Date: Wed Dec 03 2003 11:35
trotsky (Takachi, 9:03) ID#377387:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
the answer to the conundrum is quite simple: the productivity data are completely bogus ( in this context, note that commerce was forced to revise down the 90's productivity gains sharply, and as it turned out, gains in the 50's and 60's were far stronger, in spite of no hedonic indexing at the time ) .
the culprit is the statistical methodology, the very same methodology that concludes that a 13.5% SLIDE in nominal IT spending over 3 years actually represents a 58% 'GAIN' in 'real', 'chainweighted', 'hedonically indexed' dollars. in short, the productivity data describe something that doesn't exist - just as GDP describes something that doesn't exist. how anyone is supposed to arrive at informed economic decisions based on these bogus data is a mystery. inter alia, they help to prop up the stock market and allow it to trade at completely unrealistic levels - a function of the fact that most market participants are blissfully unaware of the extent of this government produced fantasy.
however, no amount of hedonic indexing can change reality as is, only the perceptions of same. government's statistical fariy tales edifice contributes to reckless behavior on the part of both consumers and producers - which will ultimately hasten and deepen the country's economic decline. it's almost like coin-clipping, only more insidious.
Date: Wed Dec 03 2003 10:59
trotsky (Rand/dollar) ID#377387:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
by now this is downright stupid...South Africa's export earnings as well as the services part ( mostly tourism ) of its current account are in freefall due to the Rand's strength. the SA economy is no doubt going to slow down sharply, with the concomitant effects on the government's budget - which has been well behaved in recent years, but won't be much longer.
at 8:1 or 7:1 the Rand may have been seen as pricing in all the good news about SA, and the fact that the chaos in Zimbabwe didn't prove contagious. but this is ridiculous - there is zero risk premium left.
as for the carry trade inducement due to the rate differential, note that SA has had a HUGE rate differential with developed world countries for 25 years running - and it has never before helped the Rand ( and is thus not a satisfactory explanation for its strength ) .
in short, buyers of the Rand here are either desparate shorts throwing the towel, or bubble-blowers. note that while rising pm prices are a Rand positive, the mining industry's importance and relative size vis-a-vis the SA economy as a whole has declined sharply over the past 2 decades - gold is something like 4% of SA'a export revenues if i recall correctly, negligible really. so gold and plats strength is likewise an inadequate 'reason' to buy the Rand.
buying the Rand at these levels means one thinks there is NO risk in SA, neither political ( well, that was always hopelessly exaggerated anyway ) nor economical. i'd say the political risks are indeed very low, but the economic risks are now quite large.
so, as soon as it turns technically, SELL the Rand.
trotsky (methods of shorting the Rand) ID#377387:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
there's a futures contract trading in Chicago or Philadelphia, i'm not sure now which exchange, but i'm sure it can be easily found.
another way is to simply buy Rand hedge stocks - for instance gold or platinum shares. obviously, DROOY is the most aggressive Rand hedge stock, but e.g. HMY and GFI also have huge Rand leverage. there are also JSE traded companies in other industries that are viewed as Rand hedges as the bulk of their revenues comes from abroad. unfortunately i'm not current which ones there are at the moment, but again, this can be easily researched. i remember Richmond used to be one such stock ( overseas tobacco and luxury goods biz ) .
Date: Wed Dec 03 2003 13:33
trotsky (frustrated, 11:48) ID#377387:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
i don't know if this tax loophole has been passed, but i do know that corporate welfare is high up on the administration's agenda ( since that's where all those nice donations come from ) . so i wouldn't be surprised if it gets, or has been, enacted. but that guy Sol Palha is simply paranoid. the amounts involved couldn't even put a dent in the dollar trend if the entire amount was repatriated in a single week.
as for corporate profits, they have peaked in 1997, over 6 years ago. neither earnings 'quality' nor growth are anything to write home about. all that has happened is that 'expectations' have been exceeded after the total earnings massacre last year. one can easily verify where things are going ( namely, to hell in a handbasket ) by examining the levels of corporate debt ( close to a record high vs. GDP and also in absolute terms ) , as well as that innocent little balance sheet item known as 'shareholder's equity' ( shrinking in most cases ) .
why Wall Street remains unanimously bullish on the outlook for corporate profits remains one of the enduring mysteries of our times. maybe the analysts eat magic mushrooms for breakfeast? it's as good an explanation as any.
that said, the plunge in the dollar has helped multinationals profits due to the favorable currency translations. however, that's merely a sort of book-keeping trick if you will. in theory, it should not matter for a multinational how the currencies of the countries it does business in fluctuate vis-a-vis each other. what it gains in one country, it loses in another. no actual wealth creation is involved. |
