Comment 14 April 2016
by Cees Bruggemans words 1380
We have come a long way in terms of junk. Indeed, as from dust to dust, in our case it seems to be a matter of ultimately going from junk to junk. After which the Phoenix-like resurrection? Perhaps, who knows.
Credit ratings are merely a degree of risk attracting a premium (spread) over a riskless rate (traditionally the US treasury rate, before which it was British gilts). Paper of empire attract least risk. Everyone else is rated relative. In terms of the quality of its economy policy, its fiscal behaviour and its inflation rate. Today also its politics, governance and long-term growth prospects. All part of the reckoning whether you will #pay-back-the-money and the risk of not doing so.
Comment 13 April 2016
SA business taking strain
Profit, we know, is a dirty word for some sections of society. Yet it is also a workhorse. As things stand, this thing is underfed and overworked. And all work and no play makes Jack a dull boy. The consequences this year could be major.
The item to watch is operational surplus. Its growth has dwindled to low single digits, the lowest in the years. Poor demand, rising costs (be they labour, diesel, electricity), loss of trade competitiveness (despite record-low Rand) and simple output lost has eroded the operational surplus accruing to business owners. Expect them to get yet more defensive. In the process, all of us may have to stand back yet more.
Comment 8 April 2016
Steady US performance
The US job growth in recent years has been stronger than imagined, during 2011-2016 by far outpacing the annuals of 2004-2007. Job creation since mid-2014 (some 4.5m on a 144m employed labour force), was nearly all in services, as manufacturing barely did 100 000 while energy lost same. Employment ratios trended higher, both the employment-population and the ratio of employed to unemployed. There was a sharp trend decline in working part-time for economic reasons, sharper even than 1983-1990, 1976-1979, or 1961-1967 adjustments.
For the past 12 months, businesses have been more worried about the tight labour market (concern of not finding the right quality labour) than poor sales, with concern higher than pre-crisis. Job openings have risen from just over 2m in 2009-recession to 5.5m today. New hires have stepped up from just short of 4m in recession to over 5m today. It currently takes 28 days to fill a vacant job, up from 23 days in 2006 (and 15 days in the 2009 recession).
Comment 7 April 2016
The Next Wave
The next global upswing won't be China-led, but it will be China supported as its long-term adjustment matures and stabilises. It won't be Europe or Japan-led either, though these will be mature followers in whatever transpires PROVIDED Europe doesn't tear itself apart (something that might start as a sideshow but not end up as one, if severely disabling enough, not only thinking Brexit here but going much wider if the migrant crisis were to intensify).
The next global upswing will be American-led, as it has been so far since 2010, if as yet hardly noticeable. And it will be ably assisted by a range of Emerging Markets and already industrialized ones, to the extent that like the US they are also robust reinventers of themselves.
Comment 6 April 2016
The Next Big Buy
by Cees Bruggemans words 1240
We all have skeletons in the cupboard, the Big One that got away, and ever since either shamefully forgotten about, or endlessly talked about (personalities differ). There is quite a bit of that in recent decades regarding shares buying, too. And naturally the question arises: What/when is the Next Big Buy?
The past, being known, makes it look effortless and riskless. Which it never could be, as we look towards an uncertain future (forgetting that the future always appears terribly uncertain, and only in hindsight a walk in the park, to have been given a miss or to have been part of boots and all).
Comment 3 April 2016
A Time-Sitting Economic Policy
by Cees Bruggemans words 880
Time-sitters. People who have been left behind by events, but who succeed in keeping their jobs, sitting out their remaining time to pension, not contributing much though getting full pay and benefits.
After last week’s events culminated in a presidential address to the nation, followed by the secretary-general conference remarks, one should be left in little doubt as to the state of play. The 18 million South Africans who drew crosses on ballots allocated political power, and those who have it, retain it, with or without concourt guidance, duly acknowledged and in the name of the constitution even welcomed. Meanwhile, the status quo proceeds, and has 20 to 35 months to run.
Comment 31 March 2016
Doing much better, Tx
by Cees Bruggemans words 930
The rich world has underperformed markedly post-2008, to the point of driving China to change its development strategy, away from export-led infrastructure and industry investing towards homegrown household consumption needs. SA also underperformed long-running trends, partly because of getting caught in the wake of the Chinese switch inviting a commodity superbust, but also by way of its own internal policy mistakes, and defensive private sector response thereto.
Even if the world turned more risk-averse in the wake of the 2007-2009 western crises, reinforced by the progressive Chinese switch post-2011, inviting less aggressive business investment and expansion, causing world growth to slow, aside of banking, property and fiscal austerity cleanups (and during the past two years the US energy investment shrinkage), was there still yet another elephant in the room?
Comment 14 March 2016
A few Moody’s questions
There are many opinions about the leading rating agencies, not all of them flattering. But is it possible they at least ask the right questions, an intimate probing that leaves many of us squirming uncomfortably?
Moody’s two weeks ago put SA up for review, and this week are in the country, trying to understand whether prospects are changing, and whether they should confirm our existing rating or downgrade, a process also playing out in many other countries today.
We are certainly not alone in this happening to us.
Comment 8 March 2016
A break in the clouds?
One could easily be mistaken, be premature by a mile, with car sales prospects this year lowered by another 10%, agriculture deeply suppressed by drought (lowest rainfall country wide since 1961, in south western Cape since 1921), manufacturing drifting in and out of coma, business and consumer confidence depressingly low, while higher tax, interest rate, food and electricity burdens weigh on households also suffering from cuts in formal employment this year.
But is there a break in the clouds shaping?
Comment 4 March 2016
Managed SA non-austerity
by Cees Bruggemans words 900
The outline of the 2016 ‘Rescue’ Budget is becoming clearer. Appearing more and more to be in the nature of a down-payment in 2016, with the harder parts to be attempted in 2017-2018? And the crucial question: can we believe the intentions? And build on them?
Pre-budget hype was intense on promising to restore confidence, restart growth and prevent junk. Yet actually doing not all that much immediately in the budget, to the point of baffling many, given the pre-budget hype, for instance being soft on tax increases this year (understandably so, wanting to keep the growth hit to a minimum), but already pencilling in two more tax bites in the outer years and pushing the hard spending curtailments and State Enterprise Organisation (SOE) ‘rationalisation’ (perhaps with or without partial private participation) out in time. This resulted in a down-payment on budget deficit reduction (to 3.2% of GDP this year), promising as low as 2.4% by 2018, thereby apparently judging what the traffic can bear (electorate in terms of hardship, and rating agencies in terms of the minimum to get away with to prevent junk).