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

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You're listening to Strictly Business Podcast with Lindsay Williams.
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The JSC has closed its doors for another day, so it's time for the 5 o'clock
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shadow.
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And as always, on a Thursday, I speak to Viv Govender from RAND Swiss and David
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Shapira from Sassford Securities,
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Johannesburg and Manhattan, respectively.
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Viv, I'll start with you because last week I started and I said, Viv,
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you said that the war was going to get worse and it had got worse.
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And today I'm saying Viv.
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Last week, you said the war was going to get worse, and it's got worse again,
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because I'm getting the feeling now that this is quite a serious one.
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And the reason I say that is because of a sort of a strange rift between Israel and
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the United States.
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Israel attacked a large oil field co-owned by Iran and Qatar last night.
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And President Trump at 3.30 this morning said, no, I didn't know anything about
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that.
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And Israel said, yes, you did.
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Viv, this is strange, strange behavior, isn't it?
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Yeah, look, I mean, here's the thing.
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The Americans really don't want to have this go on to infrastructure destruction
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kind of thing, because
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I think Israel is vulnerable, but what's really vulnerable is like the Saudis, the
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Qataris, et cetera, in the region.
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I mean, the things they could be going after, for instance, is things like not
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just the oil facilities, which apparently could take years to repair, quite frankly,
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on the Qatari side.
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But also they could go after things like desalination plants.
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And this is a very dry part of the world.
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You know, you're talking, you know...
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Tens of billions of people could be facing, you know, a shortage of water,
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which is, you know, life-threatening.
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So they really don't want to go into infrastructure kind of like, you know, a
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blot because it could really be disruptive.
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And it would also mean that even if the war ended tomorrow, if you destroy like
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the facilities in Saudi Arabia and Qatar and
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Iran's own facilities destroyed, that supply is off the market, you know, for
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the foreseeable future, which would mean oil prices above 200,
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even if the war were to end.
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So this is a very, I think, you know, dangerous escalation.
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And here's the thing.
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I've kind of come to the conclusion there's just two ways this thing ends.
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It's either boots on the ground by the U.S.
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or the Iranians get a nuke.
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And that seems to be the only way out of it at the moment.
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I think the Iranians at this moment are probably working as fast as they can
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towards a nuclear weapon.
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It's quite possible they weren't doing that previously.
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But I think right now it's quite possible they are.
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And if they are, it could be something, you know, which they will do like a...
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test like the North Koreans did, you know, and after North Korea got a couple of
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tests, you remember,
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Donald Trump started being very friendly towards the North Korean leader.
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Yeah, it's good to see you, Rocket Man.
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Do you remember that famous quote?
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Sorry, I shouldn't interrupt you.
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He said, we fell in love.
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He said, we fell in love.
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I mean, this is what we should have known what we were dealing with then during his
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first term, but nobody, nobody seemed to learn the lesson.
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Viv, carry on with your diatribe.
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It's very interesting.
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And then if he does go to the boots on the ground thing, that becomes Iran or, sorry,
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Iraq or Afghanistan, you know,
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times three or four.
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It's a vastly larger country, worse terrain in many ways than Iraq is, many
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more people than Iraq had.
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And probably, you know, unlike Iraq, where effectively the regime was destroyed,
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it's very difficult to see how they would destroy the remnants of the Iranian
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Revolutionary Guard here.
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I think that it would be, you know, a very, very bad period for the U.S.
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if they were to go, you know, boots to the ground.
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But I don't see how it ends any other way.
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The Americans can't just leave it alone because the Iranians are going to go for a
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nuke.
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The Iranians can't not go towards a nuke because at the moment, that's probably the
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only thing that can, you know, guarantee that they won't get, you know,
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bombed at some point in the future.
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So, yeah, and that's pretty much how it goes.
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And as for the future, it does seem like, you know, because this is the way it's
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going to go.
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It doesn't end next week unless something spectacular happens.
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Okay.
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Thanks for that very cheerful start to the 5 o'clock shadow.
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David, we are going from Viv the pessimist to David the optimist.
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You've always been an optimist, but maybe even you're starting to think, wait a
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second,
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this is not good what we've seen in the last 36 hours.
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It's going nowhere.
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And when I say nowhere,
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it's not even making news headlines here in the US.
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You know, I watch.
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I hop channel from ABC to CBS to Spectrum One and so on,
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just trying to get some perspective of what's happening.
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And most of the news is around kind of a fire in the Bronx or some cat up a tree in
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Queens.
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But the only thing that they focus on is that they will give you what the
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price of petrol is at the pump and how that's gone up and that it's not as high
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as it was in 2022.
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No, they're not pro-Trump.
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You know, this is not pro-Trump stuff.
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This is almost an indifference.
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The odd thing, Lindsay, is even talking to neighbours here.
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You know, people in the lift or people you see in the lobby or whatever it is.
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I can't say I've got any big friends here or very close friends here.
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But, you know, you chat up, you end up conversating.
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Most of them don't care.
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I'm not worried about that.
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You know, what do you think about?
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No, I don't care about that.
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You know, I'm worried about what's showing at the theatre or what this is.
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It's quite remarkable how indifferent I'm finding people here.
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There are no protests.
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And it gives you an idea of the American people,
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just how far removed they are from the world.
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And so I'm a bit surprised by that.
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But coming back to Viv's views and the war,
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Trump has to get this oil price down, or let's put it this way.
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the price at the pump.
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If he doesn't get it down, he's toast.
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And it looks like he's starting to burn a little bit.
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You know, it's happening now.
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I think he must be a very worried man and really not quite sure how to get out and
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how to de-escalate, how to get out.
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They use the word, you know, looking for an off-ramp.
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I can't stand that.
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But, I mean, you know, he's looking.
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There is a view that, you know, I mean, he's got to bring this to an end here.
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It can't keep going on.
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So, but America is, you know, they are feeling it.
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You heard from Powell last night.
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I mean, you know, he's confused.
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There's nothing going to happen.
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And, but if I go out now around the world, you know, around the block for some
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Italian hot chocolate because it's freezing,
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you don't see people really worried about a war or anything.
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Very strange.
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Okay, so you're going for the hot chocolate in Los Angeles.
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They're going for some chilled drink because it was 97 degrees there.
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97 degrees.
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So it's really, really weird.
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Not only is America split along party lines, it's also split along weather
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lines.
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It's quite amazing what's happening in that country at the moment.
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You talked about seeing Powell, I think it was, at the U.S.
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Federal Reserve.
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I watched the nut job Pete Hegseth giving a Pentagon press press conference earlier
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on about a couple of
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hours ago I mean this man is really he's very strange he started quoting the bible
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a lot now you know you
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know that things are going badly when you have to keep on saying that you've got to
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pray for this and you've got to pray for that and and in
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the name of Jesus Christ we're doing this and that and I think this is a bit odd um
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Viv the you mentioned $200 oil you And it's 111 at the moment.
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That's for Brent crude.
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So petrol prices, if that happened, would be in South Africa.
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When we were off air, you were mentioning, what was it, seven rand a litre?
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Is that the price?
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For diesel.
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So we've got seven rand a litre for diesel and about five rand a litre for petrol at
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the current levels of the round.
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The round, by the way, hits 17 today.
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And so, yeah, that's it.
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What I also want you guys to understand, and maybe why the Americans aren't feeling
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it as much, is because there is a big discrepancy as to how much the oil price
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is changing
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across the world.
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So you get to look at, for instance, the American price for oil versus the Brent
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crude price for oil, for instance.
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It's almost $15 a pot.
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You know what I mean?
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It's a big difference.
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And the further east you go, I mean, you go to places like Bangladesh, you go look
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at India, you look at
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Japan, the effect is worse there.
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Because they are the ones that already are actually directly impacted by the
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shortage.
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I mean, Bangladesh, for instance, which has a big textile sector,
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is a bit of a go slow to save energy.
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India, they're talking about the lack of liquid natural gas, you know, the
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cylinders.
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They basically are looking at, you know, that is a very big part of that country's,
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you know, where they actually cook their food, etc.
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It's a big deal.
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You know, we are seeing places like South Korea as well being affected.
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And also, I mean, it's not just the energy thing.
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I mean, we're talking about fertilizers being affected.
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We are talking about helium, which is important for the manufacturing of
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computer chips and other high-tech equipment, et cetera, being affected.
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And the U.S., I mean, it's almost getting like almost just a washback.
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And that's what's already causing oil prices rising in the U.S.
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and already causing this difficulty.
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The devastation you'll see in Asia will be much, much worse.
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than whatever you see in the West.
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And even today, I mean, after the attack on the, the Tifatat attack, first on
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Israel, on Iran's gas,
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and then Iran on Qatar's gas, at one point this morning, the price of liquid natural
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gas in, I think, Europe was almost 30%
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up.
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yeah you know it's not double digits positive but it's uh it was almost 30
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percent up you know early in the morning um this is 20 of the world
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supply and like i said the damage that they've done to that facility could take
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years to repair it's a really uh bad situation
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uh on the east yes it is and i'm just looking at the commodity um commodity
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board on my uh phone actually dutch ttf natural gas i didn't even know that they
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traded it it's
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uh up 12 and 3 quarters percent at the At the moment, it wasn't.
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up 23% when I looked at it at lunchtime.
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Things coming off getting a little bit better.
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Gold at one stage was down 8%.
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Now only down 5.2%.
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But that big...
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The one-year graph, David, I don't know if you look at it, but it was completely
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destroyed this morning,
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the one-year uptrend.
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The big long-term trend is still there, but the one-year, no, it's out the window.
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So gold's going to take a while to get back to things.
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David, there's been quite a bit going on since we last spoke.
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I think there's been a total of eight central banks that have announced their
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decisions on domestic
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monetary policy.
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The US, of course, and the ECB all flat, Bank of England, etc.
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But if the prices do persist, there's no way that the next move is down.
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In fact, maybe towards the middle or the end of the year.
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The next move might be up.
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I mean, look, the yields are rising across the globe in international bond markets.
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It's such a dilemma.
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You don't want to put up prices at a time where petrol prices are going up.
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You don't want to help this along.
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So we saw this, I think, going back in 1973, where they did exactly that,
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put up rates.
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And I mean, all that did is create.
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an enormous recession.
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So I think it's a very delicate situation on how to handle it.
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And that's the assumption that this is going to last, which we're not going to
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get out of it quickly,
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but this could be a few months.
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And I don't know, I'm not a central banker,
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but I think we'd be loathe to kind of start doing things like that, if anything.
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You know, one would expect them to lower rates here so that it becomes more
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affordable.
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So it's, you know, you could hear the indecision in Powell if you listen to him.
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Yeah, he said he didn't know where he was going.
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People like certainty.
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If he had said, well, we know what is going to happen, that's one thing.
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But he said, no, we didn't know.
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Well, nobody knows.
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And if Powell doesn't know, then it's a difficult one.
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What about the...
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uh ai stocks viv the i don't know if i've joked before that maybe they're recession
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proof maybe they're war proof
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um they nothing's been drastically affected okay we got the markets down what
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about 0.6
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percent at the moment something like that but when you get um the the top man and
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video coming out with these
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incredible revenue projections and i Open claw Chinese stock surging.
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I think I sent both of you that article, Aviv.
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This just keeps on going, this juggernaut.
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Yes, it does.
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I mean, I saw a recent report that was quite interesting.
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Basically, there's a thing called the H100, which is the previous generation of
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chips.
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And right now they're selling for more in terms of rental than they were when they
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first came out in some cases.
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They're really holding up in terms of the value.
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It doesn't make sense because the...
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The speed of technological improvement here is vast.
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So you're getting like, you know, five times the capacity coming out for like 50%
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more cost.
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If that was the case, you know, effectively the old chips would be
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dropping by one third,
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by one third the current value or the previous value because of the fact that
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they're just basically being, you know, there's something that's, you know,
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five times better for 1.5 times, there's three times effectively the improvement.
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But it's not happening.
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The demand is so great that people are actually spending whatever it takes to get
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these chips.
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And the bottleneck in that sector is, I think, quite worrisome at the moment.
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The fact that Jensen Wong says he's going to spend a trillion, the question is, is
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it actually going to be possible?
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Because there's a couple of things here.
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Firstly, will they be able to actually make the stuff to sell?
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There's definitely the demand out there, no doubt about that.
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But do they have the supply, number one?
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The next thing is, if they do get this thing out there, how are they going to
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power all this stuff?
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I mean, you do a trillion dollars of AI chips, that translates into so many
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gigawatts of energy that's required.
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You know what I mean?
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There's a very clear-cut thing.
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I think that's about 100 gigawatts of energy that's probably going to be
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required for that.
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That's a lot of energy.
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And obviously in an environment like we're talking about right now, with oil prices
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and natural gas prices going crazy as they are,
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it's going to be quite difficult.
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That being said, we didn't really do too much in Vidya, despite the significant
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downs.
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But we did see a couple of things happen in terms of some other players out there,
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especially downstream.
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And I think the real bottleneck in this whole system, even beyond energy, is you
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guys in the Netherlands with the ASML.
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Apparently, that's the real bottleneck in this entire system.
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It's the fact that ASML just can't make enough machines quickly enough.
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And even if they were to go all out and basically boost their production to the
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max that they could,
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they could probably only increase by about 50-70% their total production in like five
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years' time.
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You know what I mean?
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That is over the next five years.
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That's not a great...
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you know, thing to have when the world, like I said, is basically being
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bottlenecked by their progress.
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David, results coming out of the JSC Securities Exchange.
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There's been quite a few.
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Today we've had Momentum.
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That's another insurance company.
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Have you looked at the results since we last spoke?
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Have you seen any that you like?
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I mean, you're very much focused on the United States of America, but you still
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look at the JSC, obviously.
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The JSC is, I think we're facing a lot of issues here.
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And I'm not, you've seen the gold price come down quite dramatically.
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I think the signal or the warning happened when the war broke out and gold
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ran up to, what, 5,300 and then did an about turn and settled around 5,000 and
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did nothing since.
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And that was a concern.
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And as oil kept going up, this didn't prove to be a hedge against inflation.
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There were more worries about interest rates going up and the cost of holding.
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your gold position.
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And we've seen that come down.
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But what happens is, but I think also from a South African point of view, I mean,
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this means a massive increase in the petrol price.
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And we're a nation that needs petrol.
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You know, we use petrol a lot.
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We travel a lot.
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It's especially from an individual point of view.
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You know, you fill your car up at what, 20 20 rand a litre or something, which is
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going to go up.
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I worked it out as about 15 rand a litre here, and these are the high oil prices
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that we're facing at the moment.
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So there is a premium that we are paying.
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I thought it would be more.
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But there's going to be a lot of pressure on spending in South Africa.
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And, you know, if inflation goes up and the Reserve Bank doesn't reduce rates,
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which it's not going to do in this environment.
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If anything, they won't raise rates, but they're certainly not going to reduce
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rates.
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So I think South African business already feeling or South African consumers already
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feeling
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tight.
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It's going to have a big impact on spending.
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So I'm just looking at there's an interesting thing when you look at
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momentum.
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and I saw this in quite a few of the, most of the, you know, insurance companies
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coming out.
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New business is falling.
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And new business is the pipeline into the future.
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It's all very well you're doing good business now.
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But if you're not increasing the rate of new business, you're not expanding it,
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it's going to hurt down the line.
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It's a bit too early.
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Most of the companies are very efficient and they got the boost from market
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performance.
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But that's what worries me.
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And Momentum is a good company.
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You know, it used to be an ugly sister.
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I think Jeanette Marie has turned it around and doing very well there.
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And I think the loss of business or the loss of, oh, sorry, the fall in new
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business is more, it's not structural.
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I think it's more to do with the environment than them losing ground.
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So, you know, the share price has done pretty well, as we've seen with most of
18:41
the assurances.
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But I'm a bit concerned about SA Inc.
18:45
and the outlook for the economy.
18:47
Yeah, I'm also a bit concerned about SA Inc., especially in my Crystal Challenge
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portfolio.
18:53
We've got it wrong.
18:54
No, I've got no chance now, David.
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I mean, since it started, SASL has doubled.
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And you've got a fair sprinkling of people with SASL in it.
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So I'm finished now.
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I'm going to be...
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I said to you I want to be either in the top part or the very bottom part, and I'm
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really going for the very bottom part.
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Now, David, I know you've got to go, but have a look at the indices, if you would.
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And when I finish with the markets, you can give us the closing indices on the JSE
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because we've got the dollar round.
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Viv mentioned it got to 17.
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It's currently 16.86.
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British pound against the round is 22.56.
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And the euro round is 19.43 with the euro dollar.
19:34
Well above 1.15 again, so around 1.15 at the moment.
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So the stronger dollar really whacking commodity prices as evidenced by gold.
19:43
It's off its lows.
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Gold was down nearly 8%.
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It's currently down around about 5% and that is 5.25% actually, 46.15,
19:54
4,615.
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And that is almost exactly $1,000 off its high, the intraday high.
20:02
was $5,625.
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So, in fact, we're $1,010 off the highs.
20:09
And that wasn't that long ago.
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It's extraordinary stuff been going on in precious metals.
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Platinum hasn't been spared, down 5.2%.
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1939 and palladium, oh my goodness me, 22%
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down at $1,462 per ounce.
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If we go now to the all-important energy markets, not quite as glamorous as they
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were.
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West Texas crude $97.15, which is up only 0.9%, but they close at different times.
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So Brent crude up 4.4% at the moment, $112.10 per barrel.
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What else have we got here?
20:48
Copper.
20:49
Yeah, that's really getting hit as well.
20:50
It's down 2% at the moment.
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It's had a torrid few days, $5.44 per pound.
20:56
The South African 10-year bond, look at this, 100 basis points.
21:01
Worse off than it was a week ago, or actually, let's call it two weeks ago,
21:08
905, 9.05%
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yields rising.
21:12
David says that this Reserve Bank won't raise rates and they've got no
21:14
justification to do so.
21:16
But if it goes to 10%, yeah, maybe that's telling us it will.
21:18
US 10-year, 4.27%.
21:20
That's been in a range of 4% more or less to 4.3%, more or less.
21:25
So it's right at the top of its range.
21:28
And if the 430 goes, then all hell will break loose.
21:31
S&P 500 futures only down 0.4%, 66.50 we'll call it.
21:36
And what else have we got here?
21:38
Bitcoin has been to 74,000, now below 70, 69,373.
21:44
If you look at the performers on the JSE individual stocks-wise,
21:49
it's being dominated by two resources companies.
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Number one, Tungela, up just over 6%.
21:56
And Sassalong up 5.6%, 214 rand a share.
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It was 50 rand a share at its lows.
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It was 100 when David started his crystal challenge.
22:08
So, yeah, that's extraordinary.
22:10
Boxer of all stores up 3.1%.
22:14
And Pepcor up 2.1%.
22:16
That's a winner.
22:17
Downside, Cibagno down 10.2%.
22:20
Impala Platinum down 10%.
22:22
Pan African Resources down 9%.
22:24
Valterra down 9%, and Northern Platinum down 8.5%.
22:31
What about the indices, David?
22:34
Well, in fact, we were worse during the day, but they also ended it down, say,
22:40
2.75%
22:40
at 110.572.
22:43
So it's better than its worst levels of the day.
22:46
But, you know, we're now in negative territory for the year, and I think about
22:53
12%, 13% of the high.
22:55
which was at the end of February as the war started.
22:56
But losses were right across the board with miners naturally under pressure.
23:00
The resource index down 6%.
23:04
What else?
23:05
You know, base metals.
23:06
In fact, it was mainly the precious metals, those shares that took the market
23:11
down.
23:11
Subania, Impala, Harmony, Pan African, Valtiero,
23:16
all of those down quite significantly today.
23:21
Banks, the rest of the market.
23:23
down but perhaps not at the same level but still in a pretty weak across the board
23:29
Probably just looking at my list of shares, a couple of winners there, but
23:35
losses maybe three to one today.
23:37
So I must look at the volume.
23:38
Volumes have been good, hey?
23:40
I've been very interested in the volume today.
23:42
Again, we're up at, oh well, this must be, what do you call it, balancing,
23:48
because it's an 84 billion day today.
23:50
Wow.
23:52
I don't know what...
23:52
I think it must be futures closeout day.
23:56
March futures expire.
23:59
makes sense 84 billion that just gives you some kind of level of the speculation that
24:06
we see in our markets
24:08
and there must be a lot of people hurting at this closeout sure I remember in the
24:13
old days Viv there used to be futures
24:15
closeout parties in Jamsburg everyone would get together and lie to each other
24:20
about how much business they'd done it was all very good but
24:22
anyway David's got to go so we're going to close this now gentlemen thank you very
24:25
much for your time as always
24:27
Viv Govender is from Rands Swiss in Johannesburg.
24:27
David Shapiro from Assassin Securities currently in Manhattan.
24:30
And that was the 5 o'clock shadow.
24:32
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