#ZumaUnrest leaves the Rand train-wrecked

Phew, what a week…

From 0-100 was the escalation this week, as South Africa saw its worst riots in history.

Bordering on a co-ordinated attack rather than a riot, with shops, businesses (and more) saw absolute destruction as thousands upon thousands of citizens orchestrated widespread chaos.

Estimates very difficult to pinpoint at this stage, but some numbers being talked about were in the order of 42,000 businesses affected between Kwa-Zulu Natal and Gauteng.

The knock-on effects of this are going to be seen and felt for weeks and months to come.

Right now, it is food and fuel shortages.

But who knows how much more will come?

Let’s get into the full review…

Key Moments (12-16 July 2021)

So, apart from the #ZumaUnrest, these were the biggest headlines of the week:

  • US Inflation – the same worries continue, as US inflation continues to rise, affecting housing, food and more. Fed’s Yellen is beginning to get worried…
  • China Recovery – the manufacturing giant continues to emerge from it’s pandemic shutdown, and is one of the fastest growing economies

So, to get back to the Rand and local events…

The market opened around R14.20, before the tide starting turning fast.

Violence was already stepping up a notch, and things were getting worse by the hour.

By Tuesday & Wednesday, it was full blown chaos, with entire shopping centres like Shoprite, Makro, and distribution centres like Distell and SAB getting looted and completely destroyed in some cases.

By Thursday, the official death toll was at 117, with 25,000 army members deployed in order to regain control.

Community groups mobilized, essentially to take the law into their own hands as the police did little to stop this anarchy – and they stood their ground to defend their own areas, homes and businesses.

But overall, very little could be stopped due to the sheer mass of persons and scale of the riots.

What was left afterwards was the scene of a warzone…mind-blowing pictures and videos coming out of different parts of the country. Some stunning pictures and videos here, from photographer Kierran Allen.

Millions, but more likely billions, of goods have been destroyed, supply chains disrupted lost and then there is the amount of job losses, and probably permanent business closures as a result.

The numbers are going to be impossible to get accurately – but it is damage that will never be recovered from in some cases.

The stupidity of the these rioters, is that they do not realize that tomorrow they do not have a source of bread, or any chance at income to even buy that bread, as their local supermarket is now gone. They now need to take a taxi just to get to another supermarket. This all adds cost, further worsening poverty.

It is a vicious circle, and one can only wonder what the end of it is, as a lawless Communist regime takes hold of the country, breaking it down piece by piece, bit by bit. The ultimate goal is always to break EVERYTHING down to the ground, and then rebuild it – because if you just do this, then communism will work. Wrong. It will never work. And never has. But the rise of Marxism in South Africa continues, largely under the covers of the ‘plandemic’ over the last year. They have used this to advance their agenda, and the results are now evident.

It became evident with time that this attacked was orchestrated, planned with precision by Zuma-loyalists, in order to cause as much destruction as possible.

As for the Rand, it took an absolute battering as a result of this

Before you knew it, we were up just short of R14.80 to the Dollar…

…before recovering strongly at the latter half of the week!

And then in other news…

  • Over in the USA, inflation worries continue to take hold. US inflation figures released printed higher than expected at 5.4% (4.9% was expected), leading the rand to trade at its weakest levels in 3 months. Comments from the US Labour department indicated the sharp rise was due to a burst in the food and energy sector, along with used vehicle costs. Fed’s Yellen began to show some concern over this, stating that she expects to see “several more months of rapid inflation” before easing and is worrying about the housing impact.
  • However, one has to take all of these claims as to inflation with a pinch of salt as a lot of them are year on year results, and this means they are blown out of proportion. There is also Robert Pretcher’s view in his all time essential read, Conquer the Crash, that massive deflation is commonly preceded by a period of inflation. Standby for the next 12-18 months, as they are going to be extremely interesting watching this play out.
  • China has continued it’s economic recovery ever since the doldrums of the ‘pandemic’ lockdowns, and this last week the statistics continued to flow with more and more signs that things are getting back to normal. Of course, all data – including economic figures – out of China needs to be taken with an entire salt cellar, as they are not known for transparency or accuracy of reporting, but for what it is worth: they managed to grow their economy by 7.9% in the second quarter this year while the unemployment rate remained steady at 5%.
  • In other economic news, SA Retail sales data released showed growth of 15.8% (vs 12.2% expected) for the month of May, providing investors with some much needed positive news. Sadly, that number will never last following these riots. Heading over to the UK, CPI data indicated a jump in inflation to 2.5% year on year vs 2.2% expected, renewing the debate around whether to raise interest rates sooner rather than later.

In better news to end the week, we saw the Rand pull back some ground to sub R14.40/$ levels to close out for a crazy few days…

…what does the market have in store for us in the rest of July?

The Week Ahead (19-23 July 2021)

As we head into another week, there are a slew of economic events to watch, but most eyes locally will be whether we have seen the end of the #ZumaUnrest or if there is more to come…

The key point is that this is really nothing to do with Zuma being freed – and more an attack to disrupt and destroy the supply chains, distribution of basic goods and the economy as a whole.

This means there is no limit to what can happen next.

As for the economic events, here are the big ones:

  • SA – Inflation Rate, Interest Rate Decision
  • US – Jobless Claims
  • EU & UK – ECB Deposit Rate Decision, Interest Rate Decision, ECB Monetary Policy Monetary Statement

So once again, plenty to keep focus on, and with everything else going on politically, economically and socially around the globe, we have learnt to expect the unexpected!

Once again, we will continue to filter out the noise and simply follow the what the charts themselves are telling us, based on our Elliott Wave based forecasting system.

I suggest you do the same!

 

Source: Dynamic Outcomes