There is a decided air of optimism about investment prospects for the new year. Forecasts of as much as 25% growth in earnings owe some of their heft to the low base created by last year’s carnage. My view is that the share prices are already discounting that sort of rise. My concern is that in fact there are still very few signs of credible and real – as opposed to state stimulus driven – recovery in most industries world wide. It does seem that the Chinese are off like a rocket and sucking in all the raw materials they can find. My question, however, is who are they going to sell their output to? The citizens of the traditionally big consuming Western nations seem intent on paying off debt and rebuilding balance sheets. Here in SA our imports have slowed down dramatically as well. A handful of trading statements were published this week and the majority of them warned that the second half of 2009 was tough and earnings would be down. The good news from the retailers is that they did enjoy some growth in sales but clearly their costs grew faster.
Although the official numbers indicated that the recession in SA ended in the middle of last year, anecdotal evidence and personal experience here in the kingdom is less convincing. One frustrating development is that local suppliers are not getting their orders filled by overseas manufacturers. Presumably the makers have scaled back production and are letting relatively insignificant markets like ours fall down the queue.
After leaving interest rates low for so long, some central bankers seem to be growing restless and eager to demonstrate that they can make a difference. Market-determined long bond rates are drifting up all over the place as the borrowing needs of governments inexorably ratchet up. The impact of even marginally higher rates will be very damaging on the still severely indebted households in the US, almost half of whom reportedly owe more on their mortgage than the house is worth. Back home newly installed Reserve Bank Governor Marcus has decided to cut back on the bill for biscuits and this year the Monetary Policy Committee will meet only every two months. Opinion is pretty solid that they will not cut or even change the repo rate when they meet in 10 days time. In any case the rand weakened quite a lot all on its own this week.
The soccer bosses are getting a little testy over the news that South Africans are not buying fistfuls of World Cup tickets. Apparently there is even little demand to attend the matches where our own national side will be on the field watching the other guys scoring goals. What the policy makers in suits who believe that talent and ability are not the sole criteria for selection appear to ignore, is that fans like to support winners. Teams or individuals who fail regularly to hoist the silverware – or at least get very close to it – are really not fun to support. Ticket pricing for the tournament may indeed be generally affordable but two of Bafana’s matches will kick off in working hours and folk who actually work for a living rather than warm free seats in the executive suite will find it hard for example to get to Bloemfontein on a Tuesday at 4pm. And then the greatest reason of all for not buying tickets yet is that we can remember how last year, during the Confederations Cup, the organisers, anxious to get the stadiums full, threw open the gates. It is quite likely that we may see similar tactics in June. So why not just loiter outside the grounds as kick-off approaches and wait for the turnstiles to be switched to “auto”. The second best thing that could happen is that you get to watch 90 goalless minutes sitting next to someone who paid several hundred euros for their seat!
Please can we collect all 20 English wickets this time.
James Greener
16th January 2010.
