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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 5 o'clock shadow.
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And as always on a Wednesday, I speak to Skulk Lowe, who is a portfolio manager at
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PSG Wealth Old Oak in
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Cape Town.
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What are we going to talk about, Skulk?
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Last week, I teased you a little bit about the US dollar.
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And what I wanted to develop on the dollar and foreign exchange theme was how much of
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a role...
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what your view of the US dollar is, and therefore, of course, your view on what
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the RAND does.
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Does it play a part?
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Do you say, I like this stock, but unfortunately, if I think the RAND is
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going to weaken, that is going to be a detractor,
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a negative for the stock's performance.
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Do you look at it that way in the background?
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Yeah, definitely.
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I mean, naturally.
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Well, firstly, Highlands and all the listeners.
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Yeah, I think it's been, it's a great...
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And I always hate when people answer me with a, that's a great question.
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So I'm doing the same now, purely because of what happened over the past, let's call
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it a little bit more than 24 hours.
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Because yesterday was an interesting one.
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Because if I told you, if I still tell you, any time of the week that
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we're looking at a dollar, or let's say a gold
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price.
1:25
that kicked up, you would have told me we've most probably, usually you see an
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inverse movement.
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Dollar weakness, yeah.
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Yes, correct.
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And yesterday we had that.
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But the thing is, yesterday was sort of a politics versus economics day.
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Because we sat here two, three weeks ago.
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You and I said, it seems like the war is actually now.
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nearing its end.
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It seems like Trump is now really getting anxious to get this done.
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You want to start focusing on November and they sitting around a table and they're
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going to try and create some peace
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deal.
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There was a few things that was mentioned already and a few things that was agreed
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upon, but in essence
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we then saw the oil price go from over $100 per barrel to just over $70 per
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barrel and you we were heading towards peace in the Middle East.
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We also started seeing the Strait of Hormuz opening up, and then it just turned
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around again.
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And we now, as we sit here, pretty much we can agree that it's still a full-blooded,
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no-peace-deal war.
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These guys are shooting at each other.
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You know why we did that, Scott, last week?
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I'm not going to try and let our secrets out of the...
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a bag.
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But neither of us believe that.
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While Trump is in charge, we know that it's not going to happen.
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And when it takes two months to draw up a one and a half page memorandum of
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understanding versus any other peace
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deal, when you read the commentary of people that have been negotiators in this
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type of deal before with between countries,
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it takes years.
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It doesn't take two months and it's not on a page and a half.
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So, you know, it's a lot of rubbish.
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If you read William Higgs, the ex-Foreign Secretary.
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in the United Kingdom for the Conservative Party.
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If you read his analysis in The Times of the MOU, it was handing
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Iran everything.
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It's a total defeat to the United States.
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But anyway, I didn't believe what I was saying, and I'm sorry if I misled anyone,
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but we knew it wasn't going to
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last.
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We called it the Infinity War, and the Infinity War is still there.
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I mean, but that's just it.
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We pretty much went into this week, again, as war in the Middle East.
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But it's interesting to note that the oil is not back at $100.
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So market is telling us that they either not focused on it or feel that this is
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going to be last
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year.
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Or they've just got totally oblivious, totally immune against this thing called
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war in the Middle
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East.
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But then yesterday happened.
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yesterday.
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We had the inflation figures that came out of the U.S.
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And yesterday morning, we know that the wars escalated and things were really
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uncomfortable.
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I went into yesterday morning thinking, we in for a really, really red type of day.
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Yes.
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And yes, the whole world.
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When we saw the East, Japan, China, Korea, all these
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countries went in and they were negative.
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Europe and South Africa and these countries opened up and they were all red,
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really red for the day.
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But then we saw the inflation data came out 3.5%,
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last 4.2%, 4.3% and expected 3.8%.
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So that was a massive beat, so to speak.
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And it's just suddenly as if the market realized, wait a minute, this is
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interesting because month on month, we saw a
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retracement.
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We sort of saw a deflationary environment.
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And the market just realized, you saw the CME Fed tool, the probability on rate
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hikes,
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went from 46% now hike in July to, well, it
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was single figures.
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I want to say it was 8% probability.
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of a hike now in July.
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So the market just now say, well, if inflation is not a problem, in actual
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fact, we're
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starting seeing a bit of a deflationary environment, Walsh, as hawkish as he
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sounded last night, will most probably
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not be pressured to hike rates as we would have thought he would have done,
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even not hike rates.
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And that just suddenly put the dollar on a slippery side.
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sloped downwards.
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And when that happened, we saw gold pop again.
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And markets ran.
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I mean, I think the Nasdaq on one stage were close to 2% positive last night.
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So this is an interesting one for me because it tells me the market was way
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more focused on the
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economic side of the US than really the political, the war side happening in the
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Middle East.
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So just fun, very interesting.
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No, it is.
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And the dollar, of course, is the most important financial instrument when it
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comes to asset management.
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It doesn't matter whether it's gold or bonds or fixed income or an emerging
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market,
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equity market, for example.
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So terribly, terribly important.
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This is the question now.
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And you've got to be succinct on this one, Skunk, because I'm in countdown to England
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versus Argentina mode, of course.
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Here we go again.
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I'll tell you later.
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So where's the dollar going?
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I've spoken to a couple of very, very well-respected analysts last year, and
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they said that the
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dollar is in a cyclical downturn.
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There's going to be a weaker dollar, and when there's a weaker dollar, it runs for
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years.
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And here we are.
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with the dollar, I think over the last 52 weeks, up something like four and a half
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to 5% on the basis of the
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dollar index.
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Where do you think it's going?
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And how is it influencing your future strategy when it comes to equities?
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I'm not gonna I'm not gonna put a number on it, because then then I'm going to sort
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of have to either look
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at technical analysis or thumb suck some some number.
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I can just tell you that I still firmly believe we'll see a weaker dollar.
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Okay.
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a weaker dollar going forward.
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I think this 100 on the Dixie currently is vulnerable.
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And I think if we break it to double figures again, I would not be surprised if
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we merely, merely go and test
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that 90 levels again.
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Not because of technical levels.
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It's just purely fundamentals.
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We know, you know, even without Trump, Trump is there.
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He's currently the president of the country.
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He's there.
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He's there.
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So we know that his playbook is, I want to try and stimulate the economy.
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I want to see interest rates going as low as possible, because he feels that the US
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should have
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the lowest interest rates in the world.
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And naturally, that will put pressure on the dollar.
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He's often said, well, he's not too worried about the dollar.
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In actual fact, he said a weaker dollar.
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would benefit the US.
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And for that reason, I think that the dollar will see weaker levels, hence the
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fact, while
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I still believe that I wouldn't be touching my gold anytime soon.
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I'm still very happy sitting with gold exposure in my portfolio.
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I would not be selling it for that very reason.
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It seems like there's a lot of big buyers around the $39,000, $50,000 to $4,000
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area.
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the $4,000 to $4,050 per ounce area as well with gold, every time it gets there,
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it looks as though it's going to break and the gold
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bears get all excited.
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And then suddenly the next day, 1.5%, 2% pop to the upside.
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I think there's a big accumulation there.
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And given the World Gold Council report of a couple of weeks ago, it's central banks
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that are mopping it up, I think.
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China.
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I mean, China is a massive, massive buyer of gold.
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I mean, so...
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Yeah, while central banks is buying, you clearly have support.
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And yeah, so what would I do to protect my clients currently?
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I think one reason would be to have some gold.
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If you do think, and I think yesterday's playbook was an interesting one because
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you saw markets immediately reacted quite positive when they sort of realized that
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inflation might not
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be a problem for the years and that interest rate might not go up.
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It might stay at these levels and then we'll eventually see some pressure on it
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to come down.
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Yeah, that usually is a positive environment for equities in general.
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But I don't think all equities is created equal anymore.
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I mean, when I look at some of these movements, the likes of the Micron, going
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from last year
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$110, suddenly going to $1,200 literally in
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a year, that is telling me things is heated.
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be very, very careful in that type of environment.
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Yes, there's shortages.
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Yes, we know that.
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There's massive shortages.
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We saw ASML come out with their results today.
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And wow, what a beat.
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I mean, they had a phenomenal, phenomenal set of results.
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And we know that's AI.
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I mean, when you beat that, when net sales came out 9.3 billion
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euros, expected 8.8 billion net profit 2.9 billion euros expected 2.6
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um the stock is up already 115 this year and and when you listen to the ceo
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um after the results is his outlook i mean i know you like your outlooks
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and and results as well um outlook i mean you can't read that
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outlook and tell me you're not not bullish as well i mean It's a favorite company of
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one of our friends that you
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appear on television with often, and it is an incredible company.
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It is a company that I hold as well, so I like it.
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And I got in at very, very early levels.
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I mean, when it wasn't trading at elevated levels, that's the thing.
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And I think to people listening to this podcast, you know, thinking, wow, I need
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to run out and buy some ASMLs.
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Just go and look at the valuations currently.
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It's not.
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I mean, we're looking at a company that's roughly trading at a forward P of 50
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times,
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50, 5-0.
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But I mean, when one of your key customers, namely Taiwan Semiconductors,
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reported a 68% jump in their June sales, then you know, yeah,
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then there will definitely be some advantages for the likes of ASML as well.
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So.
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Yeah, it's an environment where the heated can become even more heated.
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But it's always that worry when the music stops and eventually it will.
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Yes, and when the music stops, that's when
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the really savvy investors behave with experience.
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And you're one of those people.
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So some people will panic and they'll say, well, this is going down.
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So therefore, I've got to sell that as well.
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Other people will see opportunities.
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But that's a whole other discussion.
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And Skulk, if I told you, you having come out of a self-induced coma for the last
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six months, if I said
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the United States president has just told Congress that the United States is
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officially at war with Iran,
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there's a war between Ukraine and Russia that hasn't gone away since you've been in
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the coma.
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And inflation is starting to tick up a little bit.
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Even though U.S.
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wholesale prices came down by 0.3% because of the oil price coming down, there are
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still big pockets of
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inflation, and the bond market has been going up in terms of yields over the last
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three, four months.
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So against that backdrop, this is the company.
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These are the results from this company.
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Tell me which company it is and explain how on earth this can be.
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Group sales came in at 6.3 billion euros up.
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20% constant exchange rates.
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This is for the last quarter.
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It says here, strength across all regions led by local demand with double-digit
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increases in the Americas, Asia
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Pacific, Japan, and Europe at both constant and actual rates.
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Return to growth in Middle East and Africa.
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Sustained growth across all distribution channels led by retail up by 24%.
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Constant.
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We give continued investment to support growth against a persistently volatile
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macroeconomic
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environment, etc.
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How can this be?
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First of all, what is the company?
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And secondly, how do they do that?
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You forgot one little thing as well.
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Because that same company has also accumulated another 400 million
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euros this quarter, bringing their total cash flow to 9.1 billion euros.
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That's huge.
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I'm going to say that again.
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Cash flow of 9.1 billion.
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Sure.
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I mean, that is euros.
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Yeah, yeah.
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I know.
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Not sure I know what you're talking about.
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I mean, this is a wonderful South African story.
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It's sort of always been the, I hate calling it the
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poor man's LVMH or the poor man's Gucci.
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Not a bit of it.
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It's sort of always been not the favorite in the world
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in terms of luxury goods.
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But boy, oh boy, Richemont now, I think is now firmly.
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the favorite luxury goods company in the world.
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And I say that not because I'm pro-Johann Rippert or pro-South African.
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I'm looking at actual figures.
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I mean, LDMH, if I can recall, a year or two ago, they were really interested and
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focused on taking
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over Richemont and it didn't happen.
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And now I think the way things are going, I wouldn't be so surprised if Richemont
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start mopping up
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some of their own competitors.
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When you're sitting with...
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That amount of cash on your balance sheet, effectively, you can start doing it.
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Well, you can.
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And also, if you don't start doing it, and you don't start buying back your own stock
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or paying special dividends here and there, then investors punish you.
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Yeah.
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So there is going to be a special dividend.
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There's an ordinary dividend of 3.3 Swiss
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franc, and there's going to be another special dividend of one.
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But that's still something we're going to make.
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I mean, a total dividend payable is about 2.5 billion Swiss francs.
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So it's not a massive dent in the cash flow.
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It's still going to be a massive cash flow.
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So clearly they've got things planned.
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What was interesting for me when I looked at the movement today
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in Richmond, when Richmond's results came out, Naturally, we immediately see the
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share price blow up.
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I mean, it was a massive, massive movement originally, sort of tapered down during
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the course of the day, but still ended
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7.4% up for the day.
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But I mean, for me, it was interesting when I looked at LDMH, that was up also
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2.2%.
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Hermes up 2.5%, Kering up close to 4%.
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I mean, so...
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These, when I say it was sort of the secondhand luxury goods,
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and again, it's pun intended, Richemont has now become the leading sort of
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indicator in luxury
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goods in the world.
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I mean, this is phenomenal.
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It's a great story.
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You quickly ran over it.
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But there's no region.
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I mean, even Africa and the Middle East, we saw it always an area which didn't
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grow.
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We didn't see...
18:33
any growth in those areas, that has grown 3%.
18:35
Now, I know that's nothing, but when you come out of an environment that's not
18:39
growing yet, this is showing that they're now growing
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the African and Middle Eastern markets as well.
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But I mean, look at this, Japan, 36%.
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America is, as you mentioned, 27%.
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And when you look at the areas within the Middle East, that's where it got
18:56
interesting for me because
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China and Hong Kong, It's now growing at solid double-digit figures.
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Does this tell you something about society?
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I don't want to get too cosmic about this, but it shows you there's a luxury goods
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company doing well, there's an AI company
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doing well, but when you go to Main Street, people are not doing well.
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So there's this growing gap between economies or sort of domestic
19:25
internal economies.
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And when I say economies, I mean socioeconomics, what people can buy, what
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people can't buy, what people at the top are buying, and what
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people at the bottom are struggling to buy.
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I think there's a growing gap between the wealthy and the poor.
19:40
Yeah, well, I think so as well.
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I always say the rich are getting richer and the poor are poorer.
19:48
But yeah, it is really interesting.
19:51
It's a nice example that you use, and one that you and I have been talking about.
19:57
Since COVID, when we came out of COVID, it wasn't the shop rights
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and the food retailers and food producers, the basics
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that actually popped.
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It was the luxury goods.
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That was the first companies that popped, you know, coming out of a...
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really critical locked up environment like covid um okay we'll talk about that uh at
20:26
greater length on a special show or something or a special feature within our
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podcast we can't do it now um
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because i've got to give you the markets and the dollar rand is 1633 that's a 0.2
20:38
percent fall for the u.s dollar
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the euro rand is 16 sorry 1868 British pound against the Rand is 22.02.
20:46
Euro dollar is 1.1435.
20:49
British pound against the US dollar, incidentally, 1.3520.
20:53
We've got the gold price.
20:54
It's 4,047 I've got here.
20:58
That's barely changed on the day.
21:00
The platinum price is barely changed on the day as well.
21:03
It's 16.46.
21:05
And palladium is exactly 1,300, which is down 0.6%.
21:10
The oil price has turned tail a little bit.
21:13
It's at a couple of...
21:14
really, really good or, as we should say, bad days because Brent crude is $83.48,
21:21
down 1.5% now.
21:23
West Texas, $78.39, down 1.2%.
21:26
The copper price is flat at $6.32 per pound.
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Now then, the bond markets have reacted to that US wholesale prices number because
21:37
the US yield has fallen
21:40
by three and a half basis points on the 10-year.
21:42
to 4.55%.
21:44
The South African 10-year bond yield has come in at, I think I've got 8.55%, but my
21:50
screen has just let me down.
21:51
S&P 500 futures, 75.94.
21:54
That's the September futures flat on the day.
21:57
Looking a bit vulnerable, actually.
21:58
Not anything vulnerable about Bitcoin over the last week or so, because it's gone
22:02
from just above 58,000 to just above
22:05
65,000 now.
22:07
And here's something from Warren Buffett.
22:10
Warren Buffett...
22:11
on the market today says the following it's tough to find values when everybody
22:15
is preferring gambling hey
22:18
skulk that resonates with you doesn't it nice one yeah yeah yeah very very nice one
22:23
very very nice one
22:25
okay um what have you got on the ups and downs on the jse please i don't think we
22:30
need to focus okay well let's let's let's
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let's start on the ups today because we've been waiting for this one for a long, long
22:36
time.
22:38
So it's easy to pick the biggest winner for today.
22:42
And that's an easy one.
22:45
That is, let me refresh my screen.
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That is naturally Richemont.
22:51
Richemont up 7.4%.
22:53
And then in second and in third position, we had Naspers Brozes.
22:58
I saw that.
23:00
Yes.
23:01
Yeah, yeah.
23:01
What's that all about?
23:02
At freaking last.
23:03
No, China, China.
23:05
China.
23:06
Definitely recovery this morning and things were looking much better.
23:10
And yeah, NASPA has just followed suit from the Chinese stock.
23:14
NASPA is up 4.9% for today and ProSys up 4.6%.
23:19
And then fourth and second is Clix, 3.4% and Sappy, 2.9%.
23:25
Both companies have been under the pump a little bit over the past few weeks.
23:29
Then the losers, I mean, you can just take the winners and just...
23:35
Yeah, read them out as losers today because on the downside, we had Valterra
23:40
down 4.7%,
23:42
Cup 4.6%, with Pan African Resources down 4.2%, Anglo Gold
23:49
3.8%.
23:50
And yeah, let's add another precious metals in there, Impala Platinum also down
23:54
3.1% for today.
23:57
Okay.
23:58
And the indices, it's lovely to see the industrials probably doing well because of
24:03
Richemont, but how did all the
24:04
indices fare against each other?
24:07
Yeah, you're 100% right.
24:08
But let's start at the top.
24:10
The JSU Allshare closed the day at 110,289 points.
24:15
That is down 26 basis points.
24:18
Resources gave back all they took yesterday, down 2.8%.
24:23
And as you mentioned, industrials had a fabulous day between Richemont, Naspers
24:27
and Process.
24:28
That was up 2% for today.
24:30
Financials down 26 basis points, while the SA Property Index, that was down.
24:35
um also 14 basis point when i look at the value traded wasn't it wasn't too active
24:40
day but i mean we'll
24:42
take the 21.25 billion value traded for today very nice indeed skunk thanks very
24:48
much for that i have to tell you
24:49
um after last week's show where we ended me going to do some plane spotting in the
24:54
nato base and you
24:56
going off to annoy the ground annoy the groundsman whatever the golf course it is
25:01
by hacking the thing to
25:02
pieces So this week I am going into now almost like a trance-like
25:09
state.
25:10
I went to bed this afternoon for a nap because I sort of went back to my
25:15
childhood.
25:16
On Christmas Eve I would go to bed early so that Christmas Day would come sooner.
25:20
So I did the same thing today because England versus Argentina is on at 9
25:24
o'clock Central European and South African time.
25:27
The World Cup semi-final, which is a big deal.
25:29
It doesn't matter if you don't like football.
25:31
It's a big deal.
25:32
There's off-the-pitch and on-the-pitch rivalries, which are unparalleled in
25:36
football.
25:37
And it's the only game at the World Cup where these fans will be segregated.
25:41
In other words, fans are going to be funneled in to the Argentinian side, and
25:46
the England fans will be
25:47
funneled into another because they are fearing trouble.
25:50
There's a huge police presence.
25:52
And on the pitch, it's going to be spectacular.
25:54
But what I do is I go into this sort of trance-like state where...
25:59
On my phone I've got the countdown to the match, I've got this how many seconds
26:05
there are to the game and that sort of thing
26:07
but you know like if you've ever seen one of those martial arts films the old ones
26:11
from the 1970s which are quite fun
26:13
where you see the guy go into this state of mind where he can chop a pile of bricks
26:19
in half that's what I do.
26:20
I'm like karate man but it's football watching man otherwise i have to block
26:27
everything out of my
26:27
mind I'm just focused on this thing.
26:29
If anyone says anything to me, I wouldn't hear anyone for two hours.
26:33
I can just see you with remote control, pointing it towards the TV and just going
26:36
like, switch on, switch off,
26:39
switch on, switch off.
26:43
I'm all over the place.
26:44
Skunk, thank you very much for your time this evening.
26:47
As always, a great analysis of the US dollar in particular and those results
26:51
from Richemont, which to me were the highlight of the
26:53
day.
26:54
But we didn't even speak about the US banks and the reporting season in the
26:57
United States.
26:58
We'll do that next week once that theme has developed.
27:00
Scott Glow is a portfolio manager at PSG Wealth at Old Oak in Cape Town, and that
27:04
was a five o'clock shadow.
27:06
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27:10
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27:13
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27:18
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27:19
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27:22
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27:26
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27:27
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27:29
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27:34
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27:35
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27:37
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