Eskom’s Chairman Moosa has reportedly complained that since it is the country’s high income earners who use the most electrical power then they are the ones to blame for the present shortage. I beg your pardon? So now it is the consumers who are responsible for the supply being inadequate? That’s a high-grade piece of idiocy! Whatever he gets paid to sit in that chair it is far too much. Rather he go now please.
In contrast, I watched an interview with the boss man at Shell who explained that he and his industry actually had no explanation for the current soaring price of oil. While demand was certainly growing, there are no observable disruptions in the supply chain. I have not yet seen anyone else raise my own point which is that the oil suppliers have discovered that the volume sold is apparently unrelated to the price and so therefore why worry opening the taps wider -- assuming of course that they can. Furthermore, a dollar no longer buys as much as it used to, so getting a few more of them for every barrel you produced, comes in mighty handy. I forecast that the move towards pricing commodities in currencies other than US dollars will gain momentum.
Also gaining momentum is the level of debt worldwide as folk make the choice between paying the bank and putting food on the table. So far, no local lender has yet reached the point where they have had to reveal that their lending books are in as bad a shape as their share prices suggest that investors believe they are. PE ratios of 7 and less are starting to appear against some big names in the sector and bargain hunters are getting itchy fingers. The assumption is that there can surely be no local bank that could report halved earnings or reduced dividends. I don’t know, but I am content to wait and see.
It comes as no surprise to me that some of the ratings agencies overseas are starting to mumble about their valuation models being broken when they were assigning AAA status to instruments which were merely recycled toxic waste. The fascination of the markets is that not only is the impossible likely but also that so many people will actually assume large positions against that fact.
For example, the desperately worrying and utterly sad outbreaks of unrest in this country that are being explained away by copious use of the X-word, has had rather little effect on the currency. On the week, the UK pound and the US dollar are just 65 and 30 SA cents more expensive respectively but the rand is still way stronger than most other times this year. Nevertheless, the continuing surge in global commodity prices enabled the All Share index to be pushed to a record high by the resources shares. There is no evidence of significant foreign investor flight.
Governor Mboweni has told everyone that he is definitely going to do what he can to keep the money down here on the southern tip by cranking up interest rates whenever he gets the chance. Life for inflation marksmen armed with just a single weapon is very simple. In anticipation of this promised tug on the lever, interest rates on everything from call to the long bond have been ratcheting upwards already.
I was surprised by the headlines that suggested that the situation in the national soccer side had reached the point where one of the world’s masters of the guitar riff had been appointed coach. Investigation revealed that the fellow who has accepted the poisoned chalice is one Joel Santana and that Carlos was the previous incumbent’s name. Joel wisely opened proceedings by “not promising to stay”, until presumably of course he had banked a few of those rather tasty pay checks.
James Greener
23rd May 2008
