Comment 21 July 2016
Everything keeps going...
You may remember the jingle “Everything keeps going right, T…”, an advert slogan for a Japanese car brand. Well deserved, too. Meanwhile, markets today are dancing on the ceiling, and they are welcome to it, too. The search-for-yield worldwide is in full flood, SA is heavily underpriced (though not necessarily in full risk-adjusted terms…) and one makes hay when the sun shines on the back of a tide of hot money flooding in.
Locally, however, my sense is more one of racing along the edge of a very deep precipice, daring each other, with the ultimate penalty of a misstep & plunge. There are various ways these sensations present themselves.
Comment 20 July 2016
A more stable SA prospect?
by Cees Bruggemans words 1450
Our SA prospect domestically is hardly stable, going by policy frames, business confidence and private investment trends. But globally? Traditionally, we tend to be boosted along by global windfalls serendipitously coming our way, only for us to fall down once these disappear (at best) or reverse direction (at worst). And we have for some time now been having headwinds undermining performance, with fears of yet stronger headwinds to come.
But what if the current global transition were to become more benign for us, possibly in unexpected ways, but real nevertheless? Could we depend on it? Would it make our external prospect more stable? Meaning sustained capital inflows, supporting our bond, equity and currency markets, tempering our inflation and interest burdens (indeed shaving them down to unexpected low levels)? And this irrespective of our domestic shenanigans. Or do we even here have some stability features so far unrated?
Comment 19 July 2016
A bigger European nightmare?
by Cees Bruggemans words 950
Just when you thought you understood the European situation, along come a few curved balls to add spice to the proceedings. I am not in the first instance referring to Brexit (which is mainly a British headache, though leaving its finger prints on Europe, too). Or the Italian banking crisis (and what could loom if it doesn't get sorted, for which reason it will be). Or revolt in East and Central European ranks regarding foreigners which could turn out far more radical than British thinking.
I am merely thinking Turkey (population 80m), a member of Nato, a prospective member of Europe, that seems to hold many keys regarding Syria (population 25m) and Syrian refugee streams (including many more stragglers from further east – Iraq, Iran, Persian Gulf, Afghanistan, Pakistan, Bangladesh – whose population footprint exceeds 500m).
Comment 17 July 2016
by Cees Bruggemans words 930
In the modern post-WW2 era, there have been notable political women leaders. Golda Meir, Maggie Thatcher, Indira Ghandi, Benazir Bhutto stand out, Cristina Kirchner less so. Some were major reformers (Maggie), others mothers to their nation (Golda). Some were thoroughly detested (going strictly by Kissinger).
But they were only mostly a sprinkling in their time, though each a torch bearer, breaking old moulds. Today, we have a whole bevy of women leaders in the most senior political positions around the world, and fate may be about to turn them into a posse. There is Angela Merkel in Germany, Theresa May in Britain, Nicola Sturgeon in Scotland, Dalia Grybrauskaite in Lithuania, Beata Szydlo in Poland, Erna Solberg in Norway, Arneenah Gurib in Mauritius, Marie Preca in Malta, Janet Yellen at the Fed, Christine Lagarde at the IMF. And waiting in the wings are Clinton in the US and Le Pen in France. And of course Zuma in SA.
Comment 13 July 2016
by Cees Bruggemans words 1000
The traditional way of looking at this three dimensional Union implies freedom to trade in goods and services, freedom to invest capital across the Union, and freedom of labour to offer its services across the Union and settle. But another way would be to identify economic advantages, political balancing and military dimension to stand together in maintaining security.
Comment 12 July 2016
Temporariness favouring us
by Cees Bruggemans words 1450
SA is a country whose modernity was made by global economic windfalls (and their inspired investment spurts). We have in recent years come to enjoy the favours of a sub-specie of global windfalls not connected with traditional commodity cycle or trade boosts. Instead, these are financially driven, and as such don't have the same effects.
Traditional commodity-cum-trade windfalls drove export earnings, boosting corporate confidence, between them giving rise to bigger income payouts (taxes, dividends, retained earnings) and inviting fixed investment expansion. The financial variety of global windfalls sees capital inflows into our equity and bond markets, bolstering asset prices (and offering wealth effects), while supporting the Rand, limiting imported inflation and capping interest rate burdens.
Comment 10 July 2016
Resilience vs Fractioning
The world is not marching to an unified drummer. Instead, the world falls apart in many fractions, each apparently engaged in its own struggles. This fogs up the common journey in unified global financial markets. Which way are we pushed or pulled, towards crisis or face-lifts, both transitioning to new realities?
There is the distinction between the West (America and Europe) and the non-West (the global rest), the distinction between the rich (America, Europe and Japan) and the wannabes. The non-West wannabes have as many fractions as there are continents and sub-continents (one could distinguish between a difficult Chinese transition, an exciting Indian trajectory, heavy-handed Russian preoccupation with western neighbours, Islamic heartland upheaval, heavy weather in Chinese EM dependencies).
Comment 7 July 2016
The Teflon Economy
by Cees Bruggemans words 850
It is never pretty when one part of society brings down devastation on another. Thus the John Gapper article in Business Day last week, mournfully relating how the old, played out industrial backwaters of northern and middle England were the main referendum Leavers. This in contrast with the many modern services nodes in the south and south-eastern parts that have been the main beneficiaries of European membership, but outshouted in the Brexit referendum. The logical consequences will weigh heaviest on the successful parts now about to be cut loose from their EU anchoring in coming years.
Certainly, Theresa May (not to be confused with Mother Theresa of Calcutta, instead being apparently more a potent mix in the mould of Maggie Thatcher, baroness of Kesteven, and “Mutti”Angela Merkel of Berlin) as likely next Prime Minister will have her work cut out (as was the case in the 1980s) to convince all what would be best for Britain.
Comment 6 July 2016
Waiting for GI Joe?
by Cees Bruggemans words 1000
Slow recuperation in the US, much slower recuperation in Europe, China steadily realigning (seeking weaker Yuan), Britain blown off course (recession next?), risky EM & commodity currencies, bonds & equities reflated by global search for yield, though not their economies most of which remain universally adrift.
The bottom line is growth underperformance, resource underutilization, severe shortfall in confidence and investment, over-reliance on central banks taking yields progressively into negative territory. This logic needs to be broken. But what will do it? And in its absence, who will take the lead?
Comment 30 June 2016
So Fed chair Janet Yellen wasn't wrong all these months to emphasize “risk” from a possible Brexit. Its happening should make the Fed yet more cautious, with the stronger Dollar unhelpful for American purposes, though watch out for the next payroll number (which could change perceptions anew?).
Fed caution, if it lasts, will reinforce BoE liquidity support (rate cuts shortly from 0.5% to zero?), while Draghi at ECB may also take more support action (deeper negative rates, extending his QE bond purchases deeper into 2017, and yet more bank liquidity support?).