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

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You're listening to Strictly Business Podcast with Lindsay Williams.
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JSC has closed its doors for another day, so it's time for the five o'clock shadow.
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And as always on a Wednesday, I speak to Scott Clow, Portfolio Manager at PSG
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Wealth Old Oak in Cape Town.
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I was thinking about it this morning, actually, and I thought, Lindsay, you
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shouldn't be greedy.
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You've had a war, and as a newshound, a war is a horrible thing to say.
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But it provides a lot of news.
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I'd rather not have the war and not have the news and be bored.
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But I do enjoy some bad news and some market-stirring stuff.
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I'm sitting here today and I'm thinking the gold price has done this over the last
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few years.
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The PGMs have done this.
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Oil has done that and everything.
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And I think to myself, where are we now?
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Where are we with interest rates?
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Are we going into stagflation?
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Will there be a recession?
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All those things have gone through my head pre- talking to you.
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So you're going to get the brunt of it, unfortunately.
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You're going to have to tell me all the answers to those questions.
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Don't you feel like that?
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Where to next?
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So all in less than 20 minutes.
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So there we go.
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19 now.
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Okay.
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So the short answer is, I actually got a, it was part of an interview this
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afternoon,
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and the commentator asked me specifically, and the question was,
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I can't He phrased it exactly, but he said,
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so there's some people of the opinion that the rent is going to
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skyrocket over the next few days or months.
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When you say skyrocket, you mean skyrocket?
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Exactly.
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What does that mean?
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Does it mean it goes to 20 or it goes to 13.50?
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Yes.
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Some people say if the rent skyrockets, it goes back to 19, whereas I would say it
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goes to 12.50 because that means it's going up.
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I'm in your camp I'm in your camp so I had to ask him exactly the question you know
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what are we
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because if we had this conversation two weeks ago we would have naturally accepted
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the fact that
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Skyrocket means it's going back to
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14 Rand or 13 Rand to the dollar but now suddenly we're sitting in a war
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environment where people say it's going to
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Skyrocket you need to ask the question and funny enough it was in actual fact they
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were they were Thank you.
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But this specific commentator, we're referring to people talking about the rent
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now going back to 1920,
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20 rands of the dollar.
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And how things could change in literally two weeks.
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And the thing that made it change was this war.
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So the thing is now to expect, we need to expect the unexpected.
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It's like a stupid phrase.
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But effectively, this could go left and right.
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If we sit with a scenario.
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that the straight stay is closed,
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that the war is a prolonged war and it's going to continue for months or even
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years,
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then don't be surprised if a repeat of what we've seen in the World Prize two
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days ago is sort of
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that's the new norm.
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Because now they're talking and say, well, this troubling scenario put us in an
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environment where they need to open up
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some new taps.
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They need to.
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now go into the oil reserves and make sure that they bring some stability by
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pumping the most amount of reserves since, what was it, when the Ukraine, well,
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it's even more than when the Ukraine and Russia war started.
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If we see the oil price continue to weaken and weaken even further, then yes,
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you will pay more for your petrol or your gas.
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depending on where you stay in the world.
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Strengthen, you mean?
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You said weaken.
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No, you will pay more if it strengthens.
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If the world price, I see the world price going from
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$70 to $120 as way weaker.
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But I know what you mean.
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Yes, yes, okay, I see what you mean.
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But we are, you know, the new normal is not $120 a barrel yet.
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That really depends.
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But I'm looking at a graph now, Skok, of Brent crude oil.
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And if we go back to...
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If we go back to, let's say, May 2025, April 2025,
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it's about a year ago.
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About a year ago, it was, where was that, a goat lying along there, $70 a barrel.
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And in March of this year, it was $70 a barrel.
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So it's essentially gone sideways to slightly lower, actually, because it did
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dip to $60.
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But let's say it's gone sideways.
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It went to $119.50 and it's now $91.50, let's say that.
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I don't see it coming back below 80 while there's still a little bit of a scuffle
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going on in the Middle East.
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I'm not being disrespectful about the war here.
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I'm just saying.
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I think we've gone up to the next leg.
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And how does the world cope with oil at these prices?
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It's got to have an effect.
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It's not going to have an effect on today's CPI in the United States.
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We've seen that.
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But it is having an effect in the future, don't you think?
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And that changes everything to me.
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Definitely.
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No, no, definitely.
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Because it's the ripple effect.
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I mean, that same growth that you took, I mean, that...
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period between, let's call it March last year and just before the war started,
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it was one of the lowest levels that we've seen the oil price stabilize in years.
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I mean, we've only really seen it lower in COVID.
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But after the Ukraine-Russia war broke out,
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the oil price also went to $120, $125 per barrel.
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And then after people got used to the Funny how we should get used to wars,
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but when people got used to the war and see all that stuff,
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it actually sort of averaged out around about the $85 per barrel.
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So what we've seen over the past year was sort of great.
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So I agree with you that these newer normals is going to be higher oil price.
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But what's that going to affect?
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We've already seen today the likes of Astral's coming out to say, well,
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it's been a great, great year because we came off.
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fairly high maize prices and soybean prices in
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2024-25.
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That came off quite a bit.
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So that was good.
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Plus, we had a much stronger RAND.
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So that was good.
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So already one company is talking about the effect.
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And now they say, well, if the oil price stays at these current levels,
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the petrol price is going to be… getting a product from point A to point B is just
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going to cost way more.
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But also add to that, you know, most of these fertilizer things which these
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farmers use,
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you come out of that Middle East, Eastern region.
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So that's going to kick up prices.
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So you mentioned the stagflation.
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You know, this is a conversation we've had many, many times.
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I can't see that, firstly, this war or a prolonged war.
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will not have an inflationary effect.
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In actual fact, I think it could have quite a serious inflationary effect.
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I think so too.
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And the other thing that people keep on talking about, and it's a phrase I don't
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like to use because it's overused, they keep on saying boots on the ground,
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which is troops, in other words.
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Yes.
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And they haven't ruled it out.
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If that happens, then it's all bets off about the war stopping.
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As soon as you get troops on the ground in Iran, then it's like an Afghanistan
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situation.
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And it's horrible, Skulk.
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truly horrible afghanistan doesn't produce oil it produces poppies yeah opium poppies
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it's as simple as
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that but it's iran is so important and one thing that hasn't happened yet is there's
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an island called karg
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island which
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is close to the strait of hormuz it's where the iranian oil
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refining facility is 90 percent of iranian oil goes through that island.
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They haven't touched it yet.
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Why haven't they touched it?
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It's an easy target, the Israeli and the US bombers.
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It's just too controversial to bomb that because then the oil prices go to 150
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straight away.
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And do you know who buys 98% of Iranian oil?
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Of course you do.
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It's China.
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And then you've got a real problem.
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There's so many different little arguments that can be made.
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But whatever it is, it's not good, and it's not getting any better to me anyway.
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There's only one.
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That's only one leg.
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Because we're talking about the inflationary leg.
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Because remember, we went into this year, we really went into two years ago,
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where we expected all these rate cuts coming from the Fed.
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And we know that was a really contentious subject because last year it was,
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how independent is the Fed still?
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Are the Fed going to buckle under the pressure of Trump wanting to get rates
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lower and way lower?
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Because remember, he said the U.S.
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interest rate should be the lowest in the world.
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Well, now we're sitting in an environment where we're talking about inflation.
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We're talking about oil at these current levels.
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So you could now say if we stay at these current levels, a rate cut is gone.
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ECB already came out this morning stating that, well,
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they're sort of sitting in between a rock and a hard place now because they would
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most probably next move would be to not cut anymore,
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but now hike.
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And that's...
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That's a major problem because now what you've got is that is the quickest way of
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putting the U.S.
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and most probably the whole world into a recession.
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Yes.
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And so there you've got your no economic growth.
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You've got the inflationary environment.
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And also, you know, you could expect if you see a recessionary environment in the
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U.S.
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you would see unemployment pop up even higher.
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So, yes, that's, I think, where we most probably go.
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But if they can get this war done and dusted, the way Trump has, over the past
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seven days,
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the one moment this war is pretty much done.
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It is done.
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And the next thing, you suddenly hear the commentators come out, and Trump himself,
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well,
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we won't stop until we're done.
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And it could take a bit longer.
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There was an interesting chat.
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There's been a bit of a leak from one of the congressmen who was in the debriefing,
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a closed doors debriefing about the war.
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He said it took two hours.
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I can't tell you too much, but all I can tell you is that they don't know what
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they're doing.
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It was the most scary meeting he's ever been in.
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They don't know why they went there and they don't know how long it's going to
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take.
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Literally, it was almost like one of those situations where Trump woke up in the
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morning and said, I had a dream about Iran.
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Let's go and let's go and attack it.
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It was that.
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I mean, that's frivolous what I've just said, but you know what he's like.
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The weird and the worst thing of all, Lindsay, is the fact that I would believe
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it.
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I mean, just look, I mean, we're sitting on the 11th of March.
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He came into office the 21st of January last year.
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We're talking about Trump being back in office,
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let's call it a little bit more than… one year and one month just go and count the
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amount of things that's happened i
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mean god he just he just loves the
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attention anyway uh let's get back to other things now because my time is
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limited today and i'm going to read out the
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names of companies the
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first one is harmony the other one the other ones are growth point rainbow
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chicken metair
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out assurance they all came out with results uh before between seven and eight
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o'clock this morning
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Which one or ones would you like to pick with a brief summary of what's going on?
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We have to start with… Brief summary.
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Okay, wait a second.
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Harmony is a gold mining company, isn't it?
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And Harmony, gold and brief and scuff don't go together.
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Yeah, let's tackle that one first because this is going to be a quick one.
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I mean, the share price is down over 11%.
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So when you look at the results,
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I think the major thing that stood out was the fact that production was really iffy.
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You would want to see these gold miners really working pretty much 27
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hours a day.
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Yes.
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But, I mean, you could see that there were some problems with the production side.
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So production was down.
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And also when you look at the they always had a little bit higher.
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They're all in sustainable cost.
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has run about the $2,100 per pound.
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So a little bit more than your, it's got your $1,800 odd dollars that Anger Gold
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and Goldfields has got.
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So I think a bit of a disappointment for the market.
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You know, just taking consideration, we had a bit of retracement in all gold
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shares, gold miners today.
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But I mean, Harmony being the one that's not really producing the way like the
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other gold miners are doing,
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that just, I think, saw them.
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get hurt a little bit more today.
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I think the star, out-surance today, for sure.
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And I think we were spoiled this week because we had, I think it was on Monday,
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Monday or Tuesday.
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Yeah, it was Monday.
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Monday we had Santam. Yes.
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And today we had out-surance.
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And it's really, really good to see that both these insurers did really well.
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I mean, you can see they well-managed and they really did pretty solid.
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But when I look at out-surance, They return on equity guarantee over 30%,
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32 odd percent.
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So that's really good.
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They've got a dividend and a special dividend.
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That's always a positive sign.
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And yeah, the earnings, normalized earnings, all those, they did really well.
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So solid growth, great company.
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And when I look at the outlook, they did mention that they've got a strong capital
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position.
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And they think that organic growth-wise, they're really positive for the next year
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or so.
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So even from the outlook point of view, it's looking good.
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One you didn't mention was RemGrow.
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You know that's one of my companies that I really fancy.
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And why I'm bringing him in the conversation, because naturally,
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one of the largest holdings within the… the Bimgro portfolio, and it is
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outshurants,
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but we've heard now today that Bimgro are now fully on its way getting rid of their
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total holdings of
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first-round.
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Now, this is a conversation you and I had last year when they talked about
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Raynet, how they unbundled, and I said, watch this space,
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because you can see they're selling off all the crown juice, starting to unlock
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value in Raynet.
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Do not Don't be surprised if you start seeing a similar reaction in RimGrowth.
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And on that stage… Simply because it's an archaic structure and investors don't like
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that anymore,
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constantly trading at a discount to the sum of the parts.
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Is that why it is?
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Yes.
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I mean, on that stage, the discounts are over 40%.
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I think it's still just shy of 40%.
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So I do think that this is becoming a really attractive play.
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So for the listeners out there that sort of… got a bit of FOMO, felt that they miss
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out on outshones,
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a nice entry point could be looking at something like a RimGrow where you buy
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most of these assets at quite a
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serious discount.
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What was the other?
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Well, we talked about Astral.
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Astral and Rainbow Chicken's got very similar storyline.
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Very bad.
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I mean, we know the maze prices were extremely high in 2024, and that came off.
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And that naturally is the biggest inset cost for rainbow chickens and for astrol.
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And that saw them in a better position, but they also warned.
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They warned and they said, if we do see these oil prices stay at these current
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levels,
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if we do see a kick-up, I just quickly looked at the biggest inset cost,
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which is basically soil beans and maize.
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And if you look at those two… The maize price is now up 2% year to date,
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and swerve beans up over 16%.
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So clearly there's a bit of a kicker there,
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and it could be just something to just put some cold water on any person that want to
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get a speculative position
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on rainbow chickens.
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I think they've done really well in 2024,
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but they came off sort of low base in 2024 to a higher base in 2025.
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Yeah, I think that was the most important ones.
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I can...
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No, it's very good.
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It's been a busy results time and the JSC is sort of holding its own.
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But on the other hand, it's out of the company's hands right now when it comes to
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the macro theme, isn't it?
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Because the bonds have rallied essentially 100 basis points.
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That's the 10-year.
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The round has gone from the high 1570s or
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60s to the at one point to the where is it now?
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1640.
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But anyway, let me give you some prices, Scott, so we can just sort of step.
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back a bit from the corporate stuff and our war scenarios to what's actually
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happening on the spot markets.
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And dollar-rand is unchanged at 1639.
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British pound against the round 2198.
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And the euro-rand 1897.
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Euro-dollar is about 11605.
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So the euro has regained some of its luster against the dollar.
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And there's talk, as you said earlier, Scott, that the ECB's next move maybe up.
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I mean, it's just...
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It's not going to be down, that's for sure.
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British pound against the US dollar, 134.50.
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Gold price, 51.70, which is down
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$22. And I think maybe the investors are being a little bit hard on the gold shares
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and the other miners
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because of a perceived drawdown in metal prices coming up.
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But anyway, platinum down 1.5% or $35 to 21.
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I'll call it 2200 on the nose.
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Palladium.
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Not doing so well, down nearly 3% at $16.49, $48 per ounce.
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Let's have a look at the other commodities, the big ones.
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Oil price, such an interesting one.
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$91.43 for Brent crude oil, up 4%.
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West Texas crude, $86.84, up 4% as well.
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And copper is $5.85 per pound, which is down around about 1%.
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Bitcoin.
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Above 70,000 again, 70,300.
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That's down on the day, but it's had a good week or so.
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South African 10-year bond yield, I spoke about that earlier.
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It's 8.46%, which is up 2.5 basis points,
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but much better than it was 36 hours ago after that oil price shock.
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US 10-year, 420 again.
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That's been all over the place for such a big market.
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It's been quite big in the move department.
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S&P 500 futures more or less unchanged, 6,782 after the US CPI figure came in.
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Month-on-month 0.2% and year-on-year 2.4% up.
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What else, Scott?
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What moved on the market today?
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I see that the metals and mining index down 4.7%.
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Give us some individual stocks.
20:07
It must be the diggers on the downside.
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Oh, no, for sure.
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I think there's no doubt.
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And you don't have to even look even further.
20:14
Like our first conversation point for today, how many down?
20:18
11.1%.
20:20
Goldfields down 5.7%.
20:23
Kumba Iron Ore 5.2%.
20:25
Sabania Stillwater down 5%.
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Valterra down 4.4%.
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And you can continue because then to follow is just the likes of the Anglo Gold
20:35
Sappies, Northern.
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So those are pretty much A diggers downward day for today.
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On the upside, Rainbow Chickens, not sure with a good set of results.
20:43
They were up 5.8%, 5% up today.
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Outsurance, 4.9%.
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Hey, look at this.
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Sassl back in the top of the pops, 4.6%.
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Look at that, 160.
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It's more than tripled.
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I can't believe this thing.
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I would have sold the thing at 100.
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I would have sold it.
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Oh, hold my beer.
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Hold my beer.
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That's the reason why I do what I do and you do what you do.
21:05
And then number five.
21:08
And number five, I need to mention them.
21:10
Please do.
21:10
PSG Financial. I've heard of them.
21:13
Yeah, yeah, PSG Financial Services.
21:15
2.3% higher at 26,611.
21:17
Very well done.
21:18
There we go.
21:19
So also a solid day coming from our side.
21:22
Okay.
21:23
And the indices, if you would.
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So as expected today, the JSE Resi,
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that was down 3.8%.
21:33
The industrials, that was down 1.1%. The financials down 0.8%.
21:38
The SA Property Index was down 1.2%.
21:42
The JSC All Share closed today at 117 points, 399, just shy of 400.
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So that was down 1.9% while the JSC, well, 40 closed today at 109,600 points.
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That's also down 2% for the day.
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Let me just quickly look at that value traded.
21:59
Yes, please.
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I would be interested to see if you'd see this.
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Yep, yeah, more than $30 billion traded through the JSC today.
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Well done.
22:06
Skulk, thanks so much for your time.
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Skulk Lowe is a portfolio manager at PSG Wealth Old Oak in Cape Town,
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and that was the
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five
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o'clock
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shadow.
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other than the speaker or the author.
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And since we are critically thinking human beings, these views are always subject to
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change, revision,
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and rethinking at any time.
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Please do not hold us to them in perpetuity.