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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 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 Wednesday, I speak to Skullclo, Portfolio Manager at PSG Wealth
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Old Oak in Cape Town.
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First thing, Skull, is that there's a bit of a hum in the background because it's 36
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degrees outside and
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I put the air conditioning on.
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I don't usually like that because it gives me a stiff neck.
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It's on, so forgive the hum.
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The second thing is, how was the Kalahari?
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Oh, that was talking about having to use the air con again, and for
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the better.
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It was just wonderful.
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Kalahari always remained the Kalahari.
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The most greenest I've ever seen it.
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It's not your normal Kalahari, but, I mean, you could see the game is enjoying
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it.
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They've got more than enough to eat.
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Now we live in the most...
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beautiful, beautiful country in the world, for sure.
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I think geographically you do, yes.
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I mean, I see beauty even in the Netherlands, but when it comes to
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topography and geography,
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standout winner globally is South Africa.
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Anyway, let's not get me all misty-eyed about South Africa.
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Let's have a look at the markets now.
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Brent crude oil, $73.39, down nearly 5% on the day.
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So that is what?
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around about a...
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a 25% to 30% fall in about two weeks.
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This is important, Scott.
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This is really important if it stays here.
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And because people were factoring in 90 to 110, maybe even higher for a protracted
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period,
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not going to happen anymore, it doesn't seem.
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No, it's definitely, it's positive in the sense that there's major,
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it's still inflation worries.
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There's major...
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interest rate worries.
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But I mean, with the retracement in the oil price lately, that's definitely put
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some, well, let's
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call it less pressure for further hikes.
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That said, there's still some pressure on the US.
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I mean, we do still see the pressure there, the probabilities for rate hikes in
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that
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site.
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And we're now looking at the CME Fed 2, I think it's about 40% for...
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for July, and we're sitting at more than 50% probability for rate hike in
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September.
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So that's putting some pressure on rates to go up, and it's putting some pressure
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on
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commodities.
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I mean, we've seen major, major drops in the likes of the gold price, platinum
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price, palladium price, copper price.
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So it's not just oil.
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It's sort of a broad commodity sell-off.
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And naturally… It's the dollar scale.
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It's the dollar.
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I mean, I led with the oil price, but nagging away at me was whether I should
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have led with the dollar, because look at that thing
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go against the euro.
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I mean, the ECB has raised rates, and yet the euro is getting smashed by the US
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dollar in
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currency terms, because don't forget, the euro dollar is a massive, massive market.
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So the move we've seen recently, again, last two weeks or so, has been
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significant, I think.
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Correct.
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Yeah, dollar index over 101.
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I mean, I looked at the graph, I think it was yesterday before the big drop below
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$4,000 per ounce on the gold.
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It was already yesterday.
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You just do the dollar index, you put the gold price on the same graph.
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And we know that they run in a perfect inverse correlation.
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And naturally, you know, with the rise of the dollar, you don't need to look too
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much further to why
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we're seeing some of these commodity prices drop.
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But I mean, what I want to allude to, I mean, South Africa as the largest platinum
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producer, second largest palladium
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producer, eighth largest gold producer, one of the largest, we know, largest
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rhodium, one of the largest
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copper.
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I mean, that just means that in a movement that we've seen over the past few days
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where the retracement of these types of
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commodity prices is going to put some pressure on, you know, both the rent and
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naturally, like we've seen today.
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I mean, I'm looking at...
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S&P 500 is positive, and we'll know when we look at the actual data.
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S&P 500 is positive today.
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NASDAQ is positive today.
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Dow Jones is positive today.
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But when you look at the JSE, I mean, it took a hiding today.
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I'm looking at mining and metals.
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I'm looking at the commodity index, and we'll come to that later on.
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But it has been a sort of a mini bloodbath, hasn't it?
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And it's really not good because the last thing we need in South Africa is the
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commodity cycle to be
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scuppered by a stronger dollar.
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and the week around not helping as much as it might do.
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And the revenues that were so enthusiastically spoken about in the
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budget might not be quite as
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glamorous as the Treasury.
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predicted.
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Yeah, I remember the windfall that we had with the commodity boom.
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Yeah, we're talking about a current account that's been positive and growing.
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I mean, all this positivity was predominantly driven by
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stronger commodities.
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And that has been to the benefit of South Africa.
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Because we know without them, I don't think our economy would have been growing.
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I mean, we're struggling to grow.
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our gdp by one percent per annum so yes i do think that if this is going to be a
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actual
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turn in the commodity cycle where we see a massive retracement in some of these
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commodity prices yeah i think it's it's gonna
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it's gonna put some pressure on on on the south african in economy as well yeah um
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and you've got to really say to
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yourself now is what you got to say is is this just a blip Is this just an interest
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rate led?
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sell-off in other currencies against the mighty US dollar and therefore the same
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applies to the commodity boom.
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Is it all over or is it just a little bump in the road?
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It's an important one because I'm looking at the gold price, for example, our
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favourite, 3,999.
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I haven't seen a three in front of the gold price for a long time.
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Yeah, we joked back in the days when when the gold price went above $5,000, and I
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still made the
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joke and said, remember the days when gold was trading below $5,000?
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And little did we know, making that joke that we would be sitting before the end of
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June, not back below
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$5,000, but actually back below $4,000.
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Now, I think it's an healthy retracement because we know why the gold price
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actually did what it did.
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And we often have this conversation.
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I still believe that we should see a stronger gold price compared to
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two, three years ago.
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But I think what we've seen in the beginning of the year, and I've often said
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this as well, was a bit of an overdone movement.
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We've had this sort of worry on the dollar.
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And then we had the war that broke out between the U.S.
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and Iran, the Strait and all those, the geopolitical unrest.
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And that's sort of exactly what...
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actually increased the exuberance around gold, just didn't take it just to $4,000,
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it took it way over $5,000.
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Maybe just overdone, and maybe this is a healthy retracement.
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I still believe, and I still maintain the fact that I still believe that the gold
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price should stay
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stronger or higher, not just because of geopolitical unrest,
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but purely because Donald Trump has made it clear.
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I mean, he wants to see interest rates come down, not up.
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Remember, this dollar movement is really to do with people are expecting, and you
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can see the movement in some of these
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rates is upwards, and that's bringing some positivity around the dollar.
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If the market is going to realize that Donald Trump, somewhere along the line, is
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going to turn around and say, wait a minute, what did I say at the beginning of
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the year?
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I wonder how long it'll take before he turns on Kevin Walsh, just like he...
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Turned on Powell, the former Fed chair, excuse me, because he turns on people.
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You know, he's done it to Giorgio Maloney, the PM of Italy.
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He's done it to Keir Starmer, still the prime minister of the United Kingdom, but
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he's resigned.
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He's done it to Netanyahu, most importantly.
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He does it.
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He brings people into the fold, and if they step out of line one time, according
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to his parameters, that's it.
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It's all over for you.
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Kevin Walsh will be next, I reckon.
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Yeah, I think there's going to be some pressure.
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I think there's going to be some pressure.
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And I've got no doubt that there's going to be pressure because, yes, we now see
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the oil price retracing,
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and that should bring some relief, you know, some relief.
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I mean, it's still not really at low levels that we've seen two, three months
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ago,
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before the war started.
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That said, you know...
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That's not the only problem.
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I mean, he's sitting with a high inflationary environment.
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Yes, maybe it's just transitory.
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Maybe it will retrace.
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But if Kevin Walsh reacts the way he should be doing, he should be raising, and
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I think, or hiking
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rates, I think it's going to be very interesting if that doesn't happen, what
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Trump says.
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I think he wants rates to come down.
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I think he would want rates to come down a lot.
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It's because of his personal portfolio and his business, his so-called empire's
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portfolio as well.
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They need they're geared to the hilt, so they need lower rates.
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And he's a two-bit property developer.
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We know that, and that's what they love.
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They love lower interest rates.
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Scott, the other thing I wanted to mention was the market They're being talked down
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by the media.
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And I don't usually say this, but it seems as though everybody wants AI to fail.
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They come up with some good points.
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They say, well, the cost of borrowing is going to go up.
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And these talking about being geared to the amount of money that the big tech
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companies are borrowing in order to keep up
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with their peers when it comes to AI investment.
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The numbers are staggering.
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And if something does happen, then the wishes of these people that think there's
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an AI bubble.
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on the Nasdaq and other exchanges, they might actually get their wish.
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Because it just got a different feeling on Monday when I saw the market start to
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come off.
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They weren't big moves, but they weren't rallying back straight away.
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There was a tentative rally from the lows that we saw Monday, Tuesday.
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And we're seeing that again today.
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It just has a different feel about it.
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What do you think?
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I mean, yesterday's move and that micron.
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That was sort of a, I really got this deja vu feeling of 25 years ago.
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Did you follow it yesterday?
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I saw the movement and I've seen today as well.
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Aren't Micron's results coming out today or tomorrow?
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Yeah, it's today.
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It's today.
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It's after the close of it was taken.
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But it was down something like 19%, 18% yesterday.
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I mean, that's a crazy, crazy drop.
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In one company that went over a trillion dollar market cap a few weeks ago, I mean,
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on this whole AI exuberance.
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I mean, I couldn't help but laugh this morning when I opened up, I can't
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remember, it must have been something on
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investing.com or something like that.
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And the headline was SpaceX down 22% from its highs.
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Yes.
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I went like, wait a minute.
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Didn't SpaceX, you know...
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list a week and a half ago.
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They are already telling us it's 22% down from its price.
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It's in a bear market.
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It's in a bear market.
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It's been listed for a week.
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Exactly.
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And that's the thing that's sort of making me worry.
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This is so and I think that the next part of the sentence was, but shareholders are
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not worried
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yet.
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I would be worried.
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I mean, why the excessive movements?
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Why did we see this type of exuberance run out?
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And why would you see these pullbacks?
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Why do you see Micron go surpass being a $1 trillion company?
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Movements of, I think, 100-something percent over a month or so.
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Oh, yeah, I've got it.
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It's actually Micron.
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In three months' time, it is up.
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163, that's even after yesterday's major retracement.
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163% up in three months, six months, 263%.
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One year, wait for it, 713% in one year.
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Get out, goodness me.
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Yes, $1 trillion company.
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Tell me this market is seeing some natural movements.
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You're quite right.
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So we look back and we say, we should have known.
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We should have been more.
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forceful in our opinions on the podcast on the five o'clock shadow because we knew
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that this something was wrong it's just the
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timing you see as i said to a couple of other commentators a few weeks ago i said
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it's all very well you being long of everything and your geniuses
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to my eyes they are because the sort of numbers they were talking about for their
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clients were quite staggering um
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but the real the real key now is when to say that's enough i'm taking money off the
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table because they were both saying to
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me They just got to run with it until otherwise advised.
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Yeah.
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So when is someone otherwise going to advise you or me that it is going to
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happen?
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Because that's the genius of a bull market.
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It's not playing the bull market.
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It's assessing when the turn is going to be.
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Yeah.
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That's two words.
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There's two words.
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And we can end off with that.
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And that's the two words called active management.
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It's really easy if you're in some passive.
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And again, this is not a… passive versus active management, let's call it
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conversation or even debate.
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This is just saying that somewhere along the line, this market will turn from a
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more easy, passively managed
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market, trend-wise, versus where the active managers will actually do their job
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and get paid for that
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as well.
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Yeah, it's going to be a fun time.
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Okay, what's happened on the JSC?
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I've been busy with lots of other things.
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what's happened on the jse recently corporate wise stock exchange news service
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in other words The news
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was it's really thin.
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We're now out of reporting season.
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We had Standard Bank hint earlier this week on a trading statement.
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We had NetBank doing a similar thing today.
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So there's been no real news that came out.
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So from a news point of view, it's been very, very, very quiet.
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But because we report every six months, this is the quiet season.
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But massive movements.
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I mean, we can start with a resource index that's down over 5% today.
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That's a massive movement, really, really massive movement.
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Tell me about property.
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It's still been doing well.
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I'm just saying because it looks to me, unless my screen is incorrect or out of
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date or something.
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There seems to be two or three property companies in the top 10 movers on the
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upside today on the JSC.
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Is that correct?
15:56
Yes, that is correct.
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We had a very update coming from GrowthPoint.
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Didn't look bad, neither here nor there.
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Just this mention that the dividend growth is expected to stay between 6% and
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8%.
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We had some guidance and market was sort of flattish.
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But in a day...
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where the JSE dropped by over 1.6% in a day and it's a property remained flat.
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You mean this, you can clearly see that there's some resilience.
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It's still a fairly positive environment for them.
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And I think if looking forward, looking through the fog, if we could see a
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stabilization
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in the oil price, we could see a big, big drop.
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I mean, when I say big, I mean really big drop.
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next month in the petrol price and diesel prices in Africa.
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And if it stays at these current levels, we could see a further drop again in
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August.
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That should suddenly put the ESSA Reserve Bank in a scenario where I usually say,
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remember a rate
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hike or rate cut usually lasts average 33 months.
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We might be in a situation where Gafanjau say, well, I'm focused on this 3%.
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And clearly if the oil price...
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do drop and the petrol price do retrace and we see inflation be under control hey
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nothing prohibits me you know
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retracing again and and start cutting again um and that's good for property
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stocks because they healed you look at their dividend
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deals or interest yields they're still still relatively high okay scalp let's
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have a look at some prices um
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because we've covered some quite deep subjects so let's get down to some deep
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data now with the dollar round at 1658.
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I've got the euro round at 18.83, British pound against the round 21.83, euro dollar
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1.13.50.
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I've still got a horrible idea that my screen is catching up having been down
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earlier today.
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But anyway, I'll go on to gold.
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It's bounced back since we've been speaking to 4,013 from 39.99 at 5 o'clock.
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4,013 now but still down 2.3%.
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On the white metals, I've got platinum, a near 5% loser at 15.81.
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Goodness me.
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And palladium at 11.77, down 5.3%.
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Yeah, 11.77.
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So that's a white metal complex.
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The platinum group metals, horrible.
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And that's not good for South Africa, of course.
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Sticking with commodities, I mentioned oil at the beginning.
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West Texas crude is...
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4.5% weaker, a little bounce back in progress at $69.92.
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And Brent crude oil is $73.49, which is down 4.2%.
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The copper price is below $6 a pound.
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It's now $5.96.
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This was $6.40 a couple of days ago, $6.40.
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Big moves there, down nearly 3% on the day.
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S&P 500 futures, $74.83.
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That's for the September delivery, up 0.6%.
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you The US 10-year, 4.41.
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That's an eight basis point fall.
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It was flirting with 4.50 for 36 hours or so, now flirting with 4.40.
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And the South African 10-year bond behaving itself quite well.
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8.44, which is six basis points weaker than the close last night.
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Bitcoin's having a horrible time.
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It's below 61,000 now.
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Far less than the peak we saw of 125,000, Skalk, in October.
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That was when Mr.
19:39
Trump announced his family crypto.
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You called this one also very well, eh?
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You called this one.
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It wasn't based on anything apart from I don't understand it and I don't like the
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people that pretend they do.
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So I thought, no.
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And it's going to zero.
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It's going on my list.
19:54
It's going to nothing.
19:54
I think it's going to 20,000 personally.
19:57
Yeah, I remember you said that.
20:00
So, Scott, tell me about the moves on the upside and the downside on the JSC on your
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much more accurate list, please.
20:07
So, when we look at the JSE each day, let's quickly just, I don't want to say
20:11
refresh my screen, but just get to it.
20:14
When you look at the downside, we had Impala, sorry, yeah, Impala Platinum,
20:18
8.35% down.
20:20
Tungela, 7% down.
20:22
Northern Platinum, 6.5%.
20:25
Volterra, 6.2%.
20:27
And, yeah, well, the first non, let's call it a softer commodity, Sasol down
20:33
5.8%.
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I'm going to continue and just throw in my...
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My favorite, favorite, goldfields, that's also down 5.7% for today.
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So, oh, bad day, bad day for the diggers.
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And only six days to go to the end of the quarter, the end of the month, end of the
20:50
quarter, end of the half year.
20:51
There'll be a few nervous statements going out from fund managers, I'm afraid.
20:58
Yeah, no, it's going to be a tough one because there's a few of these companies
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that's...
21:06
Got quite large exposures to these miners.
21:08
But yeah, here's your answer.
21:10
I mean, on the positive side, Hammerson today, 3.73% positive.
21:17
Nice.
21:17
Shaftesbury Capital, that is up 3.7%.
21:24
And now you get to more normal stocks.
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Vodacom, that was up 3.3%.
21:29
Richemont, this is a powerhouse.
21:31
This is a company that's been doing extremely well lately.
21:35
And Richmond, again, up another three and a third.
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And then Anaheim, another dual listed, 2.9% up for today.
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Yeah, some of those numbers make you wish you were in the Kalahari skunk.
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But yeah, this is the question now.
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Is it all over?
21:53
Or will it all turn around?
21:56
Just like the predictions of interest rates might soon become not to the upside,
22:02
but to the
22:03
downside if the oil price keeps on going.
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There could be a swift turnaround.
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But anyway, it's going to be very, very interesting.
22:08
Thank you very much for your time this evening.
22:11
Oh, no, just give us the indices.
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You gave me the individual stocks.
22:14
Close with some indices, please.
22:15
Yeah, let's do so.
22:17
So when we look at the JSC All Share, they're close to that.
22:20
109,829 points.
22:25
That is down 1.62%.
22:26
The top 40, 101,534 points.
22:32
Also down 1.8%.
22:34
As I mentioned, resources, what I call up today, 5.25% down.
22:39
We had industrials, that was up 1.36%.
22:42
Remember, we mentioned the likes of the analysis.
22:45
I mean, enrichment, 1.36% up for today.
22:50
Financials down 1.73%.
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And asset property, that was flat.
22:55
When we look at the total market turnover today, we're at 30 billion today.
23:00
So, yeah, 30 billion traded today.
23:03
Very good.
23:04
Skulk, thanks so much for your time.
23:05
As I said prematurely, Skulk Lowe is a portfolio manager at PSG Wealth Old Oak in
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Cape Town, and
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that was the five
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o'clock
23:28
shadow.
23:31
of the position of any other entity other than the speaker or the author.
23:35
And since we are critically thinking human beings, these views are always subject to
23:40
change, revision and
23:41
rethinking at any time.
23:43
Please do not hold us to them in perpetuity.