Emerging South

Europe had a quarter of negative growth, another quarter like this and the Euro enters its first recession, which is likely to happen.
While the Japanese Real Estate market is crashing, the smarter US analysts are warning that there are HUGE shadow inventories of US foreclosed homes still to be released on the market; and meanwhile Greenspan wants you to believe that the US real estate market will stabalise from 2009 on... right.  Expect this graph to go further downwards, drastically.

Today Chief Investment Strategist Richard Bernstein of Merrill Lynch stated:
"We believe that the investors seriously underestimate the extents of the credit crisis and the consequences of the deflation which will follow now".
I have written for the past half year on the deflation storms which are about to hit Europe and the United States.

Meanwhile in South Africa, Standard Bank has to rely on its offshore business to hit targets:
"Johannesburg - Standard Bank would offset the effects of lower-than-expected economic growth rate in South Africa with profits from its offshore businesses in Nigeria and China. One worrying sign for Standard Bank was the increasing problems the company was facing in its card division. The credit loss ratio in card debtors increased from 6.34% to 9.44% indicating that the consumer was becoming increasingly stretched." 9,44% credit loss ratio in amongst card debtors, ouch !!  Meanwhile Mboweni decides to not raise interests above the current 12% rate. This is a strategic blunder. Yes, I know, the general tone is that he did good in not raising the rates, because ""… the alarming rate at which cars and houses had been repossessed should be a matter of concern to Mboweni and the MPC. " At the same time inflation keeps skyrocketing and will go from the current 11,6% to 13% by the third quarter. Yet, Mboweni keeps the repo at 12%. Read that again: inflation at 13% with a repo rate of 12%.
At the same time, South African banks are turning into vulture hawks. If you put down a deposit on a property and FNB reassessed your loan and denied you your bond causing you to lose your deposit, FNB says that you should thank them because in actual fact you probably were going to lose a lot more money later on.  No, I didn't make this up, it's happening, on a wide scale.

Mboweni claims "``Food and oil price increases continue to cloud the inflation outlook, but there are tentative signs that these pressures may be moderating.''  The wording makes me smile: Food and oil price increases continue to cloud the inflation outlook, but there are tentative signs that these pressures may be moderating.
Well, I think Mboweni is wrong. "Prices will decrease when supply surpasses demand. And that will happen South Africa focuses now on expanding infrastructure and assist its people to be more productive. For this reason the government should now focus on the production side of the economy and increasing skills rather than simply placing money, in the form of social grants, in people's hands. When increased production is attained prices will be constrained, which will eventually also curb inflation." These are not my words, but a literal quote from this article. And the worst is, Mboweni will blind people, inflation will go down…well the CPI will go down…because the government plans to change the measurement of the consumer price index next year. The SA statistics office said on July 1st it will reduce the weighting of food in the CPI, which will lower the inflation rate… artificially (see Bloomberg).
Meanwhile, at the annual Rode conference on property in South Africa today "Johannesburg - House prices are expected to drop by between 10% and 15% in the next 12 months as rising interest rates and tougher credit-granting laws force buyers to tighten their purse strings, a property expert said on Thursday." Prices in Plettenberg Bay are taking a dive and when asked for the reason of selling, 18% of the people mention emigration, this figure is up from 7% 12 months ago.

Standard Bank posted a 7% rise in first-half normalised headline earnings per share (EPS) to 481,8 cents today, but said rising bad debts meant it could not give full-year guidance. When banks come with these messages you better brace yourselve for the storm, especially when you are in real estate business.  One of the "saviours" of the housing market is supposed to be the Black Diamonds, the young black professionals who have been spending money like crazy the past few years. Only one problem though, they've been spending borrowed money (mainly via credit and store cards) and getting into a heap of debt, and now that debt is becoming overwhelming, read the details here.

Conclusion:
The monetary loosening of Mboweni worries me;  of course it 'could' boost sentiment a little bit on a short term; but it will come at a very, very high price; if you lived in Brazil in the 70s and 90s, you know all about that.
Zimbabwe worries me. 
And what worries me most (although there are some opportunities in it for the well connected) is the ongoing land reform in SA.

As I've been saying repeatedly: not just an ordinary global economical blip.