When you get down and have a close look, the All Share index pretty much went nowhere this week. This will have surprised and disappointed several people, especially Governor Mboweni who had gone to all the trouble of ordering extra biscuits and summoning the MPC a month early and getting them to support his plan to lop 100 basis points off the repo rate. While the prospect of cheaper money did very little for the share market, the currency actually strengthened quite a bit especially against the euro this week.
This too is not really supposed to be how the rand should respond to a rate cut. Those of us without years of training in economics and finance had been led to expect that investors would race to buy shares in those companies which sell items that are sufficiently costly that people need to borrow money to buy them, and now with cheaper money … Well you know how the story goes. Perhaps the inflation numbers which showed that food is rapidly becoming such an item is causing a rethink about cars and houses and flat screen TVs
And then over in the USA details of the shape of the next lifeboat full of money to be launched began to emerge. The plan is for taxpayers to lend cash to private businesses that would like to sift through the garbage in the basements of the many, obviously stupid, enterprises who failed to distinguish tasty assets from toxic assets. These new publicly funded geniuses have nothing to lose but someone else’s money and presumably will select from the dross only those IOUs that they hope might deliver. The rest they will leave in the dumpster. There’s a small but very interesting matter of deciding the price to be paid by the smart to the stupid for the allegedly toxic asset that now actually does have a buyer! Presumably the plan is then for the new owners to spruce the assets up a bit and then sell them on for a profit (who to you might wonder?) and repay the government loan. Cynics like me note that this does nothing to inoculate the truly toxic and if the plan fails, the number of troubled enterprises just grows larger.
Back home it seems that an outfit named the Gauteng Enterprise Propeller is in trouble. This has nothing to do with the uproar around the farewell present for the departing CEO of the state airline. As usual the details of the misuse of public money are murky but it does inevitably involve lavish travel and catering in overseas destinations instead of helping poor people propel themselves into enterprises. An equally mysterious organisation named the South African Fryer Oil Initiative are getting into a state about extra virgin (never did follow this one) olive oil which apparently isn’t even olive oil let alone any kind of virgin. So beware anyone straying from the traditional pap and wors fare.
Whoever has the awful task of listening to all these tapped telephone conversations must have had an especially bad week. Can you even imagine the hours and hours of argument about where or what Tibet was and whether or not this Dalai Lama chap was related to Dali Tambo. All South Africans must be deeply saddened by the diplomatic gaffe of refusing this man a visa and then embarrassed by the feeble and nonsense excuse for doing so.
While it is excellent news about the Indian cricket tournament coming here I wonder if much thought has been given to how dew-soaked the fields become at night at this time of year. That trick when the mower tows a thick rope around the outfield is very funny but not much good at drying the grass. Which takes me sadly to the Lions who I fear will not be lifting the Super 14 cup this year.
James Greener
27th March 2009.
