So Governor Mboweni could not resist the opportunity to invite Governor-Designate Marcus to observe the finer points of pedal-stomping. After the speech he ushered her to the top floor eyrie and sashayed over to the corner and mashed the rates-down pedal into the floor a full 50 clicks. There are now only 700 clicks to go before the pedal hits the metal and I am sure the two started to talk about how deflation is suddenly a greater threat than inflation when Tito had to take a call from Minister Gordhan complaining that the rate cut had scared the rand badly and would further reduce the tax take. I expect he also has had to field calls from the banks, pointing out that their earnings are already being crushed and that letting borrowers pay less interest was not going to help. Lenders are likely to withdraw their cash and find somewhere for it to work a bit harder. The words “bail-out” will be popping up in local banking conversations.
Just like the phrase “toxic assets” is reappearing in articles about the US banking system. It seems that skeletons are falling out of cupboards where bankers did not even know they had cupboards. Many years of what was proudly called “financial engineering” created structures where the latter word turned out to be very badly abused. Plenty of flashing lights, sliding hidden panels and whirring fans to impress the punters but not a firm foundation or solid wall in sight. The string and chewing gum fastenings are failing. The only pieces of paper that have any value – and that may also be short lived – have pictures of dead presidents on them. The Chinese government has a lot of those dollars and recently has been asking in increasingly nervous tones just how many more President Obama plans to print. The US dollar would appear to have settled back into a trend of slow but determined weakening.
The rand too may have run out of steam and we have had a few weeks of fairly steady levels against most currencies. It is not impossible that the next big move may be further strength but most of us would accept that the higher probability is for the rand to weaken. It is interesting that there has been quite a surge in trading activity in the traditional rand hedge shares like Liberty International.
Despite some surprisingly large earnings declines being reported by the banking giants, the overall market is still keen to go on up and the All Share has breached the 25000 level almost exactly a year after it passed through it on the way down. Most of the heavy lifting so far this month has been provided by the mining and resources counters but they have had to work hard to overcome falls in the bank prices. Bears who thought that 2009 would be one of theirs are looking gaunt and worried. But patient.
And patience is what I need when I try to understand the nonsense that pours from any official who lectures us about their pet project. This week’s special concerned Rea Vaya, the trendy name given to Johannesburg’s plan to move people in large buses instead of in small ones. Transport Director Seftel offered the assurance “Unlike Metrobus, which the city subsidises, we (Rea Vaya) will …. provide a service … at a much lower cost. If patronage works out it shouldn’t be a problem. If not, we will have to put in (ratepayers) money. We guarantee a minimum return (to the operating company)”! Once again Physicist Pauli’s observation that this is “not even wrong!” seems apt. To be a little fair, however, these Bus Rapid Transport plans popping up everywhere in time for the World Cup have flushed out more organisations claiming to represent the minibus taxi industry than there are taxis. Understandably really when the BRT plans sort of mentioned that there might be money in it for the taxi owners and drivers.
Bit of a crunch happening this weekend when the Lions meet the fellows from round these parts. But it is somehow all rather academic while we try to figure out who these unbeaten Griquas are.
James Greener
14th August 2009.
