You're listening to Strictly Business Podcast
with Lindsay Williams.
The JSC has closed its doors for another day,
so it's time for the five o'clock shadow.
And as always on a Wednesday, I speak to Skulk Lowe,
Portfolio Manager at PSG Wealth
Old Oak in Cape Town.
Last week, you weren't here, Skulk,
because you had a PSG Wealth conference.
Did that go well?
Very well.
Yeah, no, very, very well.
Very,
very enlightening speaking to some of my
fellow colleagues and solving some
of the world's financial problems.
And yeah, that was a very, very,
very positive
get-together.
Yeah, thank you.
Very good.
Excellent.
I won't ask you what conclusions you came to because
conclusions are, in my opinion,
probably redundant the next day.
And this week's markets and the last even
24-hour markets have been...
Testament to that statement I've just made.
Oil price, inflation in the United States,
S&P 500 down 1.5%.
But I want to start in South Africa if I can.
Anglo-American platinum.
Surely this provides some sort of
opportunity somewhere.
An extraordinary day for one of our key companies.
Bad to worse.
I mean,
these platinum counts have been under
pressure.
You know...
you fall out of the you know one of the main index and
you get a minus 11 day it's so
yeah no it's
a it's a toughie it's a toughie but yeah you know to your
your original question do i think it's a
it's a it's an opportunity yes i do think it's an opportunity i
think uh
you know these these platinum counters has been under
i've been under massive massive pressure already
and Yeah,
I do think that there's some opportunity when you
get a movement, sort of a natural movement.
I mean,
this is a lot of fund
managers just pre-empting,
following an index now,
no need to have this share,
and sort of pre-empting the move.
So, yeah,
I think it's an opportunity.
Looking at the graph,
which I was earlier on with a previous interviewee,
2,250...
or something was the closing high a number of years ago.
It's currently around about 50,
51.50, let's call it, whatever it is.
No, what am I talking about?
2,250 down to 515.
Platinum is still needed, I think.
I think people are being too bearish.
And it's also caught up in the general
malaise when it comes to commodities,
oil price in particular,
which we'll talk about in a moment.
Is it a perfect storm on the downside?
And are people...
capitulating and therefore people like you
patient people will say now's the opportunity to
get in yeah
this do attract my interest and i know i mean
people say well then let's go out and buy we need
to know that there's there's a few things happening in the eye we've
had the
the the whole ev ev space uh you
know on pgms um we've got a
global uh economic
slowdown um not a
real session yet.
And it's just sort of bad news upon
bad news upon bad news for
the PGM counters.
But when I look at a share
price, I mean, you just mentioned another 11% down today.
That brings the year-to-date performance of this company
over 50%.
When something loses half of its value, I mean, you looked at the highs.
I just looked at January.
January.
this company lost pretty much another half of
its value.
So then something do attract me.
And
I think you might need to be patient,
might need to not go in, you know, all in.
These encounters are what we call cyclicals.
Yeah, and for good reason.
I mean,
something that can lose 50% of its value in a
few months'time.
and then just gain it.
That is extremely cyclical and extremely volatile.
But yeah,
I do think it is something that's always going to be needed.
I don't think the EV space is going to be slap bang, there we go,
every one of us are going to be driving
electric vehicles.
And clearly,
the hybrid model is something that's going to be
tested for quite some time,
which is good for platinum or palladium
BGMs.
Quite right too.
So yeah, it's worth watching,
but after a little bit of considered analysis,
I would say.
I think that's what you're saying here.
Have a look at it,
but don't get too carried away until the
whole Anglo-American unbundling process
has been done, don't you think?
I mean, that's obviously a cloud in the background and, you know,
corporate activity.
That's also a factor, Skark.
Yeah, yeah, it's open.
I mean, it is.
It's an overnight of shares.
You know, suddenly, you know,
Anglo-American shareholders will have, you know, these
Anglo-American platinum shares.
And for those,
let's call it large investors that might have
Impala Platinum, Northern, you know, Sibania,
one of those counters, they might look at this and say, well,
let's consolidate, you know, sell their platinum,
buy some more, some of the other companies.
Be there as it may.
I mean, there's a few things.
I mean, you just said it.
You started off.
It's the perfect storm.
Do I think it's a bad
company, Amplats?
No, I think it's one of the best
PGM counters in the world.
It's one of the largest
PGM counters or companies in the
world, mines in the world.
So, yeah,
I think this do open up some opportunities,
but it will be first of all for.
How do they always say it's not for widows and orphans?
Also, Sibanyu Stillwater is not for widows and orphans.
I was just looking at a share price at
2022, I think,
under the stewardship of its still CEO,
Neil Froneman.
75 rand a share.
It's now down to today.
What is that, Sibanyu Stillwater?
Five and a half percent down to say 14 rand
a share, from 75-odd to 14.
horrendous destruction of
wealth.
Yeah, it's sad.
It's sad.
I think, yeah,
what else to say?
I mean, you mentioned the value destruction.
It's definitely value destruction.
I think there's a few shareholders that would like to go back
to early 2022 now
and just take those profits
where they could run about the 60,
65-rand levels.
You talk a lot about property and you've made no
secret of the fact that you are long of property stocks on the
JSC.
Growth Point,
you must be interested in those results because they still
warn about high interest rates, Gael.
What did you make of these results and the commentary
associated with those results?
Well, this is the fact that there's been extremely
kind to us.
I mean, this is something, I mean,
you and I have had this conversation.
You've done well, let's put it this way.
Yeah, yeah, but it's something for good reason.
And I don't.
think that the whole all all you know
trade is is overall it's called the reason why
i am overweight in in property i mean
i yesterday i went and uh i
updated that uh stats essay sheet now for
those listeners let's let's listen to this for the first time this
explanation stats
as they produce on a monthly basis they will
produce different stats on on
residential and non-residential
properties yeah
The one that interests me is the non-residential one,
the office space,
the shopping centers,
industrial, all the non-residential properties.
And what they say,
they say there's a stat that they give that says
non-residential potential properties completed
by the period.
Now, what does that mean?
It means you drop your plans,
you go and build that specific
property.
There's somebody comes.
comes along and they sign that property off they
send it to the municipality and the municipality said that property
is completed now when you look at
the status this text is phenomenal it's really so
interesting looking at the stats when you look at the stats
you will see early
2000s you know there was a lot of uncertainty right south
africa we had a
1994 the
the whole um madiba magic
and and then we had a change of god
And people were also a little bit worried.
We also had extreme worries globally
on recessions.
We had worries on wars,
geopolitical unrest.
Remember, we had 9-11 and after that,
it was Afghanistan war and then
Iraq war.
There was uncertainty.
And people during that,
I suppose,
we had high interest rates and they just did not
develop.
They didn't develop new properties.
And people were looking at this and said, well,
yeah, for good reason.
But sooner or later,
this is going to pass as well.
And then what we're going to have,
we're going to sit with a massive
demand and not enough stock.
There's not going to be enough supply.
So you and I had this conversation, I think, a few months,
a year ago.
And I said, look at this.
People are going back to offices.
They're going back to shopping centers.
This work in your pajamas is gone.
Something all.
past and yet were they
not completing enough offices,
they're not completing enough shopping centers,
yet the demand is increasing.
Well, surprise, surprise, now we're starting to see it.
Now we're seeing, I mean, last night...
I was part of a
conversation with the CEO of ATT&CK.
They brought out their results yesterday,
and they exactly had the same story.
They bought some properties,
and they now clearly can see the demand
increasing at a speed of
light.
What are they doing, though, Scott?
Sorry to interrupt.
Are they taking old buildings that haven't been occupied?
I mean, for example,
the old Cecil building in Rosebank springs to
mind years and years ago when they relocated.
to Santon, I think it was.
Are they taking buildings that used to be offices
and up until now have not
been offices and saying, rather than build a new one,
we're going to completely revamp this one?
How do they go about adjusting to the new
we're going back to work mode?
That's the problem, Lindsay.
I mean, they'll need to.
I mean,
I'm not going to mention the company's name because
I was sort of a...
No, no,
it's just a conversation we had with some
of these, let's call it decision makers.
Oh, I see.
It's a big,
big listed company.
And they, during, let's call it two years ago,
sort of post-COVID,
they literally moved all their
smaller branches,
moved it into these larger clusters.
And they closed these offices because they said, well, people,
they'll…
You will work on a Wednesday and on a Friday and
your mates next to you,
you will work on a Monday.
And this is how we're going to do it.
Now, everybody's going back to the office and there's just not enough office space.
They're frantically looking around and say, well,
we need office space.
But as you mentioned,
the only thing that's currently available is older offices,
older buildings.
You know, some of these companies that's held by
GrowthPoint, High Props,
their tax, these companies.
Suddenly,
the net asset value of these properties are
increasing again,
and the yields as well.
So do I think
the whole property investment play
is over in terms of South Africa?
No, not at all.
I still think the yields are attractive,
and our stock is very, very depleted.
Quite right, too.
And after the inflation data from the United States,
which peaked recently,
As Donald Trump keeps on reminding us,
he doesn't remind us of the number because he's not
clever enough to remember the number,
but it was 9.1% CPI in the United States
of America.
It's fallen today on the CPI announcement from the
United States of America, the world's biggest economy,
down to 2.5% coming close to
target range.
And that must be good for global
capital markets worldwide, including South Africa.
So very good news there, Skulk.
Yeah.
yeah no no that's not not getting close that is bang on
target i mean we know that that that pal said
he wants to see um inflation back to
2.5 percent weight and it was
interesting i i out this morning at this conversation with my
team and i said because there's a nice tool the cm
cme fed tool where
they look at the probabilities of rate cuts
and they'll for instance look at the different meetings and this
in terms of this one is now the 18th of september
then they will look at different
probabilities on will we see a
cut, will we see an unchange,
and if we see a cut,
what's the probability of a quarter percentage,
what's the probability of half a percentage?
But this morning, as we came in,
it stood roundabout.
There was a bit of an improvement towards the
quarter of a percent,
but it stayed more or less the
70% probability for a quarter of a percent
and 30% probability.
for a half a percent.
And for any
non-mathematicians out there,
that's pretty much 100% probability for a
rate cut next week, Wednesday.
This afternoon, I made the comment and said, well,
it'll be interesting, although
I can pretty much say with 100% probability from my
personal opinion that we'll see a quarter of a percent.
I think if the inflation rate
comes out at...
2.5 percent because remember it was
expected 2.6 percent if it comes out
2.5 percent watch how the
probability on on a half a percentage suddenly
just skyrockets and it just didn't it it
it totally different scenario happened it went
uh that the quarter percent increased
again and now 83 probability for a
quarter percent hike and um
17 on on a half percent but
to me they're the most surprising
that part was that the market's
reaction of the inflation came out.
Man, oh man,
they're taking an almighty club today.
I know, we've got the S&P down,
the S&P futures, down one and a half percent, well,
down one and a third percent, actually, it's just adjusted itself.
But I don't quite understand that.
And looking at the US 10-year bond, which we'll come to in a moment,
which is totally now,
3.62%.
Yeah, but the stock market not taking it well.
Maybe the stock market isn't taking it well because of the
debate last night.
And if Kamala Harris gets in.
Which I really hope, from a personal point of view,
and this is not a PSG Wealth point of view,
I have to tell you, if she gets in,
I'll be very happy.
But the stock market won't be.
Maybe they're anticipating a victory in two
months'time and are positioning themselves accordingly,
Skark.
I don't know.
Did you watch the debate?
I've watched it twice.
I had clips.
I must say, I just did not get myself.
I was awake once or twice around
about 3 o'clock.
Yeah,
I just did not get myself to listen to Trump
for the next few hours of that time in the morning.
But I did look at a few of the highlights.
Yes.
I don't know, Lindsay.
We can have a massive debate on which one will be best for
South Africa, Kamala Harris or
Trump. We know Trump won't necessarily be
good for emerging markets.
So I don't know.
It's sort of the lesser of two evils.
B, you've got a good point.
I think that could be the
But I think the most likely scenario
for today's movement, it's just,
and yesterday on X, that's the old Twitter,
I actually placed a graph,
which I looked at the last few times where
interest rates were
cut,
where the declining
phase started.
And I just mentioned, I didn't make a...
I didn't make a prediction.
I didn't say this is going to happen.
All I said,
if you exclude COVID,
which was a sort of a very, very unique situation,
if you exclude
COVID, you're sitting with
2001 and
2007.
When they actually stopped the hiking phase for that,
let's call it a few months, we had one of the best...
bull phase because everyone was expecting the
next step to be interest rate being you know a a
cut and that should be good for
for you know equities so there
was sort of this was it as the rumor go by and rumor sell on
fact was the anticipation of the rate cuts
were way better than the actual rate cuts because when
you look at the rate cuts itself um
and
you look at the after effect you would see
that with
2001,
where the rate cut actually started,
market dropped 32%.
With the world financial crisis,
where the rate cut actually started,
the S&P 500 dropped 41%.
Yeah, but there was extraneous factors there.
I mean,
people were still digesting the global financial
crisis,
and it took a while for the cheaper money phase
to kick in.
And that is my analysis, very simple as it is.
But this time, Skunk,
it could be a shallow recession,
as indicated by the oil price.
It could be a short, sharp recession,
as indicated by Chinese and American data.
But the fact is that interest rates,
medium term, on the downside,
is good for equity markets.
Undoubtedly.
So this is the Skunk point of view.
I mean, I'm just, I put the graph out.
So declining interest rates will be good.
And I do think that the way Powell
handled this, I mean,
I often said that they, you know,
inflation,
interest rate won't really make a massive
effect.
We can debate that.
But I think the fact that they are
really, really conservative in the way they're doing,
they are waiting for this 2.5%.
Well, we're there now.
They are going to most probably do a quarter of a
percentage, do another quarter of a percentage,
and just get the market to settle.
And like you said,
what you've actually told us is a soft
landing.
We will most probably then see a soft landing.
I think so.
I mean, the China news is baked in already.
American jobs and
growth sluggishness,
not so much growth but jobs,
it's part of the cycle.
But it's not going to be.
Dramatic.
Maybe a quick one on Supergroup.
I don't know if you've watched that one, but it's numbers.
A quick minute on that one, if you've got it.
If not, then we'll pass on to the markets.
Yeah, Supergroup,
I'd add a quick glance on Supergroup.
You know, when I look at this, you know,
they've grown, they've revenue,
that didn't look too bad.
When we look at, you know, the earnings.
earnings decrease by 97
percent and there goes the share price share
price down down seven percent
um so yeah not not not a not a
good i mean when we look at the the um you
know the positives
out there they actually said um that
the the weakening rant um you know
that helped them well we know that's not going to be the case now
because we see the rant actually improving um
Yeah, so I think in general,
not the best set of results in terms of how they manage the
company over the time.
But as I mentioned, not a company that I'm really following.
Okay, good.
Well said.
Right, now let's have a look at the markets.
Dollar Rand, 1793.
British pound against the Rand is 2335.
The Euro Rand is 1974.
Euro dollar, 11010.
And the British pound against the US dollar is 130,
almost on the nose.
Gold price, that's okay.
Back above 2,500,
which is gratifying because it wasn't so a couple of days ago.
2,512,
which has barely changed on the day.
Platinum,
9.59,
which is up 19.
And Palladium up 39 to
9.99.
Call the police in England.
And that's a 4% move to the upside.
When it comes to other commodities,
and I've been fascinated by it all over the
last 10 days,
it's gone from 90 to below 70 this year.
Which is a huge move.
So I think at the current level for Brent
crude of $69.45,
we are technically in a bear crude oil
market.
It's up slightly today by 0.4%,
but it's still $69.45 for
Brent crude.
And West Texas crude
$66.27,
up 0.8% today,
but a horrible weekly and monthly and
yearly performance.
Natural gas is up a little bit.
Copper is up a little bit,
but nothing else to speak of.
So look at the South African 10-year.
Don't forget we've got a Reserve Bank meeting next week,
9-17.
The US
10-year, after that inflation data of
2.5%,
the CPI 3.63%,
which is a pretty good move to the downside for
the yield.
S&P 500 futures.
We're recovering a bit actually.
They were down over 1.5%,
down 1.2% at the moment at
5,438.
And Bitcoin is
56,100 and a bit,
which is down 1.3%.
Market moves today, Scalp.
You show me yours, I'll show you mine.
Do I go first?
I told you, you show me yours first and then I'll...
Well, we had
M-Plats, which we've already discussed.
A few companies did stand out in terms of
well, when I say a few companies,
a massive,
massive list in terms of ex-debt.
So, you know,
ItalTal might probably stand out as
a drop, but they had a dividend and a special dividend.
Super Group, we've already discussed.
Coronation,
they also had a
ex-div so you know sabania still
watered no ex-div so yeah and
apps are again negative you know five percent ex-div story
so today would most people be one of those
days if you see a massive drop in the share price you would most
probably need to go and look at the dividends
yeah so the ones that have fallen
on merit or rather demerit and sabania down
5.3 percent anglo-american platinum down
11.1 percent corporate activity of course involved
there you
but people just don't like it and i love it when people don't like
things because that means that i start to get interested
and like it 507
rand per share quite
extraordinary it was a buy i think it
is this is not a recommendation from either skunk at
psg wealth or lindsey williams from wherever he is no it's
it's not i don't own it either but it
really looks in my virtual portfolio
as though i should be buying it on the
upside Property,
Hyprop up 3.5%, Kumbayanoor up 2.9%,
Premier up 2.6%, Mass,
another property company, up 1.5%,
and Vukile up 1.4% as well.
Closing indices, please, Skull, and value traded,
of course.
So just for those
wondering what the whole Hyprop story is,
they came out with a trading statement
today.
Yeah.
Clearly had the market, you know,
quite...
quite excited um they they
mentioned the dividend per share you know for approximately
two rand 80 um and yeah like
mentioned that that definitely had the market quite quite
excited when we look at the jse today jse
closed 80 828 points
that is down one percent
top 40 close 73
223 points also down 1.1 percent
resources they um at
a very very bad day 1.2 down but not the worst
the worst came from the financial sector safe financial
sector were down 1.6 percent while the industrial
sector were down 41 basis point and this is sort of a
trend that we've been
been getting used to because as
mentioned in end of end of last month the
the is a property index where we're up over one year,
over 38% year-to-date,
close to 24% up.
And since then,
we've seen that the equity market or locals,
as well as the offshore equity market,
has given back
quite a bit of performance that they made in
August. Yet, the property sector,
just going from strength to strength.
And today was no different.
Today, they closed up 30%.
39 basis points in the market that were really looking
bad.
When we look at the value traded, value traded, not too bad,
23 billion for today.
Very good.
Yeah, the highest trading day for the past week.
You can interpret that in a couple of ways.
But yeah, 23 billion, pretty good.
Next week, we'll look at the JSC Limited, what its share price is doing,
which is also a fascinating subject
in its own right.
Skulk, thank you very much for your time this evening.
Skulk Lowe is a portfolio manager at...
PSG Wealth Old Oak in Cape Town and that was the
five o'clock shadow.
The views and opinions expressed in these podcasts are those of
Lindsay Williams and various contributors and
do not reflect the policy position or opinion
of any other agency, organisation,
employer or company associated with
StrictlyBusinessPodcast.com.
Assumptions made on the analyses are not
reflective of the position of any other entity other
than the speaker or the author.
And since we are critically thinking human beings,
these views are always subject to change,
revision and rethinking at any time.
Please do not hold us to them in perpetuity.