Any suggestion that this constitutes a hefty shift of the goal posts is met with cries of outraged disbelief that they would even think of such a thing. However, it will not be long before you will be able to spot carefully disguised statements pointing out why it would be inappropriate to link senior civil servant salaries to the new CPI.
About two dozen listed JSE companies reported this week and several others released trading statements. Most of those firms which are connected to the business of producing and shipping minerals and commodities delivered satisfyingly increased profits. The main disappointment to catch my eye was from Woolworths where a modest year on year fall in earnings was reported. In contrast, however, fellow retailer Massmart delivered rather good growth in profits.
Earlier this month the all share index was more than 20% below its May all-time high and some commentators felt that such a correction was about all one might expect from a bear market. Certainly since then, that index has experienced a 5% recovery but as is often the case with indices, this statistic conceals disparities as wide and as puzzling as the example of the two retailers quoted above. Despite the suggestion that the commodity boom is over, a careful sifting through the details indicates that financials are still underperforming resources. Patient readers will know where this is leading, which is my fear that the uncomprehendingly large debt levels in the US must inevitably continue to erode the US dollar and the financial edifice that rests on this now very shaky foundation. Not one person a year ago would have believed that we could now be at the point where gold plated banking names from places as solid as Switzerland were announcing write off amounts that grew almost every week. Not only does this suggest that they had been doing business with some very dodgy names but also it was terrifying to realise that their record keeping was so bad that they did not actually have the faintest idea of how much trouble they were in!
Maybe I should try that approach in my provisional tax return to SARS next week and say that my records are in such a mess (in fact, the dog ate them) that I’ll take a tax holiday, change my name and year end and start afresh in 2010 when I don’t feel that any of my tax will be used to subsidise someone else’s conversion to digital TV.
Plenty of sport this weekend with the ‘bokke assured of at least the bronze in the tri-nations. I am going fishing.
James Greener
22nd August 2008.
