"Time will tell I guess, we would all like Treasury to be both. The naysayers will be quick to point out that this decision represents a complete loss of control, how can you do something Wednesday and reverse on Sunday? Unless those around you, who were not consulted, asked you, in the kindest possible way, to reconsider."
To market to market to buy a fat pig. 13 December late the news broke, either the Presidency's website had been hacked or this was true, the shortest ever stint of being South African Finance minister (or perhaps any finance minister of any country) was over. DVR, or the little known David (or Des) Van Rooyen was replaced by a familiar face, Pravin Gordhan. Pravin Gordhan is of course in a Rumsfeldian ramble, a "known-known".
First of course, the context, on Saturday the presidency set the record straight Saturday: Presidency corrects malicious rumours about SAA, National Treasury and Ministerial deployments. See? The bombshell was last evening, Announcement of new Ministers of Finance and COGTA. If you had missed the announcement Wednesday evening, then this seems like business as usual. Except, wait .... David van Rooyen (DVR) is still a minister, even if it is of a "lesser" department, one that Gordhan used to oversee. This is still the same chap that Mbhazima Shilowa suggested that in his time as Mayor "You won't find a single successful project carried out by him in Merafong, Carltonville and Khutsong".
South Africa truly is a place that is very different from many other places in the world, last week the IOL reported in an article titled Van Rooyen (was) loved and loathed in Khutsong, in which Des van Rooyen's brother is quoted as saying "I now want him to come fix my shack because it is in a terrible state. We've had no home to live in since they burnt our house." That is right, along with a whole lot of other councillors, Des van Rooyen's house was burnt down by angry residents. Which rendered his brother homeless, effectively. Astonishing.
Back to the matter at hand, the release sets out a few points here, in the way that minister Gordhan will lead:
Ensuring an even stronger alignment between the Budget and the Medium Term Strategic Framework (MTSF) in the interest of stimulating more inclusive growth and accelerated job creation while continuing the work of ensuring that our debt is stabilised over the medium term.
Promoting and strengthening the fiscal discipline and prudence that has characterised our management of public finances since the dawn of freedom.
Working with the financial sector so that its stability is preserved under the broad umbrella of the Twin Peaks reform.
Ensuring that the National Treasury is more acceptable to all sections of our society.
Adherence to the set expenditure ceiling while maintaining a stable trajectory of our debt portfolio, as set out in the February 2015 Budget.
Point number 4, is that meant to be accessible or acceptable? Time will tell I guess, we would all like Treasury to be both. The naysayers will be quick to point out that this decision represents a complete loss of control, how can you do something Wednesday and reverse on Sunday? Unless those around you, who were not consulted, asked you, in the kindest possible way, to reconsider. As they president said: "As a democratic government, we emphasise the importance of listening to the people and to respond to their views." I dislike it when people read into anything, that however seems distinctly to me like, "I never consulted anyone in the first place". Which is equally disturbing, if you think about it deeply.
The upshot of it all is that some confidence seems to have returned to Mr. Market, at least in a South African context. Friday was an equally horrid day for the local market, banks, financials and retailers were smashed left, right and centre. Financials were down over five percent, the banks were sold off nearly 6 percent. General retailers were sold down over 4 percent, all of these moves were after the monster ones Thursday. The broader market sank 1.87 percent by the time anyone had time to blink.
In the minus column were stocks like Sanlam, FirstRand and Remgro, all down over 8 percent. Investec, Growthpoint and RMB Holdings down over 7. In the plus column were all the Rand hedges, the Rand was plumbing record lows, at one point threatening to hit 16 to the US Dollar. SABMiller, AngloGold Ashanti, British American Tobacco and the like, all up on account of a much weaker currency. Our broader index is basically flat over 12 months now, down a little less than 4 percent YTD, we have lost around 6500 points in the last 40 days, the ALSI was last at 48068 points.
Friday was a pretty shabby close in the US, stocks given a real roasting as we near the day of reckoning, the day when the Federal Reserve abandoned ZIRP. As I learnt from Twitter, the day would be exactly 7 years from the day it was instituted, 16 December 2008 was the day that the Fed went to a Zero Interest Rate Policy, that is what ZIRP stands for. In a sense, a momentous day for interest rate nerds. As Eddy Elfenbein pointed out in his Friday "Crossing Wall Street" letter, the last time the cycle changed (i.e. when rates started going up) was in June of 2006, and back then: "Apple was around $8 per share. Companies like Facebook and Twitter had just been started, and Uber was still a few years away." I guess the Santa Claus rally may well be late this year, on account of the Fed meeting being so very important.
The S&P 500 is down 2.26 percent year-to-date, there is one side of me that wants the index to end the year there, so that people can stop referring to the "most hated bull market of all time". I am not one for technical stand points this way or another, this is a little beyond me, however. If the index prints a negative number, do you start again from "the beginning". What is in a name, and to be frank, why do people measure themselves from one calendar year to the next? Use a list of periodic comets, although even for the deep value investors, something like the P/1997 B1 may be "too soon", returning every 25 odd years. Too small as it turns out.
Whether you like or hate the current bull market, the fact of the matter is that we tend to focus all our time on what could happen, rather on what is likely to happen. Motor vehicles for instance are parked a whole lot longer than you sleep, I don't see people obsessing about their beds, and which one they are going to get next. That is a better analogy. Rather worry about the good nights of rest that you get, instead of the commute to work.
Linkfest, lap it up
I am confused, even if just for a little bit, didn't Elon Musk say he was scared of AI? Having said that, I still was not surprised to see the following Elon Musk Backs $1 Billion Artificial Intelligence Research Group. Perhaps the more menial tasks, not involving weapons is where his research is going to go, increasing productivity. As is with many of these projects (official release: Introducing OpenAI), the aim is not to make money, rather to "to advance digital intelligence in the way that is most likely to benefit humanity as a whole, unconstrained by a need to generate financial return." Good luck we say, we wish you all the best.
Confused about the climate talks and what it means for all of us? This article sums it up nicely: A historic climate-change deal has been unveiled in Paris. I am not too sure how we are going to make sure that we keep inside of those temperature bands.
Home again, home again, jiggety-jog. The Rand is stronger, the damage is possibly done now. If you took a conscious decision last Thursday to exit South African bonds and equities, I can't see how you are going to stop now. Some funds have a mandate in which they are only obliged to invest in countries that are investment grade, if they are pre-empting any downgrade, it may be too late already. I see a couple of folks are quoted as saying that number 1 is now living on borrowed time, he may well be recalled -> Zuma Makes U-Turn on Finance Chief, Triggering Rand Rebound. I can't imagine that this political instability would be good for anyone, I can't see the biggest fighter in South African politics going down that easily. There should be a noticeable bounce back today, a cautious one nonetheless is better than none at all!
Sent to you by Sasha and Michael on behalf of team Vestact.
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