Third horsemen of the financial apocalypse is worst of the four

By Gerrit Thomas Ferreira

When, a year ago, I warned that FirstRand’s 2007 earnings were exceptional and that it would consequently be difficult to improve on this performance in 2008 and that we should prepare ourselves for some difficult times, I did not imagine the carnage that would visit the financial markets during the last year.

It appears as if two of the horsemen of the apocalypse, namely Leverage and Greed, initially entered the race under the banner: “This time it is different.”

They thus started running the race at breakneck speed, creating sophisticated collateralised debt obligations as if there was no tomorrow and pushing the US mortgage market (as well as other securities markets) to unprecedented heights.
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Credit crisis billionaires slammed

By Stephen Foley

Washington – The five best-paid hedge fund managers – who between them made $12.6 billion last year, even as the financial world began to crumble around them – were hauled before the US Congress yesterday and assailed over their huge salaries, their tax perks and their contribution to the credit crisis that has engulfed the globe.

In a piece of public theatre that reflected not just the present crisis, but also a decade or more of vastly increased income inequality, the five men declared themselves innocent of causing the market meltdown and insisted that their riches reflected hard work and investment insight.
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Deals to allay crisis in danger of failing

By Jeremy Gaunt and Alex Richardson

London and Singapore – Some deals designed to cure the global financial crisis were in danger of unravelling yesterday, as losses mounted at banks and economies deteriorated.

The International Monetary Fund (IMF) withheld backing for a $6 billion (R61 billion) bailout plan for Iceland, the Financial Times reported, putting loans to the nation at threat.

British newspapers said some of Barclays’ biggest shareholders had threatened to vote against a planned £7 billion (R111 billion) capital raising unless the UK banking giant improved the terms of the deal.
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Stock markets will start pricing in post-credit crunch recovery well in advance

By Jeremy Gardiner

Johannesburg – It has been a very difficult year. But no matter how hard the first half of the year was, the third quarter was worse. And it is by no means over yet.

The extreme market moves of the past two months led to a new term being phrased, appropriate across the globe.

PCC, or post-credit crunch, is the new world we live in, and this world is very different from the old. There was a time when China was emerging and every business worldwide had to reexamine its business model to ascertain whether it was working with or competing against the Chinese, with the latter option requiring an adjustment to strategic direction.
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SA saving habits ‘unsustainable’

Johannesburg – South Africa’s saving rate has dropped from 2.7 percent in 2001 to a negative rating of -0.5 percent in the second quarter of this year, the SA Saving Institute said on Tuesday.

Themed “Slow down, New Year ahead”, the SASI launched its annual savings campaign to create awareness among consumers ahead of Christmas and New Year.

“The concern about household preparedness for crisis is made acute by the savings performance of households, which have declined consistently from a saving rate of 2.7 percent in 2001 to a negative saving rate of -0.5 percent in the second quarter of 2008,” the SASI said in a statement.
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AngloGold forced to sell assets to pay debt

By Millie Munshi and Stewart Bailey

Johannesburg – The global credit crisis had made selling assets “imperative” for AngloGold Ashanti, chief executive Mark Cutifani said on Friday, as the firm seeks to raise cash to repay debt and invest in new gold projects.

AngloGold was working on asset sales in Mali and South Africa and nothing was “sacred’’, Cutifani said in an
interview in New York. Anglo-Gold would target a return on capital of at least 15 percent on its remaining mines, he said.

The financial crisis has made it harder for companies to borrow money and fund new projects. Mining and materials companies faced tightening availability of debt finance and the prospect of slower growth, Standard & Poor’s Ratings Services said in a report last month.
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Brace for tough times as growth slows, warns Motlanthe

By Wiseman Khuzwayo

Johannesburg – Brace yourselves for the tough times ahead, President Kgalema Motlanthe warned in his first two major speeches this week.

Addressing the fourth national congress of the Federation of Unions of SA on Thursday, he said the financial crisis enveloping the global economy unavoidably affected all workers, including those in South Africa.

“As a trade union federation, you know that one of the most dreadful consequences on the working people emanating from this downward slide in world economic output is the gloomy prospect of layoffs and job cutbacks,” he said.
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Free money in sight as banks race to zero rate

By Simon Kennedy and Craig Torres

Thursday’s cuts by the Bank of England and the European Central Bank (ECB), which came with the Federal Reserve and Bank of Japan on the cusp of zero rates, are a bid to shock life back into their recessionary economies and strained money markets. It may be an uphill battle as consumers and businesses show greater interest in saving than spending, and banks hoard capital rather than lend it.

“It’s the race to zero,” said Stewart Robertson, an economist at Aviva Investors in London. “There’s no obstacle to more rate cuts.”

The UK central bank, led by governor Mervyn King, on Thursday axed its benchmark rate to 3 percent, the lowest level since 1955. The reduction of 1.5 percentage points was the biggest in 16 years. The ECB followed with its second half-point cut in a month, to 3.25 percent, and bank president Jean-Claude Trichet declined to rule out further moves south for the euro zone.
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Economic crunch will hit house price growth even harder – Absa

By Roy Cokayne

Pretoria – Prospects for the house market for the rest of this year and next year were “quite dismal” because of current and expected economic conditions, Absa said yesterday.

Jacques du Toit, a senior property analyst at Absa, said that based on trends in the first 10 months of this year, nominal house price increases in the middle segment of the market were forecast to average between 3.5 percent and 4 percent for the calendar year.

This was the lowest annual price increase since 1996, at 3.6 percent. House prices in the middle segment were projected to fall just more than 7 percent in real terms this year.
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Survive tough times by becoming more efficient

By Nick Hough

It’s a tough time for many business owners, with firms facing lower demand and pressure on their cash flow. To survive the economic downturn, companies will need to do things much smarter.

Here’s a guide to help your company increase its efficiency.

Budget carefully: Prepare an up-to-date budget of how you really expect your business to do in the next six months. Think first about your expected sales and then estimate your costs. Be realistic: there’s no point in trying to kid yourself.
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