Neither the best nor worst of all possible worlds

Arrived late last night in New York from London (and Edinburgh and Frankfurt)  and the lag means I am only going to want to fall asleep at exactly the time it will be most unsuitable to do so.

I have been travelling (for Indian owned Religare Capital Markets, where I have a new berth) with the excellent Michael Kavanagh who is a mining and metals specialists. We have a story which interestingly balances the South African political risk (especially associated with nationalisation) and the long-term bullish outlook for  platinum. We are half way through a global tour talking to fund managers who specialise in investing either in mining stocks or emerging markets … or both.

South Africans at the point of weeping and pulling their hair out because of the latest ANC Youth League posture, or the newest tender scandal or Jacob Zuma’s increasingly hopeless grasp on the complexities need to spend a little time with people whose job it is to compare South Africa as an investment destination with its peers.

Oh yes, they worry faintly about Julius Malema’s antics but their universe of comparison is huge and diverse … and if the worst comes to the worst the money they manage can shift very easily and early.

(Our parochialism causes us to believe) we have no-one with whom to compare our populists, gangsters, thugs and incompetents.

Trust me (or rather trust the fund managers with whom I have been speaking), ours are no worse than the equivalents in Russia, Brazil, India, China … and a host of similar investment destinations between which the money flicks and flitters.

One of my slides that might not charm a domestic audience causes nothing more than a wry smile here. This is par for the course for investors who concentrate on global emerging markets; some light relief before going back to worrying about whether Israel is going to bomb the Iranian nuclear fuels development programme or not.

We might as well smile – both because we are not as bad as we could be, but also because when you look further than the grotesque, our earnestness is almost sweet and crazy … to my mind, anyway.

3 thoughts on “Neither the best nor worst of all possible worlds

  1. I missed something. You said we have no one with whom our gangsters and thugs compare but then you said we aren’t much different from a clutch of other nasty people in various countries. Does that affect investors or do they turn quickly away from the blood and invest elsewhere? I’m sorry, I couldn’t get the argument.

    1. Thanks for the heads-up; my paragraph made no sense at all. I have attempted to fix it … but I realise there might still be confusion. When I say that our general political woes are unexceptional in the emerging market universe I am implying that ‘general politics’ is unlikely to drive the money from one emerging market to another … such markets exist in countries which often have pretty awful politicians. Very generalised flights to safety usually (caused by a crash or similar) mean money flows out of emerging markets as a whole and into traditionally safer asset classes or geographies. The kinds of funds that I would have spoken to over the last few weeks generally have pure emerging market mandates … they do not have an option to buy US treasuries or whatever would be considered a ‘safer asset’ (guns, bottled water and physical gold?) in these troubled and confusing times. That being said, perceptions of a real risk of expropriation (which I do not think is where our nationalisation debate is going, but there is enough confusion to keep the marginal player out of the market) would definitely cause money to flow out of our mines and resource companies to mines and resource companies where where such threats were absent – or less likely to “eventuate” … excuse the awful word, I can’t think of an alternative.

  2. To eventuate: to come about; to ultimately result in.

    As to what foreign investors fear most, it is not (as you say, Nic) gangsters, thugs and incompetents; rather, it’s political instability.

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