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 5 o'clock
shadow, and as always, on a Wednesday.
I speak to Skullclo, Portfolio Manager at PSG Wealth Old Oak in Cape
Town. Strange time of year, this one, Skull, because here we are in
mid-November,
so we're at the midpoint of the fourth quarter of 2024.
People looking forward to the end of the year.
On the other hand, there's still a lot of work to do.
And goodness me, a lot of market movements I would predict in the next six to eight
weeks.
But you've sort of got one eye on one thing and one eye on another.
Are you finding that?
Yeah, yeah.
No, definitely.
And I feel or agree with what you're saying.
I think there's going to be quite a bit of action this, let's call it, latter part of
November,
even December.
Because so many things need to happen until Trump now actually takes office.
We've seen he made announcements today on X as head of defense
and all these.
But I mean, the one thing that sort of dominated markets over the past, let's
call it week,
has been this thing called the Trump trade.
It is just unbelievable how this.
Trump trade has really moved the needle on the American
market and some of these other Western markets.
And countries, emerging markets like South Africa, China, those countries,
has been under unbelievable pressure.
How we've changed from September going into a risk-on scenario.
We just started the cutting or interest rate cutting cycle.
And it just suddenly turned around.
One person that made a hell of a lot of promises,
now really creating some havoc in some of these emerging markets.
Well, it's interesting also you talk about the Trump trade because he campaigned on
I'm going to get prices down.
But what the bond market is telling us that he's not going to get prices down.
He's not going to keep prices level.
In fact, he's going to do the opposite.
And this is a, I don't know whether you say reflationary or inflationary trade,
because bond yields have risen, not dramatically,
but they've risen, because they think that if tariffs are initiated according to his
manifesto, or his,
rather his campaign promises, there'll be 20% here, 50% there, 200% in other places.
So of course that hits the consumer and it raises inflation.
So the bond market is a little bit on edge.
So that, to me, that's the big one.
But on the other hand, last week...
was the best u.s markets week of the year so the equity traders love him but the
bond
traders don't yeah there's so many so many things i mean him talking about
uh bringing the corporate tax rate down from 21 to 15 people's done you know quite
a bit of calculations i can't
recall and sorry for the source now but uh how i i i think it was either city group
or goldman
sachs they brought a report where they look at these individual sectors, the
consumer discretionary, consumer staples,
tech sectors, and how each of these sectors should have an advantage if we
decrease the corporate tax rate from 21% to 15%.
How this could literally on the S&P 500 have a 4% difference on earnings for the
next year and
going forward.
Now, I mean, I look at this and I say, well, it's all...
all fantastic listening to all these things he's he's been been talking about
cutting interest rates
uh tax rates how you know these tariffs and and i just exactly first thing that i
i look at this
and say well this isn't it's got to be inflationary i mean you're just not gonna
just push our prices
you know coming from from china
and other countries producing these and you're not going to push our prices i mean
that's the first point
Secondly, I mean, where is he going to yes, if you cut corporate taxes,
you need to make up for it somewhere along the line because as we sit here, the U.S.
government debt is just shy of well, when I say U.S.
government debt to GDP, it's just shy of 130 percent.
That's Japanese-style stuff, isn't it?
I mean, that's incredible.
Exactly, exactly.
When Trump took
office for the first time that was in 2016 I mean they were there was already sitting
at
98% and we know and we've spoken about it last week on the UK
scenario they now at a 98 percent uh debt to gdp levels and people are extremely
worried if you look at the how the pound has has been been under under pressure
lately and that is one of the main reasons
markets are or countries are currently a
little bit worried that the uk you know maybe bit off a little bit more than they
can chew and they they had 98
that's where where trump took office in 2016.
they're sitting at 130 percent how
the hell is he going to do what he promised to be doing without just kicking
out that debt levels even
a hell of a lot more so yeah i mean what's it um uh what's it john
arthur uh from from bloomberg he had a great um he's
got a daily newsletter and he had a newsletter that he brought out yesterday
and
i thought that was what was quite a nice i don't know if you
read it where he said he's he's he's got this he's got this 1928 feeling and
and and just for everyone for people that are too young to know what happened after
1928 the biggest crash on on wall street yeah and then many
many years of not just recession but depression horrible horrible years and
that's when the far right of course
rose you And you can see, and I'm getting politics in here just for a minute, and
then you can go on with your market analysis.
What has happened this year is that almost every single election there's been, and
there's been lots of them,
the incumbent has been turned over by the person seeking power.
So even the UK, okay, the UK went from right to left with Keir Starmer.
Italy went far right.
South Africa.
The ANC lost its majority, so I had to get a coalition going.
And so it goes on.
And that's exactly what happened in the 1930s. So there are parallels.
I don't think anything like what came after the 1930s will happen again.
But there's certainly some stuff going on.
People are not satisfied, Skalk.
It's as simple as that.
Exactly.
That's where the similarity, politically, we've got some similarities.
you know, to 1928.
I mean, Herbert Hoover, and that was, I think, he was the 31st president of the
US.
So I'll go and check afterwards.
But as I can recall, I think it was the 31st president of the USA.
I mean, he was a business mogul.
He was a really, I mean, actually a mining mogul, but he was a wealthy businessman.
And how they got him in, and when I say they, the Republicans got him in.
and say, well, you need to come and run for office.
We need you.
I mean, we're looking around and things are a little bit, you know, worrying.
And a very successful campaign.
I mean, extremely successful.
And as the campaign ran towards the end, very similar to Trump now,
people were expecting him to win, which he did.
It was an absolute landslide.
Very similar this time around.
Democrats got their teeth kicked in.
But the run-up.
As the campaign was positive,
the S&P 500 were just running on this euphoria that Hoover
is going to be the most fantastic president.
He's going to make America great again.
And yeah, he got elected and markets reacted well, markets, the U.S.
market reacted extremely positive.
They still threw the money in, as you correctly mentioned.
A few months later, the great crash.
To date, if you go and Google the words great crash, you still get the 1929 crash.
And as you mentioned, I mean, that was followed by the Great Depression in the
30s.
So my advice to the listeners out there is not that history is going to repeat itself
and
because they were both bitless moguls.
That's not what I'm saying.
I'm just saying as we sit here.
The U.S.
market are traded at elevated levels.
I've released a tweet today where I look at the K pressure.
I've now recently combined the K pressure and the forward piece.
And no matter which way you look at it,
we're currently sitting at some of the most elevated levels that the U.S.
market has seen in history.
And that, to me, is worrying because...
People are not, I'm calling it insanity.
Investors are not approaching this market with sanity.
They are really throwing money out of this and saying, Trump is going to make America
great again.
He's going to do all those things which you're going to say.
I'll look at this and say, he does not have the ammunition.
I mean, when you were running 98% debt to GDP levels,
you sort of had some movement.
Now he's sitting at around 30%.
I want to see him do half, just half, the stuff he promised he'll be doing.
There's lots of promises that need to be kept and some of which won't be.
But anyway, let's get into what happened in the States today before we come to
South Africa.
Consumer prices rose slightly in October, was in line with expectations.
A 2.6% annual rise in October, as expected,
and the consumer price index gained 0.2% month over month.
But the market didn't like it.
The dollar strengthened, the bond yields have...
Well, look at the RAND, for goodness sake.
Do you think, you talked about the Trump trade,
do you think this is the Trump trade in one little microcosm of data?
Because obviously this is not to do with Trump, this is to do with world markets
and the Biden administration.
and everything else, mainly world markets, I would say.
But do you think that next year he'll sit down one day and say, OK,
the tariffs have increased the basket of the average American family, and that's
not what I promised.
I promised exactly the opposite.
And then we could have problems because the bond market falls and because people
suddenly say, well, you know,
a promise is a promise, and you always say that you keep your promises.
Yeah, I think that's going to I really just want to see how he's going to be able
to keep his promises.
And yes, the currencies are let's call it the emerging market currencies,
BRICS currencies.
We're taking sort of the hit on the Trump trade.
I mean, yes, we've had the dollar-rand again weakening somewhat, you know, again
today,
further weakening.
But when I look at the Brazilian realm They actually weaken a little bit more.
When I look at things like the Mexican peso, they weaken a little bit more.
So this is not a South African thing.
This is a dollar index trading way of… No, I wasn't singling out South Africa at all.
In fact, I'm putting together a podcast now about emerging market currencies,
emerging market debt, and emerging market government debt as well,
the ability to repay the outstanding loans.
And they were doing quite well with interest rates falling, but now suddenly…
The Treasury Department's lots of governments must be saying,
wait a second, interest rates might go up again under this Donald J.
Trump fellow.
It could happen.
It's an emerging market story, not just a South African story.
Yeah.
No, no, no, definitely.
Definitely.
I think all eyes are going to be on inflation next year.
I mean, you know my stance.
I mean, you and I have had the stagflation conversation so many, many times.
I don't think that's off the table yet.
I think one of the things we've definitely had wrong this year is
I think most of investors or let's call it professionals out there said that there's
going to be some sort of recession.
It might just be a mild one.
And here we're sitting
13th of November and we haven't seen any major recessions anywhere in the world
really.
But I do think it's going to be interesting.
Interesting year next year.
I'm going to be watching this inflation mark because, you know,
I told you about the graph where I look at the late 70s, beginning 80s, that
stagflation period.
And for the listeners out there that didn't follow our previous podcast,
stagflation is pretty much a period in a country or economy
where you've got very low economic growth, sometimes even recessions.
negative growth, you've got very low employment, and you've got high inflation.
It's a very dangerous environment to be in.
And what Lindsay has said, I mean, we might just see inflation kick up next
year,
and we know that the job market has been sort of surviving, surviving in the U.S.,
but if that thing just goes under further pressure, I think then stagflation might
just be back on.
on track.
For a policymaker, the worst thing you can have is stagflation.
In other words, a stagnant economy.
So you've got to boost it.
You've got to cut interest rates.
You've got to pump money into the system.
And then you've got inflation.
And if you do what I've just said, then inflation runs right again.
It's a horrible situation.
So hopefully it doesn't prevail.
Let's have a look at those markets that we've been talking about, because the
dollar round is now 1815.
And that's a 0.4% rise for the US dollar.
British pound 23.04, virtually unchanged.
Euro-Rand is 19.17, behaving itself.
Euro-Dollar though, 105.70, and that is a Euro falling by about half a percent
against the US dollar.
The gold price, let's call it 2600, let's give it the benefit of the doubt.
Platinum is 9.44 and Palladium 9.33.
Last time we spoke, they were both in four figures.
Now they're both deeply.
in three figures, which is not great.
What is great, though...
is that the oil price, this could save us from stagflation,
because the Brent crude oil price is down just over a percent to $71.15.
And I saw a report today from some Augustan institution that said oil prices
next year will be $40 a barrel
because the voluntary production cuts from the OPEC countries are going to be thrown
out the window.
They're just going to pump, pump, pump like Trump, Trump, Trump says.
I just want to just honour...
point if that is the case then i mean i mean after the the one company i've been
and we'll talk chat about uh
it's like sshs and and and just a minute or two but yeah in a sassel i mean this
this company has just gone from from
absolute euro to absolute zero i mean this thing has just been dropping every day and
we
looked at it yesterday where we chatted about it and and they they would start
making losses if
the oil price all price drop below $55 a barrel.
So what you just said, if that comes true, then yeah, that will be buy or buy.
If you look at the long term graph, and if you are a bit of a graphist, ignore the
fundamentals, which you can't, of course,
I think it's going to down to $30 to $40 a barrel in the next year.
And I put that out a couple of months ago to a technical analyst, and he said, what
should I buy?
Should I buy December?
put options i said no go into the new year so yeah it's it doesn't look great uh
brent crude oil anyways it's bounced a bit actually as we're
speaking about it being negative 71 32 it's only down 0.8 percent now and west
texas crude is
67.55 which is down 0.8 as
well uh what else have we got here wheat price is down 1.8 uh all sorts of copper
down one and a quarter percent now
it's only four dollars and seven cents per pound
threatening to break down below the key $4 level.
Now then, S&P 500 futures after a brilliant week last week with the Trump
trade.
It's fiddling around.
It's still above 6,000.
It's 6,000 and, as my screen furiously updates, 6,004.
It's down a little bit on the day, but goodness me, what a year it's had.
I think the S&P people will be looking forward to sending out their year-end
statements.
US 10-year bond yield, 4.415%.
The South African 10-year is 9.35%.
And the Bitcoin price, this is fascinating, Skulk, because of Trump and
Musk,
91,700, up nearly 6% today.
It is.
It's complete madness.
But good luck to those people that have bought it.
And I saw an interesting graph.
I don't know if you sent it, but I saw it somewhere on X, and it plotted...
Bitcoin versus the Nasdaq.
Bitcoin is a tech stock, essentially, if you have a look at that.
You can do that.
I know you're a very clever person when it comes to graphing.
You can do that.
Nasdaq versus Bitcoin, almost identical, Skunk.
No, I'll have a look.
You must do.
And stick it out on X or LinkedIn or something like that.
Tell me about the stocks on the JSC Securities Exchange and start with Sasol.
Yes, Cecil today had a bit of, well,
I actually had to look twice because at the end of the day,
an actual positive territory just shoved 1% up.
So that was sort of, yeah, we don't see that a lot.
But I think on the JSC today, markets still, you know, slightly negative.
We did see a bit of a recovery from resource stocks.
Companies that reported or brought out trading statements.
not a lot we had amira bringing out a well six month results um and
uh not a not a lot of action there and the share price reacted about you know 36
basis points negative um
10 cent came out with very very strongish uh third quarter results um diluted hips
per
share was up 50 percent um but you just get this feeling now that that that i
think it was for standard bank
They had a comment where they said that the market expectations appeared to have
caught up to 10
cents fundamentals now.
So you need to get big surprises now to really see the likes of 10 cents move.
NASPERS reacted.
They're still down 48 basis points for today and process down 1.13.
And then finally, we had results from...
great.
We don't have to spend a lot of time.
I just always find it fascinating to look at this little company where they did
fairly well out of
holding in Premier Foods.
The net asset value still trading, you know, 3.10, with the share price that
closed at
1.91. That's still a bit of a discount.
But here's the fun part.
I mean, 61% of Braid is pretty much Virgin Active.
So it seems like people might be going back to the gym.
They actually stopped going to the gym in COVID.
Yeah, in the old days with lockdown, you bought Peloton stuff, and now
Peloton is gathering dust in your utility room, if you're lucky enough to have one,
and now you go back to the gym so you can look at other people and say to yourself,
well, I don't look that bad.
I never go to the gym.
Are you a gymmer?
I'm not.
I'm definitely not a gymmer.
I do stay active.
I do go for training,
but I don't formally go to a Virgin Active now.
Interesting, like I said, 61% of Bright is Virgin Active now.
That did kick up.
It did seem like revenue did look good.
Earnings-wise, there was quite a nice little bit of growth.
coming from Virgin Active and Shareprice loved it.
I mean that was most probably one of the best performers today on the JSE up 5.52
percent so yeah
I think it's been a company that's been under immense pressure over the past few
years so this might just be might be a
bit of a turn of the tide.
So interesting that Braid is suddenly a gym company amazing stuff what it's how it
keeps on not reinventing
itself I mean that's far too flattering a word but anyway.
It's a gym company.
On the upside on the JC today, according to my screen, pick and pay up 4.1%,
Italtile up 3.4%,
Pan-African Resources up one and two-thirds, Harmony up one and a quarter,
Anglo-Gold Ashanti up 1.1%.
On the downside, the ones that are meaningful, Implats down another 2.1%,
Quilter down 2.1%,
and BidCorp down 2% as well.
Any others to add there?
No, you've done it.
Yeah, I've covered them all.
Okay.
Give us the closing JSC indices, if you would, Skalk, and also the value traded,
please.
So the JSC today closed at 83,803 points.
That was down 47 basis points.
The top 40 closed 75,763 points, also down 48 basis points.
And as mentioned, the resource index managed to keep itself in the green.
It was a little bit stronger midday, but did give up some of the…
the early early gains that we had like i said only five basis points in the green
then uh industrials
down 52 basis points while financials were down
68 basis points and the sa property index they took a massive breather with this
rant weakening
down 1.1 percent i wouldn't read too much in there and then the volumes not a lot of
volume today
17.75 billion value traded on the market for today It's that time of year, isn't
it?
Yeah.
Okay.
Just very quickly, the dollar ran under pressure 1816.
And this is just the beginning of the Trump residency, the anticipation of Trump
being in power for four years.
If he does do what he does, I fear for emerging markets, you know, their bonds
and their currencies.
Am I right to be fearful?
Yeah.
You need to be fearful.
I think he's definitely focused on America.
And these countries, like I said, emerging markets,
that is one of our biggest trading partners is the US.
I mean, I think they're third largest, fourth largest.
They are definitely one of our top five.
So if they're going to turn around and say, well, yes, you can continue doing
business with us,
but we're going to be slapping you with these tariffs.
Yes.
This is going to be an awkward conversation and can't be good for any of
these countries.
And you know what Trump thinks of Africa, of course, because of his comments in the
past.
Off-guard comments.
He called it the shithole.
Yeah, he called us, he said these shithole countries.
And it really doesn't bode well.
I mean, if he looks down his list of priorities, you've got China and Israel
and Russia, of course, and all those things.
And it goes down and right at the bottom, you've got Africa.
And so if there's any money going into Africa at the moment, it won't be going in
there in the future.
If there's any money going to COP, that money's gone.
So everything that is not on his agenda, anything that he either doesn't understand
or doesn't value,
is going to be gone.
And I can tell you what.
It won't be good.
The next four years will not be good for South Africa and for the African
continent, which is, yeah,
I understand his stance.
But for goodness sake, it's you can't just throw things out just like that.
Yeah, I think it's going to be an interesting conversation because because,
yeah, you're right.
It's going to be difficult.
But let's just take let's just take things like platinum and palladium just for.
interest sake.
We know that as we sit here, that we're the largest platinum producer and second
largest palladium inversely.
We're the second largest palladium and second largest palladium.
The thing is, what are you going to do?
Between us and Russia, we pretty much have, let's call it 60% of the platinum
and palladium market.
As we sit here, I don't know if that's changed, but- Russia still got slapped
with a huge amount of sanctions.
So they do get their commodities out, but it's not going to be easy to get it out.
If they're going to be slapping these tariffs and say, well, we know I'm going
to do business with Africa.
I'm telling you, it's going to be difficult to get a hold of some of these
commodities,
these BGMs, these commodities that we are producing.
Back to this is going to be very, very interesting because.
He talks a good go,
but he also says that we're going to get and keep inflation to the lowest levels
that we've seen in decades.
The two do not make sense.
They need to talk to each other, and unfortunately, this is not going to be the
case.
So, yes, I agree.
If everything he says happens, it's not going to be good for South Africa, but
I've got a feeling he's going to retrace in some of these hard talks.
Yes, he's a politician.
So of course, it's a given that he's going to break promises.
Skulk, thank you very much for your time this evening, as always.
Skulk Lowe is a portfolio manager at PSG Wealth, Old Oak in Cape Town.
And that was the five o'clock shadow.
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