Once again, I can report that the All Share index set a new high during the week. One year and 40% ago I was doing the same and making a fool of myself in print by wondering if the end was nigh. So there’s no harm in doing it again this year.
Among the signals which I interpret as ominous is that the dividend yield of the index that tracks just the financial and industrial shares (i.e. no resource or mining shares) has fallen below 2.5%pa. In the past, this has been a critical level that seems to lure the sellers from their lairs. Exacerbating this development is the rise of money market interest rates. 1 year deposits of wholesale money should now be able to get better than 9.8%. Remember that this should jump up by almost half a percent when Governor Mboweni announces the seemingly inevitable 50 bp rate hike in a month’s time.
The Governor’s opposite number in Washington this week surprised most people by admitting that the US is facing some slightly worrying deficits that could grow larger unless something is done. Just who is going to tell the US consumer and voter that tax hikes and spending cuts are the remedy was not mentioned. So far, the markets’ reaction has been benign. The US dollar and the pound sterling have been the best performing of the major currencies this year so far. I am puzzled by the relative weakness of the Swiss franc. Can it be that the paucity of snow at the ski-resorts is harming tourism so much?
I haven’t been following the developments down at Coega near Port Elizabeth (the place where the Proteas are getting hammered this morning) as closely as the spending of my tax money deserves. But I seem to remember that one of the industries we are begging to come here and open for business on the salt flats of the Eastern Cape is an aluminium smelter plant. Now among the many stories in the press today about yesterday’s wide-spread power blackouts is that Eskom have been chatting to the existing smelters about their power usage. Apparently, the conversations have touched on the need for them to turn down the wick a tad. This will not have gone unnoticed by those who once might have considered coming to shovel bauxite in Algoa bay. Given that many of the world cup matches are scheduled to be played under lights it may avoid acute embarrassment if we were rather to discourage large electricity users from coming here just at the moment.
This energy debacle provides an appropriate background for the notice this week published by the national department of labour. They are seeking technical experts to develop a Business Case for the National Skills Fund. There is an element of cart preceding horse here. Since 1999, the ever-thoughtful state has been collecting levies from us but only now appears to be getting around to putting the money to uses other than paying the salaries of those who placed the notice. Early candidates for an injection of technical skills must surely be the planners at Eskom who have been caught so unprepared
I must now go home and switch off the water heater and the TV. A sing-song round the braai fire before a cold shower and then bed by candlelight, awaits.
James Greener
19th January 2007
