This must be one of the most sobering truthful atricles I have read in a while. Seems we are where the US was about 4 months ago
The market hype is worrying.
Vehicle sales figures released on Wednesday will no doubt provide one more stat that economists, analysts and journalists will use to evoke the over used "green shoots" analogy. Even if things look horribly bad, and a drop in sales of 26% is horribly bad, we just tell ourselves that it is not as bad as last month (27% down) so relatively things are looking rosy.
It certainly seems we are through the worst but are we really on the way up - so much so that it is worth rating the market 14% higher than two months ago? The general weakness of the economy is worrying and judging at how the market opened this morning, it seems worried. The question is not whether we have reached the bottom, but how long it is going to take to get out of this pit and whether investors will have the patience to wait for what will be a much delayed earnings recovery.
Job losses reached 475 000 half way through the year and it is expected that a further 175 000 jobs will be shed this year, bringing job losses to a total of 650 000. That is a lot of jobs considering that only 13.3m people are collectively employed in the formal and informal sectors. Add to that the dependency ratio in South Africa of around one to five. Every one employed person supports five people so by the end of the year 3.2m South Africans will have lost a form of income.
Unlike the recession earlier this decade, low interest rates are not going to see the consumer rebound. The concerns facing the banks are not customers stretched by interest payments but customers who simply have no income to repay debt. Companies are going to wait for a very real and sustained recovery globally before they begin to re-hire. This is going to be a long drawn out affair and it will be a long time before those green shots bare any fruit
