In which: Cyril Ramaphosa is called to step down, Instagram gets new terms of service, US bank deposits surge, December’s Fools Day, and coal demand to overtake oil.

Good morning

The headlines:

  1. Return to the Coal Ages.

    Link: also black gold.

    According to the International Energy Agency (IEA), global coal demand is rising and may eclipse global oil demand by 2017. A quote:

    “Thanks to abundant supplies and insatiable demand for power from emerging markets, coal met nearly half of the rise in global energy demand during the first decade of the 21st Century. Coal’s share of the global energy mix continues to grow each year, and if no changes are made to current policies, coal will catch oil within a decade”.

    Given that coal is the most polluting of the fossil fuels…

    I always wonder whether this type of report takes into account the potential global warming → natural disaster implications of these lines of increase. It’s all good and well taking a ceteris paribus approach to the theory. But real life is not exactly one for paribus.

    Here is a fact-sheet of the report. China, unsurprisingly, is the world’s biggest importer. Pictures like the below make me think that China is destined for barren wasteland:

    The above looks like this (from above):


    But I’d still take the bet on energy commodities.

  2. Cash stock-piling.

    Link: it’s called an “adjustment”.

    The Federal Reserve has released some data, and it shows that the banks are receiving more in deposits than they’re lending out. There’s currently a $2 trillion gap between deposits made and loans extended.

    Some call this cash-stock-piling, and bemoan the lack of stimulation that the “soaring bank deposits” indicate. I’m saying: if deposits increased by 8.7% to $9.17 trillion*, then that figure is an increase of $734 billion in absolute terms. To reiterate, that is the direct increase in immediately-spendable cash. This should say something about inflation relative prices, surely?

    Because if the amount of cash that could be spent has increased by 8.7%, and the amount of goods in the economy has not, what does that tell you about the adjustment that has not yet taken place?

    A quote from a Royal Bank of Canada person:

    “Borrowers are still de-leveraging, so the demand is not at the level it would be in this part of the recovery. That combined with the low-rate environment has led to this unintended consequence.”

    Initially, I thought that he was making a good point about demand. Then he said something about a “low-rate environment” which seems entirely absurd: if interest rates are low, you borrow and spend – you don’t “deposit”**.

    Or it has nothing to do with lending-rates and everything to do with the cash-stock-piles. If you’re stock-piling cash, why would you borrow money? Clearly, you have too much of it and nothing that you want to spend it on.

    And the low rates can’t entice you to part with someone else’s money either.


    *It’s a “record”! Well it would be – does anyone see the US taking money out of her economy? Uh no.

    **Unless he meant that somehow lower rates meant that borrowers were able to pay back more of their loans as they were spending less on interest? 

  3. Welcome Mr Ramaphosa.

    Link: keep your business interests where we can see them.

    Businessmen and rand-billionaire Cyril Ramaphosa has returned to politics as the very potential new Vice-President of South Africa. Fresh off the scandal of having bid R18 million for a buffalo at auction*, some cynics might say that he’s just the type of feather for the ANC birds.

    And now the ANC folk are calling for him to resign from the multiple boards on which he sits (MTN, Bidvest, SAB Miller, Standard Bank, Lonmin)…

    In all honesty – I think that these calls are more envious than practical. Resigning from a board or a position is not going to change a vested interest. The vested interest will still be there (he’s a businessman with investments). Forget the appearance of impartiality – surely it would be better to have the interest public and known?

    At least, then, public opinion will be on-the-look-out for legislation that is self-serving.

    Not that it makes any real difference in the South African environment. The Protection of State Information Bill has glibly passed through the various parliamentary and provincial bodies in a storm of public opposition. Calmly and blatantly ignored. And soon-to-be-signed into law.

    *He has subsequently apologised.

  4. Instagram.

    Link: instant outcry.

    Facebook has announced a new terms of service for Instagram, which basically makes anything that you put on there Facebook’s. Oh, and obviously, you agree to submit to advertising, which means that all your info is tracked, etc.

    If you follow it on Twitter, the Instagram users are throwing toys.

    But then I’m sure that they all have Facebook accounts. And we’ve all been agreeing to those terms of service for years.

    Besides – who is going to regulate Facebook? Much like the South African government – Facebook’s agenda is its agenda. And it moves too fast for anyone’s legislation to do anything but trail in the background rather uselessly.

  5. Tis the silly season.

    Link: predictions that go past Friday.

    I laughed. Especially at the call that crude oil might drop below $50 a barrel as a result of “advanced production techniques”. And gold falling below $1,200 as “the strong U.S. economic recovery surprises the market and especially gold investors”.

    I’m sure they would be surprised.

    It’s like April Fool’s. Only for analysts.

That’s all for now.

Have a good day.