In common with investors worldwide, those on the JSE became overexcited at yesterday’s news that only 451 000 Americans were claiming unemployment relief and indulged in a buying spree. Shortly afterwards the Bloomberg’s news service announced that the SA repo rate had been cut 50 basis points from 6.5% to 6.0%. 20 minutes later Governor Marcus confirmed this in her TV broadcast and even more frantic buying ensued. But before the market closed, the sad fact that all of this actually has scant immediate impact on the valuation of companies wiped out much of the exuberance and prices slumped. Day trading is for the brave and nimble only.
Some research suggests that changes in the price of money can take months before any measurable effect can be detected in the various measures of economic activity. Presumably now that cash is cheaper than it has been for decades, borrowers must be pleased, but whether they will now borrow and spend more than they had already planned is unknown. I suspect that matters such as threatening political instability, excessive and unpredictable regulation and bureaucratic interference provide somewhat more important considerations for financial decisions than interest rates.
That would seem certainly to be the case with the currency, where notwithstanding the rate cut and ever more strident shrieking about nationalisation and land ownership, demand for the rand is maintained. In addition to the widely believed story that foreigners just love buying our still quite high yielding bonds. Notwithstanding the demand for super luxury watches and whisky from President Zuma’s fortunate and capable friends and relations, other data also indicate that the value of exports is recovering faster than the value of imports Whatever the reasons, it does look as if quite soon just seven rands will buy you one US dollar. Mind you that also says something about the dollar getting cheaper.
Reporting and dividend season is now upon us and good news results outnumber the bad. The people running the real economy are doing a good job for themselves and their shareholders. This doubtless is one reason for the trade unions demanding that the government “tax the super rich”. Assuming – incorrectly – that each of the 400 or so listed companies is able to pay say 10 directors and executives R10m a year each, that R40bn, even if taxed at 100% (!) would cover just 19 days of government expenditure.
If your travels ever land you at our new King Shaka airport down here in the kingdom, take a minute to find and view the smallest of the delightful family of bronze bovines that stand outside the terminal building,. The recumbent calf is easily overlooked but is very appealing. The bull, however, is rapidly acquiring a shiny nose as visitors adopt the custom of rubbing it as they pass. The figure of the herd’s minder, King Shaka himself is absent. It has been removed following complaints that it failed to radiate sufficient power and gravitas. An official committee has been convened to instruct the sculptor
The folk who run cricket will be delighted that they have at last managed to rid themselves of any support from old duffers like myself. After studying a full page colour advertisement for a so-called Champions League Twenty 20 tournament that is about to start here on the southern tip, I am no wiser about how many South African teams or players might be participating. The organiser’s transformation of the game from employing boring yet identifiable regional and national teams into natty contemporary franchises is complete. Who on earth are the Wyamba?
And come to think of it, who are the Pumas? The hint is that the Sharks are going to Witbank tonight so I guess someone in the Eastern Transvaal thought an American cat was an appropriate name for their rugby team.
James Greener
10th September 2010.
