AN AWARD CEREMONY WE ALL MISSED
The rather spectacular collapse in the price of Bitcoin has had some interesting repercussions on the value of other securities which also depend a lot on being worth what their originators and custodians say they are. As the Steinhof debacle shows, the valuation of even ordinary shares depends upon the trustworthiness and honesty of the people who run the businesses and more importantly in the ability and professional integrity of those we expect to audit them. The view that a Krugerrand in the hand is worth more than a dematerialized share certificate in a central share depository is certainly archaic and the JSE has a proud record of converting to a paperless securities market with minimal glitches. However, nothing is really risk free and it’s important to recognize that and price it accordingly. With the almost 10% pull-back in many share markets experienced this week, breathless commentators have been calculating gleefully how much the vile capitalists have lost. Unfortunately for their narrative, the bounce back suggests that those capitalists just added to their holdings at the lower prices
One of the difficulties for believers in free markets is the presence in high office of people who think they know what the price of everything and especially money, should be. These central bankers (for it is primarily, they) fiddle incessantly with interest rates, adjusting them up or down in tiny increments, in the hope that the gigantic economies they think they command will respond appropriately. The very simple fact that we still experience periods of boom and bust, shows that either their measures are largely ineffective or else they don’t know what they are doing. If all the expert advice was just that, shouldn’t we all be educated, employed and content?
Astonishingly, there is a monthly periodical named Central Banking (what else?) which is apparently essential reading for the sort of people who wear a suit AND tie (or smart frock) to work. This is the journal that has declared our very own SARB Governor Lesetja Kganyago to be “Governor of the Year”. An accolade of which he must be very proud. But it doesn’t explain why citizens are being warned to expect very serious tax hikes in the forthcoming budget. Obviously taxing the proletariat into perdition is not a bad thing in Central Banking circles.
It should be admitted that experiments with letting the markets set prices have not all worked. Often, powerful players (e.g. individual traders with dozy and greedy managers) contrive to operate a cartel and move prices to their own advantage. [viz. The LIBOR scandal!] This is a failure of the supervisors and regulators to exercise their powers with sufficient scepticism and diligence, not of the market.
The only people to be disappointed by the postponement of Number One’s State of the Nation speech are those who have been taking their credit cards for strenuous outings around the malls. SONA has grown into a lavish social event for the P-list[1] celebrities to display their trappings earned as servants of the people. This gathering in parliament has during JZ’s term revealed little except sycophantic adulation of the benefactor of most of the cast. The real story in the postponement is that, to no one’s surprise (well maybe a few), having two different people as presidents of the ruling party and nation respectively is not working. JZ reportedly has agreed to an early departure from his post but first he wants to say good bye to some people like his cabinet. Since there are more than 70 of them and each will doubtless be very keen to get assurances about their place in the cash flows this farewell might take some time. Like through to 2019 perhaps, which is anyway the scheduled date for JZ to retire.
My understanding of winter sports appears to be similar to the knowledge the Proteas have of the ODI record at Newlands. Bowling first is as dangerous as putting on skis on with the pointy end backwards. And now that Alistair Coetzee has been asked to return the poisoned chalice to SARU who will they find to give it to next?
James Greener
Friday 9th February 2018
1 Politicians and Pests
[1] Politicians and Pests