Rand-Dollar Watch

[Hendie]

This by courtesy of Prof. Werner Antweiler of the University of British Columbia:

 

 

 

 

 

 

[Springbok]

Attached is more about the Rand since 2001. I am measuring both the Rand and Aussie $ against the Euro, as Europe is our biggest trading partner.

Look how the Rand has plunged so far this year, after 4 positive years... the Aussie$ is much more stable, but that's what you expect from a first-world currency.

[Dedrei]

It has really gone bad, we left 10 April this year and exchange rate was at just under R4.50 a aussie dollar. No when I transferred some last money from our house it was R5.72 (and this just in a period of 5months). It really is crazy, if you have any rands in SA, best to get it out asap before you lose any more.

[Springbok]

Here is another chart of the Rand (ZAR) vs. Aussie$ (AUD). I suppose many of the forumites here want to know whether they should take their money offshore now or later. The ZAR has clearly resumed its uptrend (weaker) against the AUD, but usually currencies experiece a correction after a period of sudden strength or weakness, as we have seen in 2006. The ZAR has lost 25% against the AUD since April, which is HUGE! So we can expect the ZAR to retrace to some extent over the short term, possibly to around 5.0, before resuming the long term trend.

Hard to say where the ZAR will go in 2007, but my guess is anywhere between 5.0 and 6.0 against the AUD. Also, the level of 5.50 seems to be a reasonably strong resistance level, so we should wait for a clear break above this, before getting to gloomy. Just look what happened in early 2004 - a mere wiplash around 5.50 before the ZAR turned around and strengthened all the way to 4.30.

So what I am saying is that it may be a good idea to take your money out of S.A., not all in one go, but rather gradually just in case we see another spurt of strength.

[Guest Noeks]

And so..... I am quite depressed.... actually "oh so angry" - "of eintlik net de hel in" - here's me trying to get what I can out of my SA account for my daughter's college fees here.... and its not getting easier, is it??

[ocean3]

Isn't there another way of getting money out of South Africa?

What about buying Krugerrands ?

Isn't there anything of value in SA that might be a sort of Rand hedge. I have done some research but don't know enough about gold to comment further at this stage.

[Springbok]

Isn't there another way of getting money out of South Africa?

What about buying Krugerrands ?

Isn't there anything of value in SA that might be a sort of Rand hedge. I have done some research but don't know enough about gold to comment further at this stage.

You can buy either Krugerrands or a share called Newgold through any stockbroker of your choice on the JSE. Newgold is actually an exchange traded fund (ETF) and its price is directly tied to the rand price of gold. The prices work as follows: today's gold price is roughly US$600 per ounce and the exchange rate is R7.75 per US$. Therefore the rand price of gold = 600 x 7.75 = R4650 per ounce. The Krugerrand usually trades at a slight premium to the gold price. Its closing price today was R4775 per coin, therefore a premium of 2.7%. Newgold's price is usually 1/100th of that, or R46.50 per share today. So there you have you hedge against rand weakness, as well as insurance against a falling dollar in the form of a rising gold price. To buy these, simply open an account at a stockbroker of your choice. A list of member firms are available at JSE.co.za. Most stockbrokers have websites, so you can do all your buying and selling online. Examples are PSG online and BOE Personal. I would recommend a minimum of R5000, as smaller transactions attract higher fees when buying and selling. You should aim to pay not more than 2% when buying or selling, but for larger transactions it should be around 1% per trade. Depends on the broker though, so check! Feel free to PM me for more info - I have been a stockbroker for 5 years before I ventured into banking.

Most people do not understand gold, so I will give a short explanation. Gold merely serves as a barometer of the health of the global financial system. A rising gold price means something is wrong with paper assets. Wars and political turmoil are side issues. Gold (hard asset) is tied directly to the US dollar (paper asset). Whenever the dollar is strong, gold behaves as a commodity and seeks its value according to the cost of production. But when the dollar is declining, gold acts as a currency and protector of wealth as investors embark on a flight to quality.

Those of you who were around 30 years ago (or those who have studied history), will remember that gold hit a high of US$850 in January 1980. The oil price was also high and there was also political turmoil in the Middle-East (Iran). Many similarities to what's happening today... anyway, that high of US$850 is equivalent to about US$1800 today, after adjusting for inflation. So today's price of US$600 is still cheap and we haven't seen the end of this bullmarket yet.

I highly recommend that anyone interested in gold, read and learn from the daily writings of Jim Sinclair at JSMineset.com. Mr Sinclair has been a highly successful precious metals dealer for 45 years, so can be regarded as an expert on the subject. He has also been interviewed by Bloomberg recently.

Finally, a great deal of truth lies in the essay, Gold and economic freedom, that former Fed chairman Alan Greenspan wrote in 1966.

Regards

Charl

[ocean3]

Hi Charl

Very informative. Thank you. Still a little in the dark I'm afraid ! Will PM you.

Regards

Ocean3

Edited September 30, 2006 by ocean3

[Springbok]

As always, a picture tells a 1000 words.... the first one shows the historical gold price in US$ per ounce and in Rand per ounce since 1970 (both on the left). Just note that these are nominal prices, so the inflation-adjusted high of US$850 in 1980 is equal to about US$1800 in today's terms. On the right are graphs of Newgold and the Krugerrand, both of their prices tied to the Rand price of gold. By buying Newgold and/or Krugerrand, you are basically taking a bet on a weaker Rand and/or a rising gold price. Of course you can also buy ordinary gold shares like Anglogold, Goldfields, Harmony, etc., but due to their gearing effect, the shares carry higher risk than Newgold and the Krugerrand.

For those of you who are more familiar with unit trusts, the second chart shows the performance of the Allan Gray Equity Fund vs. the JSE Allshare index and the Australian All Ordinaries index. I have expressed all 3 on a common base, i.e. in terms of Aussie dollars, and starting at a base of 100 in January 2000. The Allan Gray Equity Fund has returned about 250% in the last almost 7 years and miles ahead of the two benchmark indices. The JSE has even outperformed the Aussie index in Aussie dollar terms! S you see, if you put your money into the right unit trust, you can leave it in S.A. and the fund manager will protect your pruchasing power through the right investment decisions. Allan Gray has an enviable 30-year track record and the best investment manager in S.A. in my opinion. Its chairman, Dr. Simon Marais, has also relocated to Sydney 2 years ago.

Just remember that the past is never an indicator of future performance and that you must always do your own homework before committing to any investment decision. I am not giving any investment advice hereby, but just merely telling what is working for me and what my conclusions are during my observations of the stockmarket the past 7 years.

[Helena G]

I agree wholeheartedly with Springbok.....he's not just a pretty face!!! LOL Take note of his closing warning that past performance is no indicator of future performance though.

Locally (SA) our stockmarket is in overvalued territory and even the Allan Gray's of this world is not expecting more than a 3-4% real return over the next couple of years. The days of 40% + returns are over!!!! The clever guys with the thick glasses have been wrong in the past and we almost always seem to underestimate the greed of the market. Our market is currently almost 3 times as expensive as it was in 2003 while most of the offshore markets are cheaper. If I was sitting with money in SA that i wanted to convert to AUD at some stage the sensible thing will probably be to, like Springbok said, buy foreign currency or Gold. I like my assets to have earning potential in it's own right though.....so will probably favour something like the Orbis International Equity Fund...this is a fund similar in approach to the Allan Gray Equity fund (here locally) but are an offshore fund. SA'ns that want exposure but don't have time to go through the Reserve bank clearance schlep can invest via asset swop in the Orbis International Equity Feeder fund (via the Allan Gray Lisp platform).

Now, unfortunately, I also must cover my behind by stating that the above is in NO MEANS ADVICE and nobody should act on this before consulting with a professional.

Andro

[Hendie]

By popular demand, I have pinned this topic for easy reference. Please remind me to update it when it gets too old.

Also if you would like to see some other graphs added, just shout.

[Stuart and Jill]

It has really gone bad, we left 10 April this year and exchange rate was at just under R4.50 a aussie dollar. No when I transferred some last money from our house it was R5.72 (and this just in a period of 5months). It really is crazy, if you have any rands in SA, best to get it out asap before you lose any more.

I know, we started the process last February - also around R4.50 to the dolllar - now sitting at around R5.70 and the government is talking about further de-valuing the rand to increase trade and exports ... lovely!

[Swerwer]

Here is a link to Fin24's Rand/AU$ watch it is normally VERY up to date (I mean within the last 15 minutes)

[Stuart and Jill]

Here is a link to Fin24's Rand/AU$ watch it is normally VERY up to date (I mean within the last 15 minutes)

Thanks for the link, that's excellent.

Note: You have to register on the site to access the graph.

[Swerwer]

Can I give anybody a quick tip how they could have made R146 000 in one year without having worked for it....

By waking up a year earlier to the idea of emigrating to Australia.... If I would have had the foresight to start with my emigration plans a year earlier, I would have made R146 000 by now by buying "shares" in Australia last year.

To me it is sad to have "lost" that amount of money by waking up lo late to smell the roses....you snoose you lose.

When you look at the Rand/AU$ graph.

On 4 April 2006 I could have bought AU$ for R4.35.

Say we were taking (R420 000 = 2x160000 + 2x50000) the full travel allowance over to Oz a year ago, we would have been able to buy AU$ 96551.72.

1 year later (today), I can only buy AU$ 71672.36 at the current exchange rate of R5.86/AU$.

That is a difference of : AU$ 24879.36

That means, buy simply emigrating 1 year later, I lose: R 145793.05

It is like getting to Australia and somebody GIVING me a brand new Hyndai Tucson FOR FREE!!!!

Aaaaaargggggg!!!!

[Springbok]

Can I give anybody a quick tip how they could have made R146 000 in one year without having worked for it....

Soos hulle sê, "there are many ways to skin a cat":

Jy kon jouself eenvoudig verskans het teen die Rand se verswakking teen die AUD deur daai R420,000 bloot in die plaaslike Allan Gray Equity Fund (AGEF) te belê het:

AGEF prys op 4 April 2006 = R119

R420,000 / R119 = 3529.412 units

AGEF prys op 4 April 2007 = R165

3529.412 units x R165 = R582,353

Dus jou wins = R582,353 - R420,000 = R162,353.

Sonder die inagneming van dividende!

So jy hoef nie noodwendig vroeër te ge-emigreer het nie.

[Swerwer]

Dankie Springbok....as ek dit geweet het, het ek al laaaaaankal my huis verkoop.

[Springbok]

Update of Aussie dollar vs. US dollar by Norway's Lars Lindgren... 1 AUD currently trading at 0.8243 USD (or A$1.21 per USD.) Lars' target is 0.90-0.95 (1.11-1.05).

Edited May 9, 2007 by Springbok

[Springbok]

The latest on the Rand / Aussie dollar... doesn't look too encouraging from a South African perspective unfortunately

And this one shows how the Rand has moved RELATIVE to the Aussie $ and the US$. The Rand is trading at the same level

against the US$ than 7 months ago, but it has depreciated by 11% against the Aussie $ over the same period!

Edited July 20, 2007 by Springbok

[Umhlanga]

Hi Springbok en slim traders en bank manne,

Ek lees op forum julle advies oor Rand Aud $. Kyk nou is die rand heeltemal in sy m__r. Ek begin nou eers proses en sal my seker nog 2 jaar neem. Ek is ;n prokerower en moet eers "conversion" deur NSW universiteit doen en dan kan ek eers aansoek begin! Wat stel jy voor. Dit word net moeiliker om jouself daar te vestig. As jy nou al jou bates verkoop(2 huise en 4x4's) kan jy seker 1slk flat en 'n fiets in "outback"kan koop?(as jy gelukkig is) Sal Rand nie versterk met wereldbeker sokker wat na SA kom nie? HEEEEEEEEEEEEELP

[Springbok]

Kyk nou is die rand heeltemal in sy m__r.

As the global credit crunch unfolds, here's your economic update for the day (sorry no short version available , but hope you enjoy the read and possibly learn something in the process… ).

Business Day (15 August 2007):

THE rand fell to a four-and-a-half-month low to the dollar today, and some traders said the rand could weaken even further as investors unload risky assets. In early trade the rand stood at R7,39 to the dollar, 0,6% weaker than its previous New York Close. It touched a low of R7,4120 earlier, a level last hit on March 21, according to Reuters data. Traders said the unit was likely to be volatile in the session. "I think we should brace ourselves for weaker levels on the currency. Everybody is so worried that they don’t want anything risky in their books, and South Africa is very risky," said Ion de Vleeschauwer, chief dealer at Rennies Bank. Global investors remained nervous as problems from the US credit market spread to the rest of the world, with major bourses falling. Emerging markets fell overnight as investors reversed their positions in high risk markets and traders said this is likely to continue in the session. "Some people said this (rand weakness) was overdone last week, but I can't see it stopping. It will get worse before it gets better," de Vleeschauwer said. Local markets are waiting for a Reserve Bank decision on interest rate tomorrow. The Reserve Bank is widely expected to raise its repo rate by 50 basis points to 10% (this will take the prime rate up to 13.5%), adding to 250 basis points in increases since June last year. "Hopefully we can concentrate on tomorrow, but I don't see where the good news is going to come from," said Jim Bryson, dealer at Rand Merchant Bank. "If the Dow (Jones) futures come under pressure, then the rand will remain under pressure, but it is still a nervous market."

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As you can see in the following videoclip, some poor fools in the USA have been burnt badly lately. Jim Cramer is however just a clown and nothing more, CNBC needs someone like him to keep the viewers "entertained". http://www.break.com/index/jim-cramer-cnbc-meltdown.html

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So what exactly has been going on in the USA? Well for starters you have the sub-prime problems in the mortgage market, i.e. loans made to people with weak credit records. Rising interest rates usually mean they cannot service their loans so the banks don’t get their money back. But the banks have packaged those loans into other financial instruments and selling them off to other banks around the world. Now the chickens are coming home to roost and that’s why a few international banks have sweaty palms. Global central banks, including Europe's central bank and the US Federal Reserve, have injected over US$150 BILLION of liquidity into markets. The move is an attempt to moderate investor losses, but we all know when you flood the world with too much money (created out of nothing!), the result is eventually a decline in the value of currency. Which is what is happening to the US dollar by the way.

And here in Australia, a mortgage company called Bluestone, on Monday put up its interest rates by as much as 0.55%. That's double the cash rate increase. Observers are speculating that the subprime problem may soon hit Australian debt markets. And yesterday another Australian business warned of company problems related to the US mortgage market. RAMS Home Loans expects mortgage volatility from America to reduce its market value this year.

As if that is not enough, the concomitant drop in global stockmarkets have caused havoc among hedge funds...amongst others those of Goldman Sachs and Bear Stearns. In June Bear Stearns paid $1.6 BILLION in emergency finance to two of its mortgage-backed securities funds, but was forced last month to obtain bankruptcy protection for the funds, telling investors that they would see little, if any, of their money returned. Things are not looking up at Goldman Sachs either...

From Online LondonTimes:

"Goldman Sachs, one of Wall Street's premier investment banks, was forced to inject $3BILLION yesterday into one of its hedge funds after it was hit by a downward spiral in global equities. The move calls into question for the first time so-called black-box trading, an increasingly prevalent investment strategy on both sides of the Atlantic, whereby hedge fund managers rely on computer models to identify and execute trades. Goldman pumped $2 billion into its $3.6 billion Global Equity Opportunities (Geo) fund, topped up with a further $1 billion from investors including Hank Greenberg, the former head of AIG, and the billionaire property entrepreneur Eli Broad. Existing investors in the fund will be able to put in more money on the same terms. The bank has not decided whether to put extra money into its $500 million North American Equity Opportunities fund (Naeo) or its flagship $7 billion Global Alpha fund, both of which have been hit by market turbulence. Geo lost 32 per cent of its value in the past few weeks, while Global Alpha is down 27 per cent this year. Other funds affected by the downturn in equities included the $29 billion Renaissance Institutional Equities fund, which fell 8.7 per cent this month, and a number of funds at New York's Tykhe Capital, which sustained losses ranging from 17 per cent to 31 per cent in the month to August 9. Highbridge Capital Management, the hedge fund manager owned by JPMorgan, saw 18 per cent wiped off the value of its $1.7 billion Highbridge Statistical Opportunities fund in the month to August 8. The funds use quantitative strategies, which are based on complex computer models with minimum human in-put. The models look for correlations between asset classes but can be thrown by unusually violent market movements. The type of quant strategy worst affected by the recent turbulence has been equity market neutral (EMN) a style of investing used by Tykhe, Renaissance and Goldman Sachs, among others. Goldman Sachs said yesterday that Geo's performance had “suffered significantly, while Naeo's had been adversely affected and Global Alpha's was disappointing. In order to reduce the level of risk posed by Geo and Naeo, both EMN funds, and Global Alpha, a multi-strategy fund, the bank has removed more than 75 per cent of their leveraging. In Geo's case, this involved paying back about $30 billion to its prime broker, Deutsche Bank. The $3 billion being injected by new investors will be used to trade the current glut of cheap equities, although it could be used to further delever the fund if the situation in the stock markets worsens.”

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The problem with these high priests of finance is, in my opinion, that they think their fancy computer models are the Holy Grail for making money for them and clearly haven’t learn the lesson from the Long Term Capital Management (LTCM) fall-out only 9 years ago!

From: Roger Lowenstein (2000). When Genius Failed. The rise and fall of Long-Term Capital Management. Randon House, p.235:

"Long-Term was in fact the quintessential fund of the late twentieth century - an experiment in harnessing the markets to the twin new disciplines of financial economics and computer programming. The belief that tomorrow's risks can be inferred from yesterday's prices and volatilities prevails at virtually every investment bank and trading desk. This was Long-Term's basic mistake, and its stunning losses betrayed the flaw at the very heart - the very brain - of modern finance. "None other than Merrill Lynch observed in its annual report for 1998, 'Merrill Lynch uses mathematical risk models to help estimate its exposure to market risk.' In a phrase that suggested some slight dawning awareness of the dangers in such models, the bank added that they 'may provide a greater sense of security than warranted; therefore, reliance on these models should be limited.' If Wall Street is to learn just one lesson from the Long-Term debacle, it should be that. The next time a Merton proposes an elegant model to manage risks and foretell odds, the next time a computer with a perfect memory of the past is said to quantify risks in the future, investors should run - and quickly - the other way."

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More commentary in The Times, August 14, 2007 - Rocket scientists end up acting like sheep:

"Goldman Sachs is playing down the rescue of its black box hedge fund Global Equity Opportunities as a minor housekeeping matter which should have the happy byproduct of delivering good investment returns in future. There’s much more to this episode than that. For Wall Street’s preeminent investment bank to inject $2 billion of its own capital into a solitary hedge fund is almost unprecedented. It is a collossal sum to be put into any geared, single-strategy hedge fund, let alone one with a track record both short and poor. The probability is that without the fresh injection of capital Geo would have folded.

"Any hedge fund that loses more than 25 per cent of its investors' money is almost certainly doomed. The institutions and wealthy individuals putting money in hedge funds have none of the loyalty or patience of small investors. At the first sign of a blow-up, they redeem. Geo's -32 per cent performance this year, which follows a disappointing -1 per cent last year, would surely have sounded the death knell for the fund. By orchestrating a rescue, Goldman has saved itself considerable reputational damage. It has seen how Bear Stearns has been mauled over its two failing sub-prime mortgage hedge funds.

"That is not to say that Goldman will take a loss on its new investment. It argues that the true value of the assets in the fund is higher than the mark-to-market price put on them by a shell-shocked market in a risk-averse funk. The cynical might wonder whether, if this is such a golden opportunity for new investors, existing investors are being rescued at too high a price. The credibility of black box or quantitative investing, meanwhile, has been seriously tarnished. Using computers to identify past trends in relative share price movements and take investment positions on the assumption those trends will continue has been proved costly.

"The black box has turned out to be less Vorsprung Durch Technik and more Heath Robinson. Too many of the rocket scientists behind these funds are using the same algorithms, producing herd-like behaviour. Many were trying to extricate themselves from similar trades at the same time last week, moving prices against them. Margin calls from nervous prime brokers exacerbated the pain. It is the leverage taken on by quant funds which has multiplied their normally very modest returns.

"Geo alone was allowed to gear up tenfold, borrowing as much as $50 billion. Geo and most of its peers have delevered drastically in the past few days. If the quant crunch of the past few days does nothing else, it should encourage their prime brokers to extend their clients less credit in future."

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To end this off with, Gibbon's "The Decline and Fall of the Roman Empire" should be mandatory reading for concerned investors today. History ALWAYS repeats itself because each generation thinks it is somehow wiser than previous generations and deludes itself that, things are different now.

Drawing parallels with the end of the Roman empire, Mr (David) Walker (comptroller general of the US) warned there were striking similarities”between America's current situation and the factors that brought down Rome, including “declining moral values and political civility at home, an over-confident and over-extended military in foreign lands and fiscal irresponsibility by the central government. More at: http://www.ft.com/cms/s/80fa0a2c-49ef-11dc...00779e2340.html

Other stories of interest for those of you whose attention I still have:

What's going on with quant hedge funds?

http://rick.bookstaber.com/2007/08/whats-g...edge-funds.html

Killer derivatives, zombie CDO’s and Basel Too?

http://us1.institutionalriskanalytics.com/...ory.asp?tag=232

The Global Economy and Financial Markets: Where Next?

http://www.rgemonitor.com/blog/economonitor/210313

Edited August 15, 2007 by Springbok

[Springbok]

please ignore, sorry... duplication of post occurred...

Edited August 15, 2007 by Springbok

[Biltongboer]

Excuse my ignorance, but has anyone answered Uhmlanga's question?

Maybe I'm too stupid to understand the answers.

I have another question: Is it possible to invest money in australia before you get there? I am also looking at a possible 2 year waiting period during which I also want to obtain financial stability. Can you invest in auz now? And if so, How?

Maybe one of you gurus have a quick and easy answer, or give me a link to someone. I have checked out the ASX breifly, but it confused me.

I am only a dumb engineer...

[Springbok]

Excuse my ignorance, but has anyone answered Uhmlanga's question?

yes i have answered him via PM... the 1st paragraph from the Business Day tells though that S.A. is perceived as a risky country and you can see what the effect of that is on the Rand. So any money you can get out of the country, do so.

I have another question: Is it possible to invest money in australia before you get there? I am also looking at a possible 2 year waiting period during which I also want to obtain financial stability. Can you invest in auz now? And if so, How?

of course! you can either go on holiday and make use of your annual travel allowance of R160,000 or your offshore investment allowance up to a maximum of R2million. For this you would need tax clearance though. For the travel allowance only your passport and flight ticket.

Maybe one of you gurus have a quick and easy answer, or give me a link to someone. I have checked out the ASX breifly, but it confused me.

the ASX is not much different from the JSE... if you like Satrix40 in S.A. then go for SFY here in Australia. SFY is the SPDR S&P/ASX 50 Fund and replicates the performance of the top 50 shares in Australia. If you want broader coverage, then opt for the STW, which replicates the top 200 shares.

I am only a dumb engineer...

hey! i am engineer too (by training at least)! and there is no such thing as a dumb engineer...

[Biltongboer]

Thanks Bokkie!

I must find out how the Namibian laws work, what the amounts are. It should be very similar though.

(Not that I have more than 2mil, anyway!)