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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 Skulk Lowe, Portfolio Manager at PSG
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Wealth Old Oak in Cape Town.
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First thing I've got to say, Skulk, if I'm slightly quiet or if I seem a bit
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distracted because I'm looking at my television on the left-hand side,
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England kick off in 56 minutes against the DRC in the first of their...
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knockout stages, hopefully the first of their knockout matches in the World Cup.
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So forgive me.
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You know how you feel ahead of a Springbok game, right?
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Yeah, It's excitement versus nervousness.
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I can hear that in your voice, Lindsay.
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I'm breathing heavily.
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I can hear that.
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I can hear that.
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No, seriously.
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Skulk, it's July the 1st.
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I don't really want to go through in much detail what went on in the six months that
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started January the 1st.
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um but more what's going to happen in the next six months because we know the world
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is a different place to the
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world that we were speaking of six months ago yeah how's that i mean we're sitting
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on the
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the first day as i woke up this morning i went like h2 this is
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this is h2 first day of the second half of 2026.
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Ah, quickly I have time gone.
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Crazy, crazy, crazy.
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And it's been a crazy six months.
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It's just been up and down.
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Tomorrow is like totally the opposite of the previous day.
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And I mean, markets, it's been strange.
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I mean, here we're sitting halfway through 2026.
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And it's sort of a strange feeling because we went into...
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And 2026, with this total optimism, when I say we are South Africans, because
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in 2000 and what was it, 2024, we had a fantastic time in the market.
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The JSE was just rocking and rolling.
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I mean, what was it, 2024, we were looking at a return of
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what?
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Are you getting your dates right?
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It's 2025 you're talking about, right?
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No, 2024 was already good.
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Are you going back even further?
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Yeah, the latter part of 2024 was good.
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I mean, we actually had a solid time.
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And then 2025, local equity market was 42%.
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It was fantastic.
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And then we went into 2026 and people said, well, there's sort of an upbeat.
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feeling on emerging markets in general.
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Commodities were booming and the outlook for South Africa is looking good.
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And here we're sitting halfway through the year.
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The JSE in Rand terms is down, well, down 3% or 4%, if I'm not mistaken.
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When you look at it in dollar terms, it's 2 point something, 3% softer.
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I mean, when you look at it compared to emerging markets, and we've often had
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this.
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this conversation, you know, how fantastically the South African market has
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recovered,
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seriously outperformed the MSCI All-Country World Index, the MSCI emerging
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market.
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As we sit here, I mean, we're lagging the MSCI emerging market in dollar terms about
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20% in
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one year.
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That's a turnaround, isn't it?
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That's a really big turnaround.
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It just shows you the cyclical nature of the South African economy translates
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itself into the...
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JSC, because we're still a commodity-based economy, not quite as much as it was maybe
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40, 50 years ago, because there's been diversification, but today it's still the
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case.
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And this is the question I've got for you.
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I mean, I love the way that gold has bounced back from below 4,000 today to be
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up to 2.1%.
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The white metals are a little bit firmer as well, but one bounce back doesn't make
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a half year, does it?
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you Are you still deep down, are you still a commodity bull?
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Yes, undoubtedly.
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I mean, for sure.
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So let's, I mean, the reason for, there's commodities and there's commodities.
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And we're not going to go into the whole gold thing again, because I know your game
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starts in an hour's time, and we're not going to
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make it, sorry.
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Not with you, no.
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No, not with me.
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But the business case for gold is still there.
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It's still very much intact.
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I'm not selling my gold.
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I'm lighter.
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I've made it clear earlier this year that when we went into that Iran-US
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war, I think that first three or four days, I did mention that I did take
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some profits.
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But again, the gold price is looking more attractive now.
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The gold mines are still doing extremely well.
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And the business case for gold is still there.
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I mean, we're still sitting in an environment which is pestered by
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geopolitical unrest.
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Yes, I know the US, or more specifically, Trump, want to make peace now because he's
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looking towards
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November.
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He wants to make peace.
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The fact of the matter is that the world is still a very, very uncomfortable place
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as we
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sit here.
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And then you can continue and look at things like economic growth.
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You can look at how the AI bubble is actually just sort of keeping everything.
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I mean, this CapEx is just crazy how these companies are spending.
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That is keeping things afloat.
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And here's a very, very quick example.
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When you look at it, and I just mentioned the MSCI World Index, this is sort of a
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tongue in the cheek because
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South Africa is still the sixth largest emerging market in the Emerging Markets
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Index.
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And when you look at the past 12 months, the MSCI World, or let's take this year,
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this year alone,
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the MSCI Markets Index did 24% in dollar terms up to yesterday's close.
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The JSE all show over the same period in dollar terms, it's minus 2%.
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So that's pretty much 26% alpha.
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And then you would say, well, clearly not all emerging markets is created equal.
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You need to go and look at that index, Lindsay.
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It's not an emerging market play anymore.
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It's an AI play.
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Because when last did you look at the constituents, not specifically the
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constituents, the… countries within the emerging markets and i just wanted to say
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i've just told you that
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africa is the sixth largest would you say is the largest in there the largest
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emerging market index you
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see it depends on on what countries are deemed to be emerging markets these days
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is india an emerging
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market is china emerging an emerging market both of them are so it must be
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india Okay, so
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funnily enough, India is only fourth largest.
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within the index.
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For many years, China was, and they are giving it away, China was the largest.
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And when I say the largest, they were the largest by country model.
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Oh, of course.
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I should have known when you mentioned AI.
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Yes, okay.
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Yeah.
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Sorry.
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So 2020, the weight of China in the MSCI emerging
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market index was over 40%.
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In actual fact, it turned around about...
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a 42% weight in the index.
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And it was the largest by far.
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When we look at China, I think 18 months ago, a little bit more than 18 months, it
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came down to about 34%,
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33%.
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A third of the index was China.
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As we sit here, China is not even the second largest anymore.
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It's now the third largest.
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It only make up 18% of the MSCI emerging market index.
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With Taiwan, carrying a 27% weight, and South Korea, 23%.
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And when you look inside those, let's call it specific shares,
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you'll clearly understand the largest share currently in the index, that's
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Taiwan Semiconductors, carrying
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a weight of 13% of the total MSCI.
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emerging market index it sounds dangerous skulk it's it sounds it sounds like it's a
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narrowing just like we had a narrowing of
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markets last year that are bigger than well i don't know if they're bigger than
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the msci but they're the ones that people use as their benchmarks for
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example the s&p 500 the uh the nasdaq uh driven by a small number of
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stocks and that has huge implications for the fund management industry and in
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investors everywhere whether they're with
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a fund manager or investing individually.
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You cannot ignore these stocks.
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And that's dangerous to me because when they're going up, it's fantastic.
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When they come down, then they come down.
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We know that.
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This is an AI bubble and it is big.
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And could it become much bigger?
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Yes, it can.
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But this is an AI bubble.
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Make no mistake.
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You know, when your emerging market index is now, you know, Taiwan Semiconductor
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13%, 7% Samsung,
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SK Hynix, that's… been nowhere now close on one stage actually the largest company
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in in south
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korea a little company called micron and here's another thing i'm an msci value
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index People look at the MSCI value index lately and say, well, look at that.
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Look at the performance of the value stocks.
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It is starting to revert.
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That's it.
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It's value stocks.
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So now you're going to look at the value index.
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The largest company in the MSCI value index a little bit more than a year ago
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was Intel.
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That company was on the brink of being bankrupt.
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It was $20 a share.
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That's when Donald Trump says he invested for the American people.
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I don't know how many billions he put into it.
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But anyway, he got it at around $20 a share.
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Wasn't it a couple of weeks ago we were talking about $140 a share?
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Yeah.
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Micron.
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You can go look at that graph as well.
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This is also a boring company.
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They only make hard drives or what do they call it these days?
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Storage for computers and RAM.
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They've got the memory.
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This is boring stuff inside a computer and laptops.
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It got cheaper and cheaper over the past 30 years, and it's just boring, And then
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people realized,
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wait a minute, we need for these storage farms and for AI, we need these
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RAMs.
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And there's a massive amount of shortage.
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Between 2016, and you can go and pull the graph later, between 2016 and last year,
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the share price of Micron.
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remained between, let's call it $100 and $110 for pretty much 10 years.
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Very similar to Intel.
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It flatlined.
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Boring, boring, boring.
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And then people realized, wait a minute, we need this stuff.
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This stuff actually tripled and quadrupled in price and Micron is trading at $1,200
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today.
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It surpassed Microsoft as the fourth largest company a week, two weeks ago.
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How's them apples?
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Okay, so the bottom line is that what we've got here is a bubble, but that
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bubble can get bigger.
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You are sticking with gold and you like the commodity cycle.
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We haven't got time to go into the sectors, the base metals, the bulk
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commodities and all that sort of thing, or even energy with
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oil now having been $120 at the beginning, or sorry, the end of the first quarter is
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now down at
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around $70.
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Let's call it $70 a barrel, depending on which grade you look at.
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$70 a barrel at the beginning of the third quarter of 2026.
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Are you taking protection against a crash that will bring the whole market down
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should the AI bubble start to
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burst?
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Yes, but by having, let's call it gold in your portfolio, that is a
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hedge.
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Earlier this year, I did.
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invest in companies or up weight my weight in companies, which today got hurt
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badly.
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But the likes of the British American Tobacco Company and hours of bush, those
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are deemed,
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let's call it defensive type of stocks.
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I always say when you find it in your kitchen cupboard or find it in your
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bathroom cupboard, it should be found in
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your portfolio.
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So that's...
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That's the typical stocks where I would be finding safety for now.
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Okay.
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And I would just caution people, don't follow the herd.
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Because this, I've told you so many times, I've seen this before.
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And yes, this bubble could go bigger.
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I'm not Nostradamus.
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I'm not calling the tops on anything.
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I'm just showing you the risk is currently involved.
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Because a company...
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Boring, boring, boring company that was trading at $100 and $10 lost.
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You're now trading at $1,020.
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We know it can't last.
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We're too old to not know that it can't last, Skunk.
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So that's it.
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Okay, I want to talk to you about something on the JSC today because when I
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see South32 selling its aluminium value chain assets to
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Alcoa for $5.6 billion and seeing the share price go up over 10%.
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I think to myself, what's happening with this company?
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Is this part of a bigger strategy or did they just see an opportunity?
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Was it a price they couldn't resist?
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Tell me more about South32 before we go to the markets, please.
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No, that's clearly strategy.
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It's not a great opportunity.
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So, I mean, that's cleaning.
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That's some proper house cleaning.
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And they made it clear, you know, post the transaction, the portfolio is expected,
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predominantly.
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expected to consist of base and precious metals.
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So, yeah, I think it's sort of a transient strategy for South32.
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And, yeah, market loved it.
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Is it doing an Anglo-American, like Anglo-American got rid of the white
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metals?
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Is it something like that?
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Very similar.
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It's very, very similar.
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Okay.
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So, yeah.
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I mean, a big transaction, 12.
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Last that I saw, share price up 12.4% for today.
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So, market loved it.
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Market loved it for sure.
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And I like the fact that the market was surprised by it.
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There wasn't any leaking or anything.
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Not much anyway.
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Skulk, the dollar round is 1640.
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Next week, we'll have a chance to talk about the U.S.
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dollar because it's the key.
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It doesn't matter what people say about Bitcoin or even gold or even the remnimbi.
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the dollar is key to every single asset class worldwide.
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And I'd really like your opinion on the dollar index, which is cementing its
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position
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above 100.
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But that's for next week.
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1640 is the dollar round.
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British pound against the round, 2176.
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The euro round is, what is the euro round?
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1867 in the euro dollar, about 11405.
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Gold price, as I said at the beginning of this chat, gold price has bounced back
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very nicely, 2% up at the moment,
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4089.
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Platinum is $1,600 on the nail, 2.2% to the good, and palladium a laggard but
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still up three-quarters of a
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percent to $12.20 per ounce.
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US 10-year bond is $4.465.
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S&P 500 futures currently $75.59, barely changed.
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Oh, I forgot the other commodities.
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Sorry, I'm getting ahead of myself.
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Told you I'd be excited during this chat.
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Crude oil is down 1.5% to $68.43.
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And Brent crude is $71.45, down 2%.
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So it's bucking the trend in commodities, except for copper, which is also down.
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Down 1% to $6.13.5 per pound.
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Gave you the South African 10-year, gave you the S&P, gave you the US.
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Let's have a quick look at the South African 10-year bond.
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That is 8.41%, another good performance, 3.5 basis points down for the yield.
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So the bond market doing well.
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And Bitcoin, having got very close to a new 52-week low yesterday, is trying to
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get back above
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60,000, 59,900, up two and two-thirds percent.
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What were the big winners on the JSC today?
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South32 top of the list, Skulk?
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Undoubtedly.
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Yeah.
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So South32 is at the top.
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Close of the day, 11.3% up.
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There's also Bytes.
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SPAR making a bit of a recovery today.
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We know Spurs have been...
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Under massive pressure lately, they actually improved 3.6% today.
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But then you see quite a few of these precious metals.
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Impala Platinum, 2.7%.
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Goldfields, 2.4%.
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Afromat, 2.3%.
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So in general, not a bad day.
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I'd like to mention the NASPAS because that's one that gave me an early feeling
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as going to zero.
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So clearly not today, up 2%.
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Look at the downside.
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It was definitely not the day for the banks.
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What is that?
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APSA down 4.3% on my delayed screen.
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What happened there?
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That's after it dropped 6 point something yesterday.
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At one stage, I think APSA was down 9% yesterday.
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It came up with a trading statement and just said that their ROE
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is going to come down a little bit.
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And this is what you don't want to see this.
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coming from the banks because they had a bit of a re-rating.
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They priced the books.
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We're trading at between 0.8, 0.9 times last year.
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And then they actually indicated that the ROE is going to be increasing or they've
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turned on equity.
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And yeah, Mr.
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Marker did not like the fact that they mentioned that the ROE seemed to be as
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good as it got.
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last year.
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Something we should also talk about is, is it because they're falling behind with
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digital banking, with online banking?
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Are they not keeping up?
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Are they being the old stage sort of bricks and mortar banks?
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Or is it simply because you look at South Africa, and it hasn't got a growth rate to
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speak of.
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And if you're not growing the economy, you're not growing transactions for banks,
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and therefore banks don't do well.
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It was the writing on the wall.
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It's just a question of the timing again.
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Market is always about timing.
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But we can discuss the banks again, even because we don't often do so.
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Sassl down again, 156, down 3.5%.
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I've got it on my screen.
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Do you think that one's over or are we going to bounce back?
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Well, it all depends on if you think the war's over.
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I mean, I think if we sat here six months ago, just before the war started,
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and remember back then, Sassl was trading at below 100 grand.
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I mean, I remember you and I having this conversation where I told you I just gave
19:45
Cecil the kiss of death.
19:47
I recommended it as a buy.
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And just by the way, that buy was just below 100 Rand.
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It was 89, 90 bucks.
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Where did it go?
19:55
250, 260 recently?
19:57
Yeah, it was way, I don't know.
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Wait a minute.
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Yeah, 52 high, 242 Rand.
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So it went to 242 Rand.
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So yeah, when you look at it, 156 compared to the highs of 242.
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or 32-week highs to 42, one might be a bit disappointed.
20:16
But looking at where the world price now trades, and compared to where Cecil was
20:21
trading earlier this year, I think a
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lot of Cecil shareholders will still take this as a win.
20:27
Okay.
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To close, let's have a look at the indices.
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I think topped by the resources from what I can see on my very unsophisticated
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screen.
20:36
Tell us what happened.
20:38
Yeah, that's an important point because when you look at the JSE, I mentioned JSE
20:42
down 4% here today.
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When you look at the resources, that is down 14%.
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That was to yesterday's close.
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Industrial is down 5%.
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The financial is still positive 8%.
20:53
So we needed a bit of a recovery coming from resources.
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I wouldn't call 0.84% increase today a recovery.
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But yeah, how do you eat an elephant?
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Yeah, one.
21:06
bite at a time.
21:06
So yeah, JC Allsheet today closed the day at 109,613 points.
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That was down 64 basis points.
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The top 40, 101,276.
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That's also down 65 basis points.
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I just mentioned the resources.
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Resources bugged the trend.
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They were up 84 basis points while industrials were down 68 basis points.
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Financials down 1.9% and even the asset property index which was uh, Some of the
21:36
star performance
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in 2026, that is down 96 basis points.
21:43
Skulk, thank you very much for your time.
21:44
As always, I'm going to get into my zone now, do some deep breathing, get into some
21:50
yoga
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position or something.
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But nothing works.
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And the only thing that used to work would be a nice soothing beer or glass of wine
21:57
or something, but I don't drink anymore, so there's nothing I can do.
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I've just got to go with it.
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Skulk Lowe is a portfolio manager at PSG Wealth Old Oak.
22:04
in Cape Town.
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And that was the five o'clock shadow.
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The views and opinions expressed in these podcasts are those of Lindsay Williams and
22:11
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