Now that the UK have left the EU – and nothing much seems to have fallen apart – there is less news from that region that seems worth understanding. Except for the prediction that Italy might be the next to go and the Irish received a bill from Brussels for Services Rendered which has soured the taste of Guinness. Nonetheless the euro has been quietly gaining against the US dollar in recent weeks, so something is afoot. Its hard for Tidemarks to believe that forecasts of Biden winning the presidential race in November are credible, though undoubtedly that would do the greenback little good. The similarity between the political choices in the US and SA are surely coincidental. Unappealing characters in or standing for president. Strident women with far too much power. And woefully and wilfully ignorant left wing extremists with a taste for violence.
Company results for periods where the lock down was well underway are starting to trickle in and the picture is terrible. The JSE market index that tracks the larger market capitalisation shares in the industrial and financial sectors is reflecting an average decline of 15% in reported earnings over the last few months. This is of course not the worst we will see. The cavalier and callous government program that is relentless, terrifying and ongoing, appears to be planned to throttle far more life out of the economy than any lives it might save from an increasingly better understood viral infection. Last night the President backed down to demands from the teacher’s unions and fiddled with the public-school calendars again, They are to be reclosed “until the peak in Covid-19 related deaths has passed” A mendaciously vague target. The private schools – catering to a numerically rather trivial fraction of pupils – have been left alone. One suspects that like private hospitals, these usually better run facilities are where the cadres choose to seek education and health care for themselves. Hypocrisy is present in industrial strength quantities.
Obviously, earnings declines like this will show up as similar reductions in dividends. And yesterday’s cut in the repo rate to 3.5%pa means lower interest payments. The conventional wisdom is that borrowers will now be able to afford more debt and this will stimulate increased commercial activity. In the current environment of a punitive and deadly attack by government on private enterprise this is clearly and fatally wrong. Those businesses which have survived to this point have little appetite for debt regardless of its price. This is demonstrated by the news that the government’s R200bn loan scheme for small business affected by the lockdown has attracted little interest among the target market. Lenders, landlords and investors are also facing a crisis. Their income streams are similarly collapsing.
There is a kind of race emerging that unfortunately is towards the bottom. Either through stubborn adherence to dogma or deadly ignorance of mathematics the government have created a fast lengthening list of beneficiaries from the public purse. These comprise state employees (three tiers of government plus uncountable numbers of wholly state-owned agencies) and social grantees. The other runners in the race are those who supply the government with the funds to meet this terrifying monthly wage bill; that is taxpayers and investors in the state’s debt instruments. The inarguable fact is that the economic depression that has been caused and is being deepened daily by government can be reversed only by a very serious cull of the beneficiary list. There is almost nothing more to be gained by approaching the other side. The tempting feature about the cull is that it could reveal the whereabouts of some of the stolen trillions which were deftly extracted from public gaze by legions of crooks and thieves over the last few decades. Sadly, most of it has been very thoroughly laundered by now. Great folk for cleanliness are the cadres.
Meanwhile the most wonderful classic comet seen in years has rounded our Sun and is on its way back into deep space. Following some rule about these things the comet was named NEOWISE after the satellite that first spotted this object. This in turn stands for Near Earth Object Wide-field Infrared Survey Explorer. Catchy hey? Anyway, it is well worth asking Google for some of the pictures that have been taken of this comet. They are breath-taking.
James Greener
Friday 24th July 2020
