If money had to carry a passport and had to go through customs and immigration when ever it went from one country to another then the queues at Joburg International would be all the way out of the door and into Kempton Park. The stuff is leaving South Africa at one hell of a rate. Both foreigners and locals are deciding that despite the attractive big-five motif on our notes, the artwork alone is no reason to hold the stuff. All of which is a long-winded way of noting that the rand exchange rates are soaring. More and more of our runts are required to purchase a unit of almost any other currency except perhaps for a Zim dollar.
Presumably much of the foreign money has been down here trying to earn its owners a return in the JSE share market. Now there is a widespread view that it is game over in that particular arena and unfortunately for us all, the non-residents are suffering an extra whammy as they try to get through the narrow rand exit door all at the same time.
Every single foreign seller of JSE shares and South African rands will of course have their own mix of reasons for making these moves and hopefully not all of them are equally alarmed by the dramatic disintegration of the ruling political party. There will also be domestic reasons for taking their money back home. Maybe there is a new-found spirit of fiscal prudence and rectitude that will begin with paying off debt? Actually the good thing about politicians squabbling with each other over the spoils of office is that they then don’t have much time for dreaming up more ways to interfere in our lives and steal our cash. As long as they keep the noise levels down and don’t for a minute believe that anyone in the real world thinks that their opinions of each other is relevant or important, I say go for it.
It has been another week of severe tests of character and patience in the share market. I don’t think that the official interventions being proposed and carried out can have anymore than a brief effect on the still astonishingly large numbers of investors who trust that governments can conjure up a bull market. The bubbles that are being deflated and corrected in the current market actions are numerous, large and in some cases very long lived. Whether there are yet enough conditions being met to declare that we are in a recession or a depression or just having a bad hair day, matters only for the satisfaction of the box tickers. For everyone else, the fact is that their net worth, their standard of living, and their sense of financial security is noticeably less than it was just a short while ago. Sentiment is deteriorating but I don’t think that it has yet reached a point of widespread capitulation and rejection of the share market as a destination for one’s money. Until that time the bear remains in charge.
I have often remarked that one of the most important components of any gathering, meeting or conference is the catering. After watching the world’s big cheeses in government finance gathering to out-bid each other with schemes about which particular black hole to throw money into, it is clear that the group photo session is also an important moment. After hard hours of saving the globe from the mess that they originally created, the delegates eagerly troop out into the sunshine and jostle about on the steps of the palace smiling at the cameras and hoping that the voters back home will see what important friends they have. Presumably there is a pecking order worked out by those smart but nearly invisible young ladies who prod the luminaries into position. It must be getting increasingly difficult to decide to reserve the centre spot for the Washington delegate and to get others who will agree to stand next to him. Folk from the USA are these days prone to asking foreigners for money.
James Greener
17th October 2008.
