Rex Column 27 February 2017
Mixed signals 27/2
by Cees Bruggemans words 440
US and European growth appears to be gradually firming. Chinese performance appears to be stabilising. Commodity prices remain well supported compared to a year ago, lifting producer prospects. SA growth talk remains to the upside, even though its foundation isn't clear, and of the decimal point variety.
The political rhetoric is of a different quality. In the US it is revivalist in nature, while similar plain-talking battles are being fought all over Europe. In SA, the talk has become more populist, too. Whether the future will remain populist is another matter. Certainly complexity keeps increasing. And there are no simple answers to many issues, only hard ones.
Rex Column 20 February 2017
by Cees Bruggemans words 750
Not everyone understands the economy or how markets impact. That could be crucial when deciding on a change in underlying policy. SA has been subjected to such a reality for years, when the focus moved away from market- and business friendly policies to one favouring central authority directing resource allocation.
In the US we have currently major shifts under way, which especially in trade and migration policy could be heavily damaging. There is a yet bigger fish, however, still swimming free but coming rapidly into focus. That is monetary policy as conducted by the Fed.
Rex Column 13 February 2017
A regulatory recession
by Cees Bruggemans words 520
I am not a mining analyst, but I picked up enough on the fringes of the Mining Indaba to make me feel highly uncomfortable. As a general rule, demand and supply decide overall activity conditions. And with commodity prices having recovered last year, steeply in cases such as iron ore, one would have expected a more healthy condition and sentiment to have been prevailing on entering 2017.
But that wasn't the predominant SA vibe. The iron ore companies certainly have done well of late, spectacularly in places, but the precious metal ones seem to be struggling to overcome more than just modest demand and steep input cost increases. For them, the growing regulatory burden alone appears to be a big enough deadweight to keep them down.
Rex Column 6 February 2017
The Blunderbuss Presidency
by Cees Bruggemans words 700
The blunderbuss is a muzzle-loading firearm with a short, large barrel flared at the muzzle. It also stands for doing things in a way lacking in subtlety and any precision.
Trump is certainly a large barrel. Whether flared or not, the mouthed effects are devastating in the true fashion of the blunderbuss, spraying little iron balls in all directions. One fails in finding subtlety of any kind in the many pronouncements following one another in rapid-fire fashion. More in the nature of a Gatling-gun.
Rex Column 30 January 2017
The betting resumes
by Cees Bruggemans words 650
After two months of joyous upward re-rating in US equities and Dollar (and fearful increases in US bond yields), markets caught a breather lasting nearly a month after Christmas.
The news flow, though initially revolutionary in its promises, had remained thin gruel, and markets do not run forever on fuel fumes alone. Doubts started to intrude.
Rex Column 23 January 2017
SA interest rate prospects
With growth short of 1% and the SA economy far from full resource use, inflation likely to fade from a recent peak of 6.8% to nearer 5%, the Rand remarkably benign in 13-14:$ territory, and near neutral in trade-weighted terms, and the short-term interest rate structure (from repo to prime) increasingly real, one might expect to see interest rate easing.
And yet those odds are fading. SARB is stability oriented, and the biggest risk resides in foreign capital flows, given the size of the SA current account deficit needing foreign funding. Anything major going wrong could shock the Rand weaker, and inflation higher, having further secondary effects on wage rounds and company pricing.
Rex Column 16 January 2017
Priced for action 16/1
When hearing the phrase “priced for perfection” one is supposed to cringe. It means all the supposed good news is already priced in, and any unforeseen negative development could give the asset price a bad knock.
US equities weren't priced for Trump, just as UK equity markets weren't priced for the 20% Sterling depreciation that followed the Brexit vote. When these two events hit, certain equities took off into the blue yonder, in the case of Trump discounting tax cuts, infrastructure spending, deregulation. In a word, higher company earnings growth.
Rex Column 9 January 2017
Back to work
Throughout last year there hung a palatable concern that the SA economy would not be coming back to any degree in 2017. The argument was about decimals, with some seeing a bit more upside while others stressed downside.
Now that we rolled into 2017, some things are becoming steadily clearer. It has really rained in the interior, and provided the summer season can keep playing a more normal pattern, the maize harvest is seen in the 11-13mt range. That would be 2/3 up on last season’s 7.2mt. A real kicker.
Rex Column 4 January 2017
Voted disrupter of 2017
by Cees Bruggemans words 870
What would have the greatest disruption potential in 2017, for good or bad? (1) Trump (2) oil (3) China (4) Something European (5) terror. Locally? Zuma shuffle.
We are playing with known unknowns here, and even then one wonders how intense some events are going to be. So ultimately we are dealing with many unknowns, known & unknown. That makes forecasting challenging, putting it politely.
Rex Column 27 December 2016
Joyful equities, fearful audiences
It is a rather bizarre combination. Joy to the world in key global equity markets, yet deep fear gripping large populations. And it could keep intensifying, at least some of it in 2017.
The equity Bulls in New York were mesmerized for most of December to get the Dow through 20 000. Increasingly, the accompanying tales were getting ever more excited. Whatever fear had existed in these equities seemed to have given way to one-way joy. This is begging for punishment, but it may take awhile coming out on top.