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The 5 o' Clock Shadow with Viv Govender · Strictly Business

• 0:00
  You're listening to Strictly Business Podcast with Lindsay Williams.
• 0:05
  JSC has closed its doors for another day, so it's time for the 5 o'clock shadow.
• 0:08
  And as always on a Thursday, I speak to Viv Govender from Randsuisse in
• 0:15
  Johannesburg, and also David Shapiro from Sasson Securities.
• 0:17
  But David Shapiro is temporarily not with us.
• 0:18
  I'm sure he's going to join the call as we go along.
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  So let's start with you, Viv.
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  And I was going to anyway, because I spoke to David on Monday and I said to him, I
• 0:29
  put the question to him, what is it going to take...
• 0:31
  for the markets to have a hit because of what's going on in the world?
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  Is it going to have to be a small nuclear device or something like that that is
• 0:38
  going to spark a sell-off?
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  Because here we are, last night, S&P 500, all-time record highs again.
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  War?
• 0:44
  What war?
• 0:46
  Look, I think a couple of things are happening.
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  Firstly, is that we are in the midst of one of those great technological
• 0:54
  revolutions that seems to be heading up,
• 0:56
  up and away without much of a...
• 0:58
  of a slowdown.
• 1:00
  So, I mean, the demand that's coming through for things like, you know, Nvidia
• 1:04
  chips and Micron, you know, it goes BEMI and, you know,
• 1:06
  it goes to the Bloom Energy and all those kind of things.
• 1:06
  It's just, you know, hitting new all-time highs and that's pushing markets up.
• 1:09
  Secondly, we had results.
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  I mean, bank results are awesome at the moment.
• 1:13
  You know, these guys are making a fortune on trading and investment banking.
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  So, that's obviously going to help.
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  You know, you're never going to short a stock just because the world looks bad if
• 1:22
  that stock's giving you a lot of profits.
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  You know what I mean?
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  So, that's one thing.
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  Just before you go on, I want to get on to the banks because I've got to be in my
• 1:30
  bonnet about the banks.
• 1:32
  The banks are doing fantastically well.
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  I mean, some of these numbers are eye-watering.
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  But the banks are not doing the traditional banking as we know it.
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  They are trading.
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  They've got the trading floors, which you quite rightly pointed out,
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  which are making gargantuan amounts of money.
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  And also, I think in that quarter, there were $33 billion worth of share buybacks
• 1:53
  from banks.
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  So it's not so much a bank as a casino.
• 1:56
  That is the cynical view, Viv.
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  There must be other stuff going on, you know, funding AI and all that sort of
• 2:02
  thing.
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  But on the other hand, without the Trump factor, I don't think these banks would be
• 2:08
  doing so well.
• 2:10
  Yeah, look, I mean, firstly, in a large extent, banking is commoditized at the
• 2:14
  moment.
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  If you think about it.
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  I mean, it's not about a branch manager that knows your name and can deal with you
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  for most people out there.
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  It's just basically an app that you're using, and that app is pretty much
• 2:27
  transferable between a bunch of different banks.
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  It's not really a big differentiator.
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  There isn't that relationship they used to have with banks in the past where you had
• 2:37
  your local branch and your local manager that knew you and you had to do whatever
• 2:39
  business you had
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  there.
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  Nowadays, it's become a lot more depersonalized, and therefore that part of
• 2:44
  the business is unlikely to be profitable in a large scale.
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  And the second thing is that I think the pent-up demand for investment banking,
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  especially in mergers and so on, because of, like, you know,
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  Lina Khan at the FTC, she basically kind of stopped most of that stuff during her
• 2:58
  term.
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  And so when the Trump administration came in and she was, you know, removed, you
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  know, a lot of pent-up bank, you know, merger demand came through that helped us
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  out.
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  And finally, you know, the last year has been quite volatile.
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  We had Liberation Day.
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  We've had whatever we had, you know, over the last year with terms of tariffs and so
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  on.
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  There's been moving markets around and obviously banks have made a bit of money
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  on volatility.
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  It's very interesting you talk about the way that banks have changed and the sort
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  of business that they used to make money from from
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  people like you and I.
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  It's just not there anymore because of the app because I was bemoaning the fact
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  because of a technical issue with one
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  of my accounts.
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  I bemoan the fact that I didn't rather...
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  have the ability to call up my branch manager and pop in and see her.
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  She was a lovely woman called Kathy.
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  Kathy, if you're listening, how are you?
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  And she was a gentle woman, you know, and she would sit down and say, don't worry,
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  Lindsay, have a cup of tea and I'll fix it.
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  And she would fix it because I'm an idiot when it comes to certain things, believe
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  it or not.
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  And those days are completely gone.
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  So, yes, I suppose technology is changing banking,
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  but is it risky to be reliant on buybacks and the skills of your trading floor?
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  It is quite risky to be reliant on that.
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  That is, of course, something I think that probably is a more volatile thing.
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  The merger is probably more dependable if, of course,
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  the termination continues and we don't have the regulatory hurdles we had in the
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  past.
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  I do, however, think that, you know, what's happened in terms of the banking
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  sector, and it's obvious seeing the stuff happening right now with private credit,
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  that I think is one of the big untold stories out there, or the undercover
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  stories out there,
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  where there's been a lot of issues with basically the private credit market out,
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  where people are, you know, talking about,
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  you know, some of that debt might not be properly valued on people's books.
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  I think it's something that we've been better in the normal banking sector, but I
• 5:00
  think after 2008, people got a bit too nervous and too...
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  uh you know over regulated with things like basel iii and that a lot of stuff
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  moved off that the the normal big banks into like the private credit market
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  uh so yeah i i do think it's it's uh it's interesting but one thing i do think also
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  is that banking is becoming commoditized it's not
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  one of the sectors i think that's going to be making uh or the long the huge profits
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  unless they They are going to be taking the big swings with things like
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  trading.
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  You were talking about private credit.
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  I've got an interview tomorrow talking about private credit in the developed
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  markets versus the emerging markets.
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  Because, as you said, the developed market private credit asset class has come under
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  intense scrutiny.
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  I think it was Jamie Dimon, as high profile a fellow as that, was talking at a
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  conference a week or so ago.
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  And he brought it up.
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  And I saw another screaming headline, is private credit the new subprime?
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  Is it going to bring the market down?
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  So if the war doesn't bring it down, then private credit will.
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  If it's in the headlines, then it's probably not going to.
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  Let's talk about some other numbers now, specifically the tantalizing numbers we
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  had out of Taiwan
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  Semiconductor. This must have interested you very strangely.
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  Look, I mean, there was an interview with a podcast.
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  I don't know if you ever watched him, Dvokis Patel.
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  Pretty much everything he does on tech is very, very important.
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  the biggest He gets the really big interviews, Elon Musk, Jensen Wang, Dario
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  Mori, the guy from Anthropic, etc.
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  He does his big, big tech interviews.
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  And he had Jensen Wang on, I think yesterday.
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  And Jensen Wang, the interesting thing was, he's been a draw cash as well.
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  He's been pushing the idea that these companies are under investing if they
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  believe AI is coming through in the kind of like the what the market or
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  the predicting market says is coming through that rate is coming to, you know,
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  Dario Mori was like pushed quite there's a meme about how
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  He was pushed by Dvokish and kept on saying, no, we can't do that.
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  And Dvokish was saying, you're just under-investing, this is what you actually
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  believe.
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  And they did the same thing with Jensen Wong yesterday as well.
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  And the interesting thing is that even Jensen Wong, who seems to be one of the
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  most, as they term, AI-pulled CEOs out there,
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  in terms of his entire valuation of his company is pretty much dependent on AI.
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  Even he doesn't quite invest in the infrastructure and in AI at the rate you
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  would think he would
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  if...
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  He really believed the forecast that people have out there for when AGI and ASI
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  and adoption is going to be coming through.
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  And so, yes, with TSMC right now, I mean, this year price, like you said, is up 30
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  plus percent just this year alone.
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  Up in the last five years, more than doubled.
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  And most of it happened in the last year, basically.
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  And the thing is that these companies, these infrastructure companies are
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  investing and they are pushing the AI thing,
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  but they are not believing.
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  the numbers, I think, or the trends that we are seeing from Anthropic and OpenAI.
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  And therefore, there's still that continuing bottleneck, allowing them to
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  sell as much as they want to in the sector going forward.
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  Yeah, but that's in sharp contradiction to a couple of the discussions that we've had
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  in the past.
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  You said, you know, is it going to be possible to invest as much as they need to
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  invest?
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  Because the infrastructure simply can't take it.
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  Something will go pop.
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  So it's all very well saying, yes, the demand will be there.
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  But can we actually fulfill that demand because of, I don't know, energy or
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  whatever, as I say,
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  a creaking infrastructure?
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  What would you say to that?
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  The thing is that the demand is there.
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  And what's happening now is that we can't fulfill the demand.
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  For instance, if you use Claude, you've seen the kind of slowdown that's happened
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  to Claude recently, you know what I mean?
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  Yes.
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  Over the last few months.
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  And it's because they can't actually service the amount of demand coming
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  through.
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  But this is like a very, very privileged problem to have.
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  It just shows that the demand out there in the marketplace is gigantic.
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  And what you should be doing when that happens is raising your prices to reduce
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  demand.
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  There needs to be some demand destruction out there.
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  And I think that is what is the next step here.
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  And that just makes these companies even more profitable.
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  I mean, if TSMC and ASML have to increase their prices just to basically make sure
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  that
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  they can match demand and supply, that just means that they are going to have a
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  lot more profits.
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  At what stage are we in the AI boom or the AI journey?
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  I hate using that word, but I'm going to.
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  The AI journey.
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  How far are we along?
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  I mean, if you could say the same thing by using a comparison with the mobile
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  telephony market,
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  you could have shown Vodacom or Vodafone rather, seen its share price progression.
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  What would you say we're at?
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  Would you say we're at least a quarter of the way through?
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  I don't think this is a comparison.
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  I think the comparison you want to put out is like the Industrial Revolution.
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  Is this the point where we have the Industrial Revolution really taking off
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  the world?
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  I don't think so.
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  I think this is the point at which you are seeing like, you know, the moles in
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  Manchester and like, you know, a couple of places in Europe taking off.
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  It hasn't gone to like, you know, the Americas.
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  It hasn't gone around the world.
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  We haven't really seen the adoption.
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  in place in some parts of the world.
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  Like I said, self-driving vehicles, Waymo, is already in the US.
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  Have you seen them happen in the Netherlands yet?
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  I have not seen them in South Africa at the moment.
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  No, definitely not.
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  But the technology is here.
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  And you can imagine, just that alone, if the technology stopped today,
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  just the adoption of what's already out there in the world would be earth
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  shattering.
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  And the problem is it's not stopping right there.
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  We saw just last week that the announcement about Muthos and
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  all the stuff that it's doing with regards to finding zero-day exploits in software.
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  That is something that we just haven't even considered in the world, because you
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  take that technology and look,
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  it's not smarter than the smartest hacker.
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  The smartest hacker is smarter than this computer.
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  The thing is that the smartest hacker is not going to be able to spend all this
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  time finding all these hacks, and there's not many people at that level.
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  What we have right now is a commoditized smart hacker that can look at every piece
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  of software and find
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  all the low-hanging fruit when it comes to exploits and put them together and make
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  combination exploits.
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  You know what I mean?
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  No software in the world right now, big software especially, is able to be secure
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  in that environment.
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  That means all banking, all online transactions, all websites, databases,
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  if you have possible to be hacked, it will be hacked.
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  And that's already something that exists in the world right now.
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  And that won't be just the end.
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  It will be something actually smarter next year.
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  And in a couple of years' time, maybe it'll be smarter than the smartest hacker.
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  I mean, the future is here, but it's just not evenly distributed.
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  And I think that's what the stage is.
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  We're not at the stage where, for instance, Africa has electricity.
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  We're at the stage where a few plants in Manchester and in London, in England,
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  basically, have the steam engine.
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  And that, I think, is where the situation is right now.
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  So right at the beginning, goodness me, that's quite exciting and also quite scary
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  because I'll be having conversations.
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  that I won't even begin to understand.
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  I'm battling to understand the conversations I have with you at the
• 11:59
  moment.
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  In the future, I'm going to be blown out of the water.
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  But I'll learn, Viv.
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  I'll adapt.
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  Okay, let's have a look at some real markets now.
• 12:08
  The dollar round is 16.42, British pound against the round 22.22,
• 12:12
  and the euro round is 19.34, all barely changed on the day.
• 12:18
  A euro dollar, 1.1810.
• 12:21
  It's the dollar after a...
• 12:23
  A fairly decent end to the first quarter, i.e.
• 12:25
  the month of March.
• 12:26
  It was war-inspired.
• 12:28
  The dollar's on the slide again.
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  British pound, 135.30.
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  Gold price, 4,808.
• 12:36
  It's gone very, very quiet recently.
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  It's become a dollar play, Viv.
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  It's not a war play anymore.
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  It's not a central bank play.
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  It's purely a dollar play.
• 12:45
  Dollar goes down, gold goes up.
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  4,808.
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  It's up a third of a percent today, or $17 per.
• 12:51
  ounce.
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  Platinum is down another $7.23 and palladium is barely changed at
• 12:57
  $15.87.
• 12:58
  Let's have a look at oil now because with the risk on trade on equity markets,
• 13:04
  that also implies that oil will be down.
• 13:07
  But in fact, oil is up again.
• 13:08
  It's up suddenly 3%, just under 3% for Brent crude, $97.70.
• 13:14
  And West Texas crude is $93.24, which is up 2.1%.
• 13:19
  I have to look at copper because copper, the New York version of copper anyway,
• 13:23
  went to a record high over the last day or so.
• 13:27
  It's pulled back a little bit, but it's still $6.07 per pound, which is just down
• 13:34
  very slightly,
• 13:36
  as I said.
• 13:38
  Other commodities, not much going on there.
• 13:38
  The South African 10-year bond yield, 8.48%,
• 13:42
  and that is seven basis points higher on the day.
• 13:45
  US tenure.
• 13:47
  is what if a screen could work but it's suddenly frozen i'll go to the s&p first
• 13:52
  uh 70 52
• 13:54
  7050 for the june feud and that is down just a tad eight points us 10
• 13:59
  year now if i can get it no it won't do it for me uh bitcoin has had a bit of a run
• 14:06
  recently got up to 75 000 earlier on
• 14:08
  today it's just above 73 000 at the moment Right, I've got to look at the JSC VIV.
• 14:12
  I don't know if you've been watching it.
• 14:13
  It hasn't been a busy week for results.
• 14:15
  In fact, there's been barely any results out this week.
• 14:19
  So it's been very quiet, especially with the gold price and the platinum price
• 14:23
  doing what it's doing.
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  And so I've got on the upside Harmony, 4% better.
• 14:29
  Boxer, the retailer, up 2.7%.
• 14:32
  Mr.
• 14:32
  Price up 2.6%.
• 14:34
  And on the downside, Valterra, 5.5% down.
• 14:37
  Northam's.
• 14:38
  Down three and three quarters of a percent.
• 14:41
  So it's the white metal producers going down.
• 14:43
  Otesia is a 3.6% loser.
• 14:46
  Alphamin down 2.9 and HCI down
• 14:50
  2%. Any other corporate stories that have caught your eye since we last spoke, Viv?
• 14:58
  Not really.
• 14:59
  I mean, I think the big thing I have to say is that, you know, the reason that the
• 15:04
  market's kind of down,
• 15:06
  it's just like a rule of thumb I have at the moment is you want to sell at the end
• 15:07
  of this week.
• 15:08
  Every week, Friday, basically, the S&P ends up negative.
• 15:11
  I don't know if you noticed that in the South of War.
• 15:13
  So basically, we've had a very strong week.
• 15:15
  We're up about 10% from lows in the market.
• 15:18
  And we're heading into another weekend tomorrow.
• 15:20
  And the market, I think, is probably going to set up.
• 15:22
  And that's probably why we are seeing oil prices higher.
• 15:24
  And that's probably why we are seeing...
• 15:25
  you know, the kind of movements we're seeing at the moment in markets.
• 15:29
  It's just because it's the end of the week, you have two days when you can't do
• 15:35
  much, and you're going to be, you know, quite brave to be,
• 15:37
  you know, as fully in the market as you were maybe Monday.
• 15:40
  Yeah, very good assessment.
• 15:42
  Okay, let's enjoy the relatively quiet time.
• 15:45
  And Viv will speak again next week.
• 15:47
  Just very quickly, the all share on the JSC today closed down half a percent,
• 15:54
  118,708 and the top 40,
• 15:56
  110,000
• 15:58
  833 and that was a 0.6 percent loser thanks very much for your solo efforts
• 16:02
  this afternoon viv
• 16:04
  governor is from rand swiss in jahannesburg and that was the five o'clock
• 16:09
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• 16:11
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