Why is it that just about anyone who shuffles large sums of money
around for a living is either very foolish or devious or tragically, both? The
share prices of banks got hammered this week when firstly local outfit ABSA
admitted that more of their customers are finding that they have less money
than month and so are skipping the mortgage payment. ABSA as the nation’s
largest mortgage lender is suffering from rocketing bad debts. Meanwhile, its
parent Barclays in London
admitted that their traders had found ways to buy cheap and sell expensive that
might not be entirely legitimate or fair. Additionally, JP Morgan Chase
(remember the London Whale?) think that their spell of inattention might have
torched $9bn and not the trivial $2bn first announced. Presumably many others
took the opportunity of this heavy smoke screen to release their own unpleasant
snippets
It is human nature to believe that bad news if kept hidden will get
better before it has to be revealed. Unfortunately the very efficiency and transparency
of free markets that most of us praise and call for ensures that mistakes and
malfeasance does not remain hidden for long. However, the bear which was
released by these dribbles of news was eager to return to hibernation and his savagery
has been limited.
Not even the reckless and foolish pronouncements from the ruling
party’s current policy conference about the roads to economic freedom are
causing much market damage so far. Threats of socialism and interference are
always near the surface. Public Enterprises Minister Malusi Gigaba, urged State
Owned Enterprises (SOEs) to “invest beyond what their balance sheets afford so
that we can stimulate economic activity through the investments of the SOE's”. Only
the Honourable Minister knows what this means but it is likely to be bad news
for tax payers who by definition are the equity shareholders of all SOEs. This
arrant nonsense comes hard on the heels of muttering that savers in future
might be compelled to place some of their money with the state. The idea is not
new and when last implemented was known as “prescribed assets”. This was deeply
unpopular with fund managers but oddly was not actually a total disaster in
terms of performance. However, today yields are at generational lows rather
than at the highs which were occasionally available way back then and which
often rescued the more gung ho managers from their penchant for dodgy equities.
But none of these ideas for getting the unemployment down and growth
up compare with the far simpler one of scrapping the statutes and regulations
about the allocation of resources, all of which are predicated on the utterly
flawed assumption that there is always someone in charge who knows what is best
for you and your money. Sadly even the much admired Finance Minister Gordhan
claims to have spotted places in the economy where the markets “won’t go” and
so thinks it is sensible to send taxpayer funded expeditions to explore these
obviously dark and unprofitable areas.
There has been a big show-down at the OK Corral (aka Tombstone
Tshwane) and both the United Sheriffs’ Society and the SA Institute of Sheriffs
have been closed down. The survivors have founded the SA Sheriffs Society. Big
hats, dusty boots silver stars and hot lead? I hope some one caught it on
camera.
A very clever friend has suggested that instead of resorting to a
very unsatisfactory penalty shoot out to find a winner after 2 hours of result
free and often score less football, the shoot-out should be held first. That
score would remain on the board until the first real goal is netted in normal
play or used it to resolve a draw at the final whistle. Think about it while
you watch the Lions stage their late season surge against the Stormers this
weekend. Le Tour is about to start and at Wimbledon
it’s like standing under a baobab tree. Big seeds falling.
James Greener
29th June 2012
