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 Thursday, I speak to David Shapiro from Sasson Securities and
Viv Govender from RAND Swiss,
and they're both in Johannesburg.
And David, I'll start with you, because it's been, it's been a busy week, and
we'll start with economic stuff, because first of all,
we had the Fed Minutes, and secondly, we had, no, we didn't have the Fed Minutes,
sorry, we had...
We had CPI and then we had Jerome Powell before Congress.
CPI being a little bit stubborn, ticking up to 2.9% and core inflation, I think, 3%
or the other way around.
But whatever, it ticked up fractionally.
Is that a worrisome thing for the markets?
No.
No, the markets are basically brushed it aside.
And if you look at the S&P at the moment,
it's up yesterday as well when the CPI came out.
I thought that there'd be concern.
I thought that the market would take a bit of a knock.
But at the end of the day, it recovered whatever it had lost and ended up almost
flat.
And I think, look, the PPI was out today without getting too technical.
And just reading commentary, the view is that it didn't add, you know, the Fed
watches the PCE,
which is the personal consumption expenditure.
They use that as an indicator.
And from the numbers that have come out.
it looks like that's under control it's not going to go down this year but it'll
probably level out and it won't
be uh there won't be massive increases but bottom line to get to that is that is
unlikely to be
any reductions in the in interest rates but you know to cut to the chase markets
are just brushing it aside and carrying on and and picking up and i'm just looking
now the you know the the nasdaq is up
all the indices up Shares, equities are going better.
I haven't looked at the bond market yet.
It did kick up yesterday, but I haven't seen.
Or 51, I think, the 10-year, which is behaving itself.
It is behaving itself.
And that's the best way we can describe the market.
And I think from now on through to the next end of the year, we're going to be
driven by economic growth,
you know, how the US economy is getting on and how companies are doing.
So I think.
Taking it all into consideration, all that you mentioned, we're okay.
That's the best way I can describe it.
No major sell-offs, no major worries.
Okay.
Viv, would you concur with that?
And have some specific reference here to the Magnificent Seven and also AI-related
stocks.
Because after the flurry of announcements, we're going to spend this and we're going
to spend that on research and development.
Has there been any fallout?
Has there been a little bit of a...
taken a back sort of stance saying wait a second how are you gonna justify spending
all that money what's been happening
well uh well my i do you know i do run an ai portfolio um which is not basically
looking at some of the smaller stocks is
basically investing in some of the biggest ai companies out there yeah and year to
date we're up nine percent and
this is basically the last six weeks so you can imagine that it's it hasn't
exactly been negative for these things
um so yes i mean the one thing i've come to the conclusion of looking at the latest
like stuff coming
through and uh i'm more convinced than ever that there is no
wall uh with ai at the immediate future meaning that as these guys put more money
and you're gonna get better and better basically
products coming out uh which is going to translate into you know more and more
activity more and more impact and therefore
more valuable companies so uh some of the bottlenecks that we were talking about
like last year things like for instance uh you know
be around data there's no more human data to basically mine because we use the
entire internet that's not a problem anymore uh spheres about
basically um you know the expense of some of these models deep seek if anything just
showed that you know a little bit big innovation is
just increasing you know a pace uh these
guys yes they did copy a lot of stuff from the americans and they it did like call
itself you know uh gpt at some point in time
but it obviously has you know innovation and it's coming from china And I don't
think that these Chinese, because of the way they've structured it,
they've basically made this all open source.
Whatever the Chinese have invented is going to be copied by the Americans.
As much as they want to say that they are the leaders, they are going to copy the
Chinese innovations as well.
So this is just going to continue at pace, I think, at least for the foreseeable
future.
So I have no doubt that this is basically, I have less doubt right now than I did a
few months ago,
that this technology is just going to be gaining this year more than we've ever
seen.
Very good.
Just staying with you, Viv.
There was an AI conference in Paris.
I still don't understand what it was about, and I didn't understand what J.D.
Vance, as they call him, the vice president, said.
Did you get anything useful out of Paris?
Yeah, basically he came out and said the Europeans can't threaten American
companies or slow them down by regulation.
What has been happening is that the Americans have been innovating and been
producing mostly AI stuff.
There's one company called Mistral, which is a French company that has done some
really clever things.
And there's no doubt that the Europeans, just like the Chinese, have a lot of
brainpower.
It's just that the Americans are the ones that can actually commercialize the stuff
properly.
And he's basically come out and said that, you know, we are going to innovate.
And if you.
I think you're going to stop our companies by, you know, putting things like, for
instance, the protection of, you know, personal information stuff out there,
all the other kind of things that the Europeans have been doing.
We are not the Biden administration.
We will fight you on these things.
And which I think has been seen very positively by the AI companies, but not so
positively by the Europeans.
OK, David, a couple of things on the JSC today, which you can skim over if you want
to.
But if you've got something to say, South 32, 5.4 percent higher.
The one that caught my eye, though, is British American Tobacco.
It came out with its preliminary results for the year ended 31st of December last
year, 8% down.
Did you read them?
You know, I don't think that's unexpected.
I mean, I don't know what the pure numbers were.
I went, I skimmed through, literally skimmed through them.
Yeah.
And, but, you know, it's, how can I say this?
You know, really, you're in an area, even though they're coming out with these
smokeless ones, and I hope they can,
because I never understand what they are.
All I know is… Well, the vapes you mean.
You're vaping.
No, but the other kind of slow burning and so on.
It's an industry that nobody wants.
You know, I know that European smoke, and I think in emerging markets they smoke,
and maybe in China they're big smokers.
I don't know.
You're not a smoker.
I know that.
But, I mean, is this a company that is going to…
just eventually either have to either reinvent yourself which is trying to do or
or disappear completely uh
viv quickly before you go back to you david sorry one factor yeah yes it's down
eight
percent today but yeah but basically year to date so the last month and a half
basically it's up five percent the
market was expecting some you know reasonably good results and in the last
year it's still up 23 24 percent uh
the This is a stock that people understand what the future is.
They think that it's going to be going towards zero eventually.
But until that point, it's giving you some solid returns.
And the market does understand, I think, that it's declining industry, but a
company that's going to make you money over time.
And that's why we've seen such a huge uptick in the last year.
I think the market is maybe expecting a bit too much from these results.
And that's why we saw this pullback today.
Okay, David, you don't understand what's going on, but would you say that Viv is
correct?
Eventually, it'll probably fizzle out or get taken over, get reinvented, whatever
it is.
But for now, you know, good dividends and share price performing well.
You know, it's one of these stocks, yes, because they make cash and they make very
high margins on the products they sell.
But it's a business where kind of, you know, volumes are going down.
People are not smoking like they used to smoke, or they may be, but it's certainly
not the kind of company in the past.
And it's also, it's a company where the authorities will keep putting pressure on
them.
You know, there's going to be ongoing cases.
They might have got a little bit of a kick because in America,
Trump has withdrawn the ban on menthol, which was a very popular cigarette.
So I don't know, I don't follow it.
You know, it's one of these companies that I say, I don't want to be involved in
smoking.
and yet most of our large institutions in this country have very high exposure to
it, together with,
because of exactly what Viv said, you know, and I said, okay, you know, this is,
why do you want that?
And all it does is, I think, exposes just the few options,
how few options we have in this country, you know what I mean, in the market, that
you have to go for a cigarette company.
I know Philip Morris and there are a couple around, but...
Honestly, this is literally a dying industry.
Okay.
Talking about Trump.
But I just, you know, oh, God, you know, British American banker.
Yeah.
Talking about Trump doing something, which he were.
He's so petty.
Because Biden introduced this banning of single-use plastic straws, Trump says, no,
no.
He says, have you ever tried to drink a drink with a paper straw?
So he's.
unbanning single-use plastic straws.
I mean, this man is such a child.
But on the other hand, and this is the interesting one, what he did last night
was less than childish with, what's his name,
Putin, because...
It has been reiterated by his defense secretary that no matter what negotiations
they go into, Zelensky,
Trump and Putin, they will not get their land back.
Ukraine will not get its land back that's been taken by the Russians.
And it's not realistic to think of them going back into
NATO. I know you watch this keenly.
That was a very interesting submission by Trump to Putin. In other words, he's
submissive to him.
You mentioned a negotiation between Trump, Zelensky and Putin.
It's a negotiation between Trump and Putin.
Yes, exactly.
He will inform Zelensky.
That's the term he used.
He said he will inform Zelensky of the outcome, basically.
Look, I mean, from a purely, no, forgetting about the market, sorry, the
ethical thing, which is obviously very one-sided here.
We know who the good guy is, we know who the bad guy is, and who's in the right and
who's in the wrong.
And that's obviously Russia's in the wrong, Ukraine's in the right.
From a market point of view, this is actually positive for the following
reasons.
Firstly, it's going to bring not just Russia's oil and stuff back into the
market.
It's going to mean that what Ukraine has, you know, in terms of exports and such,
will be more easily delivered to the market right now if a deal is made.
Ukraine is still a massive producer of agricultural products.
That's going to be, you know, obviously bringing down the price of some of these
things globally.
Sorry?
No, no, no.
Sorry, go over.
And that will be positive for, I think, all prices will come down.
Inflation might come down a little bit based on this year.
And the more important thing is that if we do see supplies of energy going back to
Europe,
it's going to mean basically Europe is not going to be quite as greedy globally as it
has been with regards to energy
products.
And that might also mean a positive effect for emerging markets because it will
reduce the demand and therefore reduce the price of these emerging markets.
And for the U.S.
point of view as well.
It's probably going to be negative for demand for their commodity.
Obviously, they're the world's largest producer of fossil fuels,
but it could actually turn their currency weaker, which might be positive for them
as well.
So overall, from a market point of view, this is the positive.
But from a justice point of view, this is obviously a case for the bad guy one.
I was going to ask that because, you know, what happens to Russia?
Are relations now normalized?
Is there a peace deal?
with giving away half a Ukraine or a third, whatever it is, you know, to
Russia?
Are they now going to behave themselves?
Are the Europeans going to trust them?
You know, yes, gas will flow and other things will flow and it will bring down
prices of commodities.
But what is Trump's outcome?
What will happen to Russia?
Are they going to be allowed back into the Olympics?
Are people going to treat them in the same kind of way?
Are the oligarchs going to be let loose?
everything freed, you know, all the assets that have been marginalized, frozen,
sorry,
I couldn't think of the word.
You know, so what's going to happen?
I don't know.
That's an interesting point you make, actually.
I don't think they can just say, oh, well, you know, that was just a slap on the
wrist, and now that
Putin and his henchmen have stopped the war, then you can have your yacht back,
Mr.
Abramovich, or one of your 11 yachts back, Mr.
Abramovich.
It's a very interesting question, David, because a lot of the money, actually,
that they recovered has been used for Ukraine in some way.
So they're not just going to say, oh, sorry, here's your 10 billion back.
Yeah.
And what about the ICC?
You know, Mr.
Putin is a criminal under the, according to the ICC, he can't travel anywhere.
So what's going to happen?
They're going to say, no, he's not a criminal.
He can now go wherever he wants to.
I know America is not part of it.
but america that's not your part of it america is starting to basically sanction
the icc because of what's happened in israel yeah so unfortunately
unless you know europe basically has built up a a kind of a power base that is that
is based on the
idea that you know their regulations and their uh you know laws etc will
be backed up to something by the americans but if you take out the american support
for these things i don't know the europeans alone are enough to do much in
the
world um you know the economies are weak uh they have internal strife,
we're seeing basically people like the AFD, Marine Le Pen,
you know, obviously Oban in
Hungary, they are much more pro-Putin than the current administrations everywhere.
I think that without the American support, the Russians may not have the same kind
of, you know, soft power,
whatever you want to call it, like the unbix, etc.
that they had in the past, but I don't think you know 10 billion or so here are
there for these oligarchs it's going to matter when the
oil starts flowing again and you know now they have access to the european resources
of the ukrainian resources as well yeah and what's people
going to do sit back and say okay i'm going to retire And we're going to be a
well-behaved nation from now on.
Not going to happen.
No, he's there for life.
He's there for life.
Viv mentioned Israel, David,
and I watched a live press conference with Trump and a gaggle of reporters around his
desk in his favourite part of the
White House.
And he said it was almost as though he made it up.
He suddenly thought of this because he said,
if they don't release all of the hostages by 12 o'clock on Saturday, then...
that all hell is going to break loose.
And then he thought, that sounds like quite a good idea.
And he actually said, you know what, I think that's quite a good time.
So he'd made it up on the spot.
He repeated it four times, and he repeated, all hell will break loose three
times.
So he got very proud.
And then I think Netanyahu must have been listening to this, and the right wing in
the Israeli cabinet must have said, yeah, this is good,
we like this.
But Netanyahu just stood.
He didn't say all the hostages, he just said the Jewish hostages.
So he was taken aback by this as well.
First of all, Saturday is Shabbos.
Exactly.
Holy day.
So why he chose Shabbos, I don't know.
He could have chosen Sunday.
But he did.
I saw that.
He just said, you know, if they're not by Saturday, 12 o'clock or something like
that.
He made it up.
He did make it up.
And you know what happened?
Hamas have listened.
They will return hostages.
Yes, but not all of them like Trump wants.
Just the ones that they agreed to.
yeah that's that's another fascinating thing i mean we could talk for hours about
the riviera of of the middle east
but one thing you mustn't forget here is what he's done with usaid right it's
incredibly painful to
jordan the jordan the jordan jordanian sorry have basically built their budget
around the
idea they get this money from the us the fact that he's gone up and taken us out is
going to it means that they are absolutely vulnerable to anything
he wants them to do And so the idea that the Jordanians are basically, I mean,
have the rug pulled from under them.
And I think that's one of the things that's going to be very important going
forward.
Because he wants to try and do things that move people.
Where's he going to move them to?
Probably not Egypt, but maybe Jordan.
And the Jordanians, like I said, have no choice.
He's going to put them in the Sinai Desert or the other deserts.
It's another thing he made up.
He said when he was talking to King Abdullah of Jordan, he said...
Well, we've got a parcel of land in Jordan and we've got a parcel of land in Egypt.
Now, I don't know where he finds these parcels of land, as you say, unless it's a
desert somewhere.
But I'm thinking, OK, you've got a parcel of land.
There's no infrastructure.
There's no water.
There's no sewage.
There's no electricity.
There's no communications.
There's no roads.
There's no houses.
So who's going to pay for this?
I don't know.
It's unbelievable, this man.
You know what happened?
That's why I say every day we've got something.
And you try and put it all together and kind of work through it.
It's impossible.
And, you know, you wake up to something new every day.
It's fascinating.
I mean, it'll be a very sad day if he ever does leave the White House, although the
way things are going,
he'll probably change the Constitution so he can go for a third term.
But we'll see.
Let's have a look at the markets now, gentlemen.
Dollar Rand is 1851, ahead of next week's budget, of course.
We've got the British pound against the Rand, 2315.
And the Euro Rand is...
19.30 euro dollar 104.30 which is virtually unchanged from last night and
British pound is
125.10.
Okay gold price is doing well again it's 2,919 up 10 dollars an ounce and somebody
told me yesterday who's the most rabid
gold bull I've ever spoken to he said that Anglo-Gold Ashanti is up 44%
and I thought what over the year he said no just this year it's up 44% which is
quite a staggering move.
and i still i still can't quite believe it the platinum is 1046 up another seven
dollars and
palladium is also going back into four figures
10 11 per ounce up nearly three percent on the day now what else have i got here and
the
crb index i'm sure i had that up there somewhere but i noticed that the oil price
was down 0.7 anyway uh south african
10-year bond yield again ahead of the budget 10.82 percent
which is a decent rise in the yield, and that's bad for the bonds, obviously.
U.S.
10-year is 4.55%, we'll call it.
S&P 500 futures, they were looking a bit dodgy yesterday, currently bouncing back
quite nicely,
up a third of a percent to 6,093.
And, yeah, that's it, really.
Anything, Viv, I wanted to ask you about Tesla, because somebody said to me in an
interview, he said, Tesla's rolling over.
No wonder, because Mr Musk is so busy with doing other things.
Is this true?
Has it come off the boil a bit?
Not just that.
I mean, he's look, Musk is basically now Trump's, you know, kind of proxy.
You see, Christina Friedland of Canada talk about the fact that if Trump
basically tries to push tariffs on her,
the first thing she's going to do is she's, by the way, was Justin Trudeau's
second in command, effectively, in Canada.
And she's told me she basically stabbed him in the back a few months ago, causing
him to announce his resignation.
But she said that what they're going to do is they're going to basically go after
Trump proxies.
such as tesla and this and she says she's discussed the idea of
100 tax on tesla not just in canada but also with european partners as well so
look he's he's gotten
a very bad reputation because of this but look it doesn't really matter that the
price of tesla quite frankly the value fundamental value of tesla if
all you thought was tesla was a car that sold these electric also a company sold
these electric vehicles electric cars there's
no way the valuation should be anywhere near this not only is tesla the most
valuable car company in the world at the moment
it's more valuable than every other car company virtually combined it doesn't make
sense in the world like this the only way tesla is this valuable is if
you believe ai is going to come about you're going to have driverless vehicles
number one which i don't think is that difficult to assume but even with
driverless vehicles i'm not sure it
justifies this price you actually add in the autonomous robots as well to justify
the current valuation of this company so
it is a play on things that are beyond just normal car sales at the moment but
cost of the moment is down in
china i think 10 11 it's down massively in europe I mean, some places down, like, you
know, more than 50%
in parts of Europe from year on year, from January this year to January last year.
And how much of that is due to the fact that Musk right now has a bit of a
toxic...
Yeah, Tesla registration numbers so far this year,
since he sort of cozied up with the alternative for Deutschland party, they
have plunged.
People hate Tesla.
So...
Righto.
Let's have a look at some of the shares that have moved today on the JSE.
On the upside, South32 up 6.4% now on the close after the auction.
Mondi up 4.75%, Alphamin up 4.25%, Richemont, David, you must love these
luxury goods.
I saw your LinkedIn notice.
This is the big surprise of the year.
3.2% up for Richemont and DRD Gold up 3.2%.
You're itching to tell us about this.
No, you know, there has been a surprise.
be the year of luxury.
When you look at the companies like Richemont, Richemont is now the second
biggest company on the JSC in terms of market cap,
exceeding the British American tobacco ABM and all the miners.
Only BHP is bigger.
No one thought, listen, the results haven't been outstanding.
What has happened though, they're certainly nowhere near as bad as everybody
had anticipated.
So we've seen, even yesterday, Kering came out with their numbers, which were, I
thought, very disappointing.
But what happened, they showed a slightly improving trend in the fourth quarter.
Shares were up 5%, 6%.
We've got Hermes, Hermes as I would call them, coming out as well, which is another
luxury company.
If you look at Ferrari, the same thing, super results, incredibly good numbers
that came out.
So, you know, I think this is...
taken everybody by surprise, they're solid companies.
I think what it also shows is that they're not really impacted.
I'm talking the upper end of the luxury market, not really impacted by economic
conditions.
But I will add one thing, is that even some of the lower ones, the smaller, you
know,
the lesser luxury goods like Burberry have done incredibly well, also showing
turnaround.
So, you know, for me, it's been a complete surprise.
to see the strength that these shares have shown well a welcome surprise and a good
call david despite the fact you had a couple of wobbly moments last
year on the downside on the jse a british american tobacco down eight percent
northern's down five and three quarters implants down four and a
quarter uh despite the strength of the white metals and sassel down 4.2 percent
closing indices please david
we'll give that to you so we ended down 0.11 percent at
87841 um resources marginally better You know,
it wasn't a great day in terms of gains.
It was mainly a negative day for the reasons that you mentioned, you know, that
we did see,
you know, Subanya and Cecil and British American Tobacco, all those that do move
the needle down,
they were under a bit of pressure.
So generally financials also coming off the boil as well.
We've seen that as a trend, as well as retailers, Lindsay, this year, having had
a very good 24.
also coming off the boil.
So a couple of positive elements, as you mentioned, in consumer discretionary,
which were
Richemont and Mondi also had a pretty good day today.
Process NASBUS, also positive.
So the bank index was down 0.7%.
Industrial index up 0.1%. Hardly there as well.
Property also under a bit of pressure.
I'll give you the value traded.
Yes, please.
It's been quite good recently.
It has been.
We're at about $25 billion today, which is above usual.
This is a lot of trade in British American tobacco today, together with NASPERS as
usual.
And the banks are always among the big traders.
Capitec, one of the favorites.
Well, listen, Capitec's number two now.
First-hand, can't be taken out of the bank.
Unbelievable.
In terms of market cap, yeah.
What a story.
And people were writing it off five years ago when it was down at 700 grand a share,
600 grand a share.
But now, look at it go.
Gentlemen, next week, we will be talking about the budget, which is February the
19th. So we'll get very essay-centric next week.
Should we get our hopes up very quickly, Viv?
Should we be looking forward to an expansive budget to get growth going?
No, I think considering all the stuff happening in the world,
the fact that the South African government is looking at doing things like the NHI
and so on is absolutely insane.
We are in, you know, some of the things that have been done, some of the moves
that the government is doing at the moment really don't make
sense from a long term strategic point of view.
I don't know whether it's the fact that, you know, they try to roll the dice
because the party, the ruling party is falling down in terms of popularity.
And they're basically pushing through things that they think is going to boost
their populism out there because they think they're losing things to,
or protests to MK and to the EFF and so on.
Or, you know, this is actually part of some longer term strategy.
I don't know.
But I do think that, you know, considering what the economy is, considering the
growth rate in the country, the fact that we are going to go up 1.8% this year,
which is not anywhere near enough, you know, to anything about our employment
rate.
And we want to go and do a spending action like, you know, national health.
It doesn't make sense at all.
Okay, well said.
Gentlemen, thank you very much as always.
Viv Governor is from Renswist in Johannesburg, David Shapiro from Sasson
Securities, and that was the 5 o'clock shadow.
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