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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 five o'clock
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shadow.
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And as always on a Thursday, I speak to Skulk Lowe, Portfolio Manager at PSG
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Wealth Old Oak in Cape Town.
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I don't think I've ever seen such ridiculous volatility.
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And not volatility from the beginning of the week to the end of the week, Skulk.
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It's every single day.
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And sometimes there are three different market trends during one day.
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You wake up in the morning and the Far East is down and the U.S.
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futures are down maybe 1% or something.
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And then someone wakes up in the morning, we won't say who, and says something.
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And then the markets reverse.
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And then in the evening, people say, well, wait a second, we don't believe him.
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So it goes in the opposite direction again.
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It's all over the place.
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It's extraordinary.
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And thank goodness we're not traders, Skulk.
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Thank goodness you're a long-term investor.
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Yeah, thank goodness.
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I was sitting on Monday and listening to a commentator
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reading out the top performers and the worst performers for the day.
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And I think it was the first or the best or the second.
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Yeah, the best performer was Cecil,
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but the second best performer was the worst performer for Monday.
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But I mean, the second best performer was Anglos.
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And he said, oh, this is fun.
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Fantastic.
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Anglo-American, that is up there.
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It's actually end of the day, 6%, 6 point something percent higher.
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And then I just realized, wait a minute, this morning I switched on my computer.
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And one of the first things that caught me, because it's in the A's, that caught
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me, I was Anglo-American being down something like
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8%. So that specific day, don't quote me, it could have been 12, it could have been
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14%.
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But that specific day, one of the largest stocks on the day is at a swing from being
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down close to
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6-odd percent, ending the day as one of the top performing, ending up 6%.
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And likewise with some of these other companies.
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I think, you know, I like following my goals sometimes.
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And goldfields that specific day, that was down 10-point-something percent during the
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morning,
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ended the day close to 2% positive.
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So that's in a sort of a one sentence or two sentence summing up the current
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market conditions.
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You will literally have a market that could swing 5%, 6% either way.
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And that's showing us the type of volatility, this type of uncertainty.
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Because the bulls can't decide, you know, is the bears actually winning?
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And likewise for the bears.
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It's this massive, massive.
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I see, you know that thing that usually stands in front of the New York Stock
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Exchange?
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We had it on bulls and bears as well.
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That bear that's trying to pull down this bull.
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Yes, the famous statue, yes, yeah.
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I'm seeing that every day.
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I mean, this is now the best analogy for markers that we're currently seeing.
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I think it was Monday morning, and what had happened was over the weekend, Donald
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Trump had woken up and thought he should have a bit of a punt over the
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weekend.
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So he put some market making news out there.
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He says you've got 48 hours.
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And if you don't open the Straits of Hormuz within 48 hours,
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I'm going to obliterate you.
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Take out all your energy infrastructure.
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You know the story.
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And everyone was worrying.
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And then on Monday, the markets opened and gold was down in dollar terms 10%
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because the dollar was stronger.
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But U.S.
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bond yields spiked.
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Market indices were all substantially lower.
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And then he said, I don't know, and I'll give you another five days.
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And the markets went through the roof.
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But gold was down at 4,100 or something.
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At the end of the day, it was 4,450 or something ridiculous.
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Three $400 swings in gold.
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It's astonishing.
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And I thought of you, and I thought, how do you get on the phone this morning to
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your clients?
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And then what do you say in the afternoon when it's reversed?
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It's testing your communication skills, Emma.
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I must say.
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Four seasons in one day.
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But Elaine, did you read, I don't know the truth, I don't know the source, but I read
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somewhere there was this massive,
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massive trade in the options market that literally something like 20 minutes or
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just literally just before that
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Trump's truth report.
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Five minutes actually in some cases.
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Yeah, it's something like that.
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We're this massive, massive long on the S&P 500.
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We're talking about one or two million dollars.
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We're talking about a massive long position in the S&P 500 and a massive
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short position in
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oil.
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You know, that can't be.
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That can't be just a coincidence.
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No, of course it can't.
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Nobody's that skillful.
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And the other thing is that it came from several different sources.
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And one of the platforms that was used apparently was Polymarket.
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I don't know if you follow Polymarket.
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It's a very sophisticated trading platform where you can literally punt on
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anything.
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But anyway, the point is Polymarket had some deals and they're looking at it.
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But if you're going to inside a trade and you're too big to go to one particular
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platform in
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isolation, you have to go elsewhere.
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And I bet every single other platform would take a decent order.
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was getting the same sort of orders as well.
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And we know what it was.
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We know from where it stemmed.
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But of course, will it ever be followed up?
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I very much doubt it during this current administration.
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Someone knew something from right from the top, I think, Skull, don't you?
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For sure, for sure.
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Like I said, it just can't be a coincidence.
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It's absolutely not.
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But I mean, that's the current market conditions.
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Wars are not only...
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A fort with missiles and the A's and boots on the ground, it's not being done.
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in financial markets.
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That's a crazy war.
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That's a crazy war.
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But anyway.
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Yes, but anyway, the important thing is, what have you done?
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Have you done anything?
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Are you still sitting with your positions, but just a little bit slightly,
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a slightly more frazzled scalp, though, than the last time we spoke, which
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incidentally you were two weeks ago because of technical problems last week.
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Yeah, Lindsay, I think you know I've been
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been been been been having this this podcast for for many many years and and
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you know over the past few months uh i've been
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really cautious and and that cautiousness did to a certain extent um made me
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take some chips off the table so
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to speak um but but i'm not just my portfolio's currently is is sitting with
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the the largest
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cash position um
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I don't think it had a larger cash position in COVID.
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So it's definitely sitting more defensively.
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But now you need to start looking.
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Start looking at opportunities.
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Your magnificent seven.
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I saw a heat map today of the S&P 500.
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And when you look at the map, it sort of looked red.
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But it's only red, well, mostly red with these magnificent sevens.
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not so magnificent anymore.
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But if you look at the rest of the S&P 500,
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it's actually held up pretty solidly in this really turmoil market because when
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you look at
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the remaining, let's call it 493 stocks, they're mostly positive, they're mostly
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green.
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So we've seen a bit of a disconnect coming from that side as well.
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And that's going to create some opportunities.
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When you look at the likes of Microsoft, that is now down 31%, 32%.
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It's still the second largest company, one of the best managed companies,
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and a product which has been the largest company 25 years, and we will most
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probably sit here,
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you and I, 25 years from now.
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Yeah, of course.
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I'll be here in the same seat talking to you, Scott.
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Absolutely no problem.
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Same nonsense, I'll talk to you.
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You'll say the same rubbish back to me.
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Yeah, of course we will be.
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Carry on.
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But I think...
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Kids, grandkids, those people will still have Microsoft around.
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And giving you the opportunity now to buy something 31% cheaper than what you would
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have bought it.
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I agree with you entirely.
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It's a blue chip.
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And if it's down 31%, there's a reason it's down 31%
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because of AI purportedly taking over software data that
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Microsoft has developed and has made its fortune on.
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But Microsoft isn't stupid.
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Microsoft will turn it around.
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It's not like BlackBerry or something like that, which went out the window.
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We never saw it again.
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Microsoft will bounce back, I think.
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And that's not a trading recommendation, by the way, or an investment
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recommendation.
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What about Tesla?
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Also technically in a bear market, more than 20% off its highs.
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I mean, you can think what you like about Musk, and I don't like him at all.
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I think he's a reprehensible character.
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But goodness me, he's clever.
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And something will happen to Tesla that will...
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get it back in its position as the top of the heap of electric vehicles and whatever
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else is attached
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to the Tesla share price at the time that he's dreamed up.
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So I think if you are liquid, Skulk, then there are lots of opportunities for you.
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But I'm saying this humbly, don't rush in yet because I think there's a lot more to
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come.
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No, I looked at some ETFs yesterday.
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And it's just themes.
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It always gives you a nice one where you look at and I do it per calendar year,
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and I've done it for the past close to 10 years, where you look at I take a
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commodity ETF,
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MSCI world value, MSCI world growth, developed markets, emerging markets, all
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these different themes.
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And it's interesting when you look at it.
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And where we sit in currency, you pretty much got to repeat.
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of the theme that we've seen in 2022, where commodities are currently leading.
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You had in second place, but quite far down second place, we had value stocks,
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which usually tend to do better in volatile, uncertain times,
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where you see some people go back to valuations rather than hype.
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And usually at the bottom of the list in 2022, it's no different.
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where the U.S.
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growth stocks were the worst performers.
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And when you look at the current year to date, that is like following that trend to
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the T.
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And the only difference is we're not nearly done.
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We're not even close to seeing the lows that we've seen in 2022.
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And I do feel And that doesn't make me a bear,
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but I do feel that valuations are still more stretched than we've seen it in 2022.
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And I do think that our environment compared to a, let's call it a
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post-current environment,
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I think is worse.
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It's worse than the environment that we've seen three years ago.
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So, yes, I agree in totality with you.
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I think people shouldn't look at this as this is the buying opportunity for the
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broad market.
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The market has done what it's done.
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JSE, I think on one stage, was off 15% from its highest.
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That's as bad as it's going to get back in.
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I think you should be a stock picker.
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Really be selective on what you buy.
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I won't go and buy the S&P 500 now,
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but I do think to start nibbling on something like Microsoft is not a bad
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idea.
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I wouldn't necessarily go out and buy the JSE, but going into a like stuff, a
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Richemont,
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which is 22% down year to date, Fifth worst performing stock on the JSE.
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A company that's, I still think, you know, luxury goods are defensive products.
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But also when you look at the Richmond, Richmond's sitting with 7.6 billion euros
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in cash, no debt.
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7.6 billion.
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What do you think they're going to do with this cash in this, let's call it, bad
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market environment?
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They'll also look for opportunities.
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and when things recovery eventually again.
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So that's where I'm at currently.
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I still sit with a large amount of cash, but I do see some opportunities sticking
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out.
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Do I think the market has done, did we see the correction?
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No, I still think this volatile,
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let's call it uncertain environment is going to persist for the next few weeks.
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Okay, I hope your mind is mossy now and fertile, Scott, because I'm going to ask
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you a question.
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And it does sound as though it is.
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Okay, so here's the question.
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I believe that the gold price peaked that day that I said it would peak or the day
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before
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I said it would peak.
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And it did peak at $5,626 per ounce intraday on the futures market.
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Okay, it's not the spot market, it's the futures market.
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The spot market was less than that.
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because of the contango.
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Now, it is currently 4,555.
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That's the spot price.
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Is there a chance that the gold shares will continue to be in a bull
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market and may even go higher and may go to new highs simply because of the
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earnings that will come through,
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even with a gold price $1,000 per ounce less than the peak it achieved?
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Or have we seen the peak?
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In Lindsay Williams' world, have we seen the peak in both the gold price in US
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dollar terms and also the shares in RAND terms,
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for example, on the JSC?
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That's my question of the week for you.
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Can I answer you next year this time?
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Yeah, that works.
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No, no, Lindsay, I've got to answer for you.
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So we had this golf association there in the,
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let's call it the build-up to the highs in gold.
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And you called it absolutely spot on.
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It was maybe a day or two left.
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It was one day early, yeah.
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Yeah, yeah, yeah, exactly.
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It was spot on, But we also had the conversation to the buildup.
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You often ask me, are the miners reacting exactly the same as the gold miners
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reacting,
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the actual gold miners?
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So, well, originally, the gold miners did.
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But that, let's call it January, February, the gold miners sort of, as if the market
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didn't.
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believe the gold price will stay at those $5,000, $5,400 level,
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which now subsequently shown to be the right view to have.
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These miners are, look at the gold fields.
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They mine their gold still at current levels at $1,800 per ounce.
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When you look at Anglo Gold, similar story.
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Harmony, a little bit higher, they $2,000, $2,100 per ounce.
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But, but.
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Let's call it average.
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Let's make it $2,000.
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Our miners are mining this metal, $2,000, and they're still selling it,
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$4,000, $4,500.
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They've still got a gross profit margin of more than 50%.
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They're still sitting with zero debt.
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None of these miners really got debt anymore.
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And so they're pumping cash.
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So, yes, I do agree with you.
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I will feel to your question.
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that eventually as the results come through,
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that it's going to surprise the market and gold miners will justify
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that it's because of the price levels it's trading.
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But here's the thing.
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Here's the thing.
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I'm looking at this war and we can go left or right.
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I'm not going to try and call an end to the war because that'll just be stupid.
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Because as you just mentioned, Trump went from,
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we're going to blow up every power station in Iran if you don't do this and this and
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this by
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noon that time.
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And hours later, he said, well, hey, there we go.
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Now we've got a great tool to date.
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conversation and we're going to not attack Iran for five days and yeah and Iran went
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like what did we miss and we're clearly on the same WhatsApp group so we're not going
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to try and
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call but eventually hopefully
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all these parties will sit around the table and we'll see an end to this war
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what will happen then
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so firstly nobody will convince me
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that that inflation is not going to kick up from current levels nobody it already
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is it's bubbling skunk we've seen all the good
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numbers we've seen the good number from south africa at three percent we've seen
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the good number from the united states at 2.4 percent forget
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those numbers even if it's just transient remember
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that phrase transient oh yeah even if it's just six months the point is it'll shock
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the markets and you can see the bond market for
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goodness sake the u.s 30 year nearly went to 5%.
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The U.S.
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10-year was in the mid-440s.
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People know that inflation numbers are going to be horrible in the next three to
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six months.
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Yeah.
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And then you get certain very intelligent individuals that keep on explaining to us
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that, yes,
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inflation is going to be a problem, but we're going to be running into a
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recession.
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When I say we, the U.S.
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are going to be running into a recession way before then.
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Nobody's going to convince me again that this is not going to put a lid on economic
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growth worldwide.
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What we're seeing and experiencing currently,
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I'm convinced that that's going to negatively impact economic growth globally
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and could even
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put countries, U.S.
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specifically, in a recession.
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So see where I'm getting.
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We're already saying we're going to see higher inflation.
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I'm telling you, we're going to see a much lower economic growth than people
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forecasted going into
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2026.
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And we've already seen the employment numbers coming out from the US not really
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shooting the lights out.
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You again, see where I'm going.
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There's a stagflation written all over it.
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But then on the other hand, you've got President Trump that made it blatantly
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clear before he went to do this walk.
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On that Fox interview in February, he said three things.
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He said, firstly, the U.S.
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should undoubtedly have the lowest interest rates in the world.
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Secondly, a 1%
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drop in the interest rates or the Fed interest rates should see an
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increase in the GDP of 600 billion U.S. dollars.
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and I 2% drop in interest rates could wipe the deficit in totality, which I don't
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believe,
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but that's what he said.
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Nonsense.
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Everything you've just said is nonsense, but it's not what you're saying.
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It's just what you're reporting upon.
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It's not going to happen.
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It might be not going to happen, but we know he's going to try.
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That's Trump.
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He's going to try.
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So when the dust settles around the conflict in the Middle East, which might
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take some time,
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we know the next step will be.
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We're going to lower interest rates.
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We're going to lower interest rates to the lowest level.
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We're going to try and reach the lowest levels in the world.
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And what's that going to create?
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Well, that's going to create a much, much weaker dollar.
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And you've got a much weaker dollar, you've got a much higher gold price.
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So, yes, I think that the gold price or the move that we've seen from
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$5,000-odd, you're right.
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That was the anticipation of the most.
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or let's call it the price of the most anticipated war ever.
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Everybody knew this war was going to happen in Iran.
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And the gold price just reflected that prior to the actual shots being fired.
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But now, did it change the reason why you should be investing in gold?
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Hell no.
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I think it's actually now even more important to have some gold in your
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portfolio.
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Very good.
21:18
Good speech, Skull, and well backed up.
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I hope you are right.
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Now, let's have a look at some numbers, shall we?
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Because I've got a confusion here, a conundrum.
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Actually, I look at a site called investing.com and I look at a site called
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the CRB
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Index site.
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It's from Trading Economics.
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But anyway, we'll get to that in a moment.
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But anyway, what I do know is...
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The dollar round is 1691, which has barely changed from yesterday.
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The British pound against the round 2263 with the pound slightly weaker against the
21:52
round.
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And the euro round is 1958,
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a third of a percent down for the euro.
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Euro dollar is 115.75.
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Let's get on to commodities now.
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I've got the gold price at 4560, let's call it, which is up around about 2%.
22:12
The Platinum price is up 2.75% to 19.45%
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and the Palladium price is up 3.25% at 14.39%.
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As I speak, my internet goes down.
22:26
You've had some problems in that department.
22:28
So I'll give you another couple of pages.
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I've got the South African 10-year bond yield at 8.97%, which is 6.5 basis points
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weaker.
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So it's changed its big figure from 9 to 8.
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the S&P 500 futures.
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are 66.59, which is up 0.8%, I think.
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And what else have we got?
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The US 10-year bond, that's been interesting.
22:52
It's been fascinating.
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The bond market suddenly, as you get older, becomes more interesting than all
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the other things like Bitcoin.
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4.32%.
23:00
Speaking of Bitcoin,
23:01
Bitcoin is sort of establishing itself around this 69 to 71 level in the
23:08
short term.
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It's now 71,278, Skulk.
23:13
Yeah, my internet is definitely down.
23:14
What have you got for oil?
23:16
Because I've got two different oil prices.
23:20
Let's quickly see.
23:21
Because I've got oil at Brent crude at like 101.40 on my CRB screen.
23:28
And yet on my investment.com screen, it says it's 96.60, which is correct.
23:34
There's obviously a difference between the futures markets that they're looking at.
23:38
One's looking at, for example, the March expiry and the next one's looking at April
23:44
or something like that.
23:46
What have you got?
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I've got the Brent price in front of me and that's currently trading at 101.52.
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That's down, let's call it, just close to 3% from the back.
23:55
Exactly.
23:56
That's exactly what I've got as well.
23:59
And West Texas Intermediary is 89.88.
24:02
It's below $90 now.
24:05
Yeah, I've got that as well.
24:07
OK, so that's what we'll go with.
24:10
Oil price above $100 a barrel, let's call it that, and that is horrible for the
24:15
world economy.
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It doesn't matter if it stays there and doesn't go to the new highs of $120, $150,
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even some people calling it $200 per barrel.
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The fact is that it was, at some stage in the last 52 weeks,
24:28
$58.40 per barrel.
24:31
So it's doubled in price, essentially.
24:33
And we've got to get used to that.
24:35
And as you quite rightly said, inflation is going to ignite.
24:38
And when inflation ignites, the peasants, they are revolting.
24:44
Because the biggest enemy to anybody, whether they're an investor or a shopper,
24:49
is inflation, Scott.
24:51
Oh, 100 percent.
24:53
That is the biggest.
24:55
Because remember, we went into this year, not just as South Africans,
24:58
but the world was looking at not a matter of if.
25:03
It was just hard.
25:05
How many rate cuts will we be seeing this year?
25:08
And I know some people were forecasting two, some were saying even three rate
25:13
cuts.
25:13
But rate cuts was the order of the day for 2026.
25:16
Well, we went from 28 February, there was a 60% probability,
25:22
and that's according to the CME Fed tool, 60% probability that the Fed will cut
25:29
rates at the
25:31
April meeting.
25:33
As we sit here, there's now no chance.
25:34
zero chance for a rate cut in April, there's actually just close to a 20%
25:39
probability that they'll have a rate hike.
25:43
So it just shows you how things have changed.
25:45
Yes, we've got the SARP meeting tomorrow, the Reserve Bank meeting tomorrow.
25:49
And as we sit here, the polls are telling us that it should be a no change.
25:56
And I do agree with that.
25:58
I don't think they should be jumping the gun because the Reserve Bank was...
26:02
very slow lowering rates.
26:04
And why am I saying that?
26:05
When you look at the past 20 years,
26:08
the difference between the RIPA rate and the inflation rate was roughly 1.5%.
26:13
So that's just subtracting the inflation rate from the RIPA rate.
26:18
So when that gap is high, meaning that inflation is way lower,
26:23
that gives the Reserve Bank a bit of ammunition to lower rates,
26:28
which it didn't really do as aggressively as some of our international counterparts.
26:33
As we sit here, that difference is more than 3%.
26:35
So hopefully...
26:37
Hopefully, the Asia Reserve Bank will look at this and say, well, as slow as we were
26:44
in lowering rates,
26:46
if we need to start hiking with higher inflation, hopefully we'll just be as
26:51
slow.
26:53
Yeah, we'll wait for that decision.
26:55
Over the next few weeks, the next two or three months, it's going to be very
27:01
difficult for the South African Reserve Bank to juggle.
27:03
And it has a juggling act every time it meets.
27:05
But this time it's very difficult.
27:06
What do they say?
27:07
This is just a moment in time.
27:09
So inflation will come back down again.
27:11
So we're not going to keep rates on hold or even raise rates.
27:15
We are going to continue with our cutting policy.
27:18
On the other hand, they'll say, well, we've got to keep inflation under control
27:22
because that's our mandate.
27:24
So we'll see.
27:26
Skulk, before we get to the ups and downs on the JSC, please tell me about Remgrove.
27:29
Numbers out today.
27:31
I thought it looked really good.
27:32
I mean This is a company, you know, that I follow and really like.
27:36
And for T's and C's purposes, I'm invested in as well.
27:40
And the main reason for buying this company, well, the two main reasons.
27:46
One, when you look at the portfolio of stocks, it gives you a great South African
27:52
Inc. representation.
27:54
And we know it's been the place to be invested.
27:57
And then secondly, it's the fact that it...
28:01
trade it.
28:02
I mean, if you look at the since 2009, the average discount to its intrinsic value
28:09
was roughly about 20, 21%.
28:11
And for the past few years, we've seen this company trade well above the 40%
28:15
discount to its intrinsic value.
28:17
Market telling the company, come on, you need to now either start unlocking value
28:23
or give us the shares back.
28:25
And we know they've done that.
28:27
They've done quite a few innovative things over the past few years.
28:29
Most recently, selling the F&B exposure.
28:34
But the companies within Remgrove did really well.
28:37
Mediclinic, phenomenal, really good set of results.
28:40
Even Rainbow Chickens, which has always been sort of a tongue-in-the-cheek type of
28:46
company, that did well.
28:48
And when you look at the company's intrinsic value, now trading slightly
28:53
below the 40% levels,
28:55
but let's call it a 38-odd percent discount, I still believe...
28:58
And it's offering a lot of value.
29:01
They're sitting with quite a bit of cash.
29:04
That's, I think, a positive.
29:08
And yeah, in general, it's just a really, really good set of results.
29:12
Very good.
29:13
A nice, robust Remgrove assessment there from a shareholder at Skunk Low.
29:19
Let's have a look at some of the other shares on the JSC today.
29:22
Diskem up 6.75%, Karoo up 6.3%, Northern Platinum 6.2% of the good.
29:28
Here come the diggers.
29:29
Northern's followed by Harmony up nearly 6%.
29:32
And Anglo Gold is 5.2% higher on the close.
29:36
On the downside, there isn't a day where Tungela is not either at the top or at the
29:40
bottom.
29:40
Tungela today down 7.2%. Another digger, but of a specific commodity.
29:46
Property company, Hammerson, down 4.1%.
29:48
Boxer.
29:49
down 3.75%, Exaro down 3.1%, Motus down two and a third.
29:56
Skulk, any outside of those?
29:59
Yeah, Emerson and Motus ex-diff scenario,
30:04
but nothing really standing out.
30:06
I think in general it was just a solid recovery day in the market.
30:10
Let's hope it's not a dead cat bounce.
30:13
How are the indices?
30:14
I noticed that the ones that you have been watching very keenly for a couple of years
30:20
are doing very well today.
30:22
Give us the details, please.
30:24
Yeah, the resources did well.
30:26
I mean, we could have started there at 4.8%, but as I mentioned, it was across
30:29
the board.
30:31
Today, we've seen industrials that actually were up 2.3% as well,
30:36
and financials up over 3%, asset property up over 1%.
30:41
So, yeah, in general, it was just across the board a very, very solid day.
30:45
But again, mostly driven by recovery and some of these resource stocks.
30:50
I'm just going to give you the S&P to just to conjure with in the last few hours of
30:55
trading.
30:55
66.50 for the June futures, up 0.7%.
30:59
I would say that they'll be flat or down by the end of the day because people are
31:06
not taking into account the fact that Iran has had a look at this
31:08
so-called 15-point plan from Trump, which he probably wrote in crayon or something.
31:10
And...
31:11
They've just said, sorry, surely you jest, Mr.
31:15
President.
31:16
And it's not going to be good.
31:18
So that's just me and just following the pattern of the last few weeks.
31:22
Skullclaw is a portfolio manager at PSG Wealth Old Oak Division in Cape Town.
31:27
And that was the 5 o'clock shadow.
31:29
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