Rex Column 1 August 2016
A 2017 Watershed?
The trend may be your friend, but do not extrapolate indefinitely. This time is no different from previous such moments. As with Brexit (misjudged by elites and their experts), the world may be getting ripe for a shake-up. But from where will it come, and how heavy the impact, for whom?
By a process of elimination, the world is looking towards the US for its next big surprise. It might be just a Yellen Fed going for a gear change, stepping up the pace of policy normalisation. It could be a Clinton/Yellen combo, though mostly politically correct and not too adventuresome.
Rex Column 25 July 2016
Three SA props giving way
We have seen three SA props giving way serially these past six years, thereby fading GDP growth from a near “old normal” of just over 3% in 2010 to zero this year (rather than to a “new normal” National Development Plan aim of 5.5%).
And a critical question facing all of us: are all three props underlying our GDP demand still giving way, thus preparing the way for an even deeper growth dive? Or are they stabilizing in preparation for a serial comeback, bringing growth back up with them? We are talking here commodity demand, private fixed investment, and government-supported income boosts.
Rex Column 18 July 2016
SA comeback in unruly world
by Cees Bruggemans words 900
We find ourselves amid most unusual events. The upshot is a strong financial market recovery as foreign capital floods in seeking yield, boosting Rand and lowering bond yields while supporting equities. This at a time when we are totally preoccupied with unsavory local politics, even as Num declares a wage dispute with Eskom (strike next?), AMCU demands 50% wage hikes from platinum mines, Num demands 20% and similarly engages the motor trade.
It is a strange set of circumstances, where one would expect deteriorating public governance, uncertain political prospects, ominous labour union posturing and macro policy tightening to depress business confidence yet more, further sinking the economy. Yet mining, retail, wholesale, manufacturing & electricity data for 2Q16 quite cheerful, bearing out four months of equally cheerful Barclays/BER Purchasing Managers readings, and scuppering any sense of recession (for now).
Rex Column 11 July 2016
Lowering our sights
by Cees Bruggemans words 1150
As a country with many problems best served by faster growth (show me a country that isn't, aside of environmental concerns), South Africa has failed rather miserably over a long period of time to discover this holy grail.
Strong nationalist governments have had to discover over time that they didn't quite know after all how to break the growth impasse. That can be very sobering for the populations concerned. Instead of adapting while learning, we are often left with the impression that politicians feel they haven't tried hard enough, and thus have to try harder, even with the same policy approach.
Rex Column 4 July 2016
SA carried aloft
Ten days on, Brexit increasingly looks like an own goal (soccer-mad Britain should understand), Continental Europe is seemingly shrugging it all off with broad shoulders (Germans should understand), Carney at BoE is contemplating carnage (using sterile institution-speak last week to describe a high-speed car-chase-cum-crash and the need to provide first-aid, referring to post-traumatic stress) while Draghi at ECB is trying to play the casual Italian he is (crisis, what crisis?).
South Africa, along with many other Latinos, Africans and Asians, is seemingly a net beneficiary of this weird episode, extending our benign 2016 runway yet further in time, as the Yellen Fed claims to have become VERY cautious (though watch those forthcoming US payrolls and initial jobless claims in months ahead), markets projecting yet more delays of its liftoff resuming, while BoE, BoJ & ECB are expected to do yet more liquidity supporting, China possibly emphasizing fiscal support.
Rex Column 27 June 2016
Carry on, please
by Cees Bruggemans words 950
Last Friday, global markets were caught out in a major way by the UK Brexit referendum result, and repositioned robustly. Selling Sterling, equities and exposed EM currencies and assets, while buying safe haven assets such as bonds (yields dropping aggressively), the Dollar, Yen, gold and Swiss.
The global trade arrangements will not be affected for a long time, given that negotiations will be “protracted” and nobody really knowing how this will play in coming years. More important are two other features. One is an immediate increase in business uncertainty in the UK (possibly leading to eventual company relocations, such as in the financial sector), and such uncertainty also likely seen on the Continent. Another is the way European leaders manage similar political discord in their own ranks, what kind of reforms may be expected, alternatively what greater political unrest may lie ahead for them, feeding yet more business uncertainty.
Rex Column 20 June 2016
Connecting some dots
by Cees Bruggemans words 920
What have a dovish Fed, Brexit, the deeper foundations of our current account deficit, a disorderly Naira depreciation and the ANC nine-point “regruk” plan in common?
They define the Rand, her suspended animation and deep undervaluation. And our general condition. Which way will this cocktail take us?
Rex Column 13 June 2016
by Cees Bruggemans words 1270
Whitewater rafting is the ultimate way to find your buddy in life (just don't tell your wife, she won't ever understand – unless the buddy). Sharing your oxygen supply with a friend in distress 100 feet below the surface isn't (he won't give it back…).
Why does this hold lessons for Team SA as we struggle to redefine the mission? In the one instance we stand together through thick and thin. In the other, self-preservation takes over. Both rely on very basic human emotions.
Rex Column 6 June 2016
A fair wind
by Cees Bruggemans words 1200
And there the tide suddenly turned in our favour, and with a fair wind in the back, we were granted another few months’ reprieve to prepare much more thoroughly for the wild seas (still) predicted next year.
For a country brought up on a steady diet of windfalls, a six month reprieve by American payrolls, the Fed and rating agencies is hardly rich pickings. We are used to much better. But our traditional mainstay (commodity windfalls) are simply not on the horizon soon. And global capital windfalls require a much more favourable set of circumstances to truly shower us. As to self-generated windfalls, we presumably know the formula (change the old guard, get new brooms) but this few societies deliver on cue though there have been exceptions.
Rex Column 30 May 2016
by Cees Bruggemans words 1320
Danger!!! Roadworks ahead, expect delays…What's looming is a possible Trump presidency, a triumphant Premier League (we aren't talking soccer here), more European upheaval (if not Brexit, much worse?). As to China, steady does it (if you want to believe the optimists; the pessimists have a horrid tale to tell of debts much worse than America’s in 2008).
And all this not without having economic ramifications, if duly delivered. It is bond & currency markets that may be most susceptible to upheaval, while (some, many?) companies (equities) may be net beneficiaries. Terribly generalising, of course, but no upheaval tends to go unrewarded or unpunished. And much of this could be upsetting existing applecarts, worldwide & locally.