Sayonara Cape Town

Well the blog signs off in South Africa and will re-open in London, where we are moving as from tonight. As I look out over Simonstown on a windy, greyish day I know I'm gonna miss this place so much. A north-wester is blowing and I saw some surfers out at Muizies in a small swell as I rode past on the train. Cape Town Metrorail works, but barely. The rolling stock is in a parlous state with ripped seats, graffiti everywhere and the wheels screech round corners. The last leg alongside the sea from Fish Hoek to Simonstown always takes ages because of the corners. But it was still fun tracking markets on my laptop using 3G in the mornings from this sleepy hollow. SA's weather forecasting system is pretty good and it needs to be in a place where wind knowledge is so important for sailing, surfing and various other outdoor pursuits. The QSL is from ZOE33 Gough Island in the South Atlantic. This is one of SA's weather stations and I heard them on the utility bands with 1kW back in 1986.

What will make the main pain in Spain go away again?

Spain is in the cross hairs of the bond bears. With sovereign debt equal to three delinquent peripheral Eurozone countries - Greece, Ireland and Portugal - put together, it is potentially very scary if Spain's yields move to levels where refinancing costs push it into a negative debt spiral. The 10-year bond yield topped 6% recently but the latest Eurozone package plus European Central Bank buying pushed that back to 5%. Even that seems high in a world where yields are much lower in some places, like USA and Germany. It is a bit ironic that 5% seems high given that it would have been quite normal a few years ago. But the simple arithmetic is that when you have debt problems you need to keep your bond yield at or below your nominal GDP growth rate i.e. real growth plus inflation. Spain is some way off that as it's real growth has slowed to a crawl. But the Spanish are not sitting on their hands and are in the process of passing a balanced budget constitutional amendment which has the support of both the ruling party and the opposition. The QSL is from the COPE radio chain broadcasting from Valencia (home of the 2009 America's Cup) heard in Johannesburg in 1991 on AM, one of quite a few Spanish medium-wave QSLs I've picked up over the years.

There'll always only be one Thiruvanathapuram for me

You get everything at Muizies. In the northwester: short and long surfboards, paddle boards, waveski's (like mine), kayaks. In the southeaster the kitesurfers take over. Last weekend there was a flurry of them. Approaching from a distance it looked as if they were actually in the parking lot rather than the breakers. Of course, there are all kinds of bathers especially when it's warm. This winter has seen more hot days than I ever can remember in Cape Town. People say to us - you're moving to London at the wrong time, two winters in a row, bad planning. But actually it's been warmer here this winter than most of the summer in England. With all the financial turmoil over recent weeks I've asked the question: can the emerging economies, now the paragons of the global economy, be the locomotive for a recovery if the developed world swoons? Short answer is: no. Yes EMs are more important than in any time over the past 20 years but they are still not the big gorilla. All eyes are on China but one day soon India will also be a big player. India has boomed in recent years. So much so that the central bank has hiked rates many times in recent months, as inflation remains stubbornly high. But it is likely to take its foot off the brake soon. The QSL is a classic from All India Radio signed by Mr Bhatnagar, from the delightfully named Thiruvananthapuram transmitter in the 60mb heard in London in 2000.

Oil shave for Chavez

Turbulence in markets has hit the oil price too. Not so long ago the Brent near futures contract was close to $130pb, now it has subsided to $108pb. West Texas, which is suffering from a congestion problem in Oklahoma is way lower still. For Venezuela the lower price is a problem. Government relies on oil for a large chunk of its budget and the Bolivarian Revolution is already unaffordable with a budget deficit of over 5% of GDP and foreign debt heading for the $100bn mark. Inflation is entrenched at well above 20%. Of course, in the long term Vennie will just muddle along as it has for years. Oil has always been the saviour and that is unlikely to change even though the national oil company PDVSA is so badly run. The country sits on gigantic deposits of heavy oil in the Orinoco Belt. Venezuela says its reserves now exceed Saudi Arabia's. This is an exaggeration but there's surely plenty of stuff in the ground. A lot of foreign expertise and capital will be needed to develop these but Hugo Chavez is unlikely to open the doors. Now, however, he is ill and may not last in power as long as he hoped (i.e. for another decade or so!). See my article on Venezuela here:
http://www.businessday.co.za/Articles/Content.aspx?id=150148 The QSL is from Radio Anzoategui, heard on AM 1210 in 1991 during a dxpedition to remote Copperton in the Northern Cape province with Vashek Korinek. Anzoategui is one of the states that borders on the Orinoco Belt.

USA from Standard to Poor?

Standard and Poor's downgraded the US credit rating from AAA. Well the US had it coming and S&P had threatened for a while. Even if we don't exactly love the rating agencies for their collusion in the last credit bubble, the appalling confrontation between the GOP and the Democrats only served to remind us all that the US must confront its fiscal demons. The downgrade came at the end of a terrible week for equities. If you had said at the start of the year the following was going to happen: major uprisings in the Middle East with 1.5m bpd of oil off the market, a major earthquake and nuclear disaster in Japan, multiple edge-of-the-cliff confrontations on debt in the Eurozone and the US political system going to the wire on the credit ceiling; well then you would have run for the hills as an equity investor. Although much of the US data looks daunting, many numbers point to no double-dip, in my opinion. You just don't get double-dips from here - low capacity utilisation, low unit labour costs, strong corporate cash flow, very low interest rates, huge pent-up demand. Hope I'm right! Friday's payrolls numbers were way better than expected with upward revisions in the prior two months. Just a reminder that forecasting that series each month is senseless. Not to worry, my profession makes a living out of it! S&P headquarters are located in the New York Financial District, on Water St, an area I just love walking in. The QSL is from WNEW New York, heard on AM 1130 Khz in Cape Town in 1972.

What Speranza for Italia?

The nor' wester started blowing yesterday morning but I could only get to Muizies at 3pm today when the wind was already quite strong, gusting at over 20 knots. This was classic Muizies - medium swell and a fresh offshore breeze. As waves approached the critical, a thin white band would appear at the crest as strips of foam ripped off the top. You had to look for waves with centre peaks and ride off to left or right away from the break. Some of the bigger ones just closed out right across the full face of the wave. But with some the sections would break consecutively giving the chance to cut back and out again without getting swamped by white water. On one ride I stayed in the swell to the last second then tried to pull out but the breaker got me and I rode backwards for a few seconds before swinging around again in the churn. Pretty pleased to stay on through that lot. In the meantime the wild ride in Italian debt returned to the Eurozone frame and equities took another big hit. The potential for calamity mounts. The scale of the Euro peripheral problem is daunting and my long experience in financial markets does not equip me to understand how we get through this. The QSL is from Radio Speranza in Modena heard in Otford, Kent in 2001 on my trusty Drake and a K9AY antenna set up at right angles.