Monday, 18 January 2016

South Africa - be pragmatic

NO investment is fool-proof. The hedging [protecting] against a loss on an investment is easy, cheap and an essential ingredient in effective management. Yes, at face value, I believe the US market is in for a correction. Notwithstanding, turn over any forgotten stone and you’ll find a dooms-day forecaster proven wrong.

Here’s the gist of it:

  1. The fall in oil is stimulatory and the market knows this ie: the market is building extra profits into company projections. Given this prognosis investors are paying more for stock, currently, than they would have / should be. Why? Investors are discounting high prices on the expectation of improved profits sometime in the future. The flip-side of this stratagem is just as Grampie told us on his knee – 'don’t count ‘em before they hatch…' What would happen if OPEC cut supply, drastically? We know the US shale industry is a dark-pool of goo filed 'not for your eyes' under SES [State Economic Security] or 'policy' for short. There are countless other layers to this onion which we don’t have the time to peel. Managers lump these under ‘market risk’; a catch-all for ‘we just don’t know’.
  2. The ECB has mooted / announced a 1.2 trillion approx. euro rescue package; supporting European sovereign bonds in the main ie: the ECB will buy up to 30% of all sovereign bonds [paper countries issue to borrow money]. It’s a backstop other investors like and on that basis only, will continue to buy the paper even though the paper is inherently risky. These governments then have access to cheap money and will continue to bolster their respective economies by spending. Spending isn’t mending and those chickens will come home; soon. Paradoxically Greece is our shining beacon for the future. Push ‘the people’ hard enough, for the economic ineptitude of their government, ie: reckless public-spending and the government is soon replaced by the far-left advocating social change & or defiance of the status quo. It’s Capitalism feeding on itself. Denying the fact is as stupid as sweeping Greece under the table by excommunication, on the sin of delinquency, when the son is the product of the father..
  3. China’s growth hasn’t stalled but is slowing; that’s if you chose to believe the data that is. Their socio-economic troubles are just beginning.  
  4. If the global consumer treadmill breaks down, we, the human race, are in for the high-jump whichever way you want to spend it. The oil which soothes the grind is a media-controlled process ie: through advertising and cajoling consumers to replace / buy / ‘need’ / aspire to etc. If that bias swings in favour of logic [We’re consuming resources at a grossly UNDERSTATED rate] then ‘consumerism’ or ‘anti-consumerism', more accurately, will be the catalyst for a financial Armageddon no one wants. It’s a hamster’s wheel of dread which keeps the lights on and we’re all on it. Make no mistake.
  5. SA’s corruption is entrenched and it’s difficult to see how that can change for the better, certainly not under the current circumstances. The international perception is equally trite. Infrastructural decay; a paucity of foresight / planning and an ever-widening wealth-gap concludes as follows: - SA is on the road to becoming another failed state. It is the perception, at least, we surmise from international cash flow. The fall in the rand will tell you much the same.

In the end I’m pragmatic more than optimistic. We live in SA. We save / spend / and earn our crust in SA currency. Outside of SA most rand-based savings wouldn’t buy you a pregnant goat. The fiasco that is hyper-inflation, under conditions of a currency negatively out of control, is emblazoned on the psyches of most Africans and a sad state of reality for most ex-Zimbabweans. So we’re damned if we do and damned if we don’t. Whilst we’re here and living under this hatchet, all we do is what we can. The first step is to have your wealth invested in the correct instruments and in such a way that the vagaries of the future don’t impact too negatively because when the US goes we all go too.

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