You're listening to Strictly Business Podcast with Lindsay Williams.
It's Wednesday, so it's time for Wayne on Wednesday.
Wayne McCurry is a Portfolio Manager at F&B Wealth and Investment in
Johannesburg. I've just been looking through the headlines of the midterm
budget policy statement
delivered by the Minister today in South Africa.
Wayne, I can't get too excited, but then again, there were no big surprises that
would cause anyone concern either, I don't think.
Yeah.
you know, there shouldn't be any big surprises because that's why we do this
medium-term budget, you know,
in stark contrast to where things were run, let's say,
in sort of up until the late 80s, where every budget was a surprise.
You didn't know what was coming around the corner, you know.
So, it's a very good, it's actually good news that there are no surprises on the
budget.
And I would say on the medium-term budget.
I would say on balance, not bad news, you know.
No, nothing bad.
I mean, they didn't come out with any controversial tax statements or anything.
They said, you know, revenue's a bit down, so deficits will widen and that sort of
thing.
But nothing as a portfolio manager, you would say, goodness me, I've got to sit
down with the team and we've got to change our allocation to this
sector or that sector.
Nothing like that, I don't think.
No, nothing like it at all.
And that, of course, is good news.
Yes.
So there shouldn't be any surprise.
It should just, in essence,
be a little bit of an update of the budget or the last medium-term budget or the last
set of statements they
came up with.
Well, that's good.
So would you say then that when you look at the political environment in South
Africa,
we all know about the government of national unity and it's still finding its
feet.
But would you say that the Treasury and the Reserve Bank are in good hands?
And those two pillars are very, very important.
Yes, I mean, the Reserve Bank and Treasury, you know, the Reserve Bank, you
know,
ever since I think 1988 was the actual time.
But the Reserve Bank's been in good hands for a substantial time period.
And, you know, the Department of Finance, other than that one, well, no, no, the
Department of Finance was fine.
It was just a SARS that was captured.
But, you know, other than that.
It's actually been fun.
Good.
Okay.
So I don't think there's any concerns there at all.
Good.
Gratifyingly boring, in other words.
Let's have a quick look.
As I said, that's exactly the way it should be.
Yeah, quite right.
We don't need surprises in our lives.
I just want to talk about one company.
We don't normally talk about company specifics.
We talk about generalities on this Wednesday afternoon.
But I saw Impala coming out with the first quarter production report and the share
price on my screen, which is delayed.
But...
doesn't matter down nearly six percent is that indicative of impala's problems or
the whole sector's problems now i
think the whole sector is going to get back on on on on production for whatever
reasons they give is they're not
making
money and when you're not making money now you don't actually mine
the ore bodies that are the most uh marginal so yeah
I think we're going to see that from everyone.
And that's part of the reasons why we could possibly get some sort of
recovery in the platinum and palladium basket.
Although the actual underlying metals have run relatively hard.
You know, they're both well over nicely over a thousand.
And so, yeah, and the impala has a share.
I mean, it touched a 52 week high yesterday.
Ah, okay.
Well, in that case, that's good.
So would you rather have less production but higher prices or the other way around?
It seems to me… Go on.
In a falling price environment, you want less production.
Yeah.
You know, especially in something like platinum and palladium where there is
clearly, you know, limited supply.
This is what is interesting because if you're a trader, for example, you come in
in the morning, you turn on your screen…
You look at the metals prices in US dollar terms.
You look at gold and platinum and palladium and rhodium and lithium, all
these things.
And you see them up $20 an ounce or something.
You say to yourself, well, that's good.
Let's have a look at impala, Anglo-American platinum, et cetera,
because in the future,
I know it's not easy to turn on extra production, but in the future you can ease
new production.
into the system and therefore benefit from the higher prices, or you can use the
derivatives market.
What is the psychology of an investor like yourself, an investor not in the physical
metal but in the equity market?
You know, look, I mean, when prices are depressed,
you actually want lower production for two reasons.
First of all, you want the platinum mines themselves to mine the more profitable ore
bodies,
you know, not do the marginal stuff,
because then at least they get a lower cost per ounce or per kilogram produced.
And then you're also in a strategic metal like platinum and that.
you actually want less less production around to actually boost the price because
the one nice thing about
platinum and palladium there's no substitution you mean someone can't just
come along and say i will use this instead we'll use something
else and they're a good example and a good friend of mine actually pointed it out to
me earlier on today you
know when when when the whole russia ukraine thing started and people just said
you know no more
gas out of russia And yet, and there was substitute, you could get gas somewhere
else.
Yeah, but with South Africa having a 76%,
I think it is a virtual monopoly on the production of platinum group metals.
That just can't happen unless they suddenly find something in Iceland or
something.
Yeah, which doesn't seem likely.
Actually, but I mean, platinum and palladium, I've said it so many times,
it's just going through a standard cycle.
There's nothing unusual about what's happening now.
It's happened many times before and will happen also many times into the future.
So there's nothing at all unusual about what's happening right now.
Good.
As we've said a couple of times in this brief chat, we don't like unusual.
We like boring, regular sort of stuff.
It's lovely to be boring.
We like boring.
It really is very, very underrated.
It's people going off and jumping off mountains and things and doing extreme
sports.
No, we don't need that, metaphorically and physically.
We don't need it.
No.
Wayne, what about the...
Investments, investments.
I suppose if you've got a well-balanced portfolio and, you know,
your days should be boring.
Predictable as well as boring.
Maybe we shouldn't say boring.
Maybe we should debate.
predict we need the predictability of returns some people will be striving for
40 50 because they've found this
the latest biotech or tech stock or ai stock or something like that but on the
other hand yes that's fine
but get a small exposure to the go-getting stocks but on the other hand you need just
good solid stuff every year
you beat inflation you get dividends and away you go isn't that the way to do it I
would think so.
Look, you've got to have exposure.
You've got to have some exposure to the new age, new wave, new thing.
Yes.
Because, you know, they always perform extremely well in the beginning.
You know, they knock the socks off absolutely everything else.
Sometimes they just disappear thereafter.
Sometimes they are still around.
And I think that is the case with AI.
You know, these companies are not going to disappear.
They're not going anywhere.
But the share prices may be a little bit elevated at the moment.
So, yeah, I think that's what you do is you, you know, if you think the share
prices are way too expensive, don't have nothing,
but maybe be underweight.
Final question on equities anyway.
When it comes to falling interest rates, it's obviously very good because it boosts
the economy and therefore more people use
banks and there's more transactions and there's more transactional income.
And so it goes on.
But.
Is a shrinking interest rate environment good for margins for banks or is a rising
interest rate
market?
How does it work?
A rising interest rate is better.
Yes.
Initially.
The way it works is, and certainly I can't talk about overseas banks because they
have a different business model,
but the way it works domestically is that if interest rates go up, your overdraft,
your mortgage bond,
your house loan, your motor car loan.
you are charged that same interest rate immediately, that new interest rate
immediately.
Bank get their finance from,
they've issued out notes and taken on money from pension funds, from the money
market,
from all over the place, normally over a time period, three months, six months, two
years,
you know, whatever note they've used.
That only reprices when it comes up to maturity.
So immediately.
you get a margin enhancement.
And then obviously exactly the opposite happens when rates fall.
Of course, banks do hedge out a lot of this because they're just going into the
interest rate futures market and take positions
in that market.
But by and large, When interest rates fall, there's a margin squeeze short term,
but that's only short term, because banks actually want lower interest rates because
then they can lend more money.
I find that the rapacious nature of the corporate world,
whether it be a grocery chain or whether it be a bank, is a little bit distasteful.
Because of what you've just said, as soon as interest rates go up,
then your mortgage bond or your credit card or your motor car loan goes up.
When they come down, it takes a while for it to filter through the system.
It's the same as if, let's say that a loaf of bread in the United States costs $5.
And because of what happened with Russia and Ukraine, the price of wheat goes up.
And therefore, you're charged $6 a week later because of the international price
of wheat on the Chicago Board of Trade.
When the price reverts, which it has done, do you see the price coming down from $6
to $5 again?
No, you don't.
They keep it up there because you become used to it.
And I find that that's what I think Kamala Harris would call price gouging.
I think that's what she means by that, because they don't pass on the reduction
in prices,
but they're very quick to pass on the rise in prices to the poor, beleaguered
consumer.
But then you must remember the one thing we all rely on.
You rely on the capitalistic system and competition.
that some guy's going to say, I can sell bread, a little bit more bread,
if I'm 10 cents lower than the other guy.
I agree with you.
Prices go up immediately, but they don't always fall straight away.
But you rely on competition to give you credible pricing structures in
various altered circumstances.
That's why the capitalistic system works and the command system doesn't work
essentially over time.
is that the market must determine prices.
And no matter what politicians might want, I also heard the vice president last night
saying, well,
and ex-president Trump saying, we're going to bring down costs.
You can't just bring down costs.
Of course you can't.
This is political talk, man.
You can't, in a capitalistic system, the market's way bigger than any president.
It's simple.
significantly bigger than any president.
So you've got to say, well, look, if prices have gone up, if the food inflation
was 10 or 12% for a year, like it was in the UK,
then prices are just higher.
You can't bring them down.
You can maybe do a little bit of subsidization, a fringe, and make a big
political roar out of it,
but you can't reduce the cost of living.
No.
It's just politics.
It's politics.
Yeah, well, Donald Trump and politics, they shouldn't be in the same sentence,
actually, because but anyway,
that's just this is just me and I mustn't get on my high horse.
But he said in the first year, energy prices in the United States will fall by
50 percent.
I mean, he says this glibly and everyone's standing there and clapping and saying,
yeah, that's good.
You can't do that.
You can't bring down prices as a president.
The moment you sit in the Oval Office, it's a lot of it's rubbish.
But what he can do and what he said on numerous occasions is he's just going to
relax the
legislation around being able to do fracking in the U.S.
And he's, I mean, he's often quoted, not quoted, he's often said in rallies, drill,
baby, drill.
Yes.
So if he now relaxes the drilling rules and the fracking rules and all of these
things, the price of energy.
It could, in fact, come down because the market might be swamped.
Whether it comes down 50% or not, no one knows.
But I do know if it comes down 50%, it won't stay there for long.
Of course it won't.
Because if the price falls 50%, no one's making money anymore.
The frackers won't make money.
Exactly.
I mean, they can maybe make money at 75 and it comes down to 65.
Then they have to turn the spigots off again.
Yeah, that's also just politics, man.
You know, I'm still amazed that we as a human race haven't worked out a better way
to govern
ourselves than with politicians.
I've worked it out.
It's too late for this show.
I've come up with a much better system, but that's OK.
And you would be part of it, of course.
But I have worked out.
And democracy would also be thrown out the window if I was president of the universe.
I would immediately revamp the whole system.
but anyway go on yeah if i was if i was president of the universe the first thing
i would legislate or first thing i would decree
is that you cannot have different
fittings for light bulbs every fitting has got to be exactly the same terribly
important and also
cell phone charges next thing i would decree your cell phone charge but we're
getting there in the cell phone charge the next thing i would decrease
every
screw must take a star screwdriver and a flat screwdriver oh that's
interesting yeah so you've got a phillips which we call it in europe phillips which
is the star one and the flat one,
which is the ordinary one.
So they've got to be interchangeable.
They've got to be adaptable.
Okay.
Third thing I would decree is every nut and bolt manufactured must have the
thread pitch or the thread size printed on the bolt.
You see, these are the semantics.
This is why you would be the expert in terms of mechanics and engineering.
And that sort of thing.
And it's actually the commies that caused all of this problem.
Oh, thank you very much.
Why?
They had British standard Wentworth thread.
They had British standard thread.
They had British standard pipe thread.
They had British standard gas thread.
They had 10 different thread patterns.
And of course, I used to store British motor cars.
And oh my goodness.
And then when the Yanks got involved, sort of in the beginning of the Second World
War.
They just said, listen, guys, listen, one standard thread.
So post the war, the thread pattern's not that bad because they said, you can't make
part of it.
You can't make a truck.
We can't make a truck in the U.S.
Then when it goes to the U.K., you've got no nuts and bolts to fix it because you
characters use a different thread pattern.
So they standardized it.
They call it the national thread.
And so post the Second World War.
But a lot of the stuff was still using all this old stuff.
I mean, it's interesting.
Today, on all your gas fittings, it's still British standard pipe fittings.
It's not metric, eh?
It's the old imperial standards.
But don't forget, I mean, don't forget that the sun never set on the British
Empire.
The British Empire, 40% of the world, was pink on the global map in the old days.
And the Industrial Revolution did start, so they had to find their way with three
patterns.
But anyway, we're digressing, but that's what I would...
First thing would be the light bulbs, yeah.
Oh, and then electric plug fittings.
Here we go.
Oh my goodness, can't we just all have the same fitting for every electrical thing?
On this subject, I agree with you.
You go to the airport and you say, where am I going now?
I'm going to the Netherlands.
What do they use there?
And you have to go into a shop and say, I'm going to the Netherlands and I've got
a South African.
plug here, I need to convert it, etc.
And you have to plug in three different devices in order to get power.
I agree with you on that one.
I also think that you ever invented the two-pin socket?
That's stupid.
It should be banished.
Oh, yeah, that should be on an island somewhere.
Everyone just stand it.
Just stand it.
Make it easy for DIY people.
So we've got plug.
Yeah, anyway.
Yes.
Plugs.
bulbs, nothing bulbs.
You see this is why my new system which banishes democracy will work and we'll
talk
about it one day in the future over a glass of red wine or something.
Wayne, do you ever get cravings?
I mean I'm talking about food.
It's my problem.
Food cravings.
That's my biggest downfall.
That's why I'm overweight is I do definitively get cravings.
to be overweight cravings don't always lead to um you know mild obesity it does
but
sometimes i get something in my head i'll be watching television there'll be a
cooking program on and i'll say i've got to have that i've got to have those
those chicken wings which which is what happened to me yesterday and i had to get
chicken
wings so what did i do i got chicken wings and then i thought i'm not going to go
through this recipe that that person's done because there's
far too many ingredients so what i did was I got these beautiful, plump, organic, as
they say in the Netherlands,
bio chicken wings.
They were delicious.
And I poached them, first of all.
I made up my own recipe.
I poached them in water for between eight to ten minutes, something like that.
I drained them off, put them in a bowl, squeezed lemon juice over them and put
some salt and pepper in.
Then I poured over a decent amount, but not too much, of very hot peri-peri sauce.
And I stirred them all up.
And then...
I thought, okay, that's a little bit too crude.
I've got to have another layer of flavour.
So I got a great big spoonful of honey, a really big spoonful of honey, and I
stirred that in as well.
I marinated them for about an hour.
Then I put a pan on, extremely hot.
And fried them.
And as I was frying one side, I poured on toasted sesame seeds.
Okay.
Oh, that sounds delicious.
It really was.
And then I turned them over with a pair of tongs, which is one of the most useful
implements in anybody's kitchen.
I turned them all over.
I poured some sesame seeds on the other side.
Two minutes either side.
Not quite charred, but certainly sealing in all that delicious flavour that I'd got
from the poaching.
And I have to say, Wayne, the combination of the peri-peri and the lemon juice and
everything else, and the honey, the sweetness with the honey,
I'm munched away like a maniac.
It was brilliant.
No, no, it sounds, it does, it truly does sound delicious because, you know, nice
peri-peri,
I mean, I'm a huge peri-peri fan.
I truly am a huge peri.
I buy peri-peri by the...
Gallon.
I buy two one-litre, I buy two one-litre bottles at a time.
Yeah.
From the honey rock.
They sell their berry, berry, old Smirnoff vodka and brandy bottles.
And you buy two.
Well, I think it's 750, not one liter.
But you buy two of them at a time.
Okay.
And it's delicious.
And I have it with many, many things.
And a good peri-peri shouldn't burn your mouth.
No.
It shouldn't be killer hot.
Now, I've done a huge study of peri-peri in the greater Johannesburg area.
and the honey rock is probably the best peri peri but i can promise you sesco's
comes close there's he's a
little bit stronger and then maybe third place but these are all very very closely
contested
positions is
uh the total hotels got also got very good peri peri yeah you see you there's a
difference
between being being a good hot peri peri and something that's too harsh it can be i
don't know
Do you ever make your own?
Do you ever try making your own?
No, I've never actually tried that.
No need, actually, if you've got the top three contenders that you've just
described.
You can just describe them.
Certainly the Honey Rock, when you buy their domestic variant, the homemade one,
it's not expensive.
I mean, I think it's about 80 rand or 100 rand for the 750 mils.
That's not bad.
I mean, 750 mils of peri-peri is a lot, eh?
Yeah, it is.
That'll have lost you a couple of months.
Yeah, the two liters lost me maybe three, but as I said, I have a lot of peri-peri.
I have it on my eggs.
I have a lot of peri-peri.
I like it.
Okay.
Yes, I can tell.
Okay, Wayne, thank you very much for your time.
As always, Wayne McCurry is a portfolio manager at F&B Wealth and Investment in
Johannesburg.
And that was Wayne on Wednesday.
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