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The 5 o' Clock Shadow with Schalk Louw · Strictly Business Podcast

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You're listening to Strictly Business Podcast with Lindsay Williams.
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The JFC has closed its doors for another day, so it's time for the five o'clock
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shadow.
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And as always, on a Wednesday, I speak to Skulk Lowe, Portfolio Manager at PSG
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Wealth Old Oak in Cape Town.
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I've got a question for you, Skulk, which I want you to consider carefully.
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Several questions, actually.
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Question number one, would you agree that cracks are starting to appear in the
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Nasdaq led by AI-associated
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stocks?
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Do you agree with that or disagree?
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No, I definitely agree with that.
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Definitely.
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Okay.
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Now then, those cracks.
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This week could be a week that papers over those cracks and everything is fine and
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everything
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goes up again.
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Or with the Fed meeting tonight, or rather giving their decision tonight, they're
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meeting at this moment, with big tech stocks coming
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up with their results and other companies as well, of course.
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Could this be a week that opens the cracks wider and creates more cracks and
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something more significant?
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Or, as I said, are they papered or plastered over by what's going to happen
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in the next 48, 72 hours?
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Your answer, your immediate answer, please.
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Yeah, I think you had so many questions.
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So I sort of need to break them down.
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So, yes, we waited for Kevin Walsh.
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He's going to have his first announcement as head of the Fed, chairman there.
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And as we sit here, I mean, we went into this day.
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with the probability of, let's call it the 30%.
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At one stage, it was 36% probability that we'll see a rate hike.
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Now, 33-odd percent.
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So I think, as expected now, one could say there's a two-third probability that we'll
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see an unchange, and I do think we're going to see the unchange.
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By the, let's call it, if we should see that hike, I think this could scare the
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market.
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I really think it could.
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I think...
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And one could say that that could just be the one small straw that breaks the camel
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back or whatever.
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Now, I think the crack's really there.
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I mean, we've seen the likes of the SK Heinrichs, the Samsungs, these companies
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that because people are telling
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me, constantly telling me, well, emerging markets has done phenomenal this year.
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Well, it's not emerging markets.
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It's basically three stocks within the emerging market index.
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AI stocks.
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I mean, and just go and pull the MSCI Emerging Market Index, and you can use an
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ETF, and
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you'll see the retracement that we've seen over the past two weeks or a week and a
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half.
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Just go and pull your Yig map of the likes of the semiconductor stocks.
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Have you seen the KOSPI, by the way, talking about these markets and these
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indices that are so reliant?
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on the AI stocks.
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And when it goes well, it goes very, very well.
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And when it goes badly, it's disastrously bad.
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Have you seen the KOSPI?
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Yesterday, 10% down.
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Today, or rather this morning, another 6% down.
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This is important stuff.
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No, I mean, just some matchbox
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information.
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And this is what Lindsay is referring to for the listeners that now need to
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frantically...
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find some AI to type in KOSPI.
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The South Korean index, I'm just going to look at it, it was by far the best
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performing market in
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2025.
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And then usually when you see that type of movements coming from any market, one
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could say that there'll be some sort of just
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relaxation for the following year, but not the case.
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As we sat here, I think a week ago, and it should still be the case.
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The Korean market or South Korean market has pretty much done double what the
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second
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best market has done this year.
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And that's just basically two stocks.
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That's Samsung and SK INEC.
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I mean, also, I mean, if you, we've had this conversation two weeks ago.
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If you go and look at what the Chinese market, Chinese market was the largest
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market in
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the world.
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emerging market in the world in 2020, the weight of it in the index was
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42%.
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That's 2020.
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And just by the way, the second largest emerging market, but quite a bit smaller,
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I think on that stage,
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something like 16 or 17% of the weight was Taiwan, not even Korea.
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Now, as we said to you, it's the largest market in the world,
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the major market in the world is Taiwan, second Korea, and only third is China.
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making up only just 17% of the total emerging market index.
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And that's just the AI trade.
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Because if you take out Taiwan semiconductors, you take out SK Hynik, and
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you take out Samsung,
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I don't think that the emerging market index would have been a great place to be.
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Isn't it amazing how fickle traders and investors are?
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Because it was only three, four, six months ago that people were saying, look
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how much they're spending on CapEx.
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Isn't that fantastic?
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We've got to buy this thing because it's going to keep on growing because of all
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that CapEx and AI
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applications will start making these companies fortunes.
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And suddenly people are saying, wait a second, why are you spending so much on
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this and where are the results?
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Where is the return on CapEx?
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That's what they're saying.
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And that's the sort of mood.
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you There's been a U-turn, Skulk.
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Yeah, you made me look now.
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So while we were chatting, I just brought the Gospi up.
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And yes, you know, obviously the plot thickens.
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So the index a year ago, and it was trading just over 3,000, just got 3,200
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points.
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At one stage, it went up to over 9,000 points.
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Goodness.
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That was in June.
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That was a month ago.
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When you look at it year to date, over the past year, it actually still, as we said,
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is up over
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75%.
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That's after today's retracement.
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If you look at it over the past month, the KOSPI has dropped just shy of 35%.
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So it's a bear market now.
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From its peak to where we are now, we're in a bear market in the KOSPI, which is
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not the same as the indices that you track, you know, the
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semiconductor index, etc., places in Philadelphia.
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all these ones that we don't normally speak about in our in our headline markets
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feature but that is terribly important
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no no no for sure and and you started off this this this podcast uh with the
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question are we you know starting to see some
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cracks well a 35 drop in any market it's not just a crack that's a chasm i see
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that's a that's a crater
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okay so have you agreed on that so this week could be a defining week for the
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trend of the market a bounce back because everything's fine, or
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the opening of the cracks.
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We've agreed with that.
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All right, let's come home now, because this is, every territory to you is
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familiar, Skunk, because you're so well-read, but
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particularly on South African resources stocks.
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Valterra, please.
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Oh, wow.
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Yeah, it's, I liked it.
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And not just because the share price reacted today, and for the listeners that
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didn't.
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see what Valterra did.
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I think on one stage it was up, I think, over 8%, if I'm not mistaken.
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And eventually went and settled up for the day 4.6%.
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So, we've seen two miners report over the past, let's call it
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24 hours, we had Kumba, which is a slightly different metal that they mine,
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and also Valterra.
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Now, let's start with the first.
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So that was as we were waiting for Volterra, I was sort of looking
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at Kumba, and I was disappointed.
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And not just because, because, yes, people will tell me, well, the iron ore price is
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not what it was trading
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three, four years ago.
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That's the reason.
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No, it's not the reason.
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Because when you look at the… the actual iron ore price over the past, let's call
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it 24 months, it's done nothing.
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It stayed at these current levels.
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Yeah, maybe
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a bit less activity than, but still, it's not this massive, massive retracement.
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But when you look at the actual results, when they talk about the total production
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was down something like
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3%, total sales, that was down 1%.
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You could see that's not just an underlying commodity price problem.
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There's some operational problems there as well.
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So I'm not going to focus on Kumba because you asked me about Volterra.
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Then Volterra came out.
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Oh, man.
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I mean, total metals.
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We were looking at the total production was up 4%.
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When you look at the PGM production, that's the refined one.
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The refined BGM production, that was up 25%.
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The sales increased by 18%.
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And then when you look at the all-in sustainable cost, that dropped by 21%.
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That's what you want to see a company do.
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When you see, and a lot of people will say, well, come on, Skulk.
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I mean, we all know.
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Look at the revenue.
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You're focusing on that 90-odd percent growth in revenue, 400% growth in EBITDA,
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and
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headline earnings per se.
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Do you see that?
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1,634% growth in the headline earnings per se.
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I know.
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I know when you look at the first six months of last year, which was 1st of
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January to the 30th of June,
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we didn't have that massive pop in the underlying PGM prices yet.
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It started, but it wasn't.
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wasn't there yet and and we've we've still had way higher underlying pgm prices for
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the first six
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months of this month yes softer than what it was three months ago but still way
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higher than the year year on
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year uh the previous year but when you look at the results and i think this is
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why the market looked at
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this and said we are excited about this because in this environment they use this
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stronger PGA Improv environment.
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to increase their production, to increase the actual sales, not sales in terms of
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turnover, sales in terms of
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volume.
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Because before Anglo-American, sorry to interrupt, before Anglo-American got rid
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of their platinum division,
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it wasn't on a sort of a go slow, but there were certain activities that had
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been closed down.
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In other words, they weren't producing as much platinum as they, or palladium or
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rhodium, whatever it is,
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as they are now.
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So it takes a while to, you know, recommission a shaft or a mine.
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And they seem to have done that over a period.
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And now you're seeing the benefits of that.
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Is that what you're saying?
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Yeah, definitely.
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Speaking of which, I mean, funny enough, what these two companies, namely Kumba and
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Volterra, has got in common
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is they were both held by Anglo-American beginning of the last year.
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Yeah, it wasn't beginning.
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Yeah, beginning of last year, they were still held.
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And I think if they could go back now, they would have probably say, well, let's
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keep Amplatz,
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now known as Valterra, and let's rather get rid of, let's get rid of Kumba.
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Because, I mean, Ewa Shapiro usually talks about those graphs that goes from the top
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left-hand side to the bottom right-hand
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side.
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So that's pretty much Kumba.
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Anyway.
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Anyway, just before we leave Valterra, because we'll have to in a moment.
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I want you to look at the summary and the comments from the CEO.
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Did he talk about deficits?
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Did he talk about PGM deficits lasting for a couple of years?
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Because that's the basis of a lot of people's arguments.
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Their sort of headline arguments for holding PGM stocks is that there will be a
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demand supply deficit.
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In other words, the supply can't keep up with the demand and stockpiles are low.
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Was there any comment on that in the summary?
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I went through it very quickly.
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So you made me look now.
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I'm trying to open it.
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But no, I haven't seen anything on that.
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And what Lindsay is referring to is that we've seen, despite the fact that the
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underlying
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PGM prices remained low until the beginning of last year, we had massive
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deficits
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in 2025, 2024, and also now it seems like we've got a big deficit.
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in these way bigger demand than actually supply.
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So I'm not getting rid of them.
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And I'm a holder.
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I'm a holder of Volterra.
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And I was actually quite positive on the report today.
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Next time, when you've read it more thoroughly, you can tell me how much they
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received.
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With the backdrop of platinum at the moment being down nearly 2%, $1,593 per
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ounce.
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I'd love to be able to know what they received for their metals over that period
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because that's also important for
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deciding whether to get into it for the future because if it goes back to where it
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was not that long ago, then it's going to be a
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bonanza for this company.
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Yeah, I mean, they did mention it.
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That I did saw.
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So they've got a basket which they work on.
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will be not just platinum or palladium as well.
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And they did mention that the dollar rise compared to last year, this time around.
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was 85% higher.
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The average was, I think, something like just over $2,800 per PGM ounce.
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But they've got a basket.
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It's all combined, yeah, under their percentages and everything.
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Okay, brilliant.
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Let's have a look at some other markets now because the dollar round, I think the
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round is showing remarkable resilience in the face of a strong dollar.
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Okay, it's weaker, but it's $16.78 today against the U.S.
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dollar.
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British pound against the rand is 2230 and the euro rand is 1911.
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The euro dollar is 11380.
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Gold price, again, it's floating with 4000.
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And every time recently it's come to 4000 or even dipped its toe in the water below
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4000, it's bounced back.
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So I'm hopeful again, but it's 4007.
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Anyway, flirting with that big round number.
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Platinum 1593 down nearly 2% and palladium is down 2%.
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at 12.47.
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Let's have a look at some other commodities, because with Mr Trump going
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on Fox & Friends, he was obviously in a
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grumpy mood because Iran had launched a couple of attacks on US interests in the
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Middle East.
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So he said on Fox News, we are going to beat the effing shit out of them.
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I mean...
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That's the president of the United States of America on national television.
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Excuse me if I swore, but that's what he said.
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So Brent crude oil has jumped.
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Spot price $90.72, which is up nearly 8%.
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And the West Texas is $85.18, which is up 7.5%.
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And the copper price is 0.8% weaker.
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Let's call it $6.28 per pound in New York.
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elsewhere if I can find the US treasury market it's been the the 10-year has been
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above
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4.7% as a yield it's now 4.64% awaiting the Fed of course S&P 500 futures
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down three quarters of a percent this makes me very interested because people
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don't normally take positions about big positions ahead of the
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Fed but that's what seems to be happening in the US markets at the moment with the
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Nasdaq down about down about a percent last time
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I looked the South African 10-year bond move bond yield 8.79 which is 14 and a
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half
16:38
basis points higher than yesterday and what else we got bitcoin doesn't know
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where to go i know where it's going
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but it doesn't know where to go at the moment 64 000 nearly on the nail which is
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up about a quarter of a
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percent so interesting markets um skulk are you um are you are you looking forward
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to
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the next few days given the scenario that I've just placed before you.
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Yeah, I think we need to normalize.
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I think that's, I mean, let's take an example.
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I mean, Apple.
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Big news yesterday.
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Apple became a $5 trillion company.
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Isn't that extraordinary?
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$5 trillion, yeah.
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$5 trillion.
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And just by the way, I mean, we had this conversation the other day.
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I think it was 2017 and 2018 became the first company.
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to surpass the $1 trillion mark.
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Now, we're not talking about, oh, you remember 10 years ago or 15 years ago when
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it surpassed $1 trillion.
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We're talking about, I can't recall if it's 2018 or 2017, but let's call it
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worst-case scenarios less than
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10 years.
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It surpassed $1 trillion, and yesterday it touched the $5 trillion.
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I mean, that's just mind-boggling to think.
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But yes, here's where I want to get to.
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Please, I mean, all this is do not take what I say as being negative on Apple
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because I'm still a
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holder and I don't, I've trimmed my positions over the, let's call it past
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year or
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two.
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But when you look at this company, 2016, I can still recall, I got so
18:23
much flack from different investors stating that this is a good investment.
18:28
It was trading at a single digit B.
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basically below 10.
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And people will say, well, this thing is X growth.
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It's a cash cow.
18:37
Yes, we know.
18:39
But I mean, what is the growth opportunity?
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It sells iPhones and people are bored to death with iPhones and iPads and those
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kind of things.
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Never.
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That's it.
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Nine years later, a year we're sitting, or 10 years later, this company is trading
18:54
today at a 41
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times P.E.
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ratio.
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That's historic.
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If you look at it on a...
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forward basis forward basis it's still trading at a 31 p that's more than three
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times
19:07
the the the pu is trading 10 years ago where nobody wanted it yes so you ask me
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about the market i do think that
19:14
this the market is disconnected where They look at the likes of these AI companies
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and say
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that's the norm.
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It's not the norm.
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Eventually, we're going to see these big shortages filter through the market.
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We're going to see these prices of these RAMs or let's call it memory and storage
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and these parts
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going to normalize again.
19:38
And also, you're going to pay a third, even a quarter of the prices for these
19:43
products again in a few years' time,
19:45
which are going to affect.
19:47
most of these companies and their profits.
19:49
So will this happen today on the 29th of July?
19:54
Is this a start?
19:55
I'm not going to call that.
19:56
You asked me in the beginning, do I see some cracks?
19:58
Yes, I do.
19:59
I clearly see some cracks.
20:00
And I'll caution any listener out there that's got major positions in these
20:06
investments because
20:07
if a KOSPI can drop by 35% in one month, I see a few other companies
20:14
and indices that can do the same.
20:16
SpaceX has gone from 225 down to 109, the low.
20:20
10960, I think it was.
20:22
And, okay, that's a ridiculous example because it's only just listed.
20:25
And the hype was the biggest hype I've ever seen in my life for a listing.
20:30
And some people are getting cleaned out now.
20:32
Luckily, it's only a few because there's such a small free float in the stock.
20:37
But anyway, just my theory on Apple now.
20:41
is that money coming out of AI has gone into Apple.
20:44
And if you can believe what I'm going to say, Apple has become a defensive tech
20:48
stock.
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And that's where people go when they want to be still involved in the market and in
20:54
the tech sector.
20:55
And Apple is a tech company after all.
20:57
They go to Apple because, as you say, it's a cash cow.
21:00
I'm never going to use anything again.
21:02
I used to use BlackBerrys and then I went to the iPhone.
21:06
I'm not going to stop buying an iPhone every three, four years or something like
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that.
21:11
Most people don't.
21:11
I'm sure there are great phones out there, the Samsung, et cetera, but I just don't
21:15
understand them.
21:16
I'm too old to have to learn some new buttons and features and stuff like that.
21:24
No, it's the honest truth.
21:27
I think most people out there that's got Apple products, if that product being a
21:33
MacBook or
21:34
an iPad, iPhone, it doesn't matter if it breaks today.
21:38
They're all priced with the same brand.
21:40
They will go into something like Samsung.
21:41
And most probably the Samsung users the same.
21:45
Okay, let's have a look at the moves on the JSC today.
21:47
And you can correct me if any of these are wrong as soon as I get them.
21:51
Actually, Scout, here we go.
21:52
I've got Tungela up 4.86%.
21:56
Valterra up 4.6%.
21:58
Xero a 4.5% winner.
22:00
Naspers nearly 4% of the good.
22:02
That doesn't do us any harm.
22:04
Implants up 3.6%.
22:06
Downside.
22:07
Property company, PH Prop, down 7.6%.
22:10
Pan African, a 2.75% loser.
22:13
Richemont coming off by 2.5%.
22:15
Anglo Gold, 2.3% weaker.
22:17
And Lighthouse Capital down 2%.
22:20
Any others outside of those, Skulk?
22:23
No, I think you've mentioned them all.
22:27
I'm glad to see nice pairs back in the winning column.
22:31
And yeah, as you mentioned, the top five, both Impala and...
22:35
Volterra, as they say, a raising tide lifts all boats.
22:39
So the results definitely lifted the PGM boats today.
22:44
I look forward to speaking to you next week.
22:45
But before we go, will you give us the JSE closing indices, please?
22:50
Yep.
22:50
JSE today closed at 110,440 points.
22:55
That is up 49 basis points.
22:57
Resources, that was up 57 basis points, while the industrials were up over 1%.
23:04
thanks to NASPERS, naturally.
23:06
Financials were down 16 basis points while the asset property index remained
23:10
unchanged.
23:11
Volume?
23:14
Let me quickly see.
23:16
It's been sluggish recently, hasn't it?
23:17
I mean, it's been flirting around the 20 to 22 mark as far as I can remember, but
23:23
it is the Northern Hemisphere summer
23:24
and it's full-blown summer, let me tell you.
23:27
It's definitely been quieter lately.
23:29
It's definitely been quieter lately, but...
23:31
Yeah, my screen, I want to update now for some obscure reason.
23:34
But we're back at the, let's call it 2021 billion levels per day recently.
23:41
But I don't see that as a bad thing.
23:43
As you mentioned, it is quite a period now.
23:46
Scott, thanks so much for your insights.
23:48
We've got a lot to look forward to, as I said, in the next 72 hours.
23:51
And, you know, I like to write headlines and get people interested, but I do think
23:54
it will be a defining 72 hours.
23:58
Skulk Lowe is a portfolio manager at PSG Wealth Old Oak in Cape Town and that was
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the 5 o'clock shadow.
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The views and opinions expressed in these podcasts are those of Lindsay Williams and
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various contributors and do not reflect the policy,
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position or opinion of any other agency, organisation, employer or company
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associated with
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StrictlyBusinessPodcast.com.
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Assumptions made on the analyses are not reflective of the position of any other
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entity other than the speaker or the author.
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And since we are critically thinking human beings, these views are always subject to
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change, revision, and revision.
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and rethinking at any time.
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Please do not hold us to them in perpetuity.