David Gracey

David Gracey

Head of Foreign Exchange and Fixed Income Trading

The roller coaster and the Finance Minister

·        When I was a kid we used to go to the “Rand Easter show”, based in Auckland Park in Johannesburg. The thing to do was to go to the fun fair. And the best ride was always the roller coaster. Year after year it was the same thing, same roller coaster, same coaster cars. It was fun, but in hindsight, nothing much ever changed. It was a rickety old thing, threatening to fall apart at any given moment.

·        The markets feel a little like that at the moment. Panic in the morning, risk on in the afternoon, and silliness at night.

·        This all means that prices are all very difficult to call.

·        The drivers of the roller coaster like price action are fairly diverse.

·        On the panic side….

o   Debt

o   Debt

o   And more debt

o   Rising bond yields

o   Skittish equity markets.

o   Reflation

·        On the zoom zoom side.

o   Stimulus spending by governments. (more debt)

o   QE by central banks

o   Optimism over covid vaccine rollouts

o   Recovering economies.

·        And so it’s literally up the tracks in the morning, and down the tracks in the evening, and in-between a few loop de loops.

·        I used to enjoy the Rand show –  incidentally, it was also the first place I ever saw the “Bohemian Rhapsody” video (about 50 times).

·        I do not enjoy these kind of markets. This roller coaster also feels like it wants to fall apart at any second.

·        Looking ahead we have the much anticipated budget tomorrow. Notwithstanding the very (unexpected)  healthy tax windfall of around 100 billion rand, it’s bound to be a tough budget.

·        I have all but given up trying to write about these events, because Government has done such a bad job of balancing the nation's books over the last 10 years, that I feel it’s pointless even attempting to forecast what they are going to do. But here goes with some thoughts.

o   Should they raise taxes? – NO!. But they may be forced to because they need the money. However, this is a bit like Eskom raising tariffs and losing revenue.

o   Should they introduce a wealth tax? – this is a bit like asking if I would like to do the tango with a bear? It may seem like a rather entertaining option, but you just know it’s going to end badly.

o   Should they cut spending? – well of course they should, but this is a little like asking your teenager not to spend so much time on the PlayStation. Even the teenager knows you are right, but they are still going to play War games until 3 in the morning.

·        Every year, The good Finance Minister always invites suggestions for the budget on Twitter. I was going to tweet some, but I just knew they would get me into trouble. All I will say is….

If his book balancing skills are as good as his culinary skills, we are in deep sardine sauce.

·        Good luck, oh, and if anyone wants to reply with some sarcastic meme or commentary about Liverpool, rest assured I’ve seen and heard them all.