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Not even an apple for teacher puts dilig... Sporting blacks shackled by apartheid's... |
Not even an apple for teacher puts diligent Trevor at the top of the classPITY poor Trevor Manuel and Chris Stals. They have diligently handed their homework in on time. They have not been disruptive in class like some of their less disciplined fellow students. They may even have managed to save some of their pocket money this term by visiting the school tuck shop less frequently. So it comes as a huge disappointment that their end of term report from rating agency Standard and Poor's gave them only a BB+ with the teacher's note in the margin saying something like: "Trevor and Chris have worked well together but need to try harder. Unfortunately the outlook is only stable at the moment and they must concentrate harder on economic growth next term. "They sometimes seem to forget that there are other children in the class who are also keen to attract foreign investment. Unfortunately they lost marks last term on their Gear economic model which looked very good on paper but didn't actually work on parent's day. "Trevor has become much quieter in class and no longer tries to make the other children laugh by using words like 'amorphous'. The ritalin seems to be working."
So it's a silver star and not a gold star and those of us who claim to understand these things are terribly disappointed. This is the financial equivalent of being beaten by Tonga in the next Rugby World Cup and gives everybody the opportunity to wander around in a blue funk muttering about how the referee must be blind and biased. Initial comment from the financial market placed the blame fairly and squarely with the teacher, Standard and Poor's, who were said to be "at odds with reality" in one newspaper report. That's the problem with the ratings business though; what is reality? One moment you are confidently giving a country like Singapore a tip-top rating and then along comes an Asian financial disaster and you are left with great splodges of oeuf sur le visage as they say in France. Investors are hammering on your door yelling, "Oi squire, thought you said Singapore was safe as houses. I've just lost my yacht thanks to you." So then you tread warily with a new kid on the block like South Africa and you upset the natives who have all borrowed money to buy government bonds in expectation of an investment rating continuing to fuel the bull market. It's a lonely life in the ratings world. I don't expect they get too many lunch invitations. The problem with asking somebody else to hold the looking glass while you say "mirror mirror on the wall, who's the cutest emerging market of all" is that the answer may not always be quite what you had in mind. The easiest way to get round the problem is to get a new mirror, but there is a jealously guarded professional etiquette among mirrors which forbids one mirror to completely contradict another. Standard and Poor's is only one of many rating agencies worldwide. Have you ever wondered how they survive financially? I'll tell you. They charge people like the South African government money to tell them how financially healthy they are. It's like a medical check-up. You presumably wouldn't berate your doctor for telling you that your blood pressure is too high or that the reason you can't heave your wheezing frame up and down all those steps is that you are a fat, burger-munching slob who should cut back to 50 cigarettes a day for starters. For the same reason, we should not be upset with Standard and Poor's for its rating of South Africa just because it tells us what we do not want to hear. Even allowing for the fact that Standard and Poor's may be erring on the cautious side after the Asian troubles, we would be deluding ourselves if we believed they had been anything less than thorough. The squeals of dismay seemed to come mainly from the bond market, which is currently thrashing around at levels last seen some four years ago. Admittedly, the bond rates kicked up on the news but that was only because they were perhaps a little too low anyway. What irked the bond traders is that the market is so long of stock that everybody is wondering who will buy the market down further. An investment rating would have introduced new lambs to the slaughter which is great for anyone looking to take profits. Now that Standard and Poor's has rained on the parade we will have to look for other reasons to be bullish.
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