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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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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
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Cape Town.
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Now, I want to rant a bit, Skullclo, will you allow me to do so?
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You can say no, by the way.
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I'll get it.
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feeling that it's not gonna matter anyway no it would do if you said no i would just
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see the bit okay i'm
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here wake up everybody the lunatic has taken over the asylum we've known that for
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a while
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and everybody that says well he's gonna say this and the ceasefire will do this
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and the ceasefire will do that just like the ceasefire
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between israel and lebanon is a real thing no it's not there
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was a drone attack by israel by israel on lebanon today causing death.
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So it's not happening.
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There's no ceasefire.
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Trump doesn't have a strategy on what he wants to do.
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He doesn't have a coherent theme of what he's going to do.
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He doesn't have a goal.
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He didn't say, I need to go into Iran because I want this.
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And he's almost admitted that with his ramblings.
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Wake up, everybody.
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The oil price, more importantly, is $100 a barrel.
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It was $60 a barrel in October.
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That means that inflation is going up.
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That means that interest rates are going up.
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That means you've got less money in your pocket.
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That means that companies that are listed on exchanges are earning less.
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Therefore, their earnings are coming down.
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That means that the stock market falls.
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Just wake up, everybody.
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We've had a few weeks of, you know, think, oh, well, maybe this, maybe that.
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No, not maybe anything.
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We're in for the long term here.
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And as I said,
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the lunatic has taken over the asylum how's the market skunk you feeling
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better now no actually no i'm not one of those people i'm gonna continue and i'm
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gonna speak to this
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african listeners now because i
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mean what what what this boils down to is the whole globe is
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putting pressure on on trump the u.s and also israel to to Thank you.
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Well, Iran, to get around the table and get this peace deal done.
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Why?
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And as you mentioned, we're sitting with a $100 oil mark.
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And for the listeners out there, where are we now in the cycle?
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I mean, we had a massive, massive,
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massive jump in the petrol price and diesel prices last month.
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Now as we sit here, There's basically the central energy fund.
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They're actually on a daily basis.
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Beautiful.
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It's like if a daily, where the oil price currently is, if it stays unchanged,
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we should either see a raise or a drop in the petrol slash diesel prices.
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As we sit here, if the oil price stay at these current levels, remember, they came
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off a little bit.
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They're not the $110 levels anymore.
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They reached almost $120 around about five, six weeks ago, I think it was.
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And it was a spike.
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But the average is the most important thing, Skulk.
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And before you go on, the point is that people say, oh, it's just speculators.
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No, it's not speculators because the market has stayed where it is.
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It's currently $100 a barrel on the futures market for Brent crude oil.
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And people can't get oil anymore, so they're paying up.
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at whatever price for whatever oil they can get from whatever part of the world.
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So that filters through to the global oil market.
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It's $100 a barrel.
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And it doesn't matter whether you're in Alabama or Afghanistan.
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Oil is $100 a barrel.
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And that's what you pay if you have the luxury of having a car.
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That's it.
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But for those who don't have a car, they'll need to make use of a taxi.
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They'll need to make use of...
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Some sort of transportation.
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As we sit here, if the oil price stay unchanged, as of yesterday's close,
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the Central Energy Fund predicting that the petrol price,
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and here I'm using the 95 unleaded, petrol price should go up further.
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2.25 rand.
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Diesel, wait for it.
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6.60 rand.
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Get out.
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And remember, this is not...
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As Lindsay mentioned, this is not the world price trading at $110, $120 anymore.
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It's now come off.
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It's actually better levels.
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I mean, we're sitting with a president in the USA talking about a victory, an
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indefinite ceasefire.
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I still need to find out what's the difference between an indefinite ceasefire
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and actually the war being over.
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But anyway, an indefinite ceasefire, massive victory, blah,
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And we as South Africans, and we're not the only, I mean, I think I've seen the
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other day something like Malawi,
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they currently, we're sitting at about 20 odd rand per litre,
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they're already something like 50 or 55 rand per litre, per litre.
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And running out of it as well.
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And totally running out of it.
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So this is going to have a detrimental effect on the world economy, South Africa
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not excluded.
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We went into this year, and I know they've now recalculated and said, well, inflation
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that came out
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3.1-ish, already north of the 3% mark that they're aiming for,
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they now say it should settle around the 3.7% mark.
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And already you can see, the Reserve Bank being a little bit more hawkish,
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not as positive as they went into this year.
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stating we should see a few interest rate cuts in 2026, very similar to the Fed.
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As we sit here,
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we're not expecting any interest rate cuts from the Fed for the rest of this year,
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if you look at the probabilities according to the CME Fed tool.
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If you look at locally already, Kahnia is saying, well,
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if we're going to have pressure on inflation upwards or further inflation
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pressures upwards,
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we're going to have no choice.
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We're going to have to hike interest rates.
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And as you mentioned, Lindsay, this is going to have a massive, massive effect on
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us.
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Because not only are we as South Africans paying more for our fuel,
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it will definitely have an effect on food prices because that will increase food
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prices.
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It will also mean that our debt repayment or debt servicing will also increase.
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That's a crazy, crazy negative environment.
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And then I'm looking at...
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the US market today and I'm seeing S&P 500 is up close to 1%
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Nasdaq up 1.25% I saw it today and I looked at it this morning throughout the
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day, even from midnight because I,
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whatever I saw the opening of the real markets at midnight, everything was going
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up,
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but all going up in tandem, gold was going up, oil was going up,
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the index futures were going up I didn't understand what was going on and as you
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speak speak,
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as we speak, the oil price has just fallen a dollar.
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It's now only up 2% on the day, but it's still up on the day.
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And as you say, the index futures in the United States, actually, the real market
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is up, and gold is up as well.
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What is going on?
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I think what it is, is there's so much money out there, Skulk, that people are
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just buying, and they're just buying anything they can.
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There's no rationale.
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It's like the Trump war policy, just buy the thing, for goodness sake.
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Do you understand it?
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I don't.
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I don't.
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And that makes this dangerous.
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That makes this dangerous.
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We were really, I mean, the other day we were talking about, oh, there we go.
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S&P 500 above 7,000 points.
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We talked about new all-time highs.
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I just can't believe we're sitting at new all-time highs while we're sitting with
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this volatile period.
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We're sitting with the oil price.
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Anyway, we can sort of debate this.
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We can.
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sort of frown upon us but i think the one thing that listeners out there should be
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very very careful because
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this i i'm unfortunately this this feels this feels like a bear trap all over it
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really feels like
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there's something there's something brewing out there and people are being too
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sanguine they're being too calm
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about it they're being yeah they're saying ah please we've seen this all before but
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this time we haven't seen it before
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because of all the reasons that i said in my rant at the beginning.
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There is something going on, Skalk.
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What will happen to gold if something does go on?
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Will the people that are long of gold, holding gold, say, OK,
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we've got to sell gold now in order to pay off our margin calls on other markets?
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That's a possibility.
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Well, they might use some treasury bills as well.
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Oh, that's my big sell of the year.
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The U.S.
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Treasury bill, the U.S.
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Treasury bond, everything.
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I mean, it's taking a while, but the US 10-year will be at 550, 650 by the end of
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the year, without a doubt.
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And the other thing that I have to comment upon after your analysis, Lesechuk and
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Yago...
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Jay Powell, Walsh, the new incoming Fed chairman, Christine Lagarde and
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Bailey at the Bank of England, they don't know.
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They don't know any better than we do.
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We are as good as they are skunk because we don't know as well.
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We don't know what's going to go on.
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So how can they say, well, we think inflation is going to peak at 3.8%
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in the UK after the UK inflation came out today at 3.3%.
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The South African came out at 3.1%.
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you Yes, that's all very willing.
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It all sounds nice.
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But in the future, it's not going to be there.
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It'll go up to 4% or 3.8%.
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And then after that, if the oil price is still 100 or 95, it'll go on from there.
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Nobody knows.
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And that's what's so scary as well.
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Remember, they look at the now.
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And we're talking about central banks slash reserve banks.
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They look at the now.
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They look at the data available to them now.
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And they make, I remember in COVID, it was very similar.
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Remember, these are central bankers.
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They're not doctors.
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So they can't predict what COVID is going to do over the next 12 months.
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So they look at what the commodity prices do back then, and they sort of extrapolate
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that on their models.
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And similar there, nobody, they're not war analysts or political analysts to sort of
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forecast where this
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war is going.
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So they look at the data now and say, well, this is where.
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Well, I'm saying that if we're going to see this war, where did I read that today?
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I was a political war analyst, but
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I think it boils down to do not take what Trump says every two, three days.
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But this war is over.
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It's done as this will be done in the next day or two.
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Expect months.
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Expect months.
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So, yeah.
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If we see months, I'm telling you now we're going to see a massive, massive
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pressure on inflation.
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I think and I still I like your bet.
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I like your call.
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I think I think a lot of these larger investors in the world will look at this
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as well and say, well,
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if it's going to be a pressure on inflation, there's going to be pressure on
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rates.
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Then I'd rather be selling selling my treasury bills and invest.
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even further in gold because that still remains one of the base hedges against a
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rising inflation tide.
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Anyway, let's not go to gold again.
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You know my view, and that's why I haven't sold mine yet.
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That's why I would definitely encourage all my clients.
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You've taken some profits, though.
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I did.
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I did.
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And I must admit, any weakness, any further weakness, I will look at
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accumulating some more.
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Bye, Beck.
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OK, let's have a look at the markets now with the RAND at $1, that is at 1647.
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British pound against the RAND 2224.
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The EUR RAND is 1930.
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On to commodities now.
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Well, the gold price, the aforementioned, is on my screen.
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Come on screen.
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Why does it do that?
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I hate it when things pop up in front of you.
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Scalp, the gold price is 4730.
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which is up just over half a percent now if we go down to the white metals we've
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got platinum up
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two percent or 44 to 2085 the palladium price is 1564
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up one and a half percent now onto the oil price which is very interesting i'm not
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hugely bullish of it
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gosh it's gone up another dollar when
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we were first speaking this is how mad it is it was 101 15 it went down to
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100.25.
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It's now $101.38 per barrel, up 3%.
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That's Brent crude.
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We've got West Texas at $92.33, up 3%.
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Copper price, $6.12 per pound,
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up 1.9%.
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And, yeah, what else have we got?
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The South African 10-year, not having a good day, up 11.5 basis points.
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or 1.3% to 8.55%.
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And the US 10-year, this is the one I like or don't like, 4.29%.
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That yield is going to 5, 550, 650, as I said earlier on.
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It is going to be trashed throughout this year.
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S&P 500 futures.
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I still can't believe I'm saying this, Skulk.
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It's up 0.84% to 715.
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9.
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0.50.
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7,159.25.
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Do these people who trade the S&P, invest in the S&P, not watch television, not
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listen to us on our podcast every evening?
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Maybe that's why they're making so much more money than I am.
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Yeah.
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Because they're not listening to me.
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Great stuff.
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Great stuff.
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Okay.
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Bitcoin.
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Wow.
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Nearly 79,000 up over.
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4%.
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What happened on the JSC today?
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I saw Quilter doing well.
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I saw AMSA doing horribly.
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So what we've seen today, it was a quiet day.
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It was a really, really quiet day today.
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We did see some information coming out from Capitec that looked good.
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I mean, they're just going from strength to strength.
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It's just crazy, crazy how this very much in line with Bloomberg consensus,
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but I mean, headline earnings per share growing 23 percent that is that's just
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crazy return
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on equity i mean a lot of people usually
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say well and i'm one of them was was always worried to get into capite because
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when you when you look at the that they priced a book um
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sometimes more than double more than double some of these other banks um the
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price the books and but when you look
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at the Return on equity.
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Return on equity.
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31%, Lindsay.
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31% and that's more than double most of these local banks'
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return on equities as well.
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So, yeah, it's really, really going from strength to strength.
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Every reporting, I think to myself, I mean, this bank just can't continue to
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grow,
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continue growing.
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That's been going for six or seven years, maybe even more when it was 7,800 rand a
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share.
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People saying, I can't keep on going like this.
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There's no customers in South Africa.
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The economy's messed up.
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So how on earth can they keep on going?
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And look at it now.
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Keep on going, Kapitek, I say, but there will be a point at one point where you
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start ignoring customers and
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customer service and you get too cocky about it all and something will happen and
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it will come down.
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But at the moment, just go with the flow.
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That's it.
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That's it.
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So, yeah, when we look at other news in the market, We had Remgrove.
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That's an interesting one.
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You know my view on Remgrove.
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You know it's one of my let's call it most loved stocks.
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They now mention that they now they actually had a complete full disposal of
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their
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first-round share.
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The whole lot.
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Yeah, the whole lot.
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First-round is gone.
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But this is crazy.
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Listen to this.
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When you look at the...
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year-end results and that was
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31st of december they had cash um cash on the cash cash within rem grow
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just over 12 billion rand okay they had a potential capital gains liability that's
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about five billion so that still means that's that's if it offsets we're talking
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about seven billion rand in cash
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the the first rand valuation on the books in in december was also
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7 billion Rand.
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So let's take that 7 billion Rand, add that to the remaining 7 billion Rand,
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that's 14 billion Rand cash for RemGrow,
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and it's still trading at quite a chunky discount to NAV.
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So, I mean, you're asking me, we're talking about the uncertainty in the
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market, we're talking about,
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I can't believe the investors are piling into the market with this environment
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we're trading in.
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I think for investors that, that feel a bit of FOMO, this could be a company you
18:38
can look at.
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Because I do think that at this very, very wide discount, this amount of cash on
18:45
hand,
18:45
and they haven't really made it clear what they're going to do with the cash.
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So usually a company,
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when they sell out of a sizable portion of the portfolio, in this case, first-rand,
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they always say, well, we have identified either to pay off some...
19:03
some of our debt.
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Now, in this case, Remgrave don't have any debt.
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Or they'll say, well, we earmarked this for further acquisitions.
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Well, they haven't done that either.
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So that leaves two things.
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That leaves that either they might be buying back some shares that could have a
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massive effect on this
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large discount to its intrinsic value, or they might pay out sizable dividends,
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which will also be very, very positive.
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What would you like as a shareholder?
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Would you like the buyback?
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which is what the American banks are doing at the moment, $33 billion in the last
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quarter,
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so maybe a financial company like Remgrove might do the same, or would you prefer the
19:44
special dividend?
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I would currently prefer the latter.
19:49
And not that I don't believe in the abilities of Yanni and Co., well,
19:55
the Remgrove team, not at all.
19:57
But the one thing that, and you've had this conversation last year, also a few
20:03
times this year as well,
20:05
you can see the playbook.
20:07
You can see what happened with Raynette, which is the, let's call it more offshore,
20:10
I want to put it in inverted commas, Remgrove of, of um at
20:16
Rupert. And they, on that side, they got rid of the Crown Jewels, namely British
20:23
American Tobacco Company,
20:25
and gave it back to the investors.
20:25
What's left, Skunk?
20:26
Tell me what's left, please.
20:29
Inside Remgrove, it's still the largest investment in Remgrove is Mediclinic.
20:35
I don't have percentage, but I think the last that I recall was about 31, 32% of
20:40
the portfolio.
20:40
Okay, a third of it is Mediclinic, yeah.
20:44
Yeah.
20:45
And then when you look at the other large investments, and this I do like,
20:50
they've got a sizable investment.
20:53
And when I say sizable, this is now starting to get very close to the
21:00
investment size of Mediclinic, and that's outshurance.
21:02
So that's also a very interesting one.
21:03
So outshurance.
21:05
It is very interesting.
21:06
And the reason it's interesting to me is because I was watching Irish television
21:10
the other night.
21:12
I mean, you cannot believe it.
21:14
I will search.
21:16
European sites to get free football.
21:18
And on Virgin Media Ireland, Virgin Media Dublin,
21:20
there was a free football match I wanted to watch so I didn't have to pay a
21:24
subscription.
21:26
So I watched it.
21:28
And in between, there were outshurance ads.
21:29
And I thought, wait a second.
21:34
This is an Irish television station.
21:36
And they're...
21:37
And it's a really good Irish ad as well.
21:40
It was quite funny.
21:41
It was quite engaging.
21:43
And you wanted to say, well, I wouldn't mind having a look at that company.
21:47
And it was Outurance, for goodness sake.
21:49
A proudly South African company.
21:52
It is.
21:53
And it's a good story.
21:54
We were talking about Capitec earlier as a great South African story.
21:59
Great management, great prospects and forecast.
22:05
And.
22:05
And out-surance is no difference.
22:07
I think it's a model that can be replicated beyond the borders of South
22:13
Africa.
22:13
But back to the point, I mean, it's the second largest position.
22:17
Then the third largest one is the one that's actually exciting me, I would say
22:22
the most,
22:24
in the sense that they've got that deal with Vodacom where they start rolling out
22:28
this dark fiber, the
22:30
CIVH. And I think that could be a very, very interesting...
22:33
interesting company for the future.
22:36
And then I would say the fourth largest one is Discovery.
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And we all know Discovery's story as well, also good.
22:43
So even if they just go and pay out a large special dividend,
22:50
I would be more than happy,
22:52
more than happy to sit with the remaining companies in Rimgrave because it's great
22:59
companies.
23:00
And do not be surprised if we've seen...
23:03
The likes of rainbow chickens, for instance,
23:06
where rainbow chickens were listed and then eventually delisted and eventually
23:12
listed again.
23:14
And we know that circle.
23:15
Don't be surprised if many clinics get to a certain point again where they get
23:22
listed again as well and stripped out of
23:24
Remgrove. Is there a chance, Skunk, that you look at this company, Remgrove, and
23:28
you look at them as they're selling first-round?
23:30
First of all, why are they selling first-round?
23:31
Why did they sell first-round?
23:33
What did they sell?
23:33
They sold advice that Remco had disposed of
23:39
51,996,739 shares and then off-market
23:46
3,300,000. Anyway, the point is they sold a lot of shares.
23:50
Why did they do that?
23:51
Did they not like first-round?
23:54
Did they not like First Rand?
23:55
No, they had a small holding in First Rand, but their main holding was in RMB.
23:59
And remember RMB, I think it was something like 96% of RMB was First Rand.
24:06
And then RMB actually unbundled First Rand out of the company.
24:12
And suddenly Remgrave was sitting with a massive chunk of First Rand.
24:16
And I think it wasn't a core holding for them.
24:19
And I've mentioned it a few times already.
24:22
First Rand was never really a core, core holding.
24:25
So I think it's just time they but again,
24:29
your bigger question is more what's been the playbook for these stuff,
24:34
for Raynet as well as Remgra over the past 24 months?
24:37
Are they getting to the point where they're saying, no, we're bored with this
24:40
now.
24:40
This is an old investment model.
24:42
So we have to get out of these things slowly and gently so that people like
24:49
Skullclo don't freak out.
24:51
and if eventually we're going to dispose of all these things, in which case you've
24:55
got to buy them immediately.
24:57
Yep, it could be.
24:59
Because at a 40% discount, sign me up for those.
25:00
Precisely, yeah.
25:03
Okay, it's an interesting one.
25:06
That could be the one.
25:06
If you're a hedge fund manager or something and you're looking at this,
25:12
goodness me, it could be the play for you.
25:14
Skunk, let's have a look at what went up and down on the JSC today.
25:18
And I'll tell you that I've got Sassel up 5.2%, 216.
25:25
Rand and 64 cents per share.
25:27
Quilter up 5.1%, Aspen up 3.9%, Tungela up 3%,
25:33
and Glencore up 2.1%.
25:35
Do you want to comment on any of those, please?
25:38
No, we had Billiton that actually brought a trading statement.
25:42
And from a copper play point of view, they did really well.
25:49
So I think that could have had an effect on the likes of Glencore as well.
25:53
Might have not.
25:54
might have had but yeah it was it was a good day i think uh billetson was also up
26:01
something like two percent so that might have just
26:03
just not make your make your top five there so that might have been just a bit
26:08
of a copper play today on the downside absa down
26:10
3.8 percent uh harmony a 3.1 percent loser richmond down 2.85 percent
26:14
uh what is it 2.1 percent down for mr price and another retailer, TrueWorths,
26:20
down just over Two percent.
26:23
Retail is not doing well, I suppose, because of the threat of rising interest
26:28
rates,
26:28
which is absolutely a threat.
26:31
And the South African consumer, if this thing goes on in the Middle East,
26:36
will be affected probably more than most.
26:40
So just on that note, Absa is an ex-stuff and also Harmony is also an ex-stuff
26:46
story.
26:47
But yeah, you're right.
26:49
I think you're definitely right.
26:50
It's definitely going to be a...
26:51
Interesting story.
26:53
Okay.
26:54
Skulk, thanks so much for your time.
26:55
Skulk Lowe is a portfolio manager at PSG Wealth Old Oak in Cape Town, and that was
27:00
the 5 o'clock shadow.
27:02
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