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JSE Direct with Simon Brown

Weekly podcast hosted by Simon Brown covering the JSE and listed companies.
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Now displaying: July, 2023
Jul 26, 2023

 

Central bakers have very few tools to achieve their mandates around inflation (and in some cases also protecting a currency and aiding GDP growth). Interest rates have a blunt lagged effect and their only other tool is what they say and we need to understand this central banker speak.

Last week it was the South African Reserve Bank MPC rate announcement that left prime unchanged for the first time since November 2021. The vote was close and the governor spent a lot of time saying they had not finished hiking, this was just a pause.

The Federal Reserve FOMC has been saying the same about pausing before more hikes.

But any hikes will surely be data dependent which is what they always say. So the threat of more hikes is central bak speak for don't get too excited.


Simon Shares

  • Shoprite* (JSE code: SHP) trading update shows just why they are the best food retailer in South Africa, even probably the world. This as they had to spend R1.1billion on diesel for the 52 weeks. This will hurt margins, but they're still profitable.
  • The Rand is on a tear, and this time it is not US$ weakness nor commodities booming. It's just good old fashioned people buying our Rand.
  • Global luxury ETF, better than buying the watch
  • Reducing tax on interest earned

* I hold ungeared positions.

Jul 19, 2023

As expected Local CPI for June came in at 5.4%, lowest in twenty months and well within the 3%-6% target range from the South African Reserve Bank. Yes base effect as June last year was the first +7% inflation print of this cycle. 

When do we start talking rate cuts? Truthfully not yet, a pause would be nice eve as the gov always targets 4.5% not the range.

Simon Shares

  • MPC is Thursday, I expect no raise and can we start talking about rate cuts yet?
  • USDZAR currency forecasts from Goldman Sachs:
    • End 2024: 16.00
    • End 2025: 15.00
    • End 2026: 14.00
  • Decent UK inflation as it dropped to 7.9% for June vs. expected 8.2%. But still highest in Europe. Italy 6.9%, Germany 6.4%, Netherlands 5.7%, Euro area 5.5%, France 4.5% & Spain 1.9%.
  • Pick n Pay (JSE code: PIK) very poor update. "SA sales declined 0.3% (0.0% like-for-like)" while "internal selling price inflation" was 9.5%, so they went backwards at a fairly alarming rate
  • ArcelorMittal South Africa (JSE code: ACL). Monday CFO quit after just two weeks and then Tuesday a horror update.
  • Transnet selects a private port operator to run the container terminal in Durban.
  • Koyfin 15% discount for first 2 years
  • The Indian Nifty 50 at all time highs and we have an ETF for that.
Jul 12, 2023

Simon Shares

  • US inflation for June was 3.0%, expected was 3.1% and previous 4.0%.
    • Next FOMC meeting is 25/26 July.
  • I think they still do a 0.25% rate hike, but then maybe pause for good, well until cuts start next year.

Nasdaq100 special rebalance to cut the 'Magnificent Seven' to "address over concentration in the index by redistributing the weights."

Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia and Tesla are the magnificent seven. They account for 55% of the index.

  • Effective close 21 July
  • Done twice previously; December 1998 and May 2011.
  • The combined weight of the five stocks with the largest market caps will be set to 38.5%, currently it is 46.7%.
  • Nasdaq100 is a modified market capitalisation index. So market capitalisation is not the only consideration, albeit is the biggest contributor.
  • Overall this has already seen some selling in the big five, and buying in those that are expected to be weighted higher. Final weightings will be announced after close in Friday 14 July.

The Four Horsemen of Big Tech

A phrase coined in the late 1990s for Microsoft, Intel, Cisco Systems and Dell Computer as they stormed higher in the dot com craze.

All had horrid collapses and took o a decade plus to recover their dot com levels and Cisco and Intel have been modest investments at best with Dell delisting.

Are we seeing the same with the magnificent seven?

Yes, no, maybe.

It is different this time, they all have real tech and make real profits. But have they gone wild on the AI bonanza? Absolutely. Now sure, AI will only get better and all seven have a real chance of be the real leaders in the space (in different ways). But valuations are stretched and this current earnings season is important as are the next few as well.

Simon Brown

Jul 5, 2023

Two-pot system is confirmed, here all the details

  • Starts 1 March 2024
  • All future reg28 and pension contributions will be split into two pots
    • One third savings
    • Two thirds investments
  • You can withdraw the savings component before retirement
  • Tax still payable
  • Existing funds will convert automatically into the new two-pot system
    • Of existing funds R25,000 will be transferred into the savings pot
    • Concerns about everybody taking out their R25,000 and crashing the market are over done.

Simon Shares

  • Pep (owned by Pepkor) has started offering credit to customers, they own Capfin so have experience in lending.
  • China will control exports of some metals used in the semiconductor industry. Gallium and germanium are considered “minor metals.” They're not rare but costly to produce and China supplies ±80%
  • SARB says fight to tame inflation monster is paying off. First time he has even hinted that maybe inflation is coming down.

Simon Brown


 

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