Thursday, 15 October 2015

Economics is neither tasty not nutritious!

Entitlement is deceptively subjective; politics an unfortunate structural requirement and yet, one thing's true, you can't feed your kids on hope and hype.

Tinkering with or restating GDP data is one thing; not addressing unemployment is something else altogether. Too many people from all walks-of-life and in most geographies are in financial stress. Although we're on the cusp of the next innovative age, there is little suggestion that the REAL issues are being adequately addressed. We're surprised when consumer-spending data shows that consumers are spending less.... Consumers are spending less because they, wait for it, have LESS to spend! Following on from that companies obviously stock less, build less, manufacture less and sell less... Why then the surprise when 'manufacturing data' deteriorates? Since companies sell less they employ fewer people who then spend less and so on. That's not economics it's common sense. Ironically companies reliant on technology and laying-off staff are merely 'passing-the-bill' hoping other industries employ the people they sell their goods to. It's not sustainable..

Do yourself a favour and employ as many people as you can. Your financial security, like mine, depends on them and theirs and his on hers and mine on yours.... The rest is rubbish.

Wednesday, 7 October 2015

China's stranglehold

BRICS - the acronym originally coined by Goldman Sachs, isn't exactly food for the imagination. Even so the moniker stuck and as the laws of gravity dictate and as the epithet suggests, like a stone has settled nicely at the bottom of the economic quagmire.

The original BRIC, for those of you who don't know, defined the broad association of the four major emerging economies; Brazil, Russia, India and China. In 2010 the plural was added with the addition of South Africa and since those heady days and the euphoria of that headline we haven't come up for air even once.

In 2007 the China-owned ICBC bought 20% of Standard Bank, South Africa's largest bank by assets & earnings. At that time it was the ICBC's largest investment outside of China. By inference it was also the perfect window into Africa; where local knowledge & expertise was acquired for not much more than 30 pieces of silver... Oh captain, my captain.

Simultaneously China continued to accumulate Africa's primary resources / commodities by all means legal.. - either by entreaty, trade-treaty or by IOU and we loved them for it. So enthralled were we that we filled boatloads of Africa's future at prices-past whilst the puppet-master piped the economic tune. Elsewhere EMEA and other 1st-world professionals / experts plied the Chinese with intellectual capital as fast as Switzerland could absorb the short-term Judas-change. China's only contribution was artificially-cheap labour & an enforced / exploitative work-ethic. Made in Italy was really Slapped-up in China and for a while consumers noted a disparity in quality. As a consequence China upped the ante. Quality became the focal point. Soon goods usually made by hand, with scrupulous attention to detail and by processes handed-down from craftsmen to craftsmen, were no better than China's / [Germany-sold]  mass-produced-machine-product. Craftsmen all around the globe perished on China's ambition to own the shelves & her propensity to exploit her own people. Mainstream media fobbed off these inevitable consequences as a spin-off of GLOBALISATION and derided the craftsmen for their tardiness and inefficiencies.

Back in South Africa China's easterly vacuum accounted for both our intellectual property & our hard-commodities. Trees were felled to make Chinese-built, Chinese-staffed & Chinese-supplied thoroughfares usually into the hinterland where more trees were shelled and more holes dug. That the infrastructure has subsequently begun to disintegrate is a discussion for another time. Shipping lanes were gridlocked with the outflow. Around about then ships, hitherto empty, started returning to South Africa fully laden with Made in China. 

Made in China carried a State-subsidised price tag & almost always significantly lower than the prices of similar goods Made in South Africa. Local product competed for a while, usually on loyalty, but in time-honoured fashion, consumers eventually felt compelled to take advantage of the foreign boon. Domestic industry suffered; the Textile-Sector first to mothball their looms. Ordinary, hard-working generations of South Africans were subsequently made redundant and became integral to the burgeoning unemployment statistic. Breadwinners became welfare-dependents and their own school-going dependents, expelled by circumstance to earn a crust. Perversely domestic commodities were ruthlessly wrenched from African soil and shipped unrelentingly East.

Next to go was the domestic white-goods industry. Tariff-free goods Made in China and subsequently dumped in the retail outlets, confounded strategic rationale. Inevitably there were more redundancies; more unemployment - more desperation; more crime. Consumers, bloated on cheap fridges & kettles, pointed accusatory fingers at the Executive for doing less than their crime-mandates had promised. The domestic currency slipped against the basket - and the unraveling began in earnest. Other domestic sectors, drowning in this sea of Chinese goods, adapted as best they could and by the only means open to them - redundancies. Staff-cuts, across the board,was a humanitarian tsunami that struck the core of South Africa's psyche. The rand deteriorated further. Goods became more expensive to import & in the absence of a domestic industry, we had no other choice. As a consequence we started to import inflation and around about then growth began to deflate. Our interest rates remained low - inflation targets notwithstanding. Lacking the economic backbone of a strong domestic industry and an employed workforce, South Africa's ability to stave off the inevitable became academic at best. Ratings agencies sat up and noticed. The rand deteriorated further. The financial-garrote pulled tighter.

In recent times the once-prosperous mining sector, wholly premised on Chinese-demand, has finally succumbed to fear-induced staff-cuts, the severity of which few people truly comprehend. China's structural over-capacity negates demand, even temporarily and South Africa's reliance on a single basket for all her eggs is a childhood lesson long unlearnt. More redundancies, less consumer-spending; more lay-offs, more bad-debt; bank failure - collapsed rand and so on. Perversely South Africa's recent cap-in-hand visit to Beijing is a suicidal injustice bloated by systemic incompetence. Who knew we could be this pathetic?

At last we find ourselves at the crossroads of desperation and yet the solution is as obvious as the day burns hottest in Africa. Reinstate national pride by protecting local industry; impose multiple import-tariffs on foreign-manufactured goods and negate China's exploitative reliance on her poverty-controlled people. Let's make knives & forks; stop the export of raw product and value-add our commodities in local industry.  Get our people back to work and back in school! Education is an investment for the future. We are a proud nation; a skilled nation and I don't see why we've allowed ourselves to become the economic slaves of a country which less than a century ago lived a rural life, largely uninterrupted by aspiration and an ambition to rule the world. Who's laughing at whom, exactly?

Wednesday, 23 September 2015

Investor fatigue

Buy when others are selling and sell when others are buying is, on its own, about as realistic as anticipating a no-claims bonus from your insurer after employing a stop at a green light and drive-on through a red strategy. Sooner rather than later you'll get it wrong, very wrong.

100 monkeys sitting in a tree eating superficially identical fruit; half the fruit poisonous and the other half not. Underneath the tree lie the monkeys poisoned. The last monkey sitting in the tree would have guessed each fruit correctly until he doesn't. Is he smarter? Perhaps. He's just a monkey remember..

I can't recall a time when retail volumes were so thin. That's applicable across the instrument spectrum and true for most markets. Investment fatigue, a concept birthed in what has become a headlines-driven market, is very prevalent. Hedge-fund gurus of yesteryear, usually wholly reliant on their say-so to influence a  market, find little solace in the fact that the average investor just doesn't care anymore.

What Mr. Buffett really means when he says buy when others are selling and sell when others are buying is this: - buy only when you know what you're buying and sell only when you know why you're selling. If, like many others, you suffer from investment fatigue and are frustrated at consistently poor investment performance don't look to the other monkeys in the tree for guidance. The grass is not greener because it's on the other side. It's greener because it's watered. Now, more than ever, do your own homework. Accept that you won't always be right. Understand that a bad investment can stay that way regardless and do something about it.  

Wednesday, 16 September 2015

Europe's world war & a fight for ECONOMIC relevance

Speak to an educated, politically astute European and don't be surprised when he / she tells you that Europe is embroiled in a war so bitter that subsequent social divides will take generations to bridge. 

An influential colleague contends that Europe is in a fight to the death and the enemy is none other than Britain and the United States! 

Why have the Europeans been so slow to respond to the EU crisis?  It’s a function of an outdated institutional structure and cumbersome Legislative, Judicial & Administrative bodies.

These are just a few of the institutional bodies / individuals responsible for the well-being of the European Union:
  1. Ministers and parliamentary secretary generals.
  2. Commissions / Committee of regions, economic and social council-BEI (European Bank of Investments)
  3. FEOGA-(European Agricultural Guidance and Guarantee Funds).
  4. (EMCF) -European Monetary Cooperation Funds.
  5. Secretary General of the Council of Europe
  6. Parliament
  7. W.E.U (Western European Union)
  9. E.C.B (European Central Bank)
  10. O.E.E.C (Organisation for Economic Co-operation and Development)
  11. The Council of Europe
  12. NATO (North Atlantic Treaty Organisation)
  13. CSCE (Commission on Security and Cooperation in Europe)
  14. The legislative council has powers.
  15. The commissions and the legislature and the executive for the E.C.S.C. 
  16. E.I.B (European Investment Bank)
  17. E.B.R.D (European Bank for Reconstruction And Development) 
It’s understandable why Europe has responded so slowly to a deliberate, well-coordinated economic attack and why the consequences have been devastating. Germany has alluded to this fact and is demanding structural reforms.

Britain is the enemy… 

(A simple example) - Britain proposed the purchase of significantly subsidised New Zealand sheep in exchange for British-made vehicles offered cheaply. The sheep are sold to France at excessively inflated prices and the commission shared…It's open to scrutiny and is a tangible and deliberate attempt by Britain to collapse the EAGGF. 

The United States is the enemy… 

(A simple example) - European banks have been driven to the cusp of bankruptcy by a co-ordinated attack by US banks intent on creating problems where there are none in an effort to destroy the Euro. Interbank rates are open to scrutiny and confirm the intent.

Whichever way you look at it it's certainly a refreshing take on the European Crisis and perhaps an opinion we should not dismiss too lightly. 

Wednesday, 9 September 2015

The South African Rand

Somebody suggested that the South African Rand [USDZAR] would strengthen ['significantly'] in the short to medium term and as these things normally pan out I asked why. 'Significant' is subjective at best so I'll assume he mean't 'return to the mean'. His definition of 'short to medium term' was from a few weeks to a month or two. In that context then:

Here's his take -

I'm not going to prattle on about the techs. but within his parameters / definitions / time-constraints / whatever... he's likely to be correct; maybe.. Who knows?

Here's my take -

My idea of short-term is three (3) years and my understanding of 'medium' is 5 years +. Asked if the South African Rand [USDZAR] would strengthen against the cross over the term, by my definition, the answer is clearly NO; almost certainly, probably..

If investments are a balance of risk and return would you risk your return on a maybe or a probably?

Monday, 7 September 2015

Cogito ergo sum

Cogito ergo sum - I think, therefore I am. [Descartes]

Africa has lost her pride. Dehumanized, patronized, colonized, enslaved, stripped of her resources and flayed in the international trade-markets, it's a betrayal of a continent's people; a scar on the collective conscience.

Unless all Africans participate meaningfully in their domestic economies, Africa will remain the pitiful, aid-slaves of international charity.

Only the weak cannot forgive and in South Africa the outlook is no less absurd. Ethnic perversion is pervasive in leadership and manifest in the consciousness of our people. We claim our own ethnicity and turn a blind-eye to the misappropriation of the collective trust.

                  First they came for the Socialists, and I did not speak out
                  Because I was not a Socialist.
                 Then they came for the Trade Unionists, and I did not speak out
                 Because I was not a Trade Unionist.
                 Then they came for the Jews, and I did not speak out
                 Because I was not a Jew.
                 Then they came for me .... and there was no one left to speak for me. 

[Pastor Martin Niemöller on national complacency when the Nazis came to power]

Ours is a country sickened by public-incompetence. The systemic abuse of political power is premised on personal enrichment. We're a nation hijacked and held ransom by a sponsored tenderpreneur-cartel. In these conditions it's difficult to hope. Under this pall of corruption we, the South African people, all her people irrespective of tribe or ethnic-claim, remain enslaved to our exclusionary past. We say what we don't believe.

For to be free is not merely to cast off one’s chains, 
but to live in a way that respects and enhances the freedom of others.” - [Nelson Mandela]

Yes we live in sad times. In backyards some pay homage to yesterday's flag; a fluttering symbol of false-entitlement and a moral abomination. Children, born a blank canvas of hope, are khaki-trained, an armed perversion - morally flawed and a false economy premised on mistrust. Others, our young ones, flee this land, some locked-out of the formal markets, a legal penance for the sins of their fathers. More render themselves useless, mercilessly beating themselves on the cross of guilt. Those who will not bend to this whip of self-loathing are declared false-prophets; harbingers of insincerity.

We live in sad times. On gilded podiums some bask in false victory; a perverted shout for freedom 20 years past. It's a rendered, context-poor homily designed to mould the economically-disenfranchised; an army dehumanized still, made desperate in chains of poverty and a green branch, compliant against the agenda of the very few. Children, born a blank canvas of hope, are denied their rights, gather in the pock-marked streets and are forced to the begging bowl and out of the classrooms as their mentors idle under trees of despair. In the dark of night behind high walls of neighboring wealth lies a false illegal financial freedom; a theft of the collective moral conscience of a people forgotten.

These are sad times. In the backstreets of sub-urban hell some suffer a despair-dependent narcotics-induced coma. Gun-toting gangs press children, born a blank canvas of hope, into acts of violent confrontation. Fathers mourn sons dead, in cold blood and mothers become mothers, children themselves.

'When a hyena wants to eat some of its children, it first accuses them of smelling like goats' - an African proverb.

Industry is a shadow of failed planning, state-interference and poor skills' development. Parastatal jobs are an exercise of executive cronyism. Our mineral wealth is a low-skilled, low-paying extraction; an international export, at cost, and for the benefit of multinational stakeholders domiciled elsewhere. Up-skilled, value-add, commodity-processing is an international monopoly from which Africa is politely excused. Trade-deficit is an unintended import and priced at the currency-gap; rated arbitrarily by the free-market controlled for 'political risk'; an economic boon for Asian and Western surplus.

Education is mostly a logistics conundrum for the administratively incompetent. Public schools wait two-to-a-desk for books destined ultimately for the black market. Teachers, qualified at the University of No Name, claim salaries from schools they've never seen. Nurses and doctors queue at emigration for a working wage.

Law enforcement is a toy of public office where the rule of law is a yellow card of restraint rather than grounds for immediate dismissal. Yes it's true. Corruption flows richly in our veins.

Cheap labour underpins a process of exploitation. The boardroom's Eton-acolytes sign-off a 200 x [20000%] wage-gap ratio; paid in sterling, at the executive-suite, but paid in South African rand at the face; substantively absurd in productivity alone. High-fenced lands lie agriculturally dormant; home to aberrant game for the trophy-pleasure of foreign dignitaries, owned and hosted by absentee lords of the manor.

Here 1:3 people persist on - $1.25 pppd; 40000 days equivalent to hunt a cage-bred lion.

In our streets indebted graduates beg a meal; engineers, mostly; denied their place by transitory Asian construction-gangs, hired on a secret handshake or at the logging-table. Elsewhere Asian-dumped steel, forged from African ore, risks 30000 jobs at the local smelter. Downstream energy-costs treble on 'generators' down'; a catch-all for 'unscheduled  maintenance'.

Our economic prognosis is terminal. It's a lethal cocktail of complacency, incompetence and corruption. Unemployment is rising at rates unprecedented in any other comparable, middle-income, developing economy. Labour-market restrictions are tightening. Inefficiencies and falling productivity is pervasive throughout the manufacturing, mining and agricultural sectors. Labour Unions, the current voting base, are more militant, less approachable. In the public sector salaries rise at levels 10 x the inflation-rate whilst 1:3 live below the international poverty-line. Trade & budget deficits are unsustainable. Domestic / foreign capital flight is real; without restraint.

An inherited infrastructure belies a political indifference to the needs of the unemployed. Political priorities / agendas are largely premised on accumulation rather than selfless service. Social grants are predicated on growth rates currently / inevitably unattainable. The debt-trap is unavoidable. These are dangerous times.

Africa stands cap-in-hand, pliant and open for renewed, unprecedented levels of exploitation; a co-authored misery and an inevitable harvesting of resources from which we can never return. It's a future bereft of dignity. The incumbent leadership-structure pays homage to the self-styled African Emperor, an Eastern phoenix. It's a morally-defunct empire of intimidation - by design; and predicated on the silence of the voiceless and perpetuated by state-corruption, national complacency and our tolerance for incompetence.