Short Note 24 December 2015
Warren Buffett Upside Down
Warren Buffett is known for many sayings, having a worldwide following as the world’s most successful serial investor. One pays attention when Warren says “only when the tide goes out, do you discover who's been swimming naked”. In other words, when times turn poor, and interest rates rise, we can see who in good times has not taken enough precaution against adversity, thus more easily becoming overwhelmed by it.
But these words can be recast, having a different outcome. The saying I have in mind also has an American origin, and is just as true in its application: “When the chips are down, you are given the chance to find the strength you never knew you had”. And there are many more variations along these lines, motivational in their inspiration. Indeed, our daily language is full of it. How about the everyday wisdom to “keep your chin up” because “If it doesn't kill you, it can only make you stronger”.
Short Note 17 December 2015
by Cees Bruggemans words 350
It has now been suggested that senior ANC members were briefed about Zuma intentions to fire finance minister Nene last week, giving their acquiescence. Nene had for months resisted and become an obstacle to specific government intentions. He had to go.
The firestorm that followed was apparently quite unexpected, the usual harvest when hubris gets in charge. Cooler minds then prevailed. Better to undo the growing financial & economic damage, recall a pair of safe hands to Treasury. Enter Gordhan. But that wasn't the whole story.
Short Note 15 December 2015
Super Salesman Pravin Gordhan
There are genuine rewards & recognitions, and then there are hospital passes. What happened to Pravin Gordhan last Sunday was a bit of both when Zuma re-offered him (as a pair of ultimate safe hands capable of damage control) the position of Finance Minister so very recently vacated by his new colleague David van Rooyen, who in turn was offered the position of minister of local government (for which he likewise wasn't really qualified, continuing his quandary, definitely not of his making).
Having gamely accepted, with ground rules we can only surmise, but probably quite different from what was ever offered before, possibly insisted upon by senior ANC cadres, Gordhan faces the unenviable task of having to face the media with a straight face and insist things would be done in ways that clearly had been flaunted up till then.
Short Note 14 December 2015
Zuma “changes” his mind
by Cees Bruggemans words 500
A rather unexpected course of events late Sunday night (13 December 2015), as Zuma “reconsiders” his decision to fire finance minister Nene, and reappoints Pravin Gordhan (who should never have been replaced last year in the first place with a presumably more pliable Nene) as finance minister.
The background to these unprecedented Zuma moves (firing Nene, reappointing Gordhan) remain murky. Zuma’s corrupt infrastructure dealings and intentions had been an open book for years, with especially deputy-president Ramaphosa getting a front row look-in. With Ramaphosa working closely with Nene on the SAA deal, and Nene’s relationship with Zuma reportedly for months breaking down, one can sense the opportunities.
Short Note 12 December 2015
The Imperial Presidency
by Cees Bruggemans words 500
We are supposed to have a democratic Presidency, with a two-term limit. But some people see evidence of monarchy and unlimited term limit. And could one argue the presence of an Imperial Presidency?
The President has sole discretion about who he wants to appoint to key public positions. Often shuffling portfolios, and firing key ministerial opposition, is what keeps everyone on their toes and in line. Thwarting the presidential line can and will be answered with dismissal. As mostly all are time-sitters, enjoying their perks & dished out patronage far too much, few are inclined to offer themselves as sacrificial lambs.
Short Note 7 December 2015
Uncomfortable Car Sales Truth
It is an uncomfortable reality.
The onset of year-on-year SA car sales declines signaled the imminent start of economic business cycle downswings in seven such episodes since 1970 (the present being the eight, but this as yet unconfirmed). And such downswings in five instances leading to full blown recessions. Draw your own conclusion. Car sales are apparently a genuine yellow canary in the coal mines of economic life as early cycle predictors go.
Short Note 5 December 2015
Shifting goalposts hitting hard
by Cees Bruggemans words 850
An extraordinary week in which US non-farm payrolls for November came in above expectations (all but sealing Fed liftoff shortly), the ECB intensified & extended its monetary support (but succeeded in disappointing markets, inviting sharp asset selloffs), OPEC met but couldn't agree about adhering to quota limits (failing to curtail production increases, and driving global energy prices yet lower, Brent spot oil potentially breaking well below $40 into 2016), China announced $60bn of support to Africa (damage control & strategic investment?), and S&P kept SA credit rating unchanged but downgraded its outlook to negative (SA growth prospects simply not making the grade, with worse to come?).
All that packed a heavy punch, causing global markets to sharply reposition.
Short Note 3 December 2015
It has been a week in which goal posts were moved.
Globally & locally, economically & politically, events unfolded that will likely shape 2016, often in unexpected ways.
Short Note 27 November 2015
GDP growth bounces, slows
The biggest surprise about the GDP estimates released by Stats SA this week?
No revision to the 2Q15, remaining stuck at -1.3%. So despite much SARB surprise & conviction that (upwards) revision was inevitable, it hasn't happened (yet). But then watch next year what they do to this past year’s data.
The 3Q15 bounced, but not very strongly or convincingly at +0.7% from the previous quarter, in line with expectations. It remains a very slow economy this year, with year-on-year growth of +2.2% (1Q15), +1.3% (2Q15) & +1% (3Q15), making for an average of +1.5% yoy so far this year, with more momentum loss likely in 4Q15 (getting SARB to project +1.4% for the year).
Short Note 24 November 2015
The SARB rate trajectory
We now have had 125 points of SARB rate tightening in two years, with the repo rate at 6.25% & prime at 9.75%. This represents a real tightening, from a mildly negative real rate to a mildly positive real repo-rate but this in the face of an ever weaker growing economy, now down to 1%-1.5% GDP growth.
What scenarios do we face in a rising rate trajectory?