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 Skullclaw,
Portfolio Manager, PSG Wealth,
Old Oak in Cape
Town. We're waiting for things, Skullclaw.
We're waiting for central bankers.
Very,
very busy central bank activity this week
and next week.
So next week,
we'll know the extent of how cheap money...
has become and therefore the reaction of the stock market.
Are they expecting it, stock markets that is?
Are they surprised because the Fed goes 50 instead of
25 basis points down?
What is your take on this matter?
Good evening, Lindsay.
Man, what a day to have this podcast because
tonight's podcast is pretty
much going to be speculating.
You and I,
we're going to be speculating what Powell is going to
say in, well, exactly three hours'time.
So...
as we we'll be recording this podcast it's five o'clock
south african time eight o'clock you need to set
those alarms because then we're going to have the
announcement what's the fed going to do we know by now
it's uh you know when we look at the the fed
cme2
you know probability you know they're looking at
100 probability for rate cut so let's not
discuss that it's it's going to be either 25
percent oh well but 0.25 percent or
0.5 percent and it's
interesting when you look at the same tool,
which I found really interesting,
it's leaning towards the 50 basis
points.
You mean the FRAs and
other derivative instruments are indicating that there's a
slightly better than 50% chance it'll be 50 basis
points?
Is that what you're saying?
Yeah, we're talking about 59% probability
that we're going to see a 50 basis points cut and
41% probability for 0.25.
Yeah.
Now, I'll put it out there.
I think the Fed's going to do 0.25.
Let's just spoil the end there.
You and I both, Scout.
And the reason is, you'll give me your reason now, but before I forget it,
because I often forget things,
it's not in Jerome Powell's nature to shock the
markets.
He's raised rates 11 times over the last, what,
four years or so?
Is it four years since they started raising?
Anyway, and now he's going to start the cutting cycle,
and he'll do it in manageable.
bite-sized increments.
Because if he does 50, there'll be people like you,
the sick optimists that say, that's fantastic.
Let's pile into stocks.
And there'll be other people, the pessimists like me that say,
what does he know that we don't?
Why is he cutting 50 basis points?
So I know where you stand, but I agree with you.
25 is an almost
precise certainty.
Yeah.
Everything true to what you just mentioned.
Up to the last point.
If he cuts 50 basis points tonight, I will run for the woods.
I would definitely be calling tops on
this
S&P 500 and most probably global market.
Yeah.
Because that will tell me that what
does
Jerome Powell know that we don't know yet.
Exactly what I said.
Yes, you're quite right.
Don't surprise people.
They hate surprises.
Yeah, they hate it.
Are you one of those people that when you have a birthday…
and someone delivers something, you know,
you walk in and the lights are off and they
turn the lights on and it's a prize.
Are you one of those people that enjoys that or are you like me?
I would turn around and go straight back to work.
No, don't jump out of the cake.
I'm not that person.
You won't give me a great time.
No.
And, you know,
Jerome Powell is not going to be jumping out of the cake tonight.
I don't think he's going to be.
I think he's going to be cutting 25 points despite what.
but currently the probabilities are looking at.
And I think that's going to be a
great outcome for markets
because markets are going to look at this and say, well,
we know now this is going to be the first step
towards, like you just mentioned, after a very,
very long hiking cycle,
we're now going to start seeing the declining cycle
for the first time.
And when you do it in these increments, Lindsay,
I mean...
When you look at the
US economic data that's recently
been coming out, no, it's not good.
But nothing are pointing towards a
hard landing yet.
So why should
Jerome Powell be dropping
rates?
Exactly.
You've got to be calm about these things.
You've got to keep
people in their
comfort zone.
And it's interesting you say about you would run for the hills if it were
50 basis points, because if you look at the graphs, I mean,
it's only a small double top.
I mean,
there's certain technical formations that I like,
you know, head and shoulders, double tops, double bottoms,
triple tops, triple bottoms, that sort of thing.
The S&P got to
5,725,
or the futures, that is, came down quite sharply.
Now back very close to there again.
And that would coincide if they did surprise the
market.
with a double top on the S&P, and I don't like that.
i don't want that definitely no i
i don't like that um and remember
i think we need to look at the psychology as well so so
firstly this this will be the the final time
where they're going to be be be be having
this this fit meeting until we see the uh
the elections so what we'll
see and after the elections we'll still have
another two fit meetings what that mean
is that Jerome Powell can actually say, well,
we'll drop it a quarter now.
We'll drop it again a quarter of a percentage on the
7th of November.
And we'll give it another
0.25% on the
18th of December.
But if things really turned out
to go pear-shaped,
if things really turned out,
economic data comes through and it's really not looking good,
at least they can go on the 18th of December.
before they go to 2025 and say, well,
let's drop it to 0.5 now.
And now you're actually going to the year with a bit of optimism.
So, well, look,
they've dropped interest rates anything between 0.75 and a
percentage in
2024.
Let's go into 2025 and see some
economic recovery.
I think it's going to be 0.25%.
And I think, personally,
I think this is going to have a positive effect.
on markets.
Do we see a 0.5?
I think as currently the probabilities are
pointing towards,
I think we will see a negative figure in
markets and I do think we will see
a jump in something like gold.
Gold will definitely have a massive pop tonight if
we do see a 0.5%.
We'll see the dollar,
we'll see the dollar drop quite a
bit and we'll see something like gold.
you know pop quite a bit and gold's positioning itself for the
the pop that you you're hoping for and that you've described because
did it touch 2600 per ounce in the
in the last week's scalp or since we've spoken i
think it got something like 25 90 or something but
here we are at 25 72 what
a performance this is yeah i did just shove juice
out every time just half two thousand uh you know six hundred dollars
but i mean yeah make no mistake
i think i think it will be interesting tonight
I think you're 100% right.
I think the move in the dollar
this week, I'm going to say this week,
is basically the movements since the,
let's call it around about the 12th of September.
The move that we've seen is already anticipating the
rate cut.
Do we see a 0.5% drop?
Then I think we're going to surpass
$2,600
on gold.
Very quickly as well, yeah.
That'll be a safe haven buy as well as a weak dollar buy.
So it'll get the double whammy
to the upside, that is.
So that'll be good.
JSC has halved its losses in the last hour or so.
But I'm going to give you a couple of other prices now.
And start with that dollar round, which is 17.56.
British pound against the round is 23.19.
Euro round is 19.52.
Euro dollar, 1.11.20.
And British pound against the US dollar,
1.32.05.
The aforementioned gold price.
25.71 up six and a half bucks
platinum yeah it's not doing so well down eight dollars to
9.75 and palladium holding above a
thousand but still on the day down 38 an
ounce or 3.4 percent that's quite chunky
10.67 for that one and
if we look at the other ones brent crude oil has
fascinated me in the last two weeks or so
it was mired below 70 dollars a
barrel for brent crude you
Now close to $74 a barrel,
$73.80.
So I think the oil traders,
having thought that it was going to be falling off a cliff,
have suddenly said, well,
if the dollar's coming down and economic activity is
stimulated by the interest rate falls,
cuts.
uh they're buying it again uh why is
that important lindsay why is that important i think to
our conversation on on on the interest rate i think
you know uh paul jerome paul and his team
will look at this and so come on guys i mean
we
we know that we look you know historically we look one year
back we look at um in inflation we did
see it softening but you know suddenly
recently you know the the the brent world price the
west exit intermediary went down you know, the,
let's call it $70 per barrel mark,
now suddenly just popped a quick,
just a very, very quick
10% levels higher.
Maybe just hold off on that, as I mentioned,
hold off on that 0.5%,
do a 0.25%.
Let's just get ahead of this
inflation pressure that we've seen over the last two,
three years.
Copper price as well has done well.
It was threatening to have a look at $4 per pound.
That's the New York COMEX price.
It's currently 4.23 and a half.
It's up half a percent on the day, but that's done well.
So all commodities seeing a little bit of resurgence.
What's the resources index been doing since we last spoke?
Skalk, I've been remiss in not looking at it.
I would imagine,
despite the stability of the round,
that it's doing rather well compared to earlier
this year.
Yeah, no, no, definitely.
I mean, especially the white metals,
white precious metals.
You know that I'm...
I'm a big gold lover and silver has sort
of been struggling around with gold.
But the PGM has been
struggling a lot.
I mean, we know that.
But the past week,
and when I say past week,
I would say the latter part of,
let's go since we last spoke,
Thursday, Friday, Monday,
we've seen a bit of a,
let's call it a recovery on all resource
prices.
and specifically, you know,
some of these resource counters.
You and I had a massive talk about
last week, this time around, we were talking about Amplas,
where the whole Anglo-American
announcement came, and I think the share price was down 11%.
Didn't we say this is a capitulation and that's probably the
bottom of Amplas?
Didn't we say that?
Well, that's exactly what we said.
We actually said, you know, back then we said, well,
would this be a buying opportunity?
And you and I, both of us.
we were looking and and just you know on that point you know
exactly the last time this time last time
around last week was
500 and just shy of 507 rand
with it with the share price close today and
after a bit of a softer day i'm going to say it's
off today it dropped 1.7
even after the drop of 1.7 today
it closed at just shy of the you know
568
you know ran so from 515 to 570
we'll call it more than 10 which is a really big movie scalp gets
your postal address or i've got your email address
and i'll send you my job application form
in the next 24 hours i'll just be a consultant you
don't want me hanging around every
day of the week let's look at some other markets now s p
5000 call it 5 700 shall
we and that's not going to do anything until 8 15 south
african time what else we got us 10 year
is trying to verify that I'm a human being,
which is tough, but I am.
And it's 3.69%.
The South African 10-year bond awaiting the South
African Reserve Bank's decision tomorrow
at 3 o'clock, 9.02%.
And Bitcoin.
I saw that Ray Dalio came out with some very
outlandish statements the other day.
The chap from
Blackwater, the world's biggest hedge fund.
He said, they asked him questions at the end,
do you want gold or Bitcoin?
He said, gold.
Do you want renminbi or the dollar?
He says the dollar.
And he just went through all these different things.
He's a bit loopy, but I quite like him.
Anyway, Bitcoin, 59,500,
let's call it.
What stocks have caught your eye today, Skulk?
Let's first just step one step back.
I mean,
I think most of the people that listen to this podcast,
we can assume will be South African.
And I think most of them will have the big question.
So you want to take a stab?
What do you think?
What do you think Kanyar will do tomorrow?
Do you think he'll drop it, you know,
also a quarter of a percentage,
just follow whatever the Fed does
tonight?
Or do you think he'll be, you know, ballsy?
No, he won't be bold.
He's very conservative.
And that's why the South African Reserve Bank is in such good
hands.
He's not all over the place.
He's not like the Turkish finance minister,
and they change that every three months or something,
or reserve bank governor, whatever they are over there.
But anyway, I think he'll do 25 basis points.
And don't forget, we have the South African inflation rate out today,
CPI inflation, 4.4%,
just below the halfway mark of the reserve bank
target.
So I'm going to say 25 the Fed,
25 the reserve bank.
What do you think?
I think 25 on the Fed,
so we've got that covered.
I want to be bucking the trend.
I want to be bucking the trend on this one because
unlike the US
economy,
the African economy is not looking out
there.
You know,
we're at the 0.4% GDP growth on the
second quarter, which, you know, with no...
Load shedding over that quarter is still
only bringing us,
call it 1.1% growth for the year,
which is not even close
to getting to the 3, 3.5% where we should be.
Add into the mix that we're sitting with an
unemployment rate which is the highest ever.
I mean,
more than a third of the country is sitting
without jobs.
And when you look at the youth,
youth unemployment is currently 61%.
Yeah, 60, 61%.
I mean,
then just what you do is,
and for the listeners out there, have a little fun time.
Just go and pull the
inflation graph.
I think it's tradingeconomics.co.za.
Just go pull the inflation graph
and go add the repo rate on
exactly the same graph,
and then you'll see how that gap has
opened up recently.
So I would say...
I do agree with you.
I think
Governor Cajonelo is maybe on the
more conservative side.
But somewhere along the line,
you need to look at your economy and say, remember,
we've got another two months to go.
You know,
if we see this economy
weakening even further over the next two months,
what are you going to do then?
Are you going to try and raise
rates?
Because then, you know, a quarter of a half percent might not.
you know be sufficient um are you going to
do a one percenter then no they won't be able to do
one percenter without really hurting the ram
so yeah it's coming up a higher base of course i'm
forgetting that the south african repo rate
is
higher than the the fed funds rate that we're talking
about so 25 basis points is it's really neither here
nor there so maybe you're right on the 50 basis points because if you
take 50 and divide it into the current rate in south
africa it's not as big as percentage as it would be
be in the states which is what 525 to five
and a half percent you see what i'm saying here the base
effect the high base effect uh exactly
exactly so so so i i do think
that i think that the the the the
surprise for the week is most probably not going to be that the
fed because i do think i
think they're going to do 20 25 basis points i think
the surprise for the week is
going to be you know coming out and
saying well I think we're going to do 0.5%.
Let's drop interest rates by 0.5%.
We know we're going to go into a declining cycle.
We are a little bit higher.
We also know that our interest rates, you know,
compared to some of these other emerging markets,
are also on the higher side.
So let's drop it by 0.5% because we
need to start kickstarting our economy.
We've got a new government of national unity.
Let's try and really see if we can't
kickstart things.
I think it's going to be an interesting one, maybe an outlier,
but I think that's going to be a fun one to look at tomorrow,
3 o'clock tomorrow afternoon.
And we shall dissect that decision next
Wednesday, Scott.
Meanwhile, this Wednesday, on the upside,
I've got Alphamin up
3.2%, Outsurance up 2.6%,
Pick and Pay up 2.4%, AVI up 2%,
and SPAR just over 1.5% higher on the
downside.
And you can tell me which of these are...
ex-divs nippy rock castle down four percent
tungela down four percent harmony down
3.7 south 32 or 3.2 percent
loser anglo gold ashanti down
3.1 percent what else have you got
uh for today now it was a quiet day i
think this is one of the days where where i
would
would say that there was no sense it
was just a very very very quiet
day so no nothing Nothing really stood out.
I think it's going to be a macro day.
As mentioned, it's just going to be pretty much all
inflation driven.
I want to see the XTIF.
There was quite a few XTIFs.
None of them that you really mentioned.
No, no.
But yeah, a few big ones.
We had Richemont today that was XTIF.
We had Woolworths, Bitcorp,
ShopRite.
some of these companies but none of the companies losers that you really
really mentioned today okay jolly good to set your alarm
skulk for the fed and yeah i hope
that uh i hope you're right on on both of
those things i think that would be entirely appropriate now i think about
it that the south african reserve bank cuts tomorrow
afternoon by 50 basis points skulk low
is a portfolio manager at psg wealth old oak
in cape town and that was the five o'clock shadow
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