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Shapiroworld by Strictly Business · Strictly Business Podcast

0:00
You're listening to Strictly Business Podcast with Lindsay Williams.
0:05
It's Monday, so it's time for Shapiro World with David Shapiro from Sassfin
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Securities in Johannesburg.
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David, big week.
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We've got a raft of results coming out, a slew of earnings, and also we've got the
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US Federal Reserve.
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The second meeting that has been chaired by Kevin Walsh that starts tomorrow,
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concludes on Wednesday evening our
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time.
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It'll be interesting to see what he does because apparently around about a third of
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market participants expect...
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a 25 basis point hike.
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I can't see it myself.
0:33
I think a flat liner.
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But this week could be defining for the short term trend of the market.
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It could confirm the few wobbles we've had recently, or it could sweep them aside and
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send the market on to the old
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highs again.
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What do you think?
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It's a difficult market to navigate.
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And because you've got quite a few forces acting against you.
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First, I don't think Mr.
0:58
Walsh is going to increase rates.
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I don't think so at this point.
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The inflation reading was satisfactory.
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Yes, we got a spike in oil prices, but it is likely to come down.
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I don't think there's going to be any major disruption.
1:15
At 90 at the moment, Brent, it was 100.
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It could go lower depending on Mr.
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Trump, who I think is trapped.
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I don't think he knows what to do.
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I think he's just, you know, he's kind of...
1:27
Just blundering around.
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I don't think he knows what to do in his daily life, let alone, apart from sending
1:34
out ridiculous
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memes and things like that on what he did last night.
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I don't want to talk about it too much.
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But dozens and dozens of the most bizarre pictures of himself rescuing Washington,
1:48
Mount Rushmore, at the head of a Navy ship blowing up Iranian vessels.
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He's completely...
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completely lost it.
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I mean, there wasn't much to lose in the first place, but what he has is being lost
2:00
at a rapid pace, and it's very dangerous.
2:04
I think it's, you know, we're going into the elections in November.
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I don't know whether it's going to make any difference, but I think over Iran and
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over the middle, the Gulf area,
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I think he's completely lost.
2:18
You know, he's got no solution.
2:20
I don't think the...
2:22
military has a solution there at all.
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This can linger.
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It just keeps going on and on.
2:27
At what expense, we don't know.
2:30
You don't want to go into a world with oil at these kind of levels for the long term.
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So the market seems to be brushing it aside.
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But when you look at a chart of the Fed rate, which went up
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dramatically in 2022.
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When Mr.
2:51
Powell suddenly decided that transitory wasn't transitory and they had to do
2:55
something, we're still in that area.
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We came down a little.
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Powell did reduce rates slightly, but we're still elevated.
3:02
And it nags on the economy.
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The economy can last.
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It's doing well.
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But it's still an inhibitor.
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It's still an impediment for growth.
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So at the moment, it's all around AI.
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It's around some of the numbers that are being spent.
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which are incredible.
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And Lindsay, you know, we forget about the multiplier effect of spending, which is
3:27
economics
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101.
3:29
When you spend a dollar, someone else gets a dollar, spends it, and so it goes
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through the whole system.
3:35
And when you look at the amounts being spent on data centers, when you see the
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amounts being spent on
3:42
power and that, there is some impact, there's something driving or keeping up
3:47
the U.S.
3:48
economy.
3:49
It's still a very lopsided economy.
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In other words, there are people that are benefiting, but there are others that are
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under pressure because of that.
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The housing market, for instance, is still a market under enormous pressure in the
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US.
4:03
So we're getting through that.
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AI has led this market.
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This is one thing that kind of...
4:12
It does nag me a little bit.
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AI has led this market for four years.
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So if something happens to AI before, I'm going to preempt what you're going to say.
4:19
So it's being led by just one thing, which is relatively new.
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I mean, David, how long is it since you first discovered ChatGPT?
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It must be three years.
4:31
Before I started to use it in a productive way, I think it's only been about two
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years.
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Yeah.
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Yeah.
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And I use it productively.
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But I'm saying, and it's developing and it's helpful, but it's only two years.
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But still, it's, you know, the market has led the way.
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Call it the Mag 7, I don't hate that.
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I hate that description, but, you know, the big hyperscalers, the Alphabets and
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the Microsofts and all of those, they've led the
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market.
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They're getting tired, and you do need breadth.
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You need to, you know, breathe.
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Yeah, there are other things like aerospace.
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You know, I was fascinated by the Farnborough discussions, how big that
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industry is getting.
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You know, but there's technology that connects all of them.
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But you do need to go back to...
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Times where people are getting money, buying houses, you know, buying those
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things.
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I don't say these are great investment ideas.
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I don't mean it.
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But you want an economy that's growing, you know, where everybody's celebrating
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growth.
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But broad-based growth, David.
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I mean, what I'm saying is what I was trying to say was that AI on its own
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cannot support the U.S.
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economy and the world economy because...
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Something might happen.
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It's still so new that something might happen.
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The money might run out.
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Interest rates might spike because of inflation.
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And therefore it becomes more expensive to put all that money into R&D by the AI
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firms, etc.
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Or just there might be some event.
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But anyway, whether it's AI or something else, if you're reliant on one thing,
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you're vulnerable.
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I was thinking today about my life and I thought, if this person wasn't in my life,
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If this person that supports me at this particular
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company suddenly retired or something happened to them, I'd be stuffed.
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They'd look and say, why are we using this fellow here?
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So that would be that's an example of someone that I'm relying on.
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And therefore, if that person disappears, I don't have a contingency plan.
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So it's the same with AI.
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Does the market have a contingency plan?
6:44
Is the rest of the economy doing well?
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I don't know, maybe it is, but without AI, will it be?
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So many questions.
6:51
Yeah, You need, I'm not saying that I will abandon AI, not
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in any way.
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Not that I will move away from technology, but I do acknowledge, you know, I call it
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the
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two-speed highway.
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You know, I say that we've got this one speed, you know it, I've mentioned it many
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times, this fast track, which is the AI track.
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the company's spending on data centers and then you've got the slow track which has
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dragged down the housing market you know general
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spending monies where people are are not getting wage increases are not coming
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through in other words the real earnings are not
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going up and that they you know there's employment and so on but it might only be
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a very small part but you want that broad
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base economy you know where where people are buying more you know renewing their
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televisions getting new
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laptops.
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They've got the money to do those things.
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drive the economy.
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We haven't had it in South Africa for I don't know how long.
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You know, we haven't grown at any major level.
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We're still under 1%, which can't absorb unemployment.
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It can't make any difference in that because there is no growth.
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And, you know, growth goes through to building new buildings and building new
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roads and building new bridges.
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I'm talking on a global point of view, which creates demand for metals and things
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like that, you know.
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And I'd love to see that coming back again.
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You know, I would like to see normalising.
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I love AI.
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I love, and I love looking for new areas of growth.
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But I would prefer to operate in a much broader based recovery.
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Yes.
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Lots of people say.
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You know what I mean?
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I'm not, you know, I'm trying to think of an analogy or a metaphor.
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It's like, it's like you want the Premier League and we're going back because the
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football season will stop.
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You don't want three or four teams.
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You want to know that there are 20 teams that can play football in the Premier
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League.
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Quite right.
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Each has a chance of winning.
8:51
Yeah, you're quite right, actually.
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There are certain teams you know are not going to make it in the Premier League
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next season.
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I count Ipswich Town, my team, as one of them.
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It's simply because they're not big enough.
9:00
They're not spending enough.
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They don't have the clout.
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They don't attract the big players.
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Who wants to go to Ipswich when they could go to London, to Arsenal, to Chelsea,
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whoever it is?
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dare I say even Manchester's quite cool these days so why not go to Manchester um
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so yeah it's it's the same
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thing the haves and the have-nots in very many differing starters of starters of
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society as well whether it be the economy or whether it be football and everything
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in between the haves and the have-nots are becoming
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more heavy and more have-notty if you See what I mean?
9:33
Yeah.
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And, and.
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You know what?
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One of the themes that we're pushing at the moment, and it's been very
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interesting, I think I might have mentioned this on Thursday,
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is when you talk to the banking analysts or you talk to the banks in Europe, And a
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lot
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of the wealth managers, they're all heading east because so many more new
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millionaires are
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being created that are going to need handholding.
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You know, the market's increasing.
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Do you understand that?
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And I'll take that back to us in South Africa and I'll make the statement, and
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I'm not apologizing, we
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cannot make a living in South Africa, you know, as a stockbroking firm.
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No.
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Do you know what I mean?
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Because your client base is not expanding, in other words, or your potential client
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base.
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Yes, yes.
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We are not, you know, our clients are retired people, people who are retired and
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might
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have inherited money, getting older.
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They don't take the same kind of risk.
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But they're not youngsters coming in, you know, with wealth, building up wealth.
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The other thing is that also even where we do have wealth, South Africa doesn't offer
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opportunities for us to
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make a living here.
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In other words, there's not enough turnover on the JSC to make it worthwhile.
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And I'm not talking trading.
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You know, we're the old, I'm the old-fashioned type of person who looks at
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the fundamentals, sleeps at night, you know, because I know
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that the company I bought into is sustainable.
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It's not going to fall over tomorrow.
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So we can't.
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There's not enough turnover.
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There's not enough stock on the shelves for us to make a viable living in South
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Africa.
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Yeah, I'm sure there are financial planners or advisors out there who've got
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products and they go around knocking on
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doors.
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But I'm talking at a high level.
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It's become very, very difficult.
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And, you know, from that point of view.
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You know, we always say we're still clients, you know.
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My base grows because I steal a client from somewhere else, from Viv, and then
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Viv steals it from me, you know, that
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kind of thing.
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Not that growth.
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Not that growth.
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I'm talking about genuinely new money.
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Organic growth.
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Organic growth.
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New clients coming along.
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Okay.
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What did you read over the weekend?
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Have you made any more decisions, David?
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Have you figured where the AI stocks are going?
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Which ones are the ones to be in?
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Have you?
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What have you discovered?
12:14
I'm still in the same.
12:15
Now, you know what's happening is, yes, as I said, it led the market up.
12:20
And there's not much capacity to add new shareholders because everybody who wants
12:25
Alphabet's got Alphabet.
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Everyone who wants NVIDIA's got NVIDIA.
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It doesn't mean they're doing badly at all.
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What is happening, the results are coming through, and they're doing well.
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It's going to make them cheaper.
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So I'm not going to get rid of them.
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But we started to look at other areas.
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I have the only area that in truth.
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intrigues me at the moment.
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And you'd never think that I'm a Farnborough fan.
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You're looking at aviation, aren't you?
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You told us about the Rolls-Royce story.
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Yeah.
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And over the weekend, there are two articles in the Financial Times worth
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reading.
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The one is on defense, on the amount of money, because I was anxious about
13:06
defense, but the spending's there
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and the technology is changing completely.
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You know, the way wars are going to be fought is more technological.
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Now, I'm not talking space.
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I'm just talking about the weapons and, you know, what they do.
13:21
There's also fascinating stories that are coming out of Israel that they have
13:27
learned after
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November, you know, sorry, of October 23.
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Yeah.
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You know, with the bombing that took place on them.
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Well, how do we stop this into the future?
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You know, how do we prevent?
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How do we...
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build this dome and some of the stuff coming out of there, the technology that,
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and they will sell it
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as much as people might despise Israel and their military.
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The Europeans are looking at it, you know, looking at buying that kind of technology
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because you don't know who's going to come
13:59
across with drones or anything like that.
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So that's become an area.
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The other one is, of course, just travel and the development, you know, Airbus.
14:09
needing more engines, that whole side of it.
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I think it's not showing, it's not coming up in the numbers.
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It's not coming up in growth.
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But the demand is there and it's a matter of actual execution, making sure that you
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can execute on these
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orders that you have.
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And that will include defense as well, companies like Ryan Mattel.
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I was just about to talk about Ryan Mattel and the other ones.
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And one of the reasons is because of a rumor that came out, whether it be
14:35
mischievous or not, is that the people that advise
14:39
the lunatic in the white house sat with him including jd jd vance He said, we
14:45
can't continue
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the war.
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One of the generals apparently said to Trump, we can't continue the war because
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we're not making any more impact.
14:54
What we're doing now, the bombing has had its day.
14:58
We can't make any gains because of that.
15:00
The only way we can make any more gains is combat, you know, not hand-to-hand combat,
15:06
but the modern equivalent.
15:08
And one of the other reasons was, David, that they're running short of supplies.
15:12
They're running short.
15:15
of missiles and also the drones or the missiles that defend.
15:19
They're saying we have to be selective.
15:21
Again, it's a rumour.
15:22
They say we have to be selective on which incoming missiles or drones that we attack
15:27
because our supplies are so
15:29
low.
15:30
So they've got to be replenished.
15:31
I mean, we saw Hegseth the other day in front of Congress saying we need X amount
15:36
extra.
15:37
It's cost us $37.5 billion so far, but we need more.
15:40
And $37.5 billion, I think, was a fudge.
15:43
It must be at least twice that.
15:45
So he's gone there for more money in order.
15:48
So what are the companies that produce these things?
15:51
That's another little project for you, perhaps.
15:55
No, no.
15:56
It's the money that's being spent.
15:58
It's not necessarily coming through in the numbers.
16:01
That's why I'm saying, yeah.
16:03
But, you know, it's like Ferrari.
16:06
I mean...
16:07
When you look at Ferrari and you see how many people are, do you know what I mean?
16:13
When you look at the number of people that buy it and you say, listen, they sell
16:17
whatever they do.
16:18
Well, I can live with that.
16:20
I can live with that kind of company.
16:23
So I like to look for those kind of businesses.
16:26
And when you look at the backlog of orders, the stress is on the company
16:32
actually fulfilling it
16:33
and doing it.
16:34
We know Boeing messed up.
16:36
But Boeing's coming right again.
16:38
But, you know, it's exciting stuff to see.
16:42
And I know from experience of traveling that something has to be done.
16:47
You know, improvements have to be made.
16:49
You can't continue to, you know, travel at the you can't have airports crowded as
16:55
they are
16:56
with security.
16:58
And, you know, that's a terrible experience.
17:00
It really is.
17:01
I mean, there was an occasion over the weekend where Gatwick Airport, London's
17:05
second...
17:06
airport, which is expanding rapidly, of course, ran out of water.
17:10
Can you imagine going to an airport and you have to get there three hours early
17:16
anyway and you
17:17
check in and everything and you want to use the bathroom and the bathroom doesn't
17:21
have any water and there's a queue and people have to go, obviously, but
17:24
you can't flush.
17:26
The infrastructure is creaking in many of these areas.
17:30
Not everything's keeping up.
17:31
So there is money being spent and it will have to be spent.
17:34
And you've identified a very fertile hunting ground, I think.
17:38
You go to JFK and you try to get from JFK to
17:45
Manhattan.
17:47
It's a nightmare.
17:48
It's an absolute nightmare.
17:50
How the taxi drivers just have the patience to just sit and negotiate their
17:55
way throughout traffic.
17:57
It's just incredible.
17:58
And, you know, it just adds on an extra leg that you don't want to happen.
18:03
You finally get to JFK, you know, you finally get your bags, you know, after a
18:08
long trip, and then you get in
18:10
a taxi and you've got another one and a half hours, just, you know, just like, it
18:16
doesn't matter if you're
18:16
traveling.
18:17
I don't know, there's something, yes, if it's an hour's drive or something like
18:20
that, it's more pleasant.
18:22
But when you negotiate, oh, it's awful.
18:24
And there's no quick way to get there, you know, no cheap way to get there.
18:29
So something has to give.
18:31
Something has to be done.
18:32
to modernize, to keep up with the number of people who are traveling and so on.
18:39
So for me, these are exciting areas.
18:42
I think pharmaceuticals also, the breakthroughs there as well.
18:47
At the moment, it's the weight loss drugs that are leading the way on that.
18:52
But when you start to see some of the cancer therapies that have just been
18:55
announced now by AstraZeneca, medical device.
18:59
But you know, Lindsay, there again, It's a mess.
19:03
I don't know how to explain it.
19:05
You've got you, the user wants to use this instrument, you know, and you know, it's
19:09
going to help you.
19:11
The company makes it, but in between, you've got the health industry, which is
19:15
made up of, I don't know, snake oil or
19:18
charlatans.
19:18
I don't know who they are, but it's so difficult.
19:23
The companies invent, people want, and in between, you've got an industry there
19:28
that's so difficult to understand.
19:31
But nevertheless, a lot of technological breakthroughs are being made there as
19:35
well.
19:36
And so there's plenty of interesting areas to negotiate.
19:41
But again, I come back to the same thing I started with.
19:44
Lindsay, you don't want to do this in an economy that's not going anywhere, that's
19:50
not
19:51
growing for everybody.
19:52
Yeah, and you're quite right.
19:54
You have to be in the United States whether you like it or not.
19:58
Yeah.
19:59
Okay, David, very, very interesting stuff.
20:01
We've got the football season starting in four weeks' time, and I want to talk about
20:04
the haves and the have-nots.
20:05
I want to talk about Arsenal because apparently they're in negotiations to buy
20:10
Vinicius Junior from Real Madrid.
20:12
Is this true?
20:12
Are you kidding me?
20:13
No.
20:14
Have you not seen that?
20:15
No.
20:17
I never take these things seriously.
20:19
No.
20:19
I don't think anyone else is.
20:21
But it shows you.
20:22
I hope it is serious.
20:24
We need somebody on the left.
20:25
He's brilliant.
20:26
Of course.
20:27
Oh, no.
20:28
There's no doubt.
20:29
And Arsenal need someone on the left.
20:32
I think we need on the left and the right.
20:34
And the middle.
20:35
And the middle.
20:38
You do.
20:39
Despite the fact you won the league and did well in the Champions League, there's
20:42
something missing there.
20:44
There is definitely something missing.
20:45
One element is missing.
20:48
On the other hand, and I have to say this.
20:50
I hope that's right.
20:51
I think that would be great.
20:52
Have a look.
20:53
Just check on AI.
20:56
Arsenal and Vinicius and you'll see lots of articles come up.
20:59
At the other end of the spectrum, David, we have little Ipswich Town who have just
21:02
been re-promoted.
21:03
They went up, they went down, and now they've gone up again.
21:06
They've brought five players.
21:08
Now, I don't remember a Swiss team that was in the Champions League for the first
21:13
time.
21:14
I think it was called something called something.
21:16
I can't remember what the name is.
21:18
Obscure team.
21:21
They've got a six foot nine Dutch goalkeeper who played at Brighton
21:28
for three years, at Brighton for three years, and he made four appearances.
21:32
Ipswich have had to pay.
21:34
I think close to 20 million for him, or 15 or something with add-ons.
21:38
Yeah.
21:39
Because, I don't know, because so many clubs are chasing such a small pool of
21:45
talent.
21:46
They brought another goalkeeper from the Netherlands, so they've brought two
21:49
keepers across the 30 million, I think, and they brought a Brazilian who's
21:53
been playing in the lower tier of the Portuguese leagues called Emerson for 26
21:59
million.
22:00
They've brought five players.
22:01
I've only heard of one of them.
22:03
And they're just splashing money because they have to.
22:06
It's like AI, the companies have to keep up by spending more and more.
22:10
And little teams like Ipswich, people see them coming and they say, well, you've got
22:13
to pay this, so pay it.
22:15
Otherwise, Hull City or Coventry or something are in the queue as well.
22:19
It's very sad for my little team.
22:21
No, it is because you need but that's the AI story.
22:26
I mean, you can relate it.
22:27
If you don't keep up, you're going to fall behind.
22:31
you know and That's the sad thing about it.
22:35
They have to do it.
22:36
And to find anybody who is going to, you've got to find the youngsters, you
22:40
know, and that's where smart scouts come in.
22:44
Yeah.
22:45
I mean, I love what's happened to, I mean, when I saw Bournemouth and Brighton and
22:51
Hove Albert,
22:51
I mean, clubs like that, even Brentford.
22:53
Yes.
22:54
You know, where they finish just through very clever management and very smart.
23:02
you know, team selection or scouting.
23:05
And, you know, yes, you develop.
23:07
Wolves did that.
23:08
Wolves, and they've gone down sadly.
23:10
But they, I mean, if you look at the people who started to play for Wolves and
23:14
where they are today, found incredible players.
23:17
It's like the clubs that are below the top tier are almost like nurseries for the
23:23
bigger clubs.
23:24
They get a player, the player does well, he suddenly gets a ridiculous valuation
23:29
and he's snapped up.
23:31
And the reason he snapped up, it's not because he's particularly brilliant.
23:35
He's not a new Vinicius or Messi or something.
23:37
It's just because if Manchester City are going for this player and they don't buy
23:44
him, then you've got to
23:44
buy him.
23:45
You see what I mean?
23:46
They've got to be on their toes.
23:48
If someone becomes available, there's a queue at the door.
23:52
And they're also very mercenary, the players.
23:56
Well, it's not the players, actually.
23:57
It's the agents.
23:58
I remember Brian Clough 30 years ago talking about agents and calling them
24:03
something very unpleasant.
24:05
But the agents are… I met some in the 90s.
24:10
I can't remember who he was.
24:12
I can still picture him because he was born on the exact same day as me.
24:17
He was a Tottenham agent.
24:20
He had short hair and I think he started as a theatrical agent and he was one of
24:26
the early agents for
24:27
players in that.
24:28
And he was a Cockney from the East End.
24:31
And I'm trying to remember.
24:32
I can still picture him a can of ramen.
24:35
And, I mean, this is what you were up against, the theatrical agent, you know,
24:38
kind of batting for you.
24:40
And I suppose a lot of the older players who are now well-retired said, oh, I wish
24:44
we could have had that in those days, you know.
24:46
Poor things.
24:48
Okay, David.
24:48
Eric.
24:50
His name was Eric something or other.
24:52
I'm going to get it.
24:52
I'll tell you.
24:53
Eric the agent.
24:53
He was great.
24:56
Eric the agent.
24:56
I stayed in a pub drinking beer with him, and he was hysterical.
25:00
You know those...
25:01
Those East End salesmen.
25:03
I do.
25:06
Okay.
25:07
David, thank you very much for your time, as always.
25:08
David Shapiro is from Assessment Securities.
25:11
And that was Shapiro World.
25:12
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