Rex Column 15 March 2016
A poor faltering start
It has been a poor start to the year. Will it keep on worsening, as sector after sector keeps slipsliding away? Or will it be like the international picture, with the market story-telling far worse than the actual reality (at least in the US)?
Perhaps we suffer from the opposite syndrome? The underlying situation is worse than the story telling would suggest? And thus we keep getting surprised as reality keeps deteriorating, and the narrative too often gives the impression of playing belated catch-up, as if we don't want to acknowledge fully what we are engaged in?
Rex Column 7 March 2016
Bouncing commodity bottom?
The global commodity bust since 2011 has been relentless, with mining commodity Dollar indices halving as the Chinese-induced supercycle was undone in relatively short order from both the demand and supply side.
But the more extreme the sell-off, the more likely a bottom comes into view eventually. Is 1Q16 that moment, or is it a false signal, with new price relapses still ahead?
Rex Column 29 February 2016
Manageable global tensions
by Cees Bruggemans words 900
It is no use ignoring it. Financial markets these past few weeks have steadily started pricing in a US recession later this year. Equity market selloffs discount a 30% chance of it happening.
With stock markets famously predicting nine out of the last five recessions (according to Doyen of Economics Paul Samuelson as long ago as 1966), one has reason to be skeptical – at least half the time…. Still, what's the evidence, what's the fallout, what's the counterargument. And does it matter?
Rex Column 22 February 2016
What tendencies can be turned? What is likely set in concrete, at least short term? SA output is struggling in diverse ways, either minimally advancing or steadily falling off, in places with severe employment and income implications. Much of it in set ways, taking long lead times to shift?
Our financial parameters may be more amenable to shifting quickly. The Rand, bond yields and equity prices are very much open to persuasion, both as regards deeper selloffs (on worse news and deteriorating perceptions materialising) but also regarding clawback of oversold conditions (decisive policy actions changing perceptions of risk for the better).
Rex Column 15 February 2016
Rejigging Rand & Rate Forecasts
by Cees Bruggemans words 730
The year is only six weeks old, and we have already enough earth-shaking events to mark a decade. It means the extreme scenarios get a greater look-in, as much the positive as the negative ones.
Will SA end up in Rand territory 15-25:$ the next two years (increasing the Rand undershoot relative to 10:$ fair value, the inflation spike and SARB rate vigilance, bearing also in mind militant labour demands in mining and industry)? Or will we travel mostly in 10-15:$ territory as global realities and domestic actions ease the Rand undershoot and its fallout?
Rex Column 8 February 2016
Rand & Bond clawbacks?
by Cees Bruggemans words 600
After the December Nene firing hurting us deeply, doubled up in January by another instalment of Chinese liberalization tribulations, the SA Rand and long bond yields ended up in deeply overshot territory. Indeed effective junk.
There has been some clawback todate, the Rand retracing to 15.80:$ (after seeing 18:$ on a single Japanese midnight cowboy trade) and long bond yields clawing back about half the 160 point Nene loss. Is this it, or is there more potential for retracing? It depends on what you want to believe….
Rex Column 1 February 2016
Thinking about this summer
It has been, to say the least, a very strange few weeks (months) this summer. How to place events in context? What implications, if any, for the year ahead? Things may look straightforward, but could easily not be.
Five very distinct events happened during December/January which had a major bearing on the Rand and our financial markets, future inflation prospects and interest rates, future actions of rating agencies and our credit rating. And not forgetting direct and indirect impacts on growth performance.
Rex Column 25 January 2016
Danger of too narrow stories
by Cees Bruggemans words 1180
Want to know what happened? THIS is what happened. Many stories, but mostly one story line, converging on a common tale, one dominant interpretation. Too little diverse thought. Yet Nature survives through wide diversification, many eggs, many baskets. So how about a few more story lines? If only to have more argument rather than deadening agreement to tease out reality.
The villain of the piece isn’t the Fed, until very recently chief straw man. It is China. Bad, mismanaging, infantile. It is commodities, deadlier than dead. It is falling oil prices and Fed liftoff after all as her grip tightens. But what if our story line is much more varied? Does it create a richer diet?
Rex Column 18 January 2016
SA consumer resilience 18/1
With the economy performing all weaker, to the point of setting in motion a recession debate (meaning national output and real income actually dropping for two or more quarters), agriculture devastated by the lowest rainfall in 55 years, motor car sales down 5%, formal jobs being shed in many sectors, and early-bird indices such as SARB leading indicator, RMB/BER business confidence index, FNB/BER consumer confidence index and Barclays/BER Purchasing Managers Index all steadily exploring downside territory, with growing panic in global markets, massive currency wars, and a global commodity superbust playing out, it is rather easy to lose the plot, as some are doing with great abandon.
But then one looks again at some more stats and you realise just how stable our greater structure hangs together. On the margin great furore as growth dwindles to a fraction its normal level, and structural improvement kept to a trickle, yet us not going through a -25% GDP experience as the poor Greeks did after 2010.
Rex Column 11 January 2016
Gordhan resetting the dial?
SA is still absorbing external headwinds (commodity prices sliding), has to face up to a major drought, and remains on a Zuma trajectory of clashing public and private paradigms, fading business confidence, growth stagnation and slipping fiscals amounting to a slow-mo credit rating banana peel towards junk. Such junk status is in any case already mostly priced in on account of the Nene fiasco and the market rethink that followed in its wake.
Most unpromising as honeymoons go, you will agree. But finance minister Gordhan presumably didn't accept the job on the usual terms (promising to be a faithful Master’s Voice). Unlike Manuel, himself and Nene before him (even if each in turn tended to block what was considered fanciful, downright criminal or inadvisable seen from the national interest). So what's different, with what kind of consequences next month? Will the Budget be 90% Nene (already finalised before the firing)? Or will it be 90% Gordhan? And if so, the Old or New variety?