The notion of applying a stress-test to a bank is wonderfully amusing. What do they do? Give the back wall a nudge with a bulldozer and see if the vaults crack open? Tie the boss to a chair in a cellar and shine light on his face while a shadow in the corner pulls pieces from the balance sheet with pliers. Or maybe it’s all civilised and they just run a computer program with the dials set to 10 sigma and see what happens. But the best part of all is when they find a stressed bank that is “too big to fail” they simply fine it half a billion dollars and go out to a nice dinner with all the trimmings.
My guess is that dinner is also the highlight of the bi-monthly Monetary Policy Committee meetings at the Reserve Bank that take two days to reach a pretty simple conclusion. The latest one this week was that the price of money in South Africa is exactly right and therefore there will be no need to adjust the repo rate. Most people seem to agree with that decision and it has done the share market no harm. In fact the All Share index seems quite likely to get back over 29 000. It started the month at 26 000, so that would be heroic stuff signifying that buyers can see substantial earnings growth ahead. Bears, however, naturally worry that this seems unlikely given what we believe are the signs of a quite severe after-party hangover coming on. Did you see how modest SAB’s results were? What happened to all the beer we were using to lubricate the vuvuzelas?
A very simple but timeous and hopefully reasonably error-free daily statistic is the value of notes and coins in circulation. While this includes the shrapnel that has fallen down the back of the couch and the contents of the numerous brown envelopes being passed around the corridors of power, one might have thought the presence of more than a quarter a million free-spending fans might have shown up in the data. Amazingly it did not. So does this mean that they used their credit cards even when buying a burger? Curious. The exact short term economic benefit from hosting the SWC is definitely unknown. Let’s hope the long term indicators provide a clearer and positive picture
In the US, Governor Bernanke prattled on for ages in front of the politicians, trying to hide his disappointment that all the money he has printed and dropped on the nation so far has failed to do very much for the economy. It must indeed be disheartening trying to work out where all those trillions have gone. Aside from banker’s bonuses that is.
There are distinct signs of delusion in the ‘bok camp these days. Not only do they believe that the coach and selectors are doing a great job, they have also hired someone to tell them what they are worth as a brand. Undoubtedly that was not a cheap exercise and now everyone will be delighted to tell them for free that their brand value is a now whole lot less than before they went touring. Nevertheless they have reportedly brandished this alleged “valuation” in front of their current sponsor to open negotiations for the next contract. Surely anyone seeking sponsorship or charity is actually a price taker? The news that Sasol has politely declined to pay the new asking price, would suggest this is the case. Any more double digit losing margins in the Tri-Nations and I think the green and gold camp may need to review their worth. They might have to settle for Joe’s Pie & Curry Shop offer of a free bunny chow and coke after every match.
James Greener
23rd July 2010.
