In the News today

HA commentary

Aka “Calling all pockets.”  This is the Japanese public getting turned upside down and shaken to get every last penny out, not even to pay off debt, but to go into more debt.

Women Prefer Men Holding State Bonds, Japan Ad Says (Update1)

By Wes Goodman and Theresa Barraclough

June 9 (Bloomberg) — Japanese women are seeking men who invest in government bonds, according to an advertisement being run by the Ministry of Finance.

“I want my future husband to be diligent about money,” a 27-year-old woman says in an ad being run in free magazines promoting a fixed-rate, three-year note that Japan started selling last week. “Playboys are no good.” She’s one of five women featured in the page, which says “Men who hold JGBs are popular with women!!”

The ministry commissioned the ads to appeal to citizens for money at a time when record government borrowing threatens to outstrip demand. Prime Minister Naoto Kan, who took office yesterday, said he doesn’t have an instant fix to rein in the world’s largest public debt.

The government’s plan to attract marrying-age men comes after a campaign aimed at retirees started last August. That push featured Junko Kubo, a former anchor on Japan’s public broadcaster NHK, in ads placed in the backs of taxi cabs. Kubo followed Koyuki, an actress and model who in 2003 appeared in “The Last Samurai” with Tom Cruise as well as posters for government bonds.

“It strikes of desperation,” Christian Carrillo, a senior interest-rate strategist in Tokyo at Societe Generale SA said about the ad campaign. “I doubt this will be a successful strategy to attract retail investors.”

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HA commentary

This debate continues to miss the point that the SARB - as the government’s banker whether privately owned or not – facilitates government indebtedness and borrowing.  It is much the same as having a family member in a credit card department at FNB who continues to issue you new credit cards to run up debts.  Difference is everyone pays for government’s reckless borrowing. 

New Sarb bill ‘not about nationalisation’

Jun 08 2010 17:01, Troye Lund

Cape Town – Debate around the Reserve Bank Amendment Bill must not get bogged down by discussions on whether the bank should be nationalised or what its mandate should be, the chairperson of parliament’s finance portfolio committee, Thaba Mudamadi, said on Tuesday.

Mufamadi also mistrusts the real motives of private shareholders opposed to the bill, which is aimed at limiting the powers of these shareholders and giving the governor of the South African reserve Bank (Sarb) more say on how its board is constituted.

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HA commentary

Start by putting half your savings in  Apart from aggravation and bank fees, holding gold will also protect the purchasing power of your money.

How to switch banks

Jun 04 2010 10:15

Johannesburg – For many people, the thought of ending a long-standing relationship with a bank conjures up painful detangling and acrimony spanning many bitter months, possibly ending with a boiling bunny on the stove.

But ditching an abusive bank may save you a lot of money and aggravation.

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HA commentary

More bankrupt economics (excuse the pun).  This misses the point that spending consumes wealth that was created by prior production and saving.  While spending may boost GDP, it depletes wealth.  A lack of spending or saving doesn’t create a bust either, it builds the foundation for wealth creation, i.e. investment and future production.

Boom or bust? The World Cup and South Africa

Chris Blaine|08 June 2010 22:50

Quantifying the Soccer World Cup’s impact on South Africa.

JOHANNESBURG – There has been much speculation about what the impending Soccer World Cup (SWC) means for South Africa and investors. Sanlam Private Investments quantified some of the numbers.

A presentation by Daniel Kriel, Alwyn van der Merwe and Emile Fourie showed, amongst other things, that based on the previous tournaments the host country has played in 45% of the final games.

For investors though, Fourie commented that “one wants to invest when there’s blood in the streets, not vuvuzelas.” This was in the context of the SWC ultimately pushing up gross domestic product (GDP) by between R14.9bn (0.56%) and R23.3bn (0.88%).

This is the effect of the expected tourist spend when they’re on the ground. About 373 000 tourists are expected, spending about R23 600 each totalling R8.8bn. This is about 14% of 2009’s tourist spend. In 2009 we have 9 900 000 tourists spending on average R8 020.

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HA commentary

Yes, thanks for stating the very obvious, Fitch.  We covered this in Dec ‘09.  The pommie government must cut spending by about £200 billion: £156 billion to close the deficit gap, and at least another £40 billion to start paying off the public debt.  Pledging to cut spending by £6 billion as Osborne has recently done is tossing peanuts to baboons.

Fitch warns UK about ‘formidable’ fiscal challenge

(Bloomberg) LONDON – Fitch Ratings agency has warned that Britain faces a “formidable” fiscal challenge and must cut its budget deficit faster.

In a special report released Tuesday, Fitch notes that the rise in public debt ratios since 2008 is faster than any other AAA-rated country. The deficit is forecast to reach 10.4 percent of gross domestic product this year.

Prime Minister David Cameron’s new coalition government — which has pledged drastic spending cuts to curb Britain’s deficit and public debt — will deliver an emergency budget on June 22.

Fitch says it must set out a more ambitious program than the previous government’s forecasts to reduce the deficit to 8.5 percent of GDP in 2011/12 and to 5.2 percent in 2013/2014.

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HA commentary

Is co-operation between business and unions/government not what Mussolini called “fascism”?   Weakening the Rand can’t achieve anything other than to redistribute profits from importers, savers and all holders of Rands to exporters and debtors.   Was the fact that manufacturing and industry boomed in Q1 in the face of a strong Rand not proof the currency matters less to profits and job creation than so commonly argued?  Let private companies fight this one out, not with the advantage of government policy, but by competing in free market place.

MONDAY COMMENT: Weaken the rand, or arm-wrestle China?

TIM COHEN Published: 2010/06/07 07:50:09 AM

AFTER a number of industrial companies had joined Cosatu in calling for a lower rand, I wrote sceptically in this column and elsewhere about the efficacy of a “lower rand” campaign, aided by statistical information largely drawn from Rand Merchant Bank ’s very detailed and comprehensive data and commentary.

This drew some furious responses from economists, Cosatu, members of the private sector grouping now supporting a lower rand, and notably from Stewart Jennings, CEO of the PG Group, president of National Association of Automotive Component and Allied Manufacturers, and Manufacturing Circle chairman.

I should say at the outset that I do find encouraging the fact that the campaign is a joint business- union affair. In principle, there are far too few of these efforts, particularly because they run counter to the false notion that business and the unions are inimical “structural” enemies, as classical Marxist economics would posit.

It seems to me almost all economic success stories entail some degree of co-operation between business and unions . Yet in SA the co-operation is minimal and the opposition quite often tends to be intense, vituperative, implacable and often irrational.

However — and I suspect the feeling is widely held in SA — on the issue of the rand, I remain sceptical, if undecided. Lowering the rand seems like a too easy, too mechanistic, too short-term and frankly too dangerous option. The opportunity for unintended consequences is enormous, and it seems like a short-cut solution which cannot be sustained.

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HA commentary

South Africa 20% undervalued to the MSCI?  What do our stock pickers have to say about this?  Bearish the economy and ZAR?

HA commentary

Real estate is overvalued, built on a foundation of debt.  If you cannot get a mortgage loan to buy a home, how much would you be able to pay for a house?  It should be clear that the crisis facing the world today – overindebtedness – will see a drying up of debt (i.e. the ability to borrow) in years to come.  Renting is a good idea at present before you get stuck with a mortgage debt in an environment of a spike in the cost of living, higher interest rates, and flat house prices.  Besides, if you’re going to go into debt, why not rather buy something you are certain will go up in price?

Flat rentals buoyant in downturn

9 June 2010 / Elma Kloppers

Johannesburg – Average flat rentals in South African cities gradually increased during the worst recession since the 1980s.

The latest figures in Trafalgar’s national rental index show that rental growth was relatively elastic in the economic downturn, largely because during this period people preferred to rent their dwellings rather than buy.

In the nine months to March this year the rental index rose 7%, which amounts to an annualised 9.5%. This is however lower than the 11.2% rise for the year to June 2009.

The Trafalgar index monitors the increase in rentals in similar two-bedroom flats in the Trafalgar portfolio in metropolitan areas countrywide, so as to eliminate distortion that could be introduced by new trends.

The sample comprises 50 to 70 flats in each metropolitan area.

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HA commentary

Good way to expand SARS’ tax base, at the least a way to track more individuals spending habbits and pick out tax evaders.  Goodbye to another bit of liberty.

Electronic cards for the unbanked

9 June 2010 / Sapa

Johannesburg – South Africans without bank accounts will soon be able to obtain chip cards onto which they can load money to use for payment on public transport and low-value retail purchases.

“Now these people will be able to go to a bank or other financial institution, obtain a contactless chip card and carry this in their wallets instead of cash,” Payments Association of SA (Pasa) CEO Walter Volker said in a statement on Wednesday.

To enable this the finance minister had granted financial institutions a special exemption from the provisions of the Financial Intelligence Centre Act, to issue electronic payment instruments, such as contactless chip cards, to those without bank accounts.

The exercise was a joint effort by the Treasury, the Financial Intelligence Centre, the national transport department and Pasa.

One of the toughest challenges in South Africa had been finding ways to offer a variety of payment options to the unbanked, who had typically been limited to cash.

The timing of the exemption, which came into effect in May, was fitting, as the government had looked to offer commuters a single payment instrument that could be used for any mode of transport, as well as at retailers. Volker said the FIC Act exemption would enable financial institutions who wished to offer low value payment instruments the ability to issue these instruments at convenient locations, with minimal risks.

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