These must be very tough and worrying times for folk whose job it is
to monitor the risks of dealers sitting at trading desks. Positions will be
soaring from hero to zero and sometimes back again in the space of a few days and
even hours. Commentators feel obliged to find a reason for each excursion and
are always grateful when some index, statistic or price is published that
differs from expectation. Another excellent scapegoat is a man in a suit
(rarely a woman) preferably with a beard or glasses assuring the audience that,
despite being in charge for many years, the current situation has nothing to do
with them and they now have just the remedy to make it all better. Throwing
large sacks of money at organisations that have already ill-used the previous
delivery of money is a common remedy. A different outcome is very unlikely,
however.
One indicator that is not bouncing around and has assumed a steady
downward trend is an index of the dollar price of commodities. This might
indicate a drying up of demand. Since it is widely assumed that China dominates
consumption of these things, it is a reminder to keep a closer eye on other
indicators from that country for sign of a cooling off. Contagion will be
inevitable colds will be caught which will be considerably worse than the
sniffle which has infected one of our noisier youthful socialist mouthpieces.
This infection has conveniently caused him to be admitted to hospital instead of
attending a disciplinary hearing. Because it is apparently “unethical, immoral
and despicable” to enquire further on this unqualified woodworker’s health we
have not learned if it was a private or a state hospital which is tending to
the patient. Anyone looking for a “Get
Well Soon” card must be sure not to buy a “Sorry You Have Lost Your Job” one
that is now selling well in the USA.
Desperate times.
Right now the market index is poised about midway between the August
low and the May high, both of which are about 8% away. No one knows where it
will be at year end or even next week. Bears worry that that many companies are
reporting disappointing profit growth and others are unwilling to commit cash
to expansion. Growth among businesses that actually add value to raw materials is
meagre and far too many resources are being devoted to fulfilling regulatory
obligations. My particular favourite is the obligation to demonstrate
sustainability – whatever that is. A sustainable mine is an oxymoron. As has
been pointed out by many others, the end result of a successful mine is just a
hole in the ground. Even paper-shufflers in the money industry are capable of
sustaining little more than ignorance and greed. But this has been cause enough
for crowds of folk to spend late autumn camping in lower Manhattan on an “Occupy Wall Street” campaign.
It is doubtful if anyone at all understands what is happening in the
Euro zone. This week Italy
received a downgrade which is financial gobbledegook for “might not be able to
repay its debts” Other such pronouncements by the so-called rating agencies, that
it should be pointed out have a poor record in these matters, are likely.
Earlier this year an exercise to “stress-test” many banks was carried out. Banks
were asked to report how much money they had has lent to which borrowers and
then an accountant prodded some buttons on the calculator to see what would
happen if the borrower went “poof”. Naturally no bank wished to be seen to fail
this test and so many probably succumbed to the temptation not to reveal all
the skeletons in all the cupboards. This week however, as the Greek mess moved
closer to “poof”, bones fell clattering to the floor in several places and it
is depositors and shareholders who are now being stress-tested.
Back home our stress peaks at 7am on Sunday when the ‘bokke meet the
Wallabies in the quarterfinal. Close to many billions of words have been
written about this event so all I can add is “Go Bokke”!
James Greener
7th October 2011
