It's the regular Saturday Morning Opening Thread. This weeks conversation topic: One more interest rate cut? Yes/No?
20 comments:
Anonymous
said...
Lower consumption in the world and excessive debt are at the root of the malaise, how will dropping interest rates sort that, catch 22 isnt it?
There is a currency war playing out. Times have changed and Malema utterings about nationalization and Treasury speeches dont even affect the rand. Its all about yield.
This might all change in a month or two if there is another crash or event, and who knows if everyone will rush into treasuries again like before, maybe not?
I see more dollar purchases, perhaps unsterilized, not interest rate cuts.
Off topic, but found the following today under the giant headline "PROPERTY MARKET RECOVERS FURTHER" (Fin24's take on Standard Bank's latest property numbers):
"The median house price increased by 0.6% month-on-month (m/m) in August, below the average monthly increase of 1.1% recorded since the start of the year.
"The September m/m growth momentum turned negative when growth of -2.5% was reported.
"'Consequently, the median house price decreased to R586 000 in September from R600 800 in August," Botha said."
Did I read that right? In August prices rose less than they've risen so far each month this year, and in September they dropped by 2.5 FREAKING PERCENT?
I fully concede that I may be missing something here, but isn't a 2.5% drop in a single month a serious fall? I mean, that's 30% in a year...
Hedge fund tycoon John Paulson is the man who made his name, and a fortune, betting against subprime mortgages when no one else even knew what they were.
And he's just made three big financial calls that you need to know about.
Speaking to the University Club in New York, he said, first, that gold could go to $2,400 an ounce based on the fundamentals–and that momentum could carry it to $4,000 an ounce. Right now it's around $1,300. Second, he said you should get out of bonds while you can: You're much better off investing in blue chip stocks with good dividend yields than bonds.
And third, he said you should buy a home. Now.
"If you don't own a home, buy one," he reportedly said. "If you own one home, buy another one, and if you own two homes buy a third and lend your relatives the money to buy a home."
(A spokesman for Mr. Paulson did not challenge the accounts of the meeting.)
Among the New York commentariat there's been a lot of head-scratching about Mr. Paulson's take–especially this contrarian stance on housing.
Is he right? If so, what does he know that everyone else doesn't?
Ignore the critics. The odds have to be on his side. The reason is simple: Inflation.
There is a debate raging on Wall Street these days between those warning about deflation and those warning about inflation. We are at, or near, deflation at the moment. It may even get worse before it gets better. But Mr. Paulson sees inflation coming by 2012 or so. Last week, several contrarian money managers I was talking to made the same prediction.
The explanation isn't hard to find.
Forget the usual technical issues economists like to talk about, such as output gaps, labor markets, money supply and the like.
Put simply: We will get inflation because we have to. It doesn't get any more straightforward than that.
We are the most indebted nation in the history of the world.
Now this would mean Rand strength, not weakness, unless of course the Reserve Bank turns up the printing press more than they have been doing the past few years.
Local and global drivers of rand strength and interest rates.
Global: weak demand from developed countries, austerity measures in EU and UK driving them to double dip and further recession; too weak stimulus in US causing the same thing. US investors chasing yield chase up the rand. No prospect of inflation and increased interest rates in US/EU for some time, at least 12 months, probably more (Read Paul Krugman and Stiglitz).
Australia is interesting - demand from China is supporting their commodity exports, their interest rates are tending to increase again and their property market continues to smoulder. They're in an odd situation, difficult to predict where they go in the next 12 months.
Local drivers: Ridiculously strong rand, low inflation (linked to strong rand and weak domestic demand) and union concerns will likely lead to at least one further rate cut. And recall, as rates go lower, 500 basis point rate cuts get more and more significant. Malema and his cronies are out in the cold, no real risk from that quarter. African growth could be one of the contributors to bringing the global economy out of its slump. Is Walmart the first of many?
SA should have dropped interest rates a tad more aggressively, we are knee-capping ourselves.
Anyone been shopping for REAL food lately ? Anyone payed school fees lately ? medical accounts ? medical aid contribuitions ? an electricity account ? Tried to buy a motorbike/car with the new green tax ?
Inflation at 4.6 % ? Please.... Try 12- 15 % in the REAL world.
Why don't news papers print the real Inflation rate that us mere mortals experience at the coal face.
Its true anon that the real inflation rate is high. If you compare the rand against the gold price you can see the real inflation rate.
Real inflation in South Africa is an average of 68% per annum over the last 3 years We have been having hyperinflation for a while now http://hgmandassociates.com/2010/05/10/gold-politics-and-inflation/
But everyone has been overjoyed at the hyperinflation i.e Look how much my property is worth!!!!
I'm not sure how much you can trust Moolman's opinion when his job is to sell gold and silver.
Economics is a social science that struggles to wrestle real-world behaviour into mathematical models with varying degrees of success.
Look I do believe that our inflation rate is sitting way higher than the official government published figures - as you say, all you need to do is go to the shops.
Just heard of a 550 sq.m. property in upper sea point going for R3.5m last week. Asking price? R4.9m
Agreed Jdog, it is a social science aince velocity especially is just as important as quantity, actually 1 to 1.
However Greenspans comments are completely correct, gold's value is not contingent on anyones promise as is the case with fiat currency, it is real money, not paper, and cannot be debased. Whether Moolman sells it or not does not change this fact. Read FOFOA to get a better angle on how gold never really went away as a "reserve" currency, as well as the flow of capital, inflation/deflation. Hugely informative reading.
Central banks have tried to create a faux gold standard through the dollar but it has not worked. All it has done is penalize the rest of the world and allow the US to run a massive defecit without any care in the world for inflation etc increasing their standard of living while the rest of the world subsidizes it. These days however are numbered.
>>Food disinflated for most of 2009, returning to levels of a year before. What items have been going up more than 5% since then?
Anyone payed school fees lately ?
>>not much change in mine - increase of 12% last year due mainly to improvements in offerings (more teachers), in relation to overseas schools, I'm not moaning
medical accounts ?
>>Pretty much what they were last year this time
medical aid contributions ?
>>Own shares in Discovery, manage your health and you can keep costs down and benefit from their performance ont he stock market
an electricity account ?
>>off one of the lowest cost bases in the world, SA electricity increases were way overdue. But good consumption management will save you even more of a fortune.
Tried to buy a motorbike/car with the new green tax ?
>>Also way overdue, taxing those who damage the environment, and who can most afford it, and get them to pay the true cost of their boys toys :).
Your personal inflation rate is partly under your own control!
I see that John Loos at FNB has quietly slipped in a negative estimate for 2011 - "negative growth" or whatever bollox they use to describe things getting cheaper. Somehow I don't think we're going to see this news on lamppost placards.
I really feel that the tipping point is nearing us. Loos also said recently that the effect of record-low rates was "wearing thin", i.e. having no effect. If they can't kickstart a fake boom with the lowest rates in 31 years, it's not going to happen. But what interests me is the defeatist talk from the Loos's and Du Toit's of the industry - openly telling sellers they are deluding themselves, etc.
Any thoughts on whether the SA slump (slowdown, flatline, plunge, coma, whatever form it takes) is finally upon us?
Finally an honest article: http://www.businessday.co.za/articles/Content.aspx?id=122755
"more than 11-million South African consumers struggling with their debt"
"With more than 400 000 distressed home loans in the country and more consumers struggling to find work, interest rates had to be reduced urgently by at least 1%"
Anyone been following the foreclosure fraud debacle in the US? All these OTC derivatives going belly up means much more QE in the States. Amazing at how much trouble property has caused in the last few years, its bringing down the whole worlds financial system. Safe as houses eh?
This is Rep. Alan Grayson explaining the crisis of foreclosure fraud and how it links to the entire securitization chain of Wall Street.
Last time interest rates dropped to similar levels in SA (1999/2000), the residential property market started flying,even before the rate cycle bottomed out. This time it's like using electrical stimulation on a corpse - nada. Just bought a distressed property in a CT satellite town for 35% below replacement value - should have waited?
Perhaps BeanCounter, but i think it all depends on SARB actions.
We all have to realize that although the property boom had the same source, currency debasement via cheap money, the drivers of "collapse" here are very different. In the US this is about OTC derivatives, subprime and debt, similar in EU. Here it is about currency strength and lower world consumption/demand.
One thing is clear though, save hyperinflation/currency collapse, property is not coming back as a store of value. However its not really needed is it? The rand is strengthening, M3 and velocity are way down. Nice, unless of course you have a lot of debt and have to pay it back with scarcer more expensive rands. This is of course to be balanced against higher commodity prices.
Now the BOJ just dropped their interest rates to zero, Brazil just doubled its bond tax to 4%. its the same in much of the east; Taiwan, India, Thailand etc all taking or studying QE measures.
Not everyone can run a trade surplus and have a weak currency. Sorry, but to balance the world economy one needs a consumer, a defecit and a strong currency somewhere. now its like global pass the buck lol, no pun intended.
So it is clear for the moment. Asset deflation as the rand strengthens but less Price deflation in food and commodities. If there is radical QE here as in debase the rand big time then we might see flat to upward prices. In the case of a Black Swan event we are in new territory, will everyone rush into UST's now?
When I started alerting people to what was happening to the rapidly increasing food inflation as seen in the weekly Saturday Argus food basket graph, it was hastily pulled and hasn't been seen since even though it had been around for years up to then. Someone didn't want us to know.
According to the real price graph, SA houses still need about another 47% in real price falls to happen. With low official inflation figures this means nominal house price falls have to kick in to make this happen.
John Paulson doesn't know any more than the rest of us. He saw a huge mistake on the part of AIG and the ratings agencies and took advantage of it. If this financial crisis has shown us anything, it's that nobody knows squat. I'm holding onto my house, but I'm not buying another one, not in South Africa anyway. Common sense is more useful than any number of dismal scientists.
There are many many people who I read who saw the financial crisis coming, years before. Paulson is not the only one and did not get lucky.
WHAT IS HAPPENING IN FINANCIAL MARKETS? a paper by T Mboweni in Sept 2007. This is public statement, do you think they were not aware of all and discussed such privately?
Do not fall prey to Management of Perspective Economics or MOPE. Remember Trevor Manuel saying we could avoid recession? Classic MOPE and a lie.
To see Warren Buffet in congressional testimony saying no one saw this coming made me laugh. Yes his rating agency rated subprime mortgages AAA. This is fraud. Warren Buffet did not get where he is by not being able to see something like a worldwide economic meltdown before it happenened.
Have you listened to any congressional testimony regarding Goldman Sachs and their selling of MBS's while taking short positions on these very securities and CDS's and CDO's, knowing full well that they were "shitty deals" and they counted on default to make more money? Are you aware that there are lawsuits over Hudson Mezzanine securities or Davis Square Funding VI as we speak?
"No one saw it coming" covers up the fraud, theft and corruption infecting every level of business and politics today. It covers the MSM who deliver the MOPE to you.
The gold price is telling you everything and has been doing so for a decade.
Nobody can see for sure what's coming up in the future. You can make an educated guess that if you continue with x, the result will be y. John Paulson (just another hedge manager before Michael Lewis's book) has now been elevated to the status of superstar guru, and the lemmings rush to follow his every sneeze and fart.
20 comments:
Lower consumption in the world and excessive debt are at the root of the malaise, how will dropping interest rates sort that, catch 22 isnt it?
There is a currency war playing out. Times have changed and Malema utterings about nationalization and Treasury speeches dont even affect the rand. Its all about yield.
This might all change in a month or two if there is another crash or event, and who knows if everyone will rush into treasuries again like before, maybe not?
I see more dollar purchases, perhaps unsterilized, not interest rate cuts.
Off topic, but found the following today under the giant headline "PROPERTY MARKET RECOVERS FURTHER" (Fin24's take on Standard Bank's latest property numbers):
"The median house price increased by 0.6% month-on-month (m/m) in August, below the average monthly increase of 1.1% recorded since the start of the year.
"The September m/m growth momentum turned negative when growth of -2.5% was reported.
"'Consequently, the median house price decreased to R586 000 in September from R600 800 in August," Botha said."
Did I read that right? In August prices rose less than they've risen so far each month this year, and in September they dropped by 2.5 FREAKING PERCENT?
I fully concede that I may be missing something here, but isn't a 2.5% drop in a single month a serious fall? I mean, that's 30% in a year...
Interesting article in the WSJ
Hedge fund tycoon John Paulson is the man who made his name, and a fortune, betting against subprime mortgages when no one else even knew what they were.
And he's just made three big financial calls that you need to know about.
Speaking to the University Club in New York, he said, first, that gold could go to $2,400 an ounce based on the fundamentals–and that momentum could carry it to $4,000 an ounce. Right now it's around $1,300. Second, he said you should get out of bonds while you can: You're much better off investing in blue chip stocks with good dividend yields than bonds.
And third, he said you should buy a home. Now.
"If you don't own a home, buy one," he reportedly said. "If you own one home, buy another one, and if you own two homes buy a third and lend your relatives the money to buy a home."
(A spokesman for Mr. Paulson did not challenge the accounts of the meeting.)
Among the New York commentariat there's been a lot of head-scratching about Mr. Paulson's take–especially this contrarian stance on housing.
Is he right? If so, what does he know that everyone else doesn't?
Ignore the critics. The odds have to be on his side. The reason is simple: Inflation.
There is a debate raging on Wall Street these days between those warning about deflation and those warning about inflation. We are at, or near, deflation at the moment. It may even get worse before it gets better. But Mr. Paulson sees inflation coming by 2012 or so. Last week, several contrarian money managers I was talking to made the same prediction.
The explanation isn't hard to find.
Forget the usual technical issues economists like to talk about, such as output gaps, labor markets, money supply and the like.
Put simply: We will get inflation because we have to. It doesn't get any more straightforward than that.
We are the most indebted nation in the history of the world.
http://online.wsj.com/article/SB10001424052748704483004575524312198244500.html
Now this would mean Rand strength, not weakness, unless of course the Reserve Bank turns up the printing press more than they have been doing the past few years.
Local and global drivers of rand strength and interest rates.
Global: weak demand from developed countries, austerity measures in EU and UK driving them to double dip and further recession; too weak stimulus in US causing the same thing. US investors chasing yield chase up the rand. No prospect of inflation and increased interest rates in US/EU for some time, at least 12 months, probably more (Read Paul Krugman and Stiglitz).
Australia is interesting - demand from China is supporting their commodity exports, their interest rates are tending to increase again and their property market continues to smoulder. They're in an odd situation, difficult to predict where they go in the next 12 months.
Local drivers: Ridiculously strong rand, low inflation (linked to strong rand and weak domestic demand) and union concerns will likely lead to at least one further rate cut. And recall, as rates go lower, 500 basis point rate cuts get more and more significant. Malema and his cronies are out in the cold, no real risk from that quarter. African growth could be one of the contributors to bringing the global economy out of its slump. Is Walmart the first of many?
SA should have dropped interest rates a tad more aggressively, we are knee-capping ourselves.
Ja - low inflation - right.
Anyone been shopping for REAL food lately ?
Anyone payed
school fees lately ?
medical accounts ?
medical aid contribuitions ?
an electricity account ?
Tried to buy a motorbike/car with the new green tax ?
Inflation at 4.6 % ? Please....
Try 12- 15 % in the REAL world.
Why don't news papers print the real Inflation rate that us mere mortals experience at the coal face.
Its true anon that the real inflation rate is high. If you compare the rand against the gold price you can see the real inflation rate.
Real inflation in South Africa is an average of 68% per annum over the last 3 years
We have been having hyperinflation for a while now
http://hgmandassociates.com/2010/05/10/gold-politics-and-inflation/
But everyone has been overjoyed at the hyperinflation i.e Look how much my property is worth!!!!
Oh and I was given 100 trillion dollars today for my birthday present lol, fresh uncirculated zim note too.
@Anon
I'm not sure how much you can trust Moolman's opinion when his job is to sell gold and silver.
Economics is a social science that struggles to wrestle real-world behaviour into mathematical models with varying degrees of success.
Look I do believe that our inflation rate is sitting way higher than the official government published figures - as you say, all you need to do is go to the shops.
Just heard of a 550 sq.m. property in upper sea point going for R3.5m last week. Asking price? R4.9m
Agreed Jdog, it is a social science aince velocity especially is just as important as quantity, actually 1 to 1.
However Greenspans comments are completely correct, gold's value is not contingent on anyones promise as is the case with fiat currency, it is real money, not paper, and cannot be debased. Whether Moolman sells it or not does not change this fact. Read FOFOA to get a better angle on how gold never really went away as a "reserve" currency, as well as the flow of capital, inflation/deflation. Hugely informative reading.
Central banks have tried to create a faux gold standard through the dollar but it has not worked. All it has done is penalize the rest of the world and allow the US to run a massive defecit without any care in the world for inflation etc increasing their standard of living while the rest of the world subsidizes it. These days however are numbered.
Ja - low inflation - right.
>>Yes dam right!
Anyone been shopping for REAL food lately ?
>>Food disinflated for most of 2009, returning to levels of a year before. What items have been going up more than 5% since then?
Anyone payed school fees lately ?
>>not much change in mine - increase of 12% last year due mainly to improvements in offerings (more teachers), in relation to overseas schools, I'm not moaning
medical accounts ?
>>Pretty much what they were last year this time
medical aid contributions ?
>>Own shares in Discovery, manage your health and you can keep costs down and benefit from their performance ont he stock market
an electricity account ?
>>off one of the lowest cost bases in the world, SA electricity increases were way overdue. But good consumption management will save you even more of a fortune.
Tried to buy a motorbike/car with the new green tax ?
>>Also way overdue, taxing those who damage the environment, and who can most afford it, and get them to pay the true cost of their boys toys :).
Your personal inflation rate is partly under your own control!
I see that John Loos at FNB has quietly slipped in a negative estimate for 2011 - "negative growth" or whatever bollox they use to describe things getting cheaper. Somehow I don't think we're going to see this news on lamppost placards.
I really feel that the tipping point is nearing us. Loos also said recently that the effect of record-low rates was "wearing thin", i.e. having no effect. If they can't kickstart a fake boom with the lowest rates in 31 years, it's not going to happen. But what interests me is the defeatist talk from the Loos's and Du Toit's of the industry - openly telling sellers they are deluding themselves, etc.
Any thoughts on whether the SA slump (slowdown, flatline, plunge, coma, whatever form it takes) is finally upon us?
Finally an honest article: http://www.businessday.co.za/articles/Content.aspx?id=122755
"more than 11-million South African consumers struggling with their debt"
"With more than 400 000 distressed home loans in the country and more consumers struggling to find work, interest rates had to be reduced urgently by at least 1%"
Anyone been following the foreclosure fraud debacle in the US? All these OTC derivatives going belly up means much more QE in the States. Amazing at how much trouble property has caused in the last few years, its bringing down the whole worlds financial system. Safe as houses eh?
This is Rep. Alan Grayson explaining the crisis of foreclosure fraud and how it links to the entire securitization chain of Wall Street.
http://www.youtube.com/watch?v=ruEeuskrAE0&feature=player_embedded#at=261
Last time interest rates dropped to similar levels in SA (1999/2000), the residential property market started flying,even before the rate cycle bottomed out. This time it's like using electrical stimulation on a corpse - nada.
Just bought a distressed property in a CT satellite town for 35% below replacement value - should have waited?
@Anon, what's a satellite town? Want to name a name?
Perhaps BeanCounter, but i think it all depends on SARB actions.
We all have to realize that although the property boom had the same source, currency debasement via cheap money, the drivers of "collapse" here are very different. In the US this is about OTC derivatives, subprime and debt, similar in EU. Here it is about currency strength and lower world consumption/demand.
One thing is clear though, save hyperinflation/currency collapse, property is not coming back as a store of value. However its not really needed is it? The rand is strengthening, M3 and velocity are way down. Nice, unless of course you have a lot of debt and have to pay it back with scarcer more expensive rands. This is of course to be balanced against higher commodity prices.
Now the BOJ just dropped their interest rates to zero, Brazil just doubled its bond tax to 4%. its the same in much of the east; Taiwan, India, Thailand etc all taking or studying QE measures.
Not everyone can run a trade surplus and have a weak currency. Sorry, but to balance the world economy one needs a consumer, a defecit and a strong currency somewhere. now its like global pass the buck lol, no pun intended.
So it is clear for the moment. Asset deflation as the rand strengthens but less Price deflation in food and commodities. If there is radical QE here as in debase the rand big time then we might see flat to upward prices. In the case of a Black Swan event we are in new territory, will everyone rush into UST's now?
When I started alerting people to what was happening to the rapidly increasing food inflation as seen in the weekly Saturday Argus food basket graph, it was hastily pulled and hasn't been seen since even though it had been around for years up to then. Someone didn't want us to know.
According to the real price graph, SA houses still need about another 47% in real price falls to happen. With low official inflation figures this means nominal house price falls have to kick in to make this happen.
John Paulson doesn't know any more than the rest of us. He saw a huge mistake on the part of AIG and the ratings agencies and took advantage of it. If this financial crisis has shown us anything, it's that nobody knows squat. I'm holding onto my house, but I'm not buying another one, not in South Africa anyway. Common sense is more useful than any number of dismal scientists.
Anon above, common sense yes!!
There are many many people who I read who saw the financial crisis coming, years before. Paulson is not the only one and did not get lucky.
WHAT IS HAPPENING IN FINANCIAL MARKETS? a paper by T Mboweni in Sept 2007. This is public statement, do you think they were not aware of all and discussed such privately?
Do not fall prey to Management of Perspective Economics or MOPE. Remember Trevor Manuel saying we could avoid recession? Classic MOPE and a lie.
To see Warren Buffet in congressional testimony saying no one saw this coming made me laugh. Yes his rating agency rated subprime mortgages AAA. This is fraud. Warren Buffet did not get where he is by not being able to see something like a worldwide economic meltdown before it happenened.
Have you listened to any congressional testimony regarding Goldman Sachs and their selling of MBS's while taking short positions on these very securities and CDS's and CDO's, knowing full well that they were "shitty deals" and they counted on default to make more money? Are you aware that there are lawsuits over Hudson Mezzanine securities or Davis Square Funding VI as we speak?
"No one saw it coming" covers up the fraud, theft and corruption infecting every level of business and politics today. It covers the MSM who deliver the MOPE to you.
The gold price is telling you everything and has been doing so for a decade.
Nobody can see for sure what's coming up in the future. You can make an educated guess that if you continue with x, the result will be y. John Paulson (just another hedge manager before Michael Lewis's book) has now been elevated to the status of superstar guru, and the lemmings rush to follow his every sneeze and fart.
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