Already there are pundits saying that the
bear can stop and return to its lair now and that 7% down in the last month is quite
enough thanks. But just seven years ago market valuations were at a level which
would be equalled currently only if prices fell another 50%. This shocker is
merely the outcome of some simple arithmetic together with the assumption that company
earnings stay more or less constant. But if earnings begin to leak away then
all bets are off and even worse carnage might follow. It is worth noting that
the decline is taking place in shares from all economic sectors. In the past
few years it was often just the mining and resources counters which
weakened.
Unfortunately the runt and bonds are also
taking a pasting this week. Money is definitely leaving the country, as
overseas investors start to end their flirtation with so-called emerging
markets. Proper pessimists might suggests that the new and overly onerous visa
requirements for tourists considering coming to our freezing shores is reducing
the demand for our money and so now a pound sterling will buy 19 rands. Wow!
This is all rather technical and
decidedly gloomy and the probability of a sudden and lengthy collapse is quite
small. Remember that research suggests that investors holding shares in quality
companies with excellent managers and terrific brands almost never gain from
selling those holdings with the intention of replacing them at lower prices.
Rather just sit tight and wait to add to those holdings at leisure later on.
A decade ago Mr Schabir Shaik, the
spectacularly unsuccessful financial advisor to the man who is now our
president, Jacob Zuma, was convicted of fraud and corruption and sent to
prison. Sadly he developed what was diagnosed as a terminal cardiac condition
and was released on medical parole after serving just three years of his
lengthy sentence. Fortunately sojourns in luxury game lodges and rounds of golf
appear to have ameliorated the condition. But this week Mr Shaik requested a
relaxation of his parole conditions in order to consult a medical specialist overseas.
The more cynical amongst us wonder why he has not been referred to one of the
Cuban doctors brought in by his former client. But perhaps Mr Shaik has other
chores to attend to overseas.
The blattering that portfolios are
suffering are nothing compared to the rapid decline in the fame and fortune of many
soccer administrators.. The FBI, who until a few years ago didn’t even know
what soccer was, have produced evidence and informants eager to confirm the
extent of the corruption practiced
by FIFA and its acolytes and associates.
While most fans and players are certainly delighted with developments, there
are pods of panic popping in plenty of places. Not least in South Africa
where the government pushed Minister Mbalula out to the podium as the
sacrificial spokesman. In his office, every dictionary and thesaurus is open at
the word “bribe” in a frantic search to find a kinder word to describe the
clandestine payment of money in return for benefits. His performances so far
have been derisory and come hard on the heels of his colleague police Minister Nhleko’s
explanation of why the president’s own cows and chickens compromise his safety.
Maybe it really is time for us all to take to the streets in protest at paying
taxes to these buffoons who treat us with contempt.
The Super Rugby tournament has reached
that stage where the mental arithmetic wizards can command respect at the bar
with the “ifs” and “thens” of which teams could make the playoffs. The rest of
us are content to order another round and wait until it’s confirmed in the
papers. In Formula 1 even the dead certainties can be derailed by team orders
but it seems unlikely that anyone but a Mercedes driver will be this year’s
champion. I wonder if the FBI has a file on Mr Ecclestone?
James Greener
5th June 2015
