You're listening to Strictly Business Podcast with Lindsay Williams.
JSC has closed its doors for another day, so it's time for the 5 o'clock shadow.
And as always on a Thursday, I speak to Viv Govender from Ransuisse and David
Shapira from Sasfin Securities, both in Johannesburg.
Now, Viv, I want to start with you because David and I were just chatting off air and
see the S&Ps down about 1.4, 1.5%.
And from what I can gather from the mainstream commentary, people like CNN and
CNBC, it's because the big...
tech stocks are spending too much on R&D or projected to on AI.
Now, I don't know if this is a valid argument or if it is a valid argument,
then it presents a buying opportunity because they've got to do so.
What is your assessment of the situation of the tech stocks and their results this
week?
Look, I would say it's the $640 billion question, you know, trillion dollar
question,
however you want to call it.
It is the question of whether or not AI is going to scale.
into the future.
We don't know that for certain yet.
We have people like some coming out and saying that new models are much, much
better and it's going very well.
But we don't know.
We haven't seen them.
Now, if it does scale, no, this is not overspending.
This is pretty much what a logical person would do.
We're talking about the greatest technology ever.
It's like trying to say, should you save money on warships during a war?
No, you need them and you need to get them.
And the one that has the most is going to win.
The one that has the least is going to lose.
And so you're just going to spend.
If I ever had this stuff.
does stall, if there is some black wall that we're going to hit, that's going to
mean that more computing power and more data does not mean a better
outcome.
Then yeah, we're talking the biggest infrastructure spend, these companies are
doing the biggest infrastructure spend in history.
There's nothing that's ever been done in the next like in a period of a year or so
that like these guys are planning for the next year.
Any country or anything, including building power systems, including going to
the moon, including building highway systems, nothing like that.
So it all depends on whether or not the technology is going to...
bear fruit.
And at the moment, I don't know.
I could just look at the tea leaves, but I don't have information saying whether or
not that's true or not.
Okay.
What about the actual results themselves?
I'll stay with you on this one, Viv, before going to David.
The actual results without the projected AI spend in the future, were there any
surprises?
I noticed Uber got a bit of a whack today, but I don't call that big tech, really.
What about the other ones?
Look, I mean, the results are reasonably good.
I mean, they were beating expectations.
They were not...
I just couldn't stop.
looking terribly bad.
I mean, some of the stuff that came out, even if you look at Meta, right, for
instance, look at Meta for the last five days.
It's basically flat.
One of the reasons that the stock basically is down is because it came after
the Google numbers, which were really good, you know, and the Google numbers,
or let me say alphabet numbers, apologies, were really good.
And therefore, the market actually pushed the price up.
And you look at the same thing with Microsoft as well.
Over the last five days, you know, or the last week or so, this The share price is
not that bad.
The article is falling at the moment.
It is, you know,
it's after a significant rally so far over the last little while.
I think these results are reasonable.
They're not terrible.
But the market basically, I think, like you said, is scared by the expenditure
into the future, as well as some fears about, you know,
revenues coming in as well from these new technologies.
Okay.
David, were you happy with the numbers?
You were heavily invested in tech.
I think the numbers are brilliant.
I mean, if you look at it in absolute terms, I mean, if you look at the number,
the earnings,
the amount of cash that they're generating, what's flowing to the bottom
line, what they have and are able to spend,
I think it's incredible.
I think I have more faith in the people running the businesses than the chaps who
are writing the reports, you know,
who sit and who are not quite sure what's up.
This is their industry.
But what's also quite significant, Lindsay, is that if you start to look at
the multiples,
and I'm not a multiple person, you know, I like to buy it on the story.
But, I mean, if you look at Alphabet, if you go one year forward,
I think their P-E ratio is down at around about 20.
You know, even on the current numbers, I think it's 23.
This has come from something like 36 or 35, 36.
I don't know what the averages are.
But, yeah.
I think, you know, if you go forward, even on NVIDIA, you start to look, it's coming
down to 46,
and we haven't seen the results yet.
So you're getting into value territory regardless of what you believe is the
right amount to
be spending.
And this is the build stage.
You know, the next stage comes is monetization.
And you can't build.
You can't have monetization if you're not building.
So I'm not, I just think that we live in an industry where it's like a betting
shop.
You know, it's super bets, it's Hollywood bets.
I just think everybody expects too much, too soon, too fast, and on a straight
line.
You know, you're never going to get an industry like this developing on a
straight line.
It's almost impossible that every quarter on quarter is going to be perfect and
going to get what the
analysts expect.
I just, sometimes you've got to take a step backwards and say, look, these
businesses, I mean,
if you take away all the narratives and the descriptions and everything and see
what their earnings are,
when they're increasing their earnings, you know, whether in double digits or
revenues by 30 odd percent or whatever,
15, 16, 20 percent, I mean, this is incredible.
These are mammoth, mammoth businesses.
So I just shrug my eyes, you know.
shake my head and say, move on, okay, let this run its way.
Just one word, though.
Yes.
Sorry, I don't want to take away from Viv,
but not in any respect disagreeing with him.
I think this has a lot to do with the election.
I think there's such a nervousness.
You know, Lindsay, if you think what we're going through when I watch the headlines,
you can understand why people are just so super sensitive and so worried about
what's going to transpire.
It has to have some impact on sentiment.
And then we've had the budget in the UK.
We've had a faltering Europe.
We have a China that's not growing.
When you put it all up together, no wonder sentiment is like a test.
You don't feel good at all about anything.
There was a very interesting, I don't know what to believe.
They've had 45, 50 million people already vote, I think.
And someone did a survey.
And it's trending on X at the moment.
It's called, it's hashtag Harris surge.
And look, some would,
she's 63% versus 37% Trump in three quite important states.
And I didn't really believe it, but there is a suddenly people are saying it's not
as close as you think.
Now, Viv, you gave us an analysis of this a couple of weeks ago when we last spoke.
Have you changed your mind at all about the closeness of the race or whoever you
think might?
be in the White House in a couple of weeks?
I saw that poll.
That poll was people that say they've already voted and what do they do?
The problem is right now that Trump voters don't really respond to these votes.
The way you'd look at it is looking at some states like Nevada, for instance,
right?
What they do is they give you an outline as to who's voting and what party they're
voting for.
Not who they're voting for, but like, you know, what party they're voting for.
Or what party they're registered for, rather.
Like you say...
I'm just a Republican and I'm voting.
You know what I mean?
I'm an independent and I'm voting.
Now, if you look at it from that point of view, there's a guy called Ralston, and I
follow him quite strongly.
And he's got a great blog.
And he goes over these things.
And he's saying that it's looking very bad for the Democrats because the Republicans
are voting in numbers that are quite high.
In the US right now, it's not about convincing anybody.
It's about getting your people to the ballot box.
And if you look at the other voting things, I mean, even places like, I think,
New Jersey,
the Republicans are basically voting on par with the Democrats.
And historically, the big advantage the Democrats have is getting the people to
the voting station, getting people to vote.
The question arises, is this huge kind of like a surge for Republican early voting
going to really cannibalize it on Election Day?
But like you said, 50 million plus people have voted already.
So this is already like, you know.
going to be a huge chunk of the total voters.
So, yeah, a couple of things.
Firstly, don't believe the polls.
The reason being is that polls are too narrow.
Everyone 1% are tied.
That's not logical, given the margin of error and stuff, you know what I mean?
And so it makes you believe that the polls have been adjusted by the pollsters to
cover themselves, you know what I mean?
So they're basically saying, oh, it's a tied race, so it's making it close, so
we'll run with the pack.
The second thing is that In terms of the polling guys,
they've changed their methodology from 2016 to 2020.
Okay.
Just to give you guys a bit of a background.
Sorry, this is the wrong person to ask this question.
So if you look at polling in 2016, 2020,
dramatically undercounted Republicans.
2018, 2022, got it very right.
Okay.
There is a strong possibility that when Trump is on the ballot, he...
don't count it properly for whatever reason.
The question arises then is, has enough changed since then that people are not as
ashamed to vote for Trump as they were in the past?
And that's the kind of thing.
Or are they also still giving us these, these, these, these, these lopsided
things?
Now that they had a search stuff, I wouldn't trust that.
I would also would not trust some of the stuff that's saying, you know, massively
ahead, just because of the fact that the,
when you look at the actual places that you have information officially from,
They don't show that there's a massive surge for Harris versus Trump unless a
whole bunch of people that are registered as Republicans
are suddenly voting for Harris.
And that is the only way these numbers are giving a Harris surge.
If the Republicans, people that are basically members of the Republican Party,
just as Republicans, are voting, but they're not voting for Harris.
And I don't know if that's the case here.
Okay, so we've just got to wait a week.
Okay.
And see Donald Trump driving garbage trucks around after he's got off his 757,
which is quite funny.
It was quite clear.
That's because Biden supported it.
The board is garbage.
Yes, I know.
Biden was so stupid, they should look him up.
I mean, really, what a stupid thing to say.
No, but Biden is, is Biden stupid or is Biden sabotaging Harris?
That's the question.
Because this is not the first time he's done something like this to Harris.
Harris had a great, excuse me, Harris had a great talking point because there was a
guy at the Republican
convention or event that made a joke about Puerto Ricans and used the word garbage.
And Biden comes the next day and totally reverses it from being a thing that got a
huge anti-Trump thing to reversing it.
Biden has called press conferences just as Kamala Harris is about to give a speech.
What is that about?
You know, he's not happy with that.
No, his nose is out of joint.
It's marketing.
Definitely.
Oh, well.
Right.
David, only one stock I want to talk about on the JSC today.
It was a stock that you mentioned when we chatted on Monday.
You said something like, I'm not really interested in the stocks like...
British American Tobacco or AB InBev.
AB InBev's numbers were pretty awful today.
Yeah, yeah.
Volumes.
And I think that's a big issue, is that if you look for one point, I think volumes
are coming down.
And it just shows you how difficult it is for these, you know,
large companies to or companies like this in beer or, you know,
in that industry to make any headway.
I'm not a great believer that You know, it's been a theme that I've had for a long
time that,
you know, companies like, you know, who sell beer, they might do okay, but they're
never going to do brilliant.
You know, there's just too much competition.
It's just too complicated around the world.
They might have certain areas in which they do well.
But I think this is just evidence, you know, just evidence of that.
Yes, they might have premium brands doing okay, but it's an industry.
um lindsay people are drinking less they're drinking this alcohol they're
drinking zero zero zero zero beers now i mean the
youth in the uk for example i mean it's a complete i mean it's a generational change
i've yeah and and if you
if you're catching up by catching a zero beer market can't see the point myself but
um if
you can catch the zero beer market then and you get it right and it's a good brand
and it's got a reasonable taste to it then you'll do well but you're quite
right Alcohol consumption is not falling off a cliff, but it's certainly been
reduced from the days when
I first was in university or got my first job.
Everyone was at it all the time.
I just think these well-known brands,
they just haven't got the power that they used to have simply because of change of
habits,
which I think was happening but was accelerated by COVID.
Also, I think, you know, advertising.
There's so many different avenues, and it's so easy to advertise.
You can start your own campaign using YouTube or TikTok or Snap or Instagram or
something.
So that's why I'm going for retailers rather.
I'd say, okay, where do they sell the beers?
You know, Walmart, Costco.
Okay, that's where I'll go because that's where they buy it.
But I think today for manufacturers, I think it's becoming really tough to get
people to, you know,
especially these global brands.
to get the kind of spread and and support that you used to have do you guys want a
bit of a
wilder take on this okay so uh you guys know about uh the the new drugs right like
the week
old bees and stuff yeah
these glp-1 inhibitors right what they do is they reduce appetite and that is why
you eat less you don't have the same attitude you
had before but do you know that studies have been showing that if you take these
drugs right you actually
drink less, you gamble less, you eat less ice cream, you bite your fingernails less.
It reduces these urges, okay?
Look at Starbucks.
Look at Unilever's ice cream business, which they sold.
Look at anything that sells anything that's unhealthy, anything people don't
want to do, and you say, okay, how much,
how big an impact can it be having?
Remember, because not everything is evenly spread.
The guys like David, who are basically running marathons, are not drinking a lot,
okay?
Guys that are basically Partly diabetic Or having Diabetes Isolated resistance Are
also more likely
To be heavy drinkers I would think You know what I mean That's probably one of
the Causes of these problems
And if you have These guys on Like you know These drugs,
what are you going to have is that these are the guys that are actually going to
reduce their consumption because the drugs reduce your addictiveness.
So I would bet in the next few years, you'd see things like Starbucks, things
that are in the fast food sector.
McDonald's, the city industries of gambling or alcohol or even tobacco are
all going to see a big
downturn.
And the reason being is that these drugs are coming and they are going to be
prescribed.
And it's like.
significant double-digit percentage of populations in the West.
And the price, of course, has to come down.
They have to be more accessible.
I mean, for example, the NHS in Britain, which is under huge pressure and has been
for many, many years,
can't afford just to dole these things out like M&Ms.
They're not at that point yet.
But as we know, with scale and with advancements, the prices will come down.
And it's a very good point that you make.
I just wonder if any of the side effects, the other side effects, I mean, what else
does it suppress?
Yeah, don't worry about it.
Here's the thing.
The actual cost of making a Zenfic, right?
How much do you think it is?
I don't know.
Tell us.
As low as maybe a dollar a month.
Really?
Really.
That is why Novo Nordisk has this huge, you know, stock increase.
That's why Eli Lilly is doing so well.
The cost of these things is like, I think at the high estimate, it's like $5 a
month.
Okay.
But it's $1 to $5 a month is the cost of making these things.
It is not a case.
It's like, for instance, EpiPens.
If you see EpiPens and they'll cost like a couple thousand rounds or a thousand
rounds for EpiPen, the insulin EpiPen you can buy for like 10 rounds.
Okay.
It's just this markups that they're putting into place here.
So, yes, I do actually think that governments are going to do this because
firstly, you reduce, oh, it's not just, by the way, amazingly,
the chance of Alzheimer's.
goes down dramatically with adipose as well.
There's evidence of that as well.
Oh, spalling.
Spalling, yeah.
Yeah.
Alzheimer's, kidney disease, it's really because most people are too fat.
That's the problem.
Yeah.
It's not about, if you reduce appetite, make people eat less, put everybody on a
diet effectively, a lot of the problems that you have, like obesity goes away,
but also Alzheimer's, also heart disease, also liver problems.
You see what I mean?
So, yeah.
I think this is going to be one of those things like, you know, back in the day,
you know, like the.
for instance, not going to just be a very popular drug, but it's going to actually
change our society functions.
That's very interesting, isn't it?
In fact, Viv, the lead article in The Economist this week is that together with
a briefing,
and it's not often that they would come out and highlight the value of a product
like this,
but they do call it, they don't call it a super drug.
I'm saying it is a super drug.
Because they identify this is real and identify exactly what you've been saying
there about the benefits
that it is going to bring.
Oddly enough, Eli Lilly came out with their numbers, and they were very good.
But there's going to be hiccups along the way, getting it to the market,
covering the issues that you brought out, the national health system, the costs and
so on, etc.
And therefore, you must look at the long effects rather than, oh, Eli Lilly missed
and knocked it 10%.
So I think the trends that you spoke about, both AI and these drugs,
they're there for a long time.
They're going to pursue.
But expect volatility.
Expect this to happen.
You can't, as I said earlier, everybody just wants this nice, smooth ride upwards.
It's not going to work like that.
Business doesn't operate like that.
All right, so let's move on to something a little more tedious, and that's the MTBPS.
And Viv,
you're very good with stats on this one.
It sent me to sleep, actually, but, you know, less income, so wider deficits, all
that sort of thing.
There was a couple of nice points about infrastructure spend and their commitment
to infrastructure, which was good.
But, Viv, anything that caught your eye, or were you like me, rather ambivalent?
One thing that did touch my eye, maybe because I'm not as keen as I should have
been, is like the amount,
the allotment for our operations in the Congo.
You know what I mean?
You guys see that?
Apparently, we have a little kind of a military existence happening in the Congo
for the South Africans.
And I wasn't quite aware of that.
Look, I mean, it's as good as you could expect.
He's basically going towards trying to have, you know, attracting more
investment, you know.
not funding all these extra little SOEs.
Also, you know, kind of cut back on the wageable, you know, which in South Africa,
as you know,
is South African public sector workers are sort of highest paid in the world with
some of the most protection in the world as well.
So that's obviously something to be looked at.
But yeah, overall.
reasonably good but like i said i was surprised by the whole congo thing yes
there are two up there and certainly certainly not
protecting the mines i wouldn't have thought okay uh dollar round is currently
17
67. the british pound against the round is 22 76 euro rand uh that's 1918 euro
dollar 108.55 british pound after its budget um 128.60 what else have we got
here a
gold price it was i think it got to 2800.
a couple of days ago, or very, very close to it.
It's down $50 an ounce today, 2,738, nearly 2% fall.
Platinum is down 1 2 3rds percent, or $17, to $9.96.
And palladium is down 17 as well, to $11.31.
S&P 500 futures, $57.63, which is now down 1 2 3rds percent,
$57.56 actually.
U.S.
10-year Treasury bond yield, 4.32%.
2%.
And the South African 10-year after the MTBPS, 9.47 cents.
So it's had a bad couple of days.
As for oil, it was down 5% on Monday.
It's now up 1.1%.
It's just above 73 now, 73.23.
Actually, 1.5% higher.
So things going on on the energy markets.
Bitcoin has also had a good time a bit of late.
That is just under 71.
David, any stocks on the JSC that you're interested in, down or up?
You know, well, you mentioned the prices of metals.
And again, you know, once more, we've been struggling to call the bottom of a market,
looking at it and saying, oh, no,
with confidence, it's turned up, it looks better.
You know, everything's looking good.
This looks like the bottom.
And then next day comes and we knock back again.
And I'm just looking at some of the, you know, some of the...
The numbers today, Sibania down over nearly 7% as well.
And it's a reflection of that fall in price and also just a bit of nervousness.
Amplats, all of those down quite significantly.
The other one you mentioned was ABM, which is down 6.4%.
So another reflection of a response to the results.
Year on year, this hasn't done anything.
Here's a big company, probably one of the biggest on the JSC.
and yet its overall performance has been very sluggish.
I'm trying to look at its overall performance this year as I talk to you,
but it gives you an idea of minus year-to-date, minus 12.5%.
That's ABM on our market.
That's a JSC.
It's the second biggest company by market cap of 2.3 trillion rand, just under BHP.
Gotcha.
Yeah, so it hasn't got that weighting in the index because most of it floats
offshore.
But I mean, it's still big.
We can deal in as many shares as we want.
Yeah, so if you actually look at some of the other miners while I'm talking on
this.
Norden's down 7.2.
Anglo Platinum's down 6%.
We saw Impala Platinum down nearly 6% yesterday after its quarterly production
report.
uh so the yeah the all the platinum miners are coming back they really are on the
upside i've got uh santam up
two and a quarter uh simpson room rest and mice we buy cars at one and a half etc
which is really nice so so
nothing there but david you're going to give us the closing jsc indices and the
value traded if you've got it yeah so
i'll
give you the value traded up for now it's uh 23 billion which is up
on the average that we've had lately.
NASPA is still dominating, but there's been quite a bit of activity recently in
banks.
Always First Rand, Capitec, Standard Bank,
also up there with the value leaders together with some of the gold shares.
But just going to the indices, the all share ended down 1.58%, which is quite a
knock.
It's taken us down to 85385.
The top 40 also down a similar amount, 1.68 at 7.7327.
And then losses right across the board.
It's only that sun time that you mentioned, which propped up non-life
insurers.
So otherwise, the miners took a hammering, led down by the platinum shares,
gold shares, and so on.
Okay.
Right across the board, we've had big losses.
which have come with sentiment in global markets.
This time next week when we chat, gentlemen,
we'll probably know almost definitively who is the next president of the United
States.
Viv, I'm not asking you who you support, I'm just asking you who you think it'll
be.
Personally, I don't know.
The certainty, I think it's possible, but I would not put a certainty down that we
would know by this time next week who the
Chulis president is going to be.
Right now, if you gave me even money and said, who do you bet on, it would be
Trump.
I think he has a slight edge.
Probably most people are putting it like 55, 60, 40, which is not dramatic, but
yeah, it's probably Trump.
But like I said, if you get to say, you know, this time next week guaranteed, I
would say it's not a guaranteed.
I don't know.
We'll have a fair idea.
David, do you agree?
Again, I'm not asking you who you want, because I know who you want, but who will
it be?
Yeah, I know.
I think it will be.
I just have this uneasy.
feeling that he's got the edge and you know why i say that is that when i talk to
rational people you
know when i talk to rational people here i was talking to a client yesterday and
uh and i see how pro-trump they are i
said we got no chance you know that they not turned away by his uh his you know
just
his whole character and what he stands for you know that they should actually support
that I think that scares me.
And I would imagine it's pretty much the same in America.
You know, for whatever reason, they're not influenced by what he does.
You know, they just think he's the right man for America.
I cannot believe it.
And Lindsay, for me to see him on the White House steps, I don't know.
I don't know how I'm going to live it.
I don't know how I'm going to live through it.
I genuinely believe you because it's affecting me quite badly, the fact that a
man could get in there.
But let's not speculate.
We'll speculate.
Next week, we'll have a decent enough idea.
But gentlemen, thank you very much for your time as always.
David Shapiro is from Satsford and Securities with Governor from Grand Swiss,
both from Johannesburg.
And that was the five o'clock shadow.
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