Wednesday, 24 September 2008
Myth of the free falling rand...
The inevitable Zimbabwesque plunging of the rand into the void is an idea burnt into the brain of most white South Africans it seems. Every time a mouse squeaks the whole country gets their schlongs out and starts their usual festival of urinating nonsensical pessimism everywhere. Just take a look at the S.A.S sites comment section. Well as long as you can without goughing your eyes out or begging for a lobotomy.
(Notice I say scholongs , because if we’re honest we’d admit your average woman cares or knows as much about the economy than she does everything apart from shoes, which is pretty much sweet f#ck all.)
So every time something happens in the country there’s mass panic and everyone is sure that finally the rand is ready to take its plunge in obscurity. The inherent panic causes people to meddle with/withhold their investments and the market obviously dips for a moment , just long enough to perpetuate and in their minds validate their fears. The rands slides rapidly down to around 12 to the dollar. They start getting phone calls from their brokers advising them to start packing their suitcases full of Tito’s big five and hauling them off to foreign shores. People stop and pay more attention to manic street preachers than usual. Church collection plates gets heavier. In short we lose our collective minds.
A few months later it’s the arduous and inevitable process of buying back those rands you invested offshore in stagnating European funds for 60% of their worth because the rand as always has corrected itself to around 8 to the dollar. We’ve seen it all before. Twice in the last 10 years.
There is a reason my friend that the rand is one of the most traded currencies in the world. Whenever our marbles go tumbling down the drain pipe and the rand slides down , foreign investors (and a few smart South African ones) start rubbing their hands in glee. When the time is right and the rand is seriously undervalued they pump in the dosh and indeed it corrects itself. Score one for smart people. Dummy takes it up the butt again.
Another reason is the the rand reacts to international trends. They dip and we dip…..but we have a unique get out of jail free card. What do people do when they are feeling a little jumpy about their markets/currencies ? They stuff their money into gold stocks and the price goes insane. Little old us crutch our battered currency up on our huge gold industry and off we go again.
It’s your money , but before you buy into this free falling rand myth , don't be upset when your joyride gets interupted by a parachute.
Posted by The Rooster at 05:31