WEBVTT

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You're listening to Strictly Business
Podcast

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with Lindsay Williams.

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The JSC has closed its doors for another
day,

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so it's time for the 5 o'clock shadow.

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And as always on a Thursday,

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I speak to David Shapiro from SAS and
Securities

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and Viv Govender from RANS Swiss,

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except that this time our associate David
Shapiro

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is tirelessly and selflessly going on a

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fact-finding field trip to the United
States of

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America.

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So he's not available today,

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but we look forward to him coming back.

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in the next couple of weeks or so.

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But Viv Govender is with us,

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and he has the stalwart that he is.

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And Viv, if I'd have said to you,

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25 basis points down,

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50 basis points down,

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and unchanged,

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and you had three central banks to choose
from before the

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actual decisions,

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you had the South African Reserve Bank,
the US Federal Reserve,

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and the Bank of England,

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which ones would you have assigned to
those central

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banks?

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Because I got it completely wrong.

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No,

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I thought the US was the only one that was
going to do the

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half percent.

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And I knew we couldn't do half because
basically,

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with regards to like being South Africa,
being as small as we are,

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being as vulnerable as we are,

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you've got to always be cautious because
if they were to come into South Africa and

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do a

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surprise like a half percent or something,

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the round would have weakened when we
would have seen, you know, inflation,

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what is returned to the system, you know
what I mean?

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Because the weaker round means like all
prices, special prices go up,

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et cetera, et cetera.

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So, yeah,

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we can't afford to be as aggressive as the
Americans

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were.

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So I knew that once the Americans cut,

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whether it was quarter, whether it was
half, we would have to cut a quarter only.

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With regards to the Americans,

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I was surprised by that.

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But I knew that they were the only ones
that could do that.

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I do think that, you know, what

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Chairman Powell did actually may have been

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slightly self-defeating just because of
the fact that

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you saw the stock market end up negative
yesterday.

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Yes, it's such a weird move, but obviously
it's changed,

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but we'll come to that in a second.

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Why do you think it did that?

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I think it was the fear that maybe he sees
something that we don't.

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I think the fact that he went bigger than
he

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was supposed to or could have.

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I mean, I think it was fluctuating
between, you know,

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which was more likely, 50 or 25.

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And on the last day it was 50 was more
likely.

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But I think the fact that, you know,

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25 would mean such a possible

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number.

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and he'd gone to 50, meant that the market
maybe might have thought, hey,

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this must be a bit overdone.

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And that might have been what caused
things to

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come back down again.

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But you're right.

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I mean, in terms of the overall moment,

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it is going to be positive for the stock
market.

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Nothing else is happening.

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The stock market is going to rise when
interest rates are cut.

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We saw that after

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2008, we saw that during COVID,

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nothing pretty much moves the stock market
like interest rates.

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or taxes and taxes only occur once in a
while so interest rates are the

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the big driver out there and cutting
interest rates are going to make the

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stock market go up even though there was
that little kind of weird movement at

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the start if i had been a technical
analyst and i

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watched the the markets after the

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50 basis points cut in the united states
last night and

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they sort of gently went higher then i
turned the television off and i

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thought well that's easy it's a nice
steady day

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but then i looked right at the end and
they were slightly

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down and if i as i said i've If I'd been a
technical analyst,

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I would have said that's a reversal
pattern,

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and that is negative for the short term.

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And here we are today, Viv,

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all-time record highs on the S&P,

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up around about 1.6%,

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an extraordinary move to the upside.

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Yeah, look,

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I think once people got over the initial
kind of surprise and whatever,

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I think, like I said, lower interest
rates,

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positive with the stock market.

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But actually, as a technical person, I
mean,

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we have a guy that's like going to this
kind of stuff,

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and he always says the first move is
almost always wrong.

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You'll make much more money by going
against the first move

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than the other way around and
disappointing the first move.

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So you see this market spike up, just go
the other way.

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If you see it fall, go the other way.

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And usually you'll end up more right than
wrong.

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And so that's the weird thing with the
technical guys.

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They do have this kind of like feeding for
the way the

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market moves that is not quite related to
logic,

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but more often than not, it's right.

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It's the OPEC principle.

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If I was an oil trader,

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which I am a frustrated oil trader, I
would say

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okay i'm looking for the opic decision
it's going to cut

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by two million barrels a day and the
market

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spikes up i always say well there's a
reason that that it's

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cutting it's because demand figures their
books are looking a little bit

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dodgy and it will eventually come down
after

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after a couple of a couple of days or so
so i suppose the same

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principles apply i hope your technical
analyst makes a

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good deal of money for you viv elsewhere
not

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much going on and we've got it all out the
way now i mean there's so

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much central bank activity the price of
money is

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coming down

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Inflation in certain jurisdictions is
slightly stubborn.

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For example, core inflation in the UK is

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3.6%,

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which is much higher than the 2.2% CPI.

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But generally set fair for the last
quarter of

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this year, I think.

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Yes,

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I do think that we are seeing core
inflation remain sticky both

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in the US and in

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Europe as well.

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And I do think that that is an issue to be
concerned about.

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We've benefited a lot from the fact that
oil prices are as low as they are

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right now.

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which kind of takes a lot of this thing
out of uh you know uh

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inflation uh but um

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I think that if you just looked at some of
these factors out there,

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like wage inflation coming through,
including in South Africa,

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that's really the long-term inflation
rate.

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It's wage inflation.

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All prices go up and down.

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You see the commodity prices spike up and
come back down again.

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But wages never, ever come back down.

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If the oil price went from here to 200,

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and therefore people had to go and ask for
wage increases,

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if the oil price was to fall from 200 back
to 70,

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they are not going to give back that
money.

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You know what I mean?

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And so that is the one thing to be
concerned about.

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Right.

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We've kind of built in some expectations

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around inflation over the last several
years.

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And that's going to be the hardest thing
to break from people's minds.

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The fact that, yeah,

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you've gotten like two to five percent
increases over the last three,

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four years.

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This year you're going to get no increase.

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You know, it doesn't quite work in
people's minds like that.

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It's interesting as well,

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because some suppliers of goods in
particular,

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when there's inflation and when there's
supply chain issues,

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they're very quick,

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almost a little bit too quick to bump up
the prices.

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of whatever product it is.

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But very, very slow to bring them down.

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It's the same with interest rates.

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Your mortgage rate goes shooting up,

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but it doesn't come down quite as quickly,
which is,

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I don't know if it's profiteering or
whatever,

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but certainly that seems to be a
phenomenon.

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Let's have a look at some prices now, Viv,

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before we get onto other matters.

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Dollar Rand, nice and steady.

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It's 1748.

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The British pound against the Rand, 23.17.

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The Euro Rand is 1946.

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The Euro dollar...

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1.1130,

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not quite as dramatic a reaction as one
might

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have expected given 50 basis points last
night.

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As we've been speaking of, British pound
against the US dollar,

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1.3260.

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Gold price is

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25.81,

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which is $10 higher.

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Platinum is up 15 to 9.90 and

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Palladium is $17 better at

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$1,085 per ounce.

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As for the other ones,

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the slightly more important ones for the
world, that is.

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Brent crude oil continues its nice run,
$74.46,

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up 1.1%, and West Texas, $71.63,

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up just over 1%.

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Natural gas down a bit.

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What else have we got here that's
important to South Africa?

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Copper price continues to do well, up
three-quarters of a percent,

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at $4.27 per

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pound.

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Now then, the aforementioned S&P

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500. The December futures.

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currently trading just over one and a half
percent higher at

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5767 the old

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high was around about

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5730 up until

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today and now it's sliced through that
very nicely

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indeed thank you very much the us

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10-year treasury bond let's call it

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3.73 percent

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and

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the south african tenure after the reserve
bank cut

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rates is just hovering let's call it
exactly

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nine percent which is

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Pretty decent move for the yield to the
downside.

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What else have we got?

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Oh, Bitcoin, yes, of course.

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Mustn't forget that one.

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Gosh, a big move there.

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Nidhi, 6% higher.

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62,900 risk

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assets.

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Very much in play today, Viv.

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How do tech stocks,

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high-growth tech stocks and AI

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stocks react to an interest rate

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cut?

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Are they as sensitive as other stocks?

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Yes, in some ways more so.

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Because remember...

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If you have lower interest rates,

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it means the discount rate for future
earnings

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goes down.

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So if you basically say, I'm going to give
you a billion rounds next year,

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and the interest rate is at 10,000%,

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it's worth a lot less than if

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I say give you a billion next year and the
interest rate is 1%,

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you know what I mean?

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Just because of the interest rate discount
that comes through because of that.

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And the fact that we are seeing

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AI stocks are obviously all about future
growth.

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We're not getting much money right now
unless you're Nvidia.

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Everybody else is talking about future
money.

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When interest rates fall,

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that future money becomes more value
relative to current

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values and therefore should be positive
for these

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companies.

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It's not just AI companies or growth
companies, it's growth countries as well.

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Technically,

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you should see emerging markets do better
than developed

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markets because of lower interest rates as
well.

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Good.

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So the market is stabilized because we've
had a couple of

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two or three dodgy weeks compared to

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the stellar performances that we've become
used to.

255
00:09:28.261 --> 00:09:30.622
But they have settled down now and people
are

256
00:09:30.842 --> 00:09:32.842
regaining their confidence?

257
00:09:32.799 --> 00:09:35.660
i i don't know what stabilization means i
mean nvidia is up like five

258
00:09:35.660 --> 00:09:37.660
percent today

259
00:09:39.241 --> 00:09:42.201
yeah this is the i remember the the i was
i would

260
00:09:42.301 --> 00:09:45.062
bet you five percent in nvidia is worth
more than

261
00:09:45.242 --> 00:09:48.123
everything but a hundred companies in the
world you know what i mean yeah you're

262
00:09:48.123 --> 00:09:51.083
looking like a uh you know you're talking
like a huge amount of

263
00:09:51.103 --> 00:09:53.664
market capitalization that has been added
to your venture

264
00:09:53.904 --> 00:09:56.585
yeah yeah yeah and look at it like tesla
is up six

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00:09:56.685 --> 00:09:59.313
percent today you know In fact,

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I'm doing an AI presentation in a few
hours.

267
00:10:01.895 --> 00:10:04.796
I'm just going to see if my assistant can
actually help me with this and

268
00:10:04.817 --> 00:10:07.778
rebalance it because it's going to look a
lot better right now than it did when

269
00:10:07.758 --> 00:10:09.758
we first did the thing, okay?

270
00:10:09.359 --> 00:10:11.359
But yeah,

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00:10:09.919 --> 00:10:12.581
it's amazing just how strong some of these
AI

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00:10:12.661 --> 00:10:14.661
companies are looking at the moment just
because, like I said,

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they're going to benefit more than anyone
else because of the fact that

274
00:10:17.984 --> 00:10:20.725
they are going to benefit from the fact
that we are seeing these

275
00:10:20.745 --> 00:10:22.745
companies which are going to have growth
in the future, hopefully,

276
00:10:23.467 --> 00:10:25.467
you know,

277
00:10:24.447 --> 00:10:26.529
having those growth being less discounted
than it is currently.

278
00:10:26.809 --> 00:10:28.809
Very good.

279
00:10:27.789 --> 00:10:29.789
Yeah, that is a big move, 6% for Tesla.

280
00:10:29.891 --> 00:10:31.891
And more importantly to me, anyway,

281
00:10:31.212 --> 00:10:33.374
the NVIDIA move of 5%.

282
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And who knows what the next few hours will
bring.

283
00:10:36.056 --> 00:10:38.056
So good luck with it.

284
00:10:37.457 --> 00:10:40.320
Keep on changing your allocation and
everything

285
00:10:40.360 --> 00:10:42.360
for your presentation.

286
00:10:41.681 --> 00:10:44.243
A quick look at South Africa, because I
know we've both got a dash.

287
00:10:44.443 --> 00:10:46.443
Bytes Technology.

288
00:10:45.364 --> 00:10:48.086
These prices may be slightly out of date,

289
00:10:48.526 --> 00:10:50.608
but Bytes up 8.6%.

290
00:10:50.648 --> 00:10:53.330
Impala Platinum, 5.7% higher.

291
00:10:53.891 --> 00:10:56.333
DRD Gold, another digger, up 5.25%.

292
00:10:56.733 --> 00:10:59.696
And Anglo-American Platinum, to complete
the three of the top five,

293
00:10:59.756 --> 00:11:02.378
Anglo-American Platinum up 5%.

294
00:11:02.738 --> 00:11:05.621
This was 5.15 just over a week

295
00:11:05.681 --> 00:11:07.681
ago, Anglo-Platinum.

296
00:11:06.862 --> 00:11:08.963
Now, 596

297
00:11:09.404 --> 00:11:11.404
Rand per share.

298
00:11:10.865 --> 00:11:12.865
It's a really big move to the upside.

299
00:11:12.506 --> 00:11:15.449
As soon as Anglo-American announced that
corporate activity,

300
00:11:16.630 --> 00:11:18.630
I mean, I said to a commentator, I said,

301
00:11:18.251 --> 00:11:20.251
surely this looks like capitulation.

302
00:11:20.353 --> 00:11:22.353
Surely this is a buying opportunity.

303
00:11:22.334 --> 00:11:24.596
And for once in my life, I was right.

304
00:11:25.601 --> 00:11:27.601
It's bargain hunting, I suppose.

305
00:11:27.343 --> 00:11:29.343
But anyway.

306
00:11:28.043 --> 00:11:30.043
In a short-term move, yeah, it makes
sense.

307
00:11:29.825 --> 00:11:32.807
But, I mean, the problem I see with these
platinum producers is,

308
00:11:32.987 --> 00:11:34.987
what's the future?

309
00:11:34.188 --> 00:11:36.188
You know, you're going to have these
short-term balances up,

310
00:11:35.970 --> 00:11:37.970
but the future looks so terrible for them.

311
00:11:37.531 --> 00:11:40.494
It's like all their factors that are
supposed

312
00:11:40.494 --> 00:11:42.876
to help them or whatever are working
against them.

313
00:11:42.936 --> 00:11:44.936
So,

314
00:11:44.177 --> 00:11:46.639
it would be negative about platinum going
forward in South Africa, unfortunately.

315
00:11:47.039 --> 00:11:49.039
Yeah, I think a lot of people are.

316
00:11:48.801 --> 00:11:51.663
I mean, it's a long way to go to the

317
00:11:51.663 --> 00:11:53.663
2250.

318
00:11:53.945 --> 00:11:56.466
a ramp a share for anglo-american platinum
a

319
00:11:56.706 --> 00:11:59.027
long long way yeah it's got to go up for

320
00:11:59.628 --> 00:12:02.389
four times almost downside alpha min down
three and a half

321
00:12:02.489 --> 00:12:05.370
lighthouse capital down two and a half rem
grow

322
00:12:05.410 --> 00:12:08.152
down 2.2 british american tobacco

323
00:12:08.372 --> 00:12:11.113
one and three quarters percent in the red
and aeci

324
00:12:11.513 --> 00:12:14.255
down one and two thirds percent if you did
have to

325
00:12:14.255 --> 00:12:16.796
invest in south africa while i get the
indices uh

326
00:12:17.336 --> 00:12:19.336
having had the initial

327
00:12:19.813 --> 00:12:22.675
A sabre rattling from the South African
Reserve Bank,

328
00:12:22.695 --> 00:12:24.695
in other words,

329
00:12:23.256 --> 00:12:26.218
cutting rates and maybe three or four in
the next six

330
00:12:26.338 --> 00:12:28.338
months or so.

331
00:12:26.959 --> 00:12:29.341
Is there any particular sector that you
think will benefit?

332
00:12:29.521 --> 00:12:32.343
Financials and retailers may be the
obvious

333
00:12:32.484 --> 00:12:34.484
ones.

334
00:12:34.265 --> 00:12:36.265
Yeah, I think maybe it's on the miners as
well.

335
00:12:36.647 --> 00:12:39.429
Look, I do think that if we are getting
our house in order,

336
00:12:39.950 --> 00:12:41.950
and it seems that we are, the GNU,

337
00:12:41.911 --> 00:12:43.911
despite the very low expectations going
into it,

338
00:12:44.473 --> 00:12:46.475
seems to be working a lot better than
people have been thinking.

339
00:12:46.615 --> 00:12:48.697
And if we can get Translate working, get
the ports working.

340
00:12:49.381 --> 00:12:52.322
The impact of companies that are exporting
commodities should be positive

341
00:12:52.322 --> 00:12:55.223
because we saw Kumba being affected by the
fact

342
00:12:55.223 --> 00:12:58.025
that it could not get stuff out of the
plot quickly enough and therefore to

343
00:12:58.065 --> 00:13:00.065
reduce production.

344
00:12:59.125 --> 00:13:01.125
We saw electricity

345
00:13:01.946 --> 00:13:04.307
obviously production under a

346
00:13:05.388 --> 00:13:07.388
threat in South Africa because of load
shedding.

347
00:13:07.869 --> 00:13:09.869
And yes,

348
00:13:08.989 --> 00:13:11.570
the Reserve Bank government was correct in
mentioning the fact that we are seeing

349
00:13:12.171 --> 00:13:14.351
high strides in electricity being way
above inflation.

350
00:13:15.312 --> 00:13:18.033
But I'd rather have electricity

351
00:13:18.253 --> 00:13:20.253
like 40% more expensive,

352
00:13:19.894 --> 00:13:22.156
but guaranteed as opposed to current
prices.

353
00:13:22.176 --> 00:13:24.176
I mean,

354
00:13:22.576 --> 00:13:25.558
like they have power going out every day
or every

355
00:13:25.618 --> 00:13:27.618
second day.

356
00:13:27.019 --> 00:13:29.501
If those things can be solved, and like I
said, it comes with a cost.

357
00:13:30.642 --> 00:13:32.642
Yeah, SA Inc looks very attractive.

358
00:13:33.184 --> 00:13:36.166
One might even look at some SA property
that looks interesting at

359
00:13:36.146 --> 00:13:38.146
the moment.

360
00:13:37.747 --> 00:13:40.209
So if the current trend with the GNU
continues,

361
00:13:40.729 --> 00:13:43.631
there's a lot of stuff in South Africa
that just has fallen so far behind that

362
00:13:43.331 --> 00:13:45.331
they look

363
00:13:43.651 --> 00:13:45.651
incredibly cheap.

364
00:13:44.772 --> 00:13:46.772
I mean, banks...

365
00:13:46.413 --> 00:13:49.114
unbelievably cheap compared to
international benchmarks.

366
00:13:49.754 --> 00:13:51.754
I mean,

367
00:13:49.954 --> 00:13:52.915
if you look at some stock which keeps on
coming across my

368
00:13:53.015 --> 00:13:55.015
desk, it's called ABSA,

369
00:13:54.955 --> 00:13:57.096
and they give me the P-E ratio,

370
00:13:57.416 --> 00:13:59.416
both current and forward,

371
00:13:59.396 --> 00:14:01.396
and the dividend yield.

372
00:14:00.797 --> 00:14:03.778
It really is something that you don't see
overseas when it comes to the

373
00:14:03.798 --> 00:14:05.798
financial services sector.

374
00:14:06.478 --> 00:14:08.478
Oh, yeah, no.

375
00:14:06.959 --> 00:14:08.959
What's it like?

376
00:14:07.399 --> 00:14:09.999
It's still the dividend yield is still
above the P-E ratio,

377
00:14:10.720 --> 00:14:12.720
despite the fact that this thing is up, I
don't know,

378
00:14:13.300 --> 00:14:16.101
in the last, say, year, you know, quite.

379
00:14:17.042 --> 00:14:19.042
not much, it's about 2% this year,

380
00:14:19.426 --> 00:14:21.426
but from the lows of this year it's up,
you know,

381
00:14:22.831 --> 00:14:24.994
25% from where it was in April.

382
00:14:25.455 --> 00:14:28.259
And yet we are still seeing, this is from
after the election, of course,

383
00:14:28.359 --> 00:14:30.863
we are still seeing, you know, P ratios
under 8.

384
00:14:31.519 --> 00:14:34.220
dividend yields almost eight yeah a very
compelling argument

385
00:14:34.420 --> 00:14:37.101
even after the rally that you just
described from the

386
00:14:37.121 --> 00:14:40.043
lows okay the indices look like

387
00:14:40.063 --> 00:14:42.664
this the financials which we've just been
speaking about

388
00:14:43.084 --> 00:14:45.345
actually relative laggards up 0.4 percent

389
00:14:45.745 --> 00:14:48.226
industrials up 1.4 percent the

390
00:14:48.246 --> 00:14:51.027
resources 10 index a 1.7 percent

391
00:14:51.087 --> 00:14:53.868
gainer top 40 1.1 percent higher at

392
00:14:53.868 --> 00:14:55.868
75

393
00:14:55.069 --> 00:14:57.870
703 and they all share the overall index

394
00:14:58.190 --> 00:15:00.591
before the auction i must say but anyway
it gives you an idea

395
00:15:00.951 --> 00:15:02.951
1.1% higher as well to

396
00:15:02.491 --> 00:15:06.273
83,652.

397
00:15:06.813 --> 00:15:09.413
Viv Govender is from Rennes, Swiss in
Johannesburg,

398
00:15:09.573 --> 00:15:11.573
and that was the 5 o'clock shadow.

399
00:15:11.794 --> 00:15:14.555
The views and opinions expressed in these
podcasts are those of

400
00:15:14.615 --> 00:15:17.536
Lindsay Williams and various contributors
and

401
00:15:17.556 --> 00:15:19.556
do not reflect the policy,

402
00:15:18.876 --> 00:15:21.497
position or opinion of any other agency,

403
00:15:21.737 --> 00:15:23.737
organisation,

404
00:15:22.817 --> 00:15:25.698
employer or company associated with

405
00:15:25.738 --> 00:15:27.738
StrictlyBusinessPodcast.com.

406
00:15:27.918 --> 00:15:29.918
Assumptions made on the analyses

407
00:15:29.939 --> 00:15:32.861
are not reflective of the position of any
other entity

408
00:15:33.241 --> 00:15:35.241
other than the speaker or the author.

409
00:15:35.183 --> 00:15:37.685
And since we are critically thinking human
beings,

410
00:15:38.045 --> 00:15:40.367
these views are always subject to change,

411
00:15:40.647 --> 00:15:43.209
revision and rethinking at any time.

412
00:15:43.509 --> 00:15:45.931
Please do not hold us to them in
perpetuity.