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.

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 <ul> <li>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.</li> <li>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.</li> <li><a href="https://justonelap.com/global-luxury-etf-better-than-buying-the-watch/" rel="nofollow" target="_blank"> Global luxury ETF, better than buying the watch</a></li> <li><a href="https://justonelap.com/reducing-tax-on-interest-earned/" rel="nofollow" target="_blank">Reducing tax on interest earned</a></li> </ul> <a href="http://www.simonbrown.co.za/portfolio" rel="noopener nofollow" target="_blank">* I hold ungeared positions.</a>

Understanding central banker speak (#551)

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% &amp; 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. 

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 <ul> <li>MPC is Thursday, I expect no raise and can we start talking about rate cuts yet?</li> <li>USDZAR currency forecasts from Goldman Sachs: <ul> <li>End 2024: 16.00</li> <li>End 2025: 15.00</li> <li>End 2026: 14.00</li> </ul> </li> <li>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% &amp; Spain 1.9%.</li> <li>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</li> <li>ArcelorMittal South Africa (JSE code: ACL). Monday CFO quit after just two weeks and then Tuesday a horror update.</li> <li>Transnet selects a private port operator to run the container terminal in Durban.</li> <li><a href="https://koyfin.com/?via=JOL" rel="noopener nofollow" target="_blank">Koyfin 15% discount for first 2 years</a></li> <li><a href="https://justonelap.com/investing-in-india-with-local-etfs/" rel="nofollow" target="_blank">The Indian Nifty 50 at all time highs and we have an ETF for that.</a></li> </ul>

Inflation back in range, now for rate cuts (#550)

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

Simon Shares <ul> <li>US inflation for June was 3.0%, expected was 3.1% and previous 4.0%. <ul> <li>Next FOMC meeting is 25/26 July.</li> </ul> </li> <li>I think they still do a 0.25% rate hike, but then maybe pause for good, well until cuts start next year.</li> </ul> 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. <ul> <li>Effective close 21 July</li> <li>Done twice previously; December 1998 and May 2011.</li> <li>The combined weight of the five stocks with the largest market caps will be set to 38.5%, currently it is 46.7%.</li> <li>Nasdaq100 is a modified market capitalisation index. So market capitalisation is not the only consideration, albeit is the biggest contributor.</li> <li>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.</li> </ul> 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. <a href="https://simonbrown.co.za/" rel="nofollow" target="_blank">Simon Brown</a>

The Four Horsemen of Big Tech (hello 1999) (#549)

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  Top ETFs so far in 2023, so +50% returns in just six months. New-vehicle sales in SA +14% for June. But last year June Toyota Durban was still closed after flooding. But still a decent number.    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

Two-pot system is confirmed, here all the details <ul> <li>Starts 1 March 2024</li> <li>All future reg28 and pension contributions will be split into two pots <ul> <li>One third savings</li> <li>Two thirds investments</li> </ul> </li> <li>You can withdraw the savings component before retirement</li> <li>Tax still payable</li> <li>Existing funds will convert automatically into the new two-pot system <ul> <li>Of existing funds R25,000 will be transferred into the savings pot</li> <li>Concerns about everybody taking out their R25,000 and crashing the market are over done.</li> </ul> </li> </ul> Simon Shares <ul> <li><a href="https://justonelap.com/local-etf-returns-year-to-date/" rel="nofollow" target="_blank">Top ETFs so far in 2023, so +50% returns in just six months.</a></li> <li>New-vehicle sales in SA +14% for June. But last year June Toyota Durban was still closed after flooding. But still a decent number.</li> </ul> <ul> <li>Pep (owned by Pepkor) has started offering credit to customers, they own Capfin so have experience in lending.</li> <li>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%</li> <li>SARB says fight to tame inflation monster is paying off. First time he has even hinted that maybe inflation is coming down.</li> </ul> <a href="https://simonbrown.co.za/" rel="nofollow" target="_blank">Simon Brown</a>

Two-pot system is confirmed, here all the details (#548)

SA Inc watch list. Building a list of stocks that are cheap, very cheap, and could give good return n the next year or three. Criteria;  Must be profitable, so positive PE ratio Must be cheap, so PE below 8x Small as in market cap under R8billion No REITs  Using Koyfin I get 46 stocks including REITs and detail them in the podcast. I'll create a watchlist on Google docs and share that link in time. What about just the mid cap ETF from FNB? FNBMID. Sixty stocks but problem is the top holdings are; Sibanye-Stillwater*, Discovery*, Nedbank, Bidvest and Remgro. That's already ±25% of the ETF and none really for my requirements as above.  Simon Shares  Local crypto exchange, Revix, suspends trade or withdrawals on 24% of client crypto assets as their South Korean partner has issues with a provider. Naspers (JSE code: NPN) &amp; Prosus (JSE code: PRX) plan to remove the complex web of cross holdings to a simple structure whereby Naspers owns 47% of Prosus who owns the stake in Tencent (Hong Kong code: 700). Good Invicta (JSE code: IVT) results. Rand all over the place. Brent weak, surely suggesting the global economy is weak. But so far the promised 2023 recession has not arrived, remember the hard vs. soft landing debate of late 2022?  * I hold ungeared positions. Simon Brown

SA Inc watch list. Building a list of stocks that are cheap, very cheap, and could give good return n the next year or three. Criteria; <ul> <li>Must be profitable, so positive PE ratio</li> <li>Must be cheap, so PE below 8x</li> <li>Small as in market cap under R8billion</li> <li>No REITs</li> </ul> Using Koyfin I get 46 stocks including REITs and detail them in the podcast. I'll create a watchlist on Google docs and share that link in time. What about just the mid cap ETF from FNB? FNBMID. Sixty stocks but problem is the top holdings are; Sibanye-Stillwater*, Discovery*, Nedbank, Bidvest and Remgro. That's already ±25% of the ETF and none really for my requirements as above. Simon Shares <ul> <li>Local crypto exchange, <a href="https://revix.com/blog/post/important-update" rel="nofollow" target="_blank">Revix, suspends trade or withdrawals on 24% of client crypto assets</a> as their South Korean partner has issues with a provider.</li> <li>Naspers (JSE code: NPN) &amp; Prosus (JSE code: PRX) plan to remove the complex web of cross holdings to a simple structure whereby Naspers owns 47% of Prosus who owns the stake in Tencent (Hong Kong code: 700).</li> <li>Good Invicta (JSE code: IVT) results.</li> <li>Rand all over the place.</li> <li>Brent weak, surely suggesting the global economy is weak. But so far the promised 2023 recession has not arrived, remember the hard vs. soft landing debate of late 2022?</li> </ul> <a href="http://www.simonbrown.co.za/portfolio" rel="noopener nofollow" target="_blank">* I hold ungeared positions.</a> Simon Brown

A watch list of SA Inc stocks (#547)

Local CPI 6.3% for May (lowest since April 2022) from 6.8% in April and vs expected 6.5%. A very good number and we should see June below 6% as June last year was the first +7% in this cycle at 7.4%. Simple base effect should put some serious pressure on inflation over the next few months. So is inflation largely over locally? Probably. Can we start talking about when the MPC starts cutting rates? The next MPC rate announcement is July, the day after we get June inflation and we'll see that the governor says. But cuts are maybe fourth quarter fo this year, at soonest. Standard Bank thinks another 0.25% hike later this year and consensus is cuts only starting next year.   Simon Shares  UK core inflation rises from 6.8% to 7.1% and CPI 8.7%. They are in trouble. Standard Bank (JSE code: SBK) trading update. Very much two parts, bad debts are ugly and profts are lookign great. They also expect a 0.25% rate increase in the second half of the year? Afrimat (JSE code: AFT) deal to buy Lafarge for ±R1billion. String vertical intergration and potential to boost profits to essentially be paying around a 3x PE. They also say that it looks lie constructions has bottomed in 2022. Omnia (JSE code: OMN) results. Agri struggling with margin pressure, ining booming while chemicals slips. But overall good and stock si cheap. Transaction Capital (JSE code: TCP) secures funding for Gomo. Securing the capital was a major market concern and now they have a bak using their balance sheet and they earn a margin. Good deal but market still selling.  How to Diversify Your Commodity Exposure With the PICK ETF Dividend portfolio paying monthly 

Local CPI 6.3% for May (lowest since April 2022) from 6.8% in April and vs expected 6.5%. A very good number and we should see June below 6% as June last year was the first +7% in this cycle at 7.4%. Simple base effect should put some serious pressure on inflation over the next few months. So is inflation largely over locally? Probably. Can we start talking about when the MPC starts cutting rates? The next MPC rate announcement is July, the day after we get June inflation and we'll see that the governor says. But cuts are maybe fourth quarter fo this year, at soonest. Standard Bank thinks another 0.25% hike later this year and consensus is cuts only starting next year. Simon Shares <ul> <li>UK core inflation rises from 6.8% to 7.1% and CPI 8.7%. They are in trouble.</li> <li>Standard Bank (JSE code: SBK) trading update. Very much two parts, bad debts are ugly and profts are lookign great. They also expect a 0.25% rate increase in the second half of the year?</li> <li>Afrimat (JSE code: AFT) deal to buy Lafarge for ±R1billion. String vertical intergration and potential to boost profits to essentially be paying around a 3x PE. They also say that it looks lie constructions has bottomed in 2022.</li> <li>Omnia (JSE code: OMN) results. Agri struggling with margin pressure, ining booming while chemicals slips. But overall good and stock si cheap.</li> <li>Transaction Capital (JSE code: TCP) secures funding for Gomo. Securing the capital was a major market concern and now they have a bak using their balance sheet and they earn a margin. Good deal but market still selling.</li> <li><a href="https://justonelap.com/how-to-diversify-your-commodity-exposure-with-the-pick-etf/" rel="nofollow" target="_blank"> How to Diversify Your Commodity Exposure With the PICK ETF</a></li> <li><a href="https://justonelap.com/jse-dividend-portfolios-paying-monthly/" rel="nofollow" target="_blank">Dividend portfolio paying monthly</a></li> </ul>

Bye bye inflation? Rate cuts next? (#546)

dd  Disappearing dividends Just this week Spar (JSE code: SPP), MultiChoice (JSE code: MCG) and Telkom (JSE code:TKG) have all cut dividend to zero. We had big dividend payer Coronation (JSE code: CML) drop theirs to provision for the SARS fine and historically good dividend payer Pick n Pay (JSE code: PIK) reduce theirs. This shows the pain that companies are experiencing, not all, but certainly some, It perhaps also shows quality, for example Shoprite* (JSE code: SHP) increased their dividend. The problem is we love dividends for cash flow and they tend to grow ahead of inflation, sometimes well ahead of inflation. They're also taxed better than traditional income from bonds or cash (albeit not as low as CGT). But the downside is that any dividend can disappear at any time. For investors such as myself, reduced dividend is not a big problem. I like the cash flow but don't need the income for expenses. For those living on dividends the pain is real. If the income is required you need a good amount of bond and cash investments and REITs that aside from the pandemic pay consistently, albeit REITs reduced over the last 5 or 6 years. Another option is something like dividend aristocrats (we have a local and offshore ETF for these). Here we have companies with decade long track record of paying dividends, but remember Steinhoff (JSE code: SNH) was in the local dividend aristocrat ETF, so even this is not guaranteed. But a basket or ETF works well. Simon Shares  US CPI for May 4.0%, lowest since March 2021. Latest IEA global oil market outlook: peak oil combustion by 2028?  Petrol demand to peak this year Road transport oil demand peak 2025 All transport by 2026 Overall oil for combustion peak 2028   ZAR 18.33    Massive moves expected in Richemont (JSE code: CFR) on Thursday 15 June as the index rebalances. Could see ±R4billion of selling.  * I hold ungeared positions. Simon Brown

dd Disappearing dividends Just this week Spar (JSE code: SPP), MultiChoice (JSE code: MCG) and Telkom (JSE code:TKG) have all cut dividend to zero. We had big dividend payer Coronation (JSE code: CML) drop theirs to provision for the SARS fine and historically good dividend payer Pick n Pay (JSE code: PIK) reduce theirs. This shows the pain that companies are experiencing, not all, but certainly some, It perhaps also shows quality, for example Shoprite* (JSE code: SHP) increased their dividend. The problem is we love dividends for cash flow and they tend to grow ahead of inflation, sometimes well ahead of inflation. They're also taxed better than traditional income from bonds or cash (albeit not as low as CGT). But the downside is that any dividend can disappear at any time. For investors such as myself, reduced dividend is not a big problem. I like the cash flow but don't need the income for expenses. For those living on dividends the pain is real. If the income is required you need a good amount of bond and cash investments and REITs that aside from the pandemic pay consistently, albeit REITs reduced over the last 5 or 6 years. Another option is something like dividend aristocrats (we have a <a href="https://justonelap.com/divtraxetf/" rel="nofollow" target="_blank">local</a> and <a href="https://justonelap.com/etf-dividends-for-quality-not-income/" rel="nofollow" target="_blank">offshore</a> ETF for these). Here we have companies with decade long track record of paying dividends, but remember Steinhoff (JSE code: SNH) was in the local dividend aristocrat ETF, so even this is not guaranteed. But a basket or ETF works well. Simon Shares <ul> <li>US CPI for May 4.0%, lowest since March 2021.</li> <li><a href="https://www.iea.org/topics/oil-market-report" rel="nofollow" target="_blank">Latest IEA global oil market outlook</a>: peak oil combustion by 2028? <ul> <li>Petrol demand to peak this year</li> <li>Road transport oil demand peak 2025</li> <li>All transport by 2026</li> <li>Overall oil for combustion peak 2028</li> </ul> </li> <li>ZAR 18.33</li> </ul> <ul> <li>Massive moves expected in Richemont (JSE code: CFR) on <a href="https://justonelap.com/big-changes-top40-indi25-etfs/" rel="nofollow" target="_blank">Thursday 15 June as the index rebalances.</a> Could see ±R4billion of selling.</li> </ul> <a href="http://www.simonbrown.co.za/portfolio" rel="noopener nofollow" target="_blank">* I hold ungeared positions.</a> Simon Brown

Disappearing dividends (#545)

Simon Shares  SEC sues Binance and CEO for U.S. securities violations. SEC Charges Coinbase for Operating as an Unregistered Securities Exchange, Broker, and Clearing Agency. First quarter GDP was 0.4% and we avoid a technical recession. Pepkor (JSE code: PPH) price slide. Tigerbrands (JSE code: TBS) horror results. Oceana (JSE code: OCE) results knock it out the park.  Sun City visit. Excellent resort, but very quiet which many commentators suggest is because it's a random weekend in June? I sent this past weekend at Sun City, vacation club. Some thoughts. The resort is world class, well maintained with a ton to do for kids and adults. 1/n pic.twitter.com/29yaV2GP8b — Simon Brown (@SimonPB)  June 5, 2023   Buying SA Inc. Not yet but building a watch list with the plan being to buy 10-15 stocks over the months ahead. Why?  Inflation comes down Rates decrease Load shedding ends (Renewable Energy Grid Survey points to 66 GW development pipeline in South Africa). Government finds a way out of the ICC Putin arrest warrant mess. Rand improves (already 100c better than the R20/US$ of last week) I hold ungeared positions.  Simon Brown

Simon Shares <ul> <li>SEC sues Binance and CEO for U.S. securities violations.</li> <li>SEC Charges Coinbase for Operating as an Unregistered Securities Exchange, Broker, and Clearing Agency.</li> <li>First quarter GDP was 0.4% and we avoid a technical recession.</li> <li>Pepkor (JSE code: PPH) price slide.</li> <li>Tigerbrands (JSE code: TBS) horror results.</li> <li>Oceana (JSE code: OCE) results knock it out the park.</li> </ul> Sun City visit. Excellent resort, but very quiet which many commentators suggest is because it's a random weekend in June? I sent this past weekend at Sun City, vacation club. Some thoughts. The resort is world class, well maintained with a ton to do for kids and adults. 1/n <a href="https://t.co/29yaV2GP8b" rel="nofollow" target="_blank">pic.twitter.com/29yaV2GP8b</a> — Simon Brown (@SimonPB) <a href="https://twitter.com/SimonPB/status/1665586660376027136?ref_src=twsrc%5Etfw" rel="nofollow" target="_blank"> June 5, 2023</a>   Buying SA Inc. Not yet but building a watch list with the plan being to buy 10-15 stocks over the months ahead. Why? <ul> <li>Inflation comes down</li> <li>Rates decrease</li> <li>Load shedding ends (<a href="https://www.engineeringnews.co.za/article/renewable-energy-grid-survey-points-to-66-gw-development-pipeline-in-south-africa-2023-06-06" rel="nofollow" target="_blank">Renewable Energy Grid Survey points to 66 GW development pipeline in South Africa</a>).</li> <li>Government finds a way out of the ICC Putin arrest warrant mess.</li> <li>Rand improves (already 100c better than the R20/US$ of last week)</li> <li><a href="http://www.simonbrown.co.za/portfolio" rel="noopener nofollow" target="_blank">I hold ungeared positions.</a></li> </ul> Simon Brown

Buy SA Inc (#544)

Simon Shares  MPC raised rates by 0.5% makes prime 11.75%, highest since 2009. The aim I suspect was to protect the rand, and that totally did not work as the currency hit its worst ever levels. Where will the rand go next? Does it ever strengthen again? RSA Retail Bond rates reset this morning and I expect the 5-year fixed to potentially increase by a full 15% and the CPI linked also reset and I also expect an increase there.. Will have update on the website. Tsogo Sun Gaming (JSE code: TSG) announced in their results last week they had acquired a ±10% stake in City Lodge (JSE code: CLH). Why? Also those were good results, much cheaper than other in the space. Zeda (JSE code: ZDD) results were poor. I was looking for FY 400c of HEPS, that's now seems a long shot. Debt is large, no dividend and short-term vehicle rentals is only a little above a quarter of pre-pandemic levels. I was holding and have sold. TigerBrands (JSE code: TBS) results were a shocker but not unsurprising? Volumes flat while revenue was +16%, hello inflation. Got some debt, but totally manageable. Load shedding hurting, consumer broken and inflation all over. But the stock trades at ±1.5x book value (see chart here), last tine this happened was 1998 when prime hit 26%. Spar (JSE code: SPP) trading update, ouch. Is Shoprite* (JSE code: SHP) eating everybody's lunch?  Don't forget to action your Purple Group* (JSE code: PPE) rights issue. You have until Tuesday to either sell the rights or take them up. Meta (Nasdaq code: META) fined Euro1.2billion by the EU, but stock rises on the day. These fines, even large ones, are just a cost of doing business for the mega large cap tech stocks? Nvidia (Nasdaq code: NVDA) gets all the AI hype and love to a trillion dollars.  * I hold ungeared positions.

Simon Shares <ul> <li>MPC raised rates by 0.5% makes prime 11.75%, highest since 2009. The aim I suspect was to protect the rand, and that totally did not work as the currency hit its worst ever levels. Where will the rand go next? Does it ever strengthen again?</li> <li><a href="https://justonelap.com/earn-11-with-retail-savings-bonds/" rel="nofollow" target="_blank">RSA Retail Bond</a> rates reset this morning and I expect the 5-year fixed to potentially increase by a full 15% and the CPI linked also reset and I also expect an increase there.. Will have update on the website.</li> <li>Tsogo Sun Gaming (JSE code: TSG) announced in their results last week they had acquired a ±10% stake in City Lodge (JSE code: CLH). Why? Also those were good results, much cheaper than other in the space.</li> <li>Zeda (JSE code: ZDD) results were poor. I was looking for FY 400c of HEPS, that's now seems a long shot. Debt is large, no dividend and short-term vehicle rentals is only a little above a quarter of pre-pandemic levels. I was holding and have sold.</li> <li>TigerBrands (JSE code: TBS) results were a shocker but not unsurprising? Volumes flat while revenue was +16%, hello inflation. Got some debt, but totally manageable. Load shedding hurting, consumer broken and inflation all over. But the stock trades at ±1.5x book value (see chart <a href="https://twitter.com/SimonPB/status/1663781853965307904" rel="nofollow" target="_blank">here</a>), last tine this happened was 1998 when prime hit 26%.</li> <li>Spar (JSE code: SPP) trading update, ouch. Is Shoprite* (JSE code: SHP) eating everybody's lunch?</li> <li><a href="https://justonelap.com/podcast-purple-rights-issues-everything-you-need-to-know-and-do/" rel="nofollow" target="_blank"> Don't forget to action your Purple Group</a>* (JSE code: PPE) rights issue. You have until Tuesday to either sell the rights or take them up.</li> <li>Meta (Nasdaq code: META) fined Euro1.2billion by the EU, but stock rises on the day. These fines, even large ones, are just a cost of doing business for the mega large cap tech stocks?</li> <li>Nvidia (Nasdaq code: NVDA) gets all the AI hype and love to a trillion dollars.</li> </ul> <a href="http://www.simonbrown.co.za/portfolio" rel="noopener nofollow" target="_blank">* I hold ungeared positions.</a>

There goes the Rand (#543)

Simon Shares  Bond ETFs yielding ±10%. That's chunky and they can go in a tax-free account. New INCOME ETF from CoreShares.  Purple Group* (JSE code: PPE) rights issue. If you held the share yesterday at close on Tuesday 23 May you will see PPEN in your account. 10.20567 for every 100 Purple shares you held. Each PPEN (letter of allocation or LOC as some are calling it) entitles you to buy 1 new Purple share at 81c.  You can take up that right and buy, or You can sell them in the market  If you do NOTHING by 6 June they disappear with ZERO value Sanlam will take their R45m and of the R105m public offer they will take up to ±R76m of the R105m if nobody else does. Existing large shareholders have promised to take up their rights at ±R28m. So at the end of the day they will get the R105m. Simon Brown * I hold ungeared positions.

Simon Shares <ul> <li>Bond ETFs yielding ±10%. That's chunky and they can go in a tax-free account.</li> <li>New INCOME ETF from CoreShares.</li> </ul> Purple Group* (JSE code: PPE) rights issue. If you held the share yesterday at close on Tuesday 23 May you will see PPEN in your account. 10.20567 for every 100 Purple shares you held. Each PPEN (letter of allocation or LOC as some are calling it) entitles you to buy 1 new Purple share at 81c. <ul> <li>You can take up that right and buy, or</li> <li>You can sell them in the market</li> </ul> If you do NOTHING by 6 June they disappear with ZERO value Sanlam will take their R45m and of the R105m public offer they will take up to ±R76m of the R105m if nobody else does. Existing large shareholders have promised to take up their rights at ±R28m. So at the end of the day they will get the R105m. Simon Brown <a href="http://www.simonbrown.co.za/portfolio" rel="noopener nofollow" target="_blank">* I hold ungeared positions.</a>

Purple rights issues, everything you need to know and do (#542)

All about investing on the JSE with Simon Brown. Every Thursday.

Simon does a brilliant job summarizing topics which are on his radar about JSE stocks. The topics covered are broad so this will benefit anyone interested in SA financial markets.

Informative

Great

JSE Direct with Simon Brown

Simon Shares The Sasol (JSE code: SOL) share price has collapsed this week for three key reasons.  Saudi Arabia has declared oil price war on Russia and sent Brent down to the low $30's as they try and get Russia to agree to production cuts. Sasol has not hedge the oil price. They usually hedge about a third pf production, but currently they only have ethane and ZAR hedges in place. Massive debt burden of some R150billion, now some 3x more than their market cap. This is spooking the market worried about a potential rights issue at current levels. I'd add that a right down on Lake Charles is surely a given and in time Sasolburg as well.  All in this is a total mess and coupled with poor management the market is not happy. I fully expect Sasol to survive, but in what form or price have no idea and I would NOT be buying.  Subscriber to our feed here Subscribe or review us in iTunes  COVID-19 continues to create havoc with Italy shutting down the entire country of 60million people as deaths exceed 600 and confirmed cases over 10k. But that still means some 20k cases they do not as yet know about. (Watch: COVID-9, markets in trouble) Recession is fast becoming a certainty as regions (and entire countries) shut down, people stop going to work or out at all so no spending and no production. A huge concern is the USA who are not testing very well as South Korea did and may have tens of thousands of cases they don't know about. South Africa has 13 confirmed cases and so far it is being handled very well. Identify the confirmed case and works backwards with who they contacted putting people into isolation. Testing is key as South Korea shows. But while we're very good at this sort of thing (remember listeriosis) it can very quickly overwhelm a struggling medical establishment. Global there are simple not enough ICU beds and we're likely far behind the global average. Bottom line is that this is getting worse and will continue to do so for a while (no idea how long that while is). No surprise markets are panicking and extremely volatile and my view is they'll go still lower.  Some quick good news; yellow and white maize levels in South Africa are looking very good which is good news for food inflation and producers, especially Astral Foods (JSE code: ARL). Offer for Assore (JSE code: ASR) at R320 which may provide some opportunity. There are no dates yet and lots of T&amp;Cs. But if I see some weakness to say around R255-R270 (15%-20% below offer price) I'll pick some up for the R320 take out.  Upcoming events;  26 March ~ Small money changes that make a big difference 09 April ~ JSE Power Hour: Trader’s game plan      JSE – The JSE is a registered trademark of the JSE Limited. JSE Direct is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Simon Shares The Sasol (JSE code: SOL) share price has collapsed this week for three key reasons. <ul> <li>Saudi Arabia has declared oil price war on Russia and sent Brent down to the low $30's as they try and get Russia to agree to production cuts. Sasol has not hedge the oil price. They usually hedge about a third pf production, but currently they only have ethane and ZAR hedges in place.</li> <li>Massive debt burden of some R150billion, now some 3x more than their market cap. This is spooking the market worried about a potential rights issue at current levels.</li> <li>I'd add that a right down on Lake Charles is surely a given and in time Sasolburg as well.</li> </ul> All in this is a total mess and coupled with poor management the market is not happy. I fully expect Sasol to survive, but in what form or price have no idea and I would NOT be buying. <ul> <li>Subscriber to our feed <a href="http://feeds.feedburner.com/MaudeStreetOnlineRadio-Jsedirectfull" rel="nofollow" target="_blank">here</a></li> <li>Subscribe or review us in <a href="https://itunes.apple.com/za/podcast/jsedirect-on-justonelap.com/id962733842" rel="nofollow" target="_blank">iTunes</a></li> </ul> COVID-19 continues to create havoc with Italy shutting down the entire country of 60million people as deaths exceed 600 and confirmed cases over 10k. But that still means some 20k cases they do not as yet know about. (Watch: <a href="https://justonelap.com/video-covid-19-markets-in-trouble/" rel="nofollow" target="_blank">COVID-9, markets in trouble</a>) Recession is fast becoming a certainty as regions (and entire countries) shut down, people stop going to work or out at all so no spending and no production. A huge concern is the USA who are not testing very well as South Korea did and may have tens of thousands of cases they don't know about. South Africa has 13 confirmed cases and so far it is being handled very well. Identify the confirmed case and works backwards with who they contacted putting people into isolation. Testing is key as South Korea shows. But while we're very good at this sort of thing (remember listeriosis) it can very quickly overwhelm a struggling medical establishment. Global there are simple not enough ICU beds and we're likely far behind the global average. Bottom line is that this is getting worse and will continue to do so for a while (no idea how long that while is). No surprise markets are panicking and extremely volatile and my view is they'll go still lower. <ul> <li>Some quick good news; yellow and white maize levels in South Africa are looking very good which is good news for food inflation and producers, especially Astral Foods (JSE code: ARL).</li> <li>Offer for Assore (JSE code: ASR) at R320 which may provide some opportunity. There are no dates yet and lots of T&amp;Cs. But if I see some weakness to say around R255-R270 (15%-20% below offer price) I'll pick some up for the R320 take out. <ul> <li>Upcoming events; <ul> <li>26 March ~ <a href="https://justonelap.com/events/" rel="nofollow" target="_blank">Small money changes that make a big difference</a></li> <li>09 April ~ <a href="https://justonelap.com/events/" rel="nofollow" target="_blank">JSE Power Hour: Trader’s game plan</a></li> </ul> </li> </ul> </li> </ul> JSE – The JSE is a registered trademark of the JSE Limited. JSE Direct is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Sasol crushed (#391)

Upcoming events;  05 December ~ Position your portfolio for 2020   Subscriber to our feed here Subscribe or review us in iTunes   Simon Shares  Third quarter GDP came in at -0.6% making the fourth negative GDP in the last seven quarters (since Jan 2018). Our economy is dying. Important the economy is not the market, but it is still dying. Sygnia will not be charging you 0.34% to exit their Itrix ETFs. But man the communication around this was a horror show that a final tweet seems to suggest it only if you're directly exiting via the ManCo. So moot for us ordinary investors. Tongaat (JSE code: TON) report is out and it another horror show. They're going after previous executives, including the previous CEO and CFO. But are refusing to release the full report. Talking of reports, Steinhoff (JSE code: SNH) is being sued by the PIC for their full PWC report. They only released a short version of the +3,000 page report claiming it was confidential. But if shareholders are going to sue, and they are. Then this report is an important part of the case against Steinhoff and the former executives. Purple Capital (JSE code: PPE) owners of Easy Equities results show much improvement in terms of number of clients, revenue and ultimately a reducing loss. Their path to break even seems easy enough now, likely two - three years. That said the share still has some large sellers now at 33c/34c, above the 30c they camped at for some eighteen months. A thought on the trade wars which Trump is heating up rather than winning 'easy'. We(the world)has always assumed that Trump was largely in control and could end them at any point. But I think that narrative may be totally wrong. Firstly China wants any phase one to include going back to zero tariffs and Trump is saying no. But I also think that frankly China may just did in their heels and wait out the next 1-5 years Trump is in power. They're not happy with him signing the Hong Kong bill and they can manage the crisis way better than he can. A side note; bail out to farmers is now larger than the vehicle manufacturer bailout of 2008 and still farmer bankruptcies is up 24% this year. SAA. I have flown SAA every flight I could for 20 years. But no more and it is frankly time to let the airline go to the wall. Rumours are that's exactly what Moboweni wants, but Gordhan is digging in his heels, incorrectly at this point. Lots of hysteria about the CompCom declaring mobile operators must reduce data fees by 30%-50%. Firstly read the actual report, this is a recommendation for ICASA to deal with if the telcos don't respond within two months. Secondly, remember when ICASA enforced reduced interconnect rates? According to the telcos this was the end of the world. Funny how they still make massive profits. The short version is the telcos price gouge because they can and they won't willing stop. Here's an example;  "(MTNs) 2nd most expensive pricing is in Rwanda where a GB of MTN data costs almost half of what it costs in its home market". "Only in the DRC ($8) does Vodacom charge its customers more, on average, for a gigabyte of data than in South Africa ($7.83)."  Grand Parade (JSE code: GPL) cautioned they are in negotiations about the "disposal of a material interest in Burger King SA". So after exiting Sun Slots what would they have left? And who is the potential buyer?  JSE – The JSE is a registered trademark of the JSE Limited. JSE Direct is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Upcoming events; <ul> <li><a href="https://justonelap.com/events/jse-power-hour-position-your-portfolio-for-2020/" rel="noopener noreferrer nofollow" target="_blank">05 December ~ Position your portfolio for 2020</a></li> </ul> <ul> <li>Subscriber to our feed <a href="http://feeds.feedburner.com/MaudeStreetOnlineRadio-Jsedirectfull" rel="nofollow" target="_blank">here</a></li> <li>Subscribe or review us in <a href="https://itunes.apple.com/za/podcast/jsedirect-on-justonelap.com/id962733842" rel="nofollow" target="_blank">iTunes</a></li> </ul> Simon Shares <ul> <li>Third quarter GDP came in at -0.6% making the fourth negative GDP in the last seven quarters (since Jan 2018). Our economy is dying. Important the economy is not the market, but it is still dying.</li> <li>Sygnia will not be charging you 0.34% to exit their Itrix ETFs. But man the communication around this was a horror show that a final tweet seems to suggest it only if you're directly exiting via the ManCo. So moot for us ordinary investors.</li> <li>Tongaat (JSE code: TON) report is out and it another horror show. They're going after previous executives, including the previous CEO and CFO. But are refusing to release the full report.</li> <li>Talking of reports, Steinhoff (JSE code: SNH) is being sued by the PIC for their full PWC report. They only released a short version of the +3,000 page report claiming it was confidential. But if shareholders are going to sue, and they are. Then this report is an important part of the case against Steinhoff and the former executives.</li> <li>Purple Capital (JSE code: PPE) owners of Easy Equities results show much improvement in terms of number of clients, revenue and ultimately a reducing loss. Their path to break even seems easy enough now, likely two - three years. That said the share still has some large sellers now at 33c/34c, above the 30c they camped at for some eighteen months.</li> <li>A thought on the trade wars which Trump is heating up rather than winning 'easy'. We(the world)has always assumed that Trump was largely in control and could end them at any point. But I think that narrative may be totally wrong. Firstly China wants any phase one to include going back to zero tariffs and Trump is saying no. But I also think that frankly China may just did in their heels and wait out the next 1-5 years Trump is in power. They're not happy with him signing the Hong Kong bill and they can manage the crisis way better than he can. A side note; bail out to farmers is now larger than the vehicle manufacturer bailout of 2008 and still farmer bankruptcies is up 24% this year.</li> <li>SAA. I have flown SAA every flight I could for 20 years. But no more and it is frankly time to let the airline go to the wall. Rumours are that's exactly what Moboweni wants, but Gordhan is digging in his heels, incorrectly at this point.</li> <li>Lots of hysteria about the CompCom declaring mobile operators must reduce data fees by 30%-50%. Firstly read the actual report, this is a recommendation for ICASA to deal with if the telcos don't respond within two months. Secondly, remember when ICASA enforced reduced interconnect rates? According to the telcos this was the end of the world. Funny how they still make massive profits. The short version is the telcos price gouge because they can and they won't willing stop. Here's an example;</li> </ul> "(MTNs) 2nd most expensive pricing is in Rwanda where a GB of MTN data costs almost half of what it costs in its home market". "Only in the DRC ($8) does Vodacom charge its customers more, on average, for a gigabyte of data than in South Africa ($7.83)." <ul> <li>Grand Parade (JSE code: GPL) cautioned they are in negotiations about the "disposal of a material interest in Burger King SA". So after exiting Sun Slots what would they have left? And who is the potential buyer?</li> </ul> JSE – The JSE is a registered trademark of the JSE Limited. JSE Direct is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

The economy is broken (#380)

Len Jordaan, Index and Structured Solutions, Absa CIB Simon and Len delve into understanding risk and how it applies to your Exchange Traded Fund (ETF) selection, both as a basket of different ETFs you put together but also as to which individual ETF you may be buying for a tax-free or discretionary portfolio. Some links we refer to;  Managed volatility JSE Direct interview. Managed volatility ETF blog. MAPPS Protect. MAPPS Growth.   Subscriber to our feed here Subscribe or review us in iTunes  JSE – The JSE is a registered trademark of the JSE Limited. JSE Direct is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Len Jordaan, Index and Structured Solutions, Absa CIB Simon and Len delve into understanding risk and how it applies to your Exchange Traded Fund (ETF) selection, both as a basket of different ETFs you put together but also as to which individual ETF you may be buying for a tax-free or discretionary portfolio. Some links we refer to; <ul> <li><a href="https://justonelap.com/podcast-managed-volatility-etfs/" rel="nofollow" target="_blank">Managed volatility JSE Direct interview</a>.</li> <li><a href="https://justonelap.com/etf-volatility-etfs-explained/" rel="nofollow" target="_blank">Managed volatility ETF blog</a>.</li> <li><a href="https://justonelap.com/etf-understanding-mapps-protect-etf/" rel="nofollow" target="_blank">MAPPS Protect</a>.</li> <li><a href="https://justonelap.com/mappsgrowthetf/" rel="nofollow" target="_blank">MAPPS Growth</a>.</li> </ul> <ul> <li>Subscriber to our feed <a href="http://feeds.feedburner.com/MaudeStreetOnlineRadio-Jsedirectfull" rel="nofollow" target="_blank">here</a></li> <li>Subscribe or review us in <a href="https://itunes.apple.com/za/podcast/jsedirect-on-justonelap.com/id962733842" rel="nofollow" target="_blank">iTunes</a></li> </ul> JSE – The JSE is a registered trademark of the JSE Limited. JSE Direct is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Understanding a risk parity portfolio (#381)

I chaired a panel discussion on the 2020 budget by Minister Mboweni and have included the audio from that panel. The biggie, which is not mentioned is that the annual tax-free allocation has been increased to R36k a year effective 2 March 2020. On the panel with me was;  Elizabeth Fick ~ Tax and Fiduciary at Investec Jacques Conradie ~ Managing Director at Peregrine Capital Theunis (TJ) Strydom ~ Financial journalist and author Albertus Marais ~ Director at AJM Tax   Subscriber to our feed here Subscribe or review us in iTunes  JSE – The JSE is a registered trademark of the JSE Limited. JSE Direct is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

I chaired a panel discussion on the 2020 budget by Minister Mboweni and have included the audio from that panel. The biggie, which is not mentioned is that the <a href="https://justonelap.com/video-a-new-tax-free-year/" rel="nofollow" target="_blank">annual tax-free allocation</a> has been increased to R36k a year effective 2 March 2020. On the panel with me was; <ul> <li>Elizabeth Fick ~ Tax and Fiduciary at Investec</li> <li>Jacques Conradie ~ Managing Director at Peregrine Capital</li> <li>Theunis (TJ) Strydom ~ Financial journalist and author</li> <li>Albertus Marais ~ Director at AJM Tax</li> </ul> <ul> <li>Subscriber to our feed <a href="http://feeds.feedburner.com/MaudeStreetOnlineRadio-Jsedirectfull" rel="nofollow" target="_blank">here</a></li> <li>Subscribe or review us in <a href="https://itunes.apple.com/za/podcast/jsedirect-on-justonelap.com/id962733842" rel="nofollow" target="_blank">iTunes</a></li> </ul> JSE – The JSE is a registered trademark of the JSE Limited. JSE Direct is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Budget 2020 review, a great surprise (#389)

FTSE 100 structured product In the last show for 2019 Simon chats to Viv Govender and Gary Booysen from Rand Swiss on their latest structured product. This time it is an auto call over the FTSE100 in US$. We also chat a bit about Brexit and what it actually means; good, bad or ugly.  Subscriber to our feed here Subscribe or review us in iTunes  JSE – The JSE is a registered trademark of the JSE Limited. JSE Direct is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

FTSE 100 structured product In the last show for 2019 Simon chats to Viv Govender and Gary Booysen from <a href="https://www.randswiss.com/" rel="noopener nofollow" target="_blank">Rand Swiss</a> on their latest structured product. This time it is an auto call over the FTSE100 in US$. We also chat a bit about Brexit and what it actually means; good, bad or ugly. <ul> <li>Subscriber to our feed <a href="http://feeds.feedburner.com/MaudeStreetOnlineRadio-Jsedirectfull" rel="nofollow" target="_blank">here</a></li> <li>Subscribe or review us in <a href="https://itunes.apple.com/za/podcast/jsedirect-on-justonelap.com/id962733842" rel="nofollow" target="_blank">iTunes</a></li> </ul> JSE – The JSE is a registered trademark of the JSE Limited. JSE Direct is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

FTSE 100 structured product (#382)

Simon Brown

Dineo Tsamela

Moodys junk (negative outlook) SARB bond buying Moboweni, world bank &amp; IMF Motsepe R1bn US worst US jobless claims - EVER US $2.2trillion bail out Edcon CEO, they can’t pay suppliers TFG wants delay on rent Dividends being delayed

Moodys junk (negative outlook) SARB bond buying Moboweni, world bank &amp; IMF Motsepe R1bn US worst US jobless claims - EVER US $2.2trillion bail out Edcon CEO, they can’t pay suppliers TFG wants delay on rent Dividends being delayed

The Market Standard with Dineo Tsamela and Simon Brown 30 March 2020

JSE Direct ~ Thank you

Simon Shares  Tesla (Nasdaq code: TSLA), epic short squeeze. Steinhoff (JSE code: SNH), epic short squeeze. Coronavirus continues to spread, fast, with almost 25,000 confirmed cases. People are recovering and we now have two deaths outside China. Tongaat (JSE code: TON) results are out and the suspension has been lifted. The results were a horror show with debt of some R13billion and negative equity of almost R4billion. They need a rights issue of at least R4billion and the share lost over 50% when it resumed trading, currently at 488c after being suspended at 1321c. No Sasol* (JSE code: SOL) that was not "a satisfactory set of operational results for the six months". Both financially and operationally the last six months (six years?) has been a horror show. I hold Sasol since 1994 and haven't added since the 2009 lows, but will be exiting. Upcoming events;  20 February ~ A new Tax-free year starts    * I hold ungeared positions.  Subscriber to our feed here Subscribe or review us in iTunes   Law of large numbers  In a financial context, the law of large numbers indicates that a large entity which is growing rapidly cannot maintain that growth pace forever. Simple that the bigger you get the harder it is to grow and ultimately the growth slows to modest inflation or GDP adjustments. We see many companies fearing this rush out and make bad acquisitions - but that's another story. I want to focus on how this law can at times be broken when the underlying market fundamentally changes and the example is Microsoft (Nasdaq code: MSFT). On a PE of 30x it is expensive, but this US$1.37trillion company grew EPS by 40% making it cheap using a simple PEG ratio. It is up six fold in the last decade and in the decade before is was red. How is a trillion dollar company able to grow earnings 40%? Broadly software as a service and cloud computing but the story is bigger, edge computing. Certainly the story is no longer Windows. Edge computing is the vast number of small devices that are invading our homes, offices and lives. Examples are; streaming music and movies, smart bulbs, security systems and virtual assistants. This is just a few examples, but they're fundamentally changing our lives and the demands on processes and data storage and importantly the data is close to the device to ensure speed, requiring data centers everywhere. Add to this the amount of data we create and need to store. For the first time in my life I have data that only exists in the cloud, simple because I have so much data. Now I am paranoid, so I keep it on two clouds, and wildy encrypted. Data storage or cloud computing was hardly even an idea a decade ago. All the talk was of slim clients with all processing and data in the cloud. Back then Google (Nasdaq code: GOOGL) was the leader, but it has exploded and Google now trails in third position and we never really got to slim clients (Chromebooks the exception and services like Stadio newly trying). This has changed companies such as Amazon (Nasdaq code: AMZN) and Microsoft (Google oddly lags in cloud) who are the leaders in cloud computing. The thing is one could have made a solid argument that even under new management Microsoft was largely ex-growth and a mature company. But then business models came along, they grabbed them with both hands and now they're growing faster then they have in over two decades. This growth changes the game for Microsoft, Amazon and others. I have no idea where it ends but this trend can go on for a lot longer and they can grow revenue by a bunch more and then, hello two trillion dollar company. What is noticeable that this is a tech issue and that traditional brick and mortar companies, miners and the like do not have this potential. They do hit the law of large numbers, but computing and the internet has changed the rules for tech stocks. Of course eventually the law of large numbers will come into play again and growth will slow. JSE – The JSE is a registered trademark of the JSE Limited. JSE Direct is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Simon Shares <ul> <li>Tesla (Nasdaq code: TSLA), epic short squeeze.</li> <li>Steinhoff (JSE code: SNH), epic short squeeze.</li> <li>Coronavirus continues to spread, fast, with almost 25,000 confirmed cases. People are recovering and we now have two deaths outside China.</li> <li>Tongaat (JSE code: TON) results are out and the suspension has been lifted. The results were a horror show with debt of some R13billion and negative equity of almost R4billion. They need a rights issue of at least R4billion and the share lost over 50% when it resumed trading, currently at 488c after being suspended at 1321c.</li> <li>No Sasol* (JSE code: SOL) that was not "a satisfactory set of operational results for the six months". Both financially and operationally the last six months (six years?) has been a horror show. I hold Sasol since 1994 and haven't added since the 2009 lows, but will be exiting.</li> <li>Upcoming events; <ul> <li><a href="https://justonelap.com/events/" rel="nofollow" target="_blank">20 February ~ A new Tax-free year starts</a></li> </ul> </li> </ul> <a href="http://www.simonbrown.co.za/portfolio" rel="nofollow" target="_blank">* I hold ungeared positions.</a> <ul> <li>Subscriber to our feed <a href="http://feeds.feedburner.com/MaudeStreetOnlineRadio-Jsedirectfull" rel="nofollow" target="_blank">here</a></li> <li>Subscribe or review us in <a href="https://itunes.apple.com/za/podcast/jsedirect-on-justonelap.com/id962733842" rel="nofollow" target="_blank">iTunes</a></li> </ul> Law of large numbers In a financial context, the law of large numbers indicates that a large entity which is growing rapidly cannot maintain that growth pace forever. Simple that the bigger you get the harder it is to grow and ultimately the growth slows to modest inflation or GDP adjustments. We see many companies fearing this rush out and make bad acquisitions - but that's another story. I want to focus on how this law can at times be broken when the underlying market fundamentally changes and the example is Microsoft (Nasdaq code: MSFT). On a PE of 30x it is expensive, but this US$1.37trillion company grew EPS by 40% making it cheap using a simple PEG ratio. It is up six fold in the last decade and in the decade before is was red. How is a trillion dollar company able to grow earnings 40%? Broadly software as a service and cloud computing but the story is bigger, edge computing. Certainly the story is no longer Windows. Edge computing is the vast number of small devices that are invading our homes, offices and lives. Examples are; streaming music and movies, smart bulbs, security systems and virtual assistants. This is just a few examples, but they're fundamentally changing our lives and the demands on processes and data storage and importantly the data is close to the device to ensure speed, requiring data centers everywhere. Add to this the amount of data we create and need to store. For the first time in my life I have data that only exists in the cloud, simple because I have so much data. Now I am paranoid, so I keep it on two clouds, and wildy encrypted. Data storage or cloud computing was hardly even an idea a decade ago. All the talk was of slim clients with all processing and data in the cloud. Back then Google (Nasdaq code: GOOGL) was the leader, but it has exploded and Google now trails in third position and we never really got to slim clients (Chromebooks the exception and services like Stadio newly trying). This has changed companies such as Amazon (Nasdaq code: AMZN) and Microsoft (Google oddly lags in cloud) who are the leaders in cloud computing. The thing is one could have made a solid argument that even under new management Microsoft was largely ex-growth and a mature company. But then business models came along, they grabbed them with both hands and now they're growing faster then they have in over two decades. This growth changes the game for Microsoft, Amazon and others. I have no idea where it ends but this trend can go on for a lot longer and they can grow revenue by a bunch more and then, hello two trillion dollar company. What is noticeable that this is a tech issue and that traditional brick and mortar companies, miners and the like do not have this potential. They do hit the law of large numbers, but computing and the internet has changed the rules for tech stocks. Of course eventually the law of large numbers will come into play again and growth will slow. JSE – The JSE is a registered trademark of the JSE Limited. JSE Direct is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

The law of large numbers (#386)

Simon Shares  Ecsponent (JSE code: ECS) have announced they will default on their March preference share dividends. This is a mess and preference shareholders are in a real bind. If you hold any, contact your lawyer. AngloGold Ashanti (JSE code: ANG) confirms the sale of their Mponeng to Harmony (JSE code: HAR) for US$300million meaning it'll no longer operate in SA from June. Coronavirus (COVID-19) continues to spread with almost 45,000 confirmed cases and over 1,100 dead. But it remains very much contained to China. Reports are it will already take 0.2% - 1% off global 2020 GDP. Upcoming events;  20 February ~ A new Tax-free year starts     Subscriber to our feed here Subscribe or review us in iTunes   Don't shoot the messenger Gina Schoeman, South Africa economist for the Citibank Global Economics team. I attended a S&amp;P Dow Jones Global event on Tuesday where Gina delivered the keynote and here are my notes on what she said. Any errors are mine, not hers. Gauteng is 35% of SA GDP. Service delivery protests show strength of democracy. People are leaving small towns due to lack of services and this erodes tax base, making service delivery even harder. SONA watch list;  Cosatu Eskom bailout plan. SAA business rescue. Public sector wage bill. Reforms. Cabinet reshuffle.  Watch the World Bank Ease of doing Business survey as good metric for Ramaphosa. We're 84th but where under 50 when Zuma took over. SA union rate is 24% and dropping and will drop further. Members are aging and youth are unemployed.  Secret strike ballot. Manufacturing is very productive, second only to financial services and this offers an opportunity.  Household debt is 75%, down from 84% in 2010. But the nuance is in the data. SA population growth is 1.5%. GDP growth has to exceed this for people to be getting richer. Lack of rental inflation is a big driver of low inflation overall. No VAT increase in the 2020 budget. Moody downgrade is very likely, but don't worry about that. Worry about Fitch and Standard &amp; Poor dropping us lower because it is now about the recovery. JSE – The JSE is a registered trademark of the JSE Limited. JSE Direct is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Simon Shares <ul> <li>Ecsponent (JSE code: ECS) have announced they will default on their March preference share dividends. This is a mess and preference shareholders are in a real bind. If you hold any, contact your lawyer.</li> <li>AngloGold Ashanti (JSE code: ANG) confirms the sale of their Mponeng to Harmony (JSE code: HAR) for US$300million meaning it'll no longer operate in SA from June.</li> <li>Coronavirus (COVID-19) continues to spread with almost 45,000 confirmed cases and over 1,100 dead. But it remains very much contained to China. Reports are it will already take 0.2% - 1% off global 2020 GDP.</li> <li>Upcoming events; <ul> <li><a href="https://justonelap.com/events/" rel="nofollow" target="_blank">20 February ~ A new Tax-free year starts</a></li> </ul> </li> </ul> <ul> <li>Subscriber to our feed <a href="http://feeds.feedburner.com/MaudeStreetOnlineRadio-Jsedirectfull" rel="nofollow" target="_blank">here</a></li> <li>Subscribe or review us in <a href="https://itunes.apple.com/za/podcast/jsedirect-on-justonelap.com/id962733842" rel="nofollow" target="_blank">iTunes</a></li> </ul> Don't shoot the messenger Gina Schoeman, South Africa economist for the Citibank Global Economics team. I attended a S&amp;P Dow Jones Global event on Tuesday where Gina delivered the keynote and here are my notes on what she said. Any errors are mine, not hers. Gauteng is 35% of SA GDP. Service delivery protests show strength of democracy. People are leaving small towns due to lack of services and this erodes tax base, making service delivery even harder. SONA watch list; <ul> <li>Cosatu Eskom bailout plan.</li> <li>SAA business rescue.</li> <li>Public sector wage bill.</li> <li>Reforms.</li> <li>Cabinet reshuffle.</li> </ul> Watch the World Bank Ease of doing Business survey as good metric for Ramaphosa. We're 84th but where under 50 when Zuma took over. SA union rate is 24% and dropping and will drop further. Members are aging and youth are unemployed. <ul> <li>Secret strike ballot.</li> <li>Manufacturing is very productive, second only to financial services and this offers an opportunity.</li> </ul> Household debt is 75%, down from 84% in 2010. But the nuance is in the data. SA population growth is 1.5%. GDP growth has to exceed this for people to be getting richer. Lack of rental inflation is a big driver of low inflation overall. No VAT increase in the 2020 budget. Moody downgrade is very likely, but don't worry about that. Worry about Fitch and Standard &amp; Poor dropping us lower because it is now about the recovery. JSE – The JSE is a registered trademark of the JSE Limited. JSE Direct is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Don't shoot the messenger (#387)

Simon Shares  Sasol (JSE code: SOL) is now talking a rights issue of some US$2billion, more than the current market cap. They hope to be able to avoid this by selling assets, finding a partner for Lake Charles and cutting costs. But the first two will be near impossible in the current climate, so expect the rights issue with a +50% dilution. In other words, a horror rights issue. Price will be weaker until those details and issuing of the rights. I am NOT buying, that may change when the rights issue hits. But not before. Brent oil is under US$27.00 a barrel. Big ouch for Sasol. Good news for petrol prices. I am seeing a flood of people wanting to get into the market, because it has fallen. On the one side, this is commendable. Yes cheap is best tine to get in. But this volatility is the worst time to try and start trading. If you want to start trading we have two series for traders, Boot Camp and Master Class. But frankly as always, ETFs the best place to start, especially in troubled times. Everybody asking about gold, yes it is going down. When crisis hits everything goes down. Gold is great when one is worried about the future, but when that worrisome future arrives people want cash so gold gets sold like everything else. MPC rate cut announcement this afternoon. No more 0.25%, surely? I think 2% - 2.5% is possible and the best response. Certainly nothing less than 1%. Upcoming events;  09 April ~ JSE Power Hour: Trader’s game plan     Subscriber to our feed here Subscribe or review us in iTunes  COVID-19, my presentation of just two weeks ago warning on the virus and resulting market melt down, is already totally over taken by the reality on the ground. Read this take from the  Imperial College COVID-19 Response Team. It has flaws, but also has golden nuggets. If we manage this crisis well I still think the worst will be behind us by Q1 2021. But the worst is going to be worse than I had thought, and if we do this well, well then it is a horror show of epic scale. It has solidly landed in South Arica and while still early days the confirmed case numbers are growing at the expected 33%, every day. So far government is doing a decent job lead by the NICD, President Ramaphosa the cabinet and especially the health department. But what matters more than anything is to #flattenthecurve. No large events, social distancing, washing hands, working from home if possible and limiting trips outside. All of this will eventually slow the growth, but we'll still end up with hundreds of thousands sick and many thousands dead ~ as a best case scenario. Yip it sounds wild, but that is the only way to slow the spread and stop it completely overwhelming our health services. This of course means a massive hit to our economy and individual peoples financial well being, find our series on managing debt here. If you have debt and are worried about repaying, or if you're in default already - this is a must read. Our market, and in fact all global markets, remain under severe pressure and extreme volatility not seen since 1929. I's not getting better any time soon. The global economy is grinding to a halt and there is no quick fix. Best estimates suggest twelve months of COBID-19 before as a planet we're truly on top of it. So Q1 2021, at best. For investors, we continue to tread cautiously and I continue to buy my monthly ETF allocation and will double the monthly purchase amount. But I am not whole sale buying stocks, because cheaper is very likely. Traders, as I have said before. Reduce position size, widen stops and be disciplined. And of course, obey your stops 100%. From a personal perspective, start planing for the long haul, I don't expect this to all be resolved in a month when schools are due to go back. As example, I've downloaded online monopoly to play with my niece and nephew in Durban and have proposed every few days or so one of us will present (via zoom.us) on a topic that interests us. It's going to be a very long school break house bound. Lastly, let me know if we can help. I have no idea what or how, not money or food or handshakes. But if you got ideas how Just One Lap or I can help you or the broader community, let me know. Maybe it just something as simple as helping to set up Zoom.us or a weekly bookclub session on Zoom. Send ideas. And very lastly, stay safe. Social distance and wash your hands. JSE – The JSE is a registered trademark of the JSE Limited. JSE Direct is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Simon Shares <ul> <li>Sasol (JSE code: SOL) is now talking a rights issue of some US$2billion, more than the current market cap. They hope to be able to avoid this by selling assets, finding a partner for Lake Charles and cutting costs. But the first two will be near impossible in the current climate, so expect the rights issue with a +50% dilution. In other words, a horror rights issue. Price will be weaker until those details and issuing of the rights. I am NOT buying, that may change when the rights issue hits. But not before.</li> <li>Brent oil is under US$27.00 a barrel. Big ouch for Sasol. Good news for petrol prices.</li> <li>I am seeing a flood of people wanting to get into the market, because it has fallen. On the one side, this is commendable. Yes cheap is best tine to get in. But this volatility is the worst time to try and start trading. If you want to start trading we have two series for traders, <a href="https://justonelap.com/bootcamp/" rel="nofollow" target="_blank">Boot Camp</a> and <a href="https://justonelap.com/masterclass/" rel="nofollow" target="_blank">Master Class</a>. But frankly as always, ETFs the best place to start, especially in troubled times.</li> <li>Everybody asking about gold, yes it is going down. When crisis hits everything goes down. Gold is great when one is worried about the future, but when that worrisome future arrives people want cash so gold gets sold like everything else.</li> <li>MPC rate cut announcement this afternoon. No more 0.25%, surely? I think 2% - 2.5% is possible and the best response. Certainly nothing less than 1%.</li> <li>Upcoming events; <ul> <li>09 April ~ <a href="https://justonelap.com/events/" rel="nofollow" target="_blank">JSE Power Hour: Trader’s game plan</a></li> </ul> </li> </ul> <ul> <li>Subscriber to our feed <a href="http://feeds.feedburner.com/MaudeStreetOnlineRadio-Jsedirectfull" rel="nofollow" target="_blank">here</a></li> <li>Subscribe or review us in <a href="https://itunes.apple.com/za/podcast/jsedirect-on-justonelap.com/id962733842" rel="nofollow" target="_blank">iTunes</a></li> </ul> <a href="https://justonelap.com/video-covid-19-markets-in-trouble/" rel="nofollow" target="_blank">COVID-19, my presentation of just two weeks ago warning on the virus and resulting market melt down</a>, is already totally over taken by the reality on the ground. Read this take from the <a href="https://www.imperial.ac.uk/media/imperial-college/medicine/sph/ide/gida-fellowships/Imperial-College-COVID19-NPI-modelling-16-03-2020.pdf" rel="nofollow" target="_blank"> Imperial College COVID-19 Response Team</a>. It has flaws, but also has golden nuggets. If we manage this crisis well I still think the worst will be behind us by Q1 2021. But the worst is going to be worse than I had thought, and if we do this well, well then it is a horror show of epic scale. It has solidly landed in South Arica and while still early days the confirmed case numbers are growing at the expected 33%, every day. So far government is doing a decent job lead by the NICD, President Ramaphosa the cabinet and especially the health department. But what matters more than anything is to #flattenthecurve. No large events, social distancing, washing hands, working from home if possible and limiting trips outside. All of this will eventually slow the growth, but we'll still end up with hundreds of thousands sick and many thousands dead ~ as a best case scenario. Yip it sounds wild, but that is the only way to slow the spread and stop it completely overwhelming our health services. This of course means a massive hit to our economy and individual peoples financial well being, find our <a href="https://justonelap.com/debt/" rel="nofollow" target="_blank">series on managing debt here</a>. If you have debt and are worried about repaying, or if you're in default already - this is a must read. Our market, and in fact all global markets, remain under severe pressure and extreme volatility not seen since 1929. I's not getting better any time soon. The global economy is grinding to a halt and there is no quick fix. Best estimates suggest twelve months of COBID-19 before as a planet we're truly on top of it. So Q1 2021, at best. For investors, we continue to tread cautiously and I continue to buy my monthly ETF allocation and will double the monthly purchase amount. But I am not whole sale buying stocks, because cheaper is very likely. Traders, as I have said before. Reduce position size, widen stops and be disciplined. And of course, obey your stops 100%. From a personal perspective, start planing for the long haul, I don't expect this to all be resolved in a month when schools are due to go back. As example, I've downloaded online monopoly to play with my niece and nephew in Durban and have proposed every few days or so one of us will present (via <a href="http://zoom.us" rel="nofollow" target="_blank">zoom.us</a>) on a topic that interests us. It's going to be a very long school break house bound. Lastly, let me know if we can help. I have no idea what or how, not money or food or handshakes. But if you got ideas how Just One Lap or I can help you or the broader community, <a href="https://justonelap.com/contact/" rel="nofollow" target="_blank">let me know</a>. Maybe it just something as simple as helping to set up <a href="http://Zoom.us" rel="nofollow" target="_blank">Zoom.us</a> or a weekly bookclub session on Zoom. Send ideas. And very lastly, stay safe. Social distance and wash your hands. JSE – The JSE is a registered trademark of the JSE Limited. JSE Direct is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Everything collapsing, even gold (#392)

Simon Shares  Recession, surely nobody surprised? Growth lower for longer. The budget is certainly designed to help, but the R160billion cut from pubic sector wage bill is not going to be easy. Likely we'll also now get at least 2 rate cuts this year, each 0.25% minimum. Last week of February was the worst week for global markets since 2008. It was violent and it's not going away. COVID-19 marches on. Of note, 94k sick but 3.4k dead. With mortality of 1% it should be 300k sick and at 2% mortality it should be 160k sick. Are markets ready for the spike in sick? We'll find out but the Fed is not waiting. Negative US rates in my life time as the Fed panics and cuts by 0.5%. Thing is COVID-19 is a supply issue, not a demand side. Fed can influence demand with rates, but that does nothing to the supply side. This after a G7 meeting, but only the Fed has responded so far and US markets sold off some 3% after the rate cut. At the post rate cut press conference;  "the risks to the U.S. outlook have changed materially" -- Powell "The virus and measures taken to contain it will surely weigh on the economy ... for some time." -- Powell  Shoprite* (JSE code: SHP) very solid results with rest of Africa back into profit (albeit small), great cash flow and local margins holding as they gain market share. Upcoming events;  5 March ~ JSE Power Hour: COVID-19, markets in trouble 26 March ~ Small money changes that make a big difference 09 April ~ JSE Power Hour: Trader's game plan    * I hold ungeared positions.  Subscriber to our feed here Subscribe or review us in iTunes  JSE – The JSE is a registered trademark of the JSE Limited. JSE Direct is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Simon Shares <ul> <li>Recession, surely nobody surprised? Growth lower for longer. The budget is certainly designed to help, but the R160billion cut from pubic sector wage bill is not going to be easy. Likely we'll also now get at least 2 rate cuts this year, each 0.25% minimum.</li> <li>Last week of February was the worst week for global markets since 2008. It was violent and it's not going away. COVID-19 marches on. Of note, 94k sick but 3.4k dead. With mortality of 1% it should be 300k sick and at 2% mortality it should be 160k sick.</li> <li>Are markets ready for the spike in sick? We'll find out but the Fed is not waiting.</li> <li>Negative US rates in my life time as the Fed panics and cuts by 0.5%. Thing is COVID-19 is a supply issue, not a demand side. Fed can influence demand with rates, but that does nothing to the supply side. This after a G7 meeting, but only the Fed has responded so far and US markets sold off some 3% after the rate cut.</li> <li>At the post rate cut press conference;</li> </ul> "the risks to the U.S. outlook have changed materially" -- Powell "The virus and measures taken to contain it will surely weigh on the economy ... for some time." -- Powell <ul> <li>Shoprite* (JSE code: SHP) very solid results with rest of Africa back into profit (albeit small), great cash flow and local margins holding as they gain market share.</li> <li>Upcoming events; <ul> <li>5 March ~ J<a href="https://justonelap.com/events/" rel="nofollow" target="_blank">SE Power Hour: COVID-19, markets in trouble</a></li> <li>26 March ~ <a href="https://justonelap.com/events/" rel="nofollow" target="_blank">Small money changes that make a big difference</a></li> <li>09 April ~ <a href="https://justonelap.com/events/" rel="nofollow" target="_blank">JSE Power Hour: Trader's game plan</a></li> </ul> </li> </ul> <a href="http://www.simonbrown.co.za/portfolio" rel="nofollow" target="_blank">* I hold ungeared positions.</a> <ul> <li>Subscriber to our feed <a href="http://feeds.feedburner.com/MaudeStreetOnlineRadio-Jsedirectfull" rel="nofollow" target="_blank">here</a></li> <li>Subscribe or review us in <a href="https://itunes.apple.com/za/podcast/jsedirect-on-justonelap.com/id962733842" rel="nofollow" target="_blank">iTunes</a></li> </ul> JSE – The JSE is a registered trademark of the JSE Limited. JSE Direct is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Another recession (#390)

Simon Shares  Deutsche Bank has redeemed three of their ETNs. DBCHIN, DBEMER &amp; DBAFRI. As ETNs they would have expired anyway, but that was due to happen next June. Holders of these ETNs last week will receive cash at net asset value (NAV) for the ETNs and it lso means Deutsche Bank is no longer active in the listed passive space on the JSE. Richemont* (JSE code: CFR) trading update was strong, but with one concern - online. Single digit growth is very pedestrian for online even if they had issues with flooding at one of their warehouses. Strong Shoprite* (JSE code: SHP) trading update. Revenue +7%. Rest of the continent is still struggling, home local was lekker. Wednesday saw Naspers (JSE code: NPN) sold 22million (1.4%) or their Prosus (JSE code: PRX) holding at a price of about R1,080. Naspers claims this is due to demand for the shares from investors. Prosus was off some 3% at just over R1,100. The logic here was that many would buy their new Prosus and sell straight away into the market, netting a small but easy profit in about half an hour. Prosus price will rebound, Naspers was trading up almost 2% as this sale happened. Nasper has said they'll use the Euro1.5billion (about R100billion) for a share buy-back in another attempt to close the discount that exists. But as Piet Viljoen of RE:CM points out in the Tweets below, it's not likely to work.  Thank you for asking, I had hoped someone would. We are in a similar (albeit much, MUCH smaller) situation, so we have thought about it. A lot. Here follows a thread. https://t.co/DkyYmX9zAo — Piet Viljoen (@pietviljoen)  January 22, 2020    How to start saving (Cash Club) Three secret ETF fees OUTvest ONEfee RA at 0.2% Upcoming events;  20 February ~ A new Tax-free year starts    * I hold ungeared positions. fff  Download the audio file here Subscriber to our feed here  Sign up for email alerts as a new show goes live Subscribe or review us in iTunes  JSE – The JSE is a registered trademark of the JSE Limited. JSE Direct is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Simon Shares <ul> <li>Deutsche Bank has redeemed three of their ETNs. DBCHIN, DBEMER &amp; DBAFRI. As ETNs they would have expired anyway, but that was due to happen next June. Holders of these ETNs last week will receive cash at net asset value (NAV) for the ETNs and it lso means Deutsche Bank is no longer active in the listed passive space on the JSE.</li> <li>Richemont* (JSE code: CFR) trading update was strong, but with one concern - online. Single digit growth is very pedestrian for online even if they had issues with flooding at one of their warehouses.</li> <li>Strong Shoprite* (JSE code: SHP) trading update. Revenue +7%. Rest of the continent is still struggling, home local was lekker.</li> <li>Wednesday saw Naspers (JSE code: NPN) sold 22million (1.4%) or their Prosus (JSE code: PRX) holding at a price of about R1,080. Naspers claims this is due to demand for the shares from investors. Prosus was off some 3% at just over R1,100. The logic here was that many would buy their new Prosus and sell straight away into the market, netting a small but easy profit in about half an hour. Prosus price will rebound, Naspers was trading up almost 2% as this sale happened. Nasper has said they'll use the Euro1.5billion (about R100billion) for a share buy-back in another attempt to close the discount that exists. But as Piet Viljoen of RE:CM points out in the Tweets below, it's not likely to work.</li> </ul> Thank you for asking, I had hoped someone would. We are in a similar (albeit much, MUCH smaller) situation, so we have thought about it. A lot. Here follows a thread. <a href="https://t.co/DkyYmX9zAo" rel="nofollow" target="_blank">https://t.co/DkyYmX9zAo</a> — Piet Viljoen (@pietviljoen) <a href="https://twitter.com/pietviljoen/status/1219939761818869760?ref_src=twsrc%5Etfw" rel="nofollow" target="_blank"> January 22, 2020</a> <ul> <li><a href="https://justonelap.com/cash-club-how-to-start-saving/" rel="nofollow" target="_blank">How to start saving (Cash Club)</a></li> <li><a href="https://justonelap.com/etf-three-secret-fees/" rel="nofollow" target="_blank">Three secret ETF fees</a></li> <li><a href="https://justonelap.com/video-outvest-onefee-a-0-2-percent-ra/" rel="nofollow" target="_blank">OUTvest ONEfee RA at 0.2%</a></li> <li>Upcoming events; <ul> <li><a href="https://justonelap.com/events/" rel="nofollow" target="_blank">20 February ~ A new Tax-free year starts</a></li> </ul> </li> </ul> <a href="http://www.simonbrown.co.za/portfolio" rel="noopener nofollow" target="_blank">* I hold ungeared positions.</a> fff <ul> <li>Download the audio file <a href="http://traffic.libsyn.com/justonelap/JSEDirect_383_20200116.mp3" rel="nofollow" target="_blank">here</a></li> <li>Subscriber to our feed <a href="http://feeds.feedburner.com/MaudeStreetOnlineRadio-Jsedirectfull" rel="nofollow" target="_blank">here</a></li> <li><a href="http://feedburner.google.com/fb/a/mailverify?uri=MaudeStreetOnlineRadio-Jsedirectfull" rel="nofollow" target="_blank"> Sign up for email alerts </a>as a new show goes live</li> <li>Subscribe or review us in <a href="https://itunes.apple.com/za/podcast/jsedirect-on-justonelap.com/id962733842" rel="nofollow" target="_blank">iTunes</a></li> </ul> JSE – The JSE is a registered trademark of the JSE Limited. JSE Direct is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Updates and discounts (#384)

Simon Shares  I bought Sibanye Stillwater* (new JSE code: SSW) last week, average price 3950c. You want to own single commodity miners when price has already boomed and underlying commodities are flying. We have both here and if prices hold they'll print money for the rest of this financial year ending June. I'll add on the fifteen day EMA and hold for as long as it runs. Metrofile* (JSE code: MFL) got nailed on Monday down at 230c while there's still a delisting on the table at 330c plus mid year dividend (likely to be at least 5c judging from last trading update). So is the deal off? Officially it is not and it seemed to me to be a fairly low risk deal. So a panicked seller who needed cash? No idea. But current offer is 280c and assuming the deal happens that's a potential 55c profit by mid year when I would expect the deal to conclude. Coronavirus (COVID-19) continues to spread with over 75,000 confirmed cases and over 2,000 dead. But it still remains very much contained to China with 750million people on some sort of travel restriction. Apple has also announced production issues out of China albeit the rumoured low cost iPhone is apparently still on track for March. More reports coming about a good maize crop locally this year, even after late rains and hence planting. But prices not as low as one would expect, seemingly Zimbabwe shortage is seeing them buying our maize and keeping it higher. That said, Astral (JSE code: ARL) still looks very cheap to me with better maize prices compared to previous years. Upcoming events;  20 February ~ A new Tax-free year starts 05 March ~ Investing in a low growth economy    * I hold ungeared positions.  Subscriber to our feed here Subscribe or review us in iTunes   Does COVID-19 just delay spending? One of the issues surrounding the Coronavirus is lost revenue and hence lower profits. Apple is reporting supply constraints, Starbucks has closed the majority of their Chinese stores and so the list goes on. But here's the question. Which purchases are simple deferred and which never happen? Supposedly large ticket items such as an iPhone or white appliance will simple be bought later. So lost sales now come up later. But this is 100% true. Say your phone was lost. You need a new one now, not in a month so maybe instead of Apple you get a Samsung, or a cheaper Apple that is in stock. With consumables the story is very different. If I don't have that coffee or lunch today, it doesn't get held over till tomorrow. That sale is lost. So Starbucks suffers more than Apple. Another point is for example the Mobile World Conference in Barcelona has been cancelled and this is not deferred. The event supposedly brings in some Euro500million in spending over the three days. That money is gone, it'll be spent at home, so the city loses out. But if you don't buy your consumable today and have left over lunch at home, where does the 'saved' money go? Do we still see a surge later, but maybe in big ticket items if we've saved enough from deferred lunch dates an coffees? Or does it get properly saved into a bank account? What about hourly paid workers? No work = no pay. They will be hurt, albeit company will benefit as lower expenses while closed. Point is, the money to be spent will surely be spent. Maybe different timing and maybe different product or location. But that money doesn't disappear. So absent of the Coronavirus becoming a lot lot worse, any hit is merely short term and could be followed by an equally short burst of spending? Sure some spending will be lost, but not much? JSE – The JSE is a registered trademark of the JSE Limited. JSE Direct is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Simon Shares <ul> <li>I bought Sibanye Stillwater* (new JSE code: SSW) last week, average price 3950c. You want to own single commodity miners when price has already boomed and underlying commodities are flying. We have both here and if prices hold they'll print money for the rest of this financial year ending June. I'll add on the fifteen day EMA and hold for as long as it runs.</li> <li>Metrofile* (JSE code: MFL) got nailed on Monday down at 230c while there's still a delisting on the table at 330c plus mid year dividend (likely to be at least 5c judging from last trading update). So is the deal off? Officially it is not and it seemed to me to be a fairly low risk deal. So a panicked seller who needed cash? No idea. But current offer is 280c and assuming the deal happens that's a potential 55c profit by mid year when I would expect the deal to conclude.</li> <li>Coronavirus (COVID-19) continues to spread with over 75,000 confirmed cases and over 2,000 dead. But it still remains very much contained to China with 750million people on some sort of travel restriction. Apple has also announced production issues out of China albeit the rumoured low cost iPhone is apparently still on track for March.</li> <li>More reports coming about a good maize crop locally this year, even after late rains and hence planting. But prices not as low as one would expect, seemingly Zimbabwe shortage is seeing them buying our maize and keeping it higher. That said, Astral (JSE code: ARL) still looks very cheap to me with better maize prices compared to previous years.</li> <li>Upcoming events; <ul> <li><a href="https://justonelap.com/events/" rel="nofollow" target="_blank">20 February ~ A new Tax-free year starts</a></li> <li><a href="https://justonelap.com/events/" rel="nofollow" target="_blank">05 March ~ Investing in a low growth economy</a></li> </ul> </li> </ul> <a href="http://www.simonbrown.co.za/portfolio" rel="noopener nofollow" target="_blank">* I hold ungeared positions.</a> <ul> <li>Subscriber to our feed <a href="http://feeds.feedburner.com/MaudeStreetOnlineRadio-Jsedirectfull" rel="nofollow" target="_blank">here</a></li> <li>Subscribe or review us in <a href="https://itunes.apple.com/za/podcast/jsedirect-on-justonelap.com/id962733842" rel="nofollow" target="_blank">iTunes</a></li> </ul> Does COVID-19 just delay spending? One of the issues surrounding the Coronavirus is lost revenue and hence lower profits. Apple is reporting supply constraints, Starbucks has closed the majority of their Chinese stores and so the list goes on. But here's the question. Which purchases are simple deferred and which never happen? Supposedly large ticket items such as an iPhone or white appliance will simple be bought later. So lost sales now come up later. But this is 100% true. Say your phone was lost. You need a new one now, not in a month so maybe instead of Apple you get a Samsung, or a cheaper Apple that is in stock. With consumables the story is very different. If I don't have that coffee or lunch today, it doesn't get held over till tomorrow. That sale is lost. So Starbucks suffers more than Apple. Another point is for example the Mobile World Conference in Barcelona has been cancelled and this is not deferred. The event supposedly brings in some Euro500million in spending over the three days. That money is gone, it'll be spent at home, so the city loses out. But if you don't buy your consumable today and have left over lunch at home, where does the 'saved' money go? Do we still see a surge later, but maybe in big ticket items if we've saved enough from deferred lunch dates an coffees? Or does it get properly saved into a bank account? What about hourly paid workers? No work = no pay. They will be hurt, albeit company will benefit as lower expenses while closed. Point is, the money to be spent will surely be spent. Maybe different timing and maybe different product or location. But that money doesn't disappear. So absent of the Coronavirus becoming a lot lot worse, any hit is merely short term and could be followed by an equally short burst of spending? Sure some spending will be lost, but not much? JSE – The JSE is a registered trademark of the JSE Limited. JSE Direct is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Does COVID-19 just delay spending? (#388)

Simon Shares Day 28 of lockdown.  Oil, negative pricing? I thought I'd seen it all when interest rates went negative, but no ~ oil says "hold my beer". I Tweeted about it. Short version, don't now suddenly decide you are an oil trader.  Overnight WTI Oil (West Texas Intermediate) traded at a negative $40. Yip -$40, traders were paying you to take their oil off their hands.  Totally wild and now everybody wants to be an oil trader.  But some caution before you jump in.  1/ — Simon Brown (@SimonPB)  April 21, 2020    Bye-bye SAA. Staff have essentially been given termination letters for end April by the business rescue practitioner, payment subject to the sale of assets and this is the worst time ever to be selling airline assets. But public enterprises minister, Pravin Gordhan, has other ideas, a new “financially viable airline”. This in the middle of a pandemic when US airlines got US$25billion, and they want more? But here's the fun part, while the minister and government is insisting no new money, the business rescue practitioner actually has less power than usual. This is because the Public Finance Management Act applies and this gives the minister a final say on major decisions and the sale of assets or a liquidation would certainly be considered a major decision? Standard Bank (JSE code: SBK) gives gives us a first quarter 2020 update. "In 1Q20 earnings attributable to ordinary shareholders were 27% lower". While providing for bad debts on a forward looking basis, they specifically said " virus related stress had to a large extent not emerged yet and bad debt provision raised were based on best estimates.". ETF: Same index, different price?  Upcoming events;  6 May ~ The economic data so far, what's it telling us? 13 May ~ Know your derivatives: CFDs, indices and FX 20 May ~ Trading 101: Getting started in trading 21 May ~ Solvency and liquidity in the time of COVID-19 28 May - Garth McKenzie   Subscribe to our feed here Subscribe or review us in iTunes   Going BIG R500billion announced by the president on Tuesday evening. We await details from the finance minister, but some highlights. 10% of GDP and some 25% of the February budget total spend. But it not all real money, some of it is soft loans, others tax relief in delayed payments.  R130billion ~ budget reprioritisation R40billion ~ UIF, they have R42billion excess reserves. R70billion ~ tax breaks, relief and deferrals.  The monies will still need to be repaid, but it helps cash flow over the next few months.   R200billion ~ loan guarantees  Banks issue the loans with state under writing them. This is an easy and quick win directly into mid size and smaller businesses and banks have the processes already in place with just a few tweaks needed.   R60billon left over and actual new spending is some R100billion. The R60billon we can cover that from the IMF easy enough. BUT for example tax breaks hurt SARS cash flow, so more fluid then just R60billion needed.  The biggie is the increase of social grants, child grants ultimately an extra R500 a month and all others +R250 while a new unemployed grant at R350. This is to run till end October, in theory - but we'll still be in the midst of a COVID-19 pandemic then, so it will have to be extended. Basically we have implemented a basic income grant (BIG) and it will be impossible to take that away any time. How do you say to poor hungry people, no more? Even when the pandemic has passed? Simple you can't and you don't. For those who think a BIG is communist or evil, go check the research. There is lots starting from the 1970s in the USA and Canada, they work and they are cost effective. How do you help a poor person? Give them money. How do you help a homeless person? Give them a home. Surely there is nothing anti-capitalist about caring about the deeply less fortunate and having a little less of our luxurious lifestyles to help them? And the concerns that they will 'waste or drink' the money is simple not true. Every research shows the incidence of waste is actually lower in groups receiving state aid. As for the theory that women get pregnant in order to receive the child grant, again research has disproved that every single time. There is zero evidence to support that theory. Lastly on social grants, we have a world class system that is also one of the largest in the world and it works. Further theft is pretty much impossible as the recipient knows what they due and if it not there, hell to pay. Now sure as we saw with Cash Paymaster Services, charges and 'extras' can get messy. But not the actual hard process. It won't be enough, we'll have to do many more. Likely this will take us into the third quarter at best (note the extra grants end in October and COVID-19 is expected to peak around September for South Africa). But eventually we'll need well in excess of R1trillion, I think maybe some R2trillion to take us into the end of 2021.  For reference the US did US$2trillion and have now passing another bill. Now sure, we're not the US and we don't have their balance sheet nor is the ZAR the worlds reserve currency. But we're trying to save a country here.  How do we pay for the R500billion? Well as per above, majority of this is not real money. But short answer is we borrow and print money, especially for the next rounds we'll have to do later in the year. US$4billion is available for South Africa from the IMF (via the rapid financing instrument, here are the T&amp;Cs of those loans) with pretty much no strings attached, that's almost R100billion. Is that all a risk to the currency and inflation, indeed it is. But firstly if all countries are doing the same, we're all in the same boat and it becomes moot? Also understand inflation, it means every Rand a person has is worth a little less in terms of what it can buy. Now the rich have the most Rands so end up paying the most, and why not pay up a little to help save the country? Certainly I happy with that as one of the rich. The president also promised 'structural reforms' and 'radical economic transformation' which is trying to work both sides of the fence. We'll see which side he really ends up on in the end, but don't forget Minister Mboweni, he not going quietly into any night. He did speak a bit on essentially a new way of doing things, on that he's right. Post COVID-19 the world will be a different place and we as individuals need to give serious thought as to how we want this new world to look. Then we need to start making it happen otherwise before we know it, we'll all be back to the same old same old. A concern is about the actual process and fears of looting of the monies. Not unfounded considering our recent past. But thoughts on this.  We have a new administration, this is not the Zuma government, sure still the ANC - but markedly different. Close your eyes for a second and imagine COVID-19 in South Africa under President Zuma. Secondly, what's the alternative? Let people starve? Thirdly, as per above grants are pretty much corruption free, except for the actual process now managed by the Post Office. Lastly, there is actually little hard cash, some billons to municipalities for water, but not that much in real Randelas.  One questions is does this 10% of GDP offset the expected 10% or so drop in GDP? The answer is no, it means maybe we only drop by the expected 6%-10%, not more. As a last aside, the president said that the 2% repo rate cut adds R80billion into the economy in lower debt repayments. This is massive and helps middle to upper LSMs with their prime linked debt. Unsecured debt of the lower LSMs is not linked to prime, rather it regulated by the usury act, but that's why the increased social grants. JSE – The JSE is a registered trademark of the JSE Limited. JSE Direct is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Simon Shares Day 28 of lockdown. <ul> <li>Oil, negative pricing? I thought I'd seen it all when interest rates went negative, but no ~ oil says "hold my beer". I Tweeted about it. Short version, don't now suddenly decide you are an oil trader.</li> </ul> Overnight WTI Oil (West Texas Intermediate) traded at a negative $40. Yip -$40, traders were paying you to take their oil off their hands. Totally wild and now everybody wants to be an oil trader. But some caution before you jump in. 1/ — Simon Brown (@SimonPB) <a href="https://twitter.com/SimonPB/status/1252476907955859456?ref_src=twsrc%5Etfw" rel="nofollow" target="_blank"> April 21, 2020</a> <ul> <li>Bye-bye SAA. Staff have essentially been given termination letters for end April by the business rescue practitioner, payment subject to the sale of assets and this is the worst time ever to be selling airline assets. But public enterprises minister, Pravin Gordhan, has other ideas, a new “financially viable airline”. This in the middle of a pandemic when US airlines got US$25billion, and they want more? But here's the fun part, while the minister and government is insisting no new money, the business rescue practitioner actually has less power than usual. This is because the Public Finance Management Act applies and this gives the minister a final say on major decisions and the sale of assets or a liquidation would certainly be considered a major decision?</li> <li>Standard Bank (JSE code: SBK) gives gives us a first quarter 2020 update. "In 1Q20 earnings attributable to ordinary shareholders were 27% lower". While providing for bad debts on a forward looking basis, they specifically said " virus related stress had to a large extent not emerged yet and bad debt provision raised were based on best estimates.".</li> <li><a href="https://justonelap.com/etf-same-index-different-price/" rel="nofollow" target="_blank">ETF: Same index, different price?</a></li> </ul> Upcoming events; <ul> <li>6 May ~ <a href="https://justonelap.com/events/" rel="nofollow" target="_blank">The economic data so far, what's it telling us?</a></li> <li>13 May ~ <a href="https://justonelap.com/events/" rel="nofollow" target="_blank">Know your derivatives: CFDs, indices and FX</a></li> <li>20 May ~ <a href="https://justonelap.com/events/" rel="nofollow" target="_blank">Trading 101: Getting started in trading</a></li> <li>21 May ~ <a href="https://justonelap.com/events/" rel="nofollow" target="_blank">Solvency and liquidity in the time of COVID-19</a></li> <li>28 May - Garth McKenzie</li> </ul> <ul> <li>Subscribe to our feed <a href="http://feeds.feedburner.com/MaudeStreetOnlineRadio-Jsedirectfull" rel="nofollow" target="_blank">here</a></li> <li>Subscribe or review us in <a href="https://itunes.apple.com/za/podcast/jsedirect-on-justonelap.com/id962733842" rel="nofollow" target="_blank">iTunes</a></li> </ul> Going BIG R500billion announced by the president on Tuesday evening. We await details from the finance minister, but some highlights. 10% of GDP and some 25% of the February budget total spend. But it not all real money, some of it is soft loans, others tax relief in delayed payments. <ul> <li>R130billion ~ budget reprioritisation</li> <li>R40billion ~ UIF, they have R42billion excess reserves.</li> <li>R70billion ~ tax breaks, relief and deferrals. <ul> <li>The monies will still need to be repaid, but it helps cash flow over the next few months.</li> </ul> </li> <li>R200billion ~ loan guarantees <ul> <li>Banks issue the loans with state under writing them. This is an easy and quick win directly into mid size and smaller businesses and banks have the processes already in place with just a few tweaks needed.</li> </ul> </li> <li>R60billon left over and actual new spending is some R100billion. The R60billon we can cover that from the IMF easy enough. BUT for example tax breaks hurt SARS cash flow, so more fluid then just R60billion needed.</li> </ul> The biggie is the increase of social grants, child grants ultimately an extra R500 a month and all others +R250 while a new unemployed grant at R350. This is to run till end October, in theory - but we'll still be in the midst of a COVID-19 pandemic then, so it will have to be extended. Basically we have implemented a basic income grant (BIG) and it will be impossible to take that away any time. How do you say to poor hungry people, no more? Even when the pandemic has passed? Simple you can't and you don't. For those who think a BIG is communist or evil, go check the research. There is lots starting from the 1970s in the USA and Canada, they work and they are cost effective. How do you help a poor person? Give them money. How do you help a homeless person? Give them a home. Surely there is nothing anti-capitalist about caring about the deeply less fortunate and having a little less of our luxurious lifestyles to help them? And the concerns that they will 'waste or drink' the money is simple not true. Every research shows the incidence of waste is actually lower in groups receiving state aid. As for the theory that women get pregnant in order to receive the child grant, again research has disproved that every single time. There is zero evidence to support that theory. Lastly on social grants, we have a world class system that is also one of the largest in the world and it works. Further theft is pretty much impossible as the recipient knows what they due and if it not there, hell to pay. Now sure as we saw with Cash Paymaster Services, charges and 'extras' can get messy. But not the actual hard process. It won't be enough, we'll have to do many more. Likely this will take us into the third quarter at best (note the extra grants end in October and COVID-19 is expected to peak around September for South Africa). But eventually we'll need well in excess of R1trillion, I think maybe some R2trillion to take us into the end of 2021. <ul> <li>For reference the US did US$2trillion and have now passing another bill.</li> <li>Now sure, we're not the US and we don't have their balance sheet nor is the ZAR the worlds reserve currency. But we're trying to save a country here.</li> </ul> How do we pay for the R500billion? Well as per above, majority of this is not real money. But short answer is we borrow and print money, especially for the next rounds we'll have to do later in the year. US$4billion is available for South Africa from the IMF (via the rapid financing instrument, <a href="https://www.imf.org/en/About/FAQ/imf-response-to-covid-19" rel="noopener nofollow" target="_blank">here are the T&amp;Cs of those loans</a>) with pretty much no strings attached, that's almost R100billion. Is that all a risk to the currency and inflation, indeed it is. But firstly if all countries are doing the same, we're all in the same boat and it becomes moot? Also understand inflation, it means every Rand a person has is worth a little less in terms of what it can buy. Now the rich have the most Rands so end up paying the most, and why not pay up a little to help save the country? Certainly I happy with that as one of the rich. The president also promised 'structural reforms' and 'radical economic transformation' which is trying to work both sides of the fence. We'll see which side he really ends up on in the end, but don't forget Minister Mboweni, he not going quietly into any night. He did speak a bit on essentially a new way of doing things, on that he's right. Post COVID-19 the world will be a different place and we as individuals need to give serious thought as to how we want this new world to look. Then we need to start making it happen otherwise before we know it, we'll all be back to the same old same old. A concern is about the actual process and fears of looting of the monies. Not unfounded considering our recent past. But thoughts on this. <ul> <li>We have a new administration, this is not the Zuma government, sure still the ANC - but markedly different. Close your eyes for a second and imagine COVID-19 in South Africa under President Zuma.</li> <li>Secondly, what's the alternative? Let people starve?</li> <li>Thirdly, as per above grants are pretty much corruption free, except for the actual process now managed by the Post Office.</li> <li>Lastly, there is actually little hard cash, some billons to municipalities for water, but not that much in real Randelas.</li> </ul> One questions is does this 10% of GDP offset the expected 10% or so drop in GDP? The answer is no, it means maybe we only drop by the expected 6%-10%, not more. As a last aside, the president said that the 2% repo rate cut adds R80billion into the economy in lower debt repayments. This is massive and helps middle to upper LSMs with their prime linked debt. Unsecured debt of the lower LSMs is not linked to prime, rather it regulated by the usury act, but that's why the increased social grants. JSE – The JSE is a registered trademark of the JSE Limited. JSE Direct is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Going BIG (#396)

Simon Shares  Moneyweb NOW, starting Monday. Live stream at 6.30am and podcast from 7am - both on Moneyweb.co.za or their app. Day 35 of lockdown, and last day of level 5, for now. S&amp;P500 trading back at August 2019 levels and Top40 at January 2019 levels. So basically saying COVID-19 is no worry? Everything is going to be alright? Sure the US has thrown over US$2trillion at the problem, but some 13% of the US workforce has lost a job in the last month and it easy to fire, but will surely be a lot slower to rehire? This is why I am at best a W recovery person not a V shaped. We have another leg lower, no idea how much lower, but lower. Locally a Stats SA survey of 707 VAT-registered companies shows that 20% have already laid off staff and 30% have decreased working hours. We also see IMF forecasting a local GDP of -5.8% and an unemployment rate of 35.3% for 2020. Then 34.1% unemployment in 2021. These are horror numbers and if they're wrong, they be wrong on the light side with reality potentially worse. Certainly that -5.8% for GDP is the lowest I am currently seeing with even the SARB and national treasury expecting -6.4% for 2020, a number I still think will ultimately be on the low side. On lockdown level 4. It not very different with tobacco products allowed to be sold (maybe) and restaurants allowed to do food deliveries (maybe) and some industry allowed to get back to work. Restaurants will be a biggie, people do not normally cook their own dinner every night, heck I know some of even ordering in for breakfast and lunch. So demand should be wild and it will get cash back into this sector, but managing demand is going to be tricky. My thought is that we should be able to book cooking times. For example, I book the 7pm slot at my fav and they have limited number of slots available at each time slot as per their capacity. This is much like a lot of the food stores were doing and it manages expectations and delays. At the end of the day level 4 lockdown is expected to see about 1.5million returning back to work. But the flip side is Edcon reportedly filing for voluntary business rescue as it burns through its cash. We're going to see a lot more large and small businesses not surviving, hence my feeling that the projected GDP and unemployment numbers are likely to be on the light side.   Subscribe to our feed here Subscribe or review us in iTunes   WTI still trading weak and frankly why not negative again just ahead of close out for the June delivery contract? Storage is now even tighter as demand remains collapsed and the supply taps remain turned on. Eventually supply has to decrease because demand is a long way from booming again, but nobody wants to be the first to blink and exit so instead each is hoping somebody else blinks and markedly cuts production first. Biggest loser locally in this oil war (aside from Sasol (JSE code: SOL) which is now over 8000c and which I am still not buying) is MTN (JSE code: MTN). Their biggest market is Nigeria and Nigeria is an oil economy that is being nailed by both COVID-19 and collapsing oil price. The latter means less government and oil industry money and that'll lead to lay offs and less income generally. All this means poorer people who have less to spend on data and voice. PSG (JSE code: PSG) are giving "serious consideration" to unbundling their Capitec* (JSE code: CPI) holding. This makes sense, the Capitec stake is worth more than the PSG market cap essentially valuing their other assets at a negative value. This defeats the point of being listed which is largely capital raising which one would never do at such a discount. In fact PSG are fairly smart at issuing new shares when they trade at a premium to their holdings. Further, the Capitec dividend flow has been very useful for PSG over the years, but with that dividend now cancelled for at least two or more years, now's a good time to do the transaction. PSG also states that "new legislation may potentially deem PSG (as a material shareholder in Capitec) to be a financial conglomerate" and that would increase compliance costs for PSG. Lastly depending ow much they unbundle it may well leave Capitec without a reference shareholder which is very useful in times of stress, but most of our big four are in the same boat so no train smash. Staying with Capitec, Michiel le Roux, one of the founding directors, has donated R99million to three efforts to fight COVID-19 in South Africa. Well done gent. Then a fascinating report on how Morgan Stanley is tracking the industrial recovery in China. They're measuring air quality and if it is returning to normal seasonal levels. Lastly, we fall out of world government bond index today (delayed from end March) as we're now full junk. This means we'll see selling pressure on our bonds and likely also our Rand. How much pressure? No idea and as I record on Wednesday afternoon, the Rand is stronger at 18.53 and about US$10-15billion needs to be sold, remember SARB is also a buyer in the secondary bond market. But bottom line this is hardly the end of the world and won't crash either the rand or our bonds - just some pressure that we'll move on from quick enough as investors like our +10% yields in a negative interest rate world.  Upcoming events;  6 May ~ The economic data so far, what’s it telling us? 13 May ~ Know your derivatives: CFDs, indices and FX 20 May ~ Trading 101: Getting started in trading 21 May ~ Solvency and liquidity in the time of COVID-19 28 May – Garth McKenzie  * I hold ungeared positions.  Track your favourite ETF with the JSE  JSE – The JSE is a registered trademark of the JSE Limited. JSE Direct is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Simon Shares <ul> <li><a href="https://www.moneyweb.co.za/news/south-africa/get-your-morning-business-fix-2/" rel="noopener nofollow" target="_blank">Moneyweb NOW</a>, starting Monday. Live stream at 6.30am and podcast from 7am - both on <a href="http://Moneyweb.co.za" rel="nofollow" target="_blank">Moneyweb.co.za</a> or their app.</li> <li>Day 35 of lockdown, and last day of level 5, for now. S&amp;P500 trading back at August 2019 levels and Top40 at January 2019 levels. So basically saying COVID-19 is no worry? Everything is going to be alright? Sure the US has thrown over US$2trillion at the problem, but some 13% of the US workforce has lost a job in the last month and it easy to fire, but will surely be a lot slower to rehire? This is why I am at best a W recovery person not a V shaped. We have another leg lower, no idea how much lower, but lower.</li> <li>Locally a Stats SA survey of 707 VAT-registered companies shows that 20% have already laid off staff and 30% have decreased working hours. We also see IMF forecasting a local GDP of -5.8% and an unemployment rate of 35.3% for 2020. Then 34.1% unemployment in 2021. These are horror numbers and if they're wrong, they be wrong on the light side with reality potentially worse. Certainly that -5.8% for GDP is the lowest I am currently seeing with even the SARB and national treasury expecting -6.4% for 2020, a number I still think will ultimately be on the low side.</li> <li>On lockdown level 4. It not very different with tobacco products allowed to be sold (maybe) and restaurants allowed to do food deliveries (maybe) and some industry allowed to get back to work. Restaurants will be a biggie, people do not normally cook their own dinner every night, heck I know some of even ordering in for breakfast and lunch. So demand should be wild and it will get cash back into this sector, but managing demand is going to be tricky. My thought is that we should be able to book cooking times. For example, I book the 7pm slot at my fav and they have limited number of slots available at each time slot as per their capacity. This is much like a lot of the food stores were doing and it manages expectations and delays.</li> <li>At the end of the day level 4 lockdown is expected to see about 1.5million returning back to work. But the flip side is Edcon reportedly filing for voluntary business rescue as it burns through its cash. We're going to see a lot more large and small businesses not surviving, hence my feeling that the projected GDP and unemployment numbers are likely to be on the light side.</li> </ul> <ul> <li>Subscribe to our feed <a href="http://feeds.feedburner.com/MaudeStreetOnlineRadio-Jsedirectfull" rel="nofollow" target="_blank">here</a></li> <li>Subscribe or review us in <a href="https://itunes.apple.com/za/podcast/jsedirect-on-justonelap.com/id962733842" rel="nofollow" target="_blank">iTunes</a></li> </ul> <ul> <li>WTI still trading weak and frankly why not negative again just ahead of close out for the June delivery contract? Storage is now even tighter as demand remains collapsed and the supply taps remain turned on. Eventually supply has to decrease because demand is a long way from booming again, but nobody wants to be the first to blink and exit so instead each is hoping somebody else blinks and markedly cuts production first.</li> <li>Biggest loser locally in this oil war (aside from Sasol (JSE code: SOL) which is now over 8000c and which I am still not buying) is MTN (JSE code: MTN). Their biggest market is Nigeria and Nigeria is an oil economy that is being nailed by both COVID-19 and collapsing oil price. The latter means less government and oil industry money and that'll lead to lay offs and less income generally. All this means poorer people who have less to spend on data and voice.</li> <li>PSG (JSE code: PSG) are giving "serious consideration" to unbundling their Capitec* (JSE code: CPI) holding. This makes sense, the Capitec stake is worth more than the PSG market cap essentially valuing their other assets at a negative value. This defeats the point of being listed which is largely capital raising which one would never do at such a discount. In fact PSG are fairly smart at issuing new shares when they trade at a premium to their holdings. Further, the Capitec dividend flow has been very useful for PSG over the years, but with that dividend now cancelled for at least two or more years, now's a good time to do the transaction. PSG also states that "new legislation may potentially deem PSG (as a material shareholder in Capitec) to be a financial conglomerate" and that would increase compliance costs for PSG. Lastly depending ow much they unbundle it may well leave Capitec without a reference shareholder which is very useful in times of stress, but most of our big four are in the same boat so no train smash.</li> <li>Staying with Capitec, Michiel le Roux, one of the founding directors, has donated R99million to three efforts to fight COVID-19 in South Africa. Well done gent.</li> <li>Then a fascinating report on how Morgan Stanley is tracking the industrial recovery in China. They're measuring air quality and if it is returning to normal seasonal levels.</li> <li>Lastly, we fall out of world government bond index today (delayed from end March) as we're now full junk. This means we'll see selling pressure on our bonds and likely also our Rand. How much pressure? No idea and as I record on Wednesday afternoon, the Rand is stronger at 18.53 and about US$10-15billion needs to be sold, remember SARB is also a buyer in the secondary bond market. But bottom line this is hardly the end of the world and won't crash either the rand or our bonds - just some pressure that we'll move on from quick enough as investors like our +10% yields in a negative interest rate world.</li> </ul> Upcoming events; <ul> <li>6 May ~ <a href="https://justonelap.com/events/" rel="nofollow" target="_blank">The economic data so far, what’s it telling us?</a></li> <li>13 May ~ <a href="https://justonelap.com/events/" rel="nofollow" target="_blank">Know your derivatives: CFDs, indices and FX</a></li> <li>20 May ~ <a href="https://justonelap.com/events/" rel="nofollow" target="_blank">Trading 101: Getting started in trading</a></li> <li>21 May ~ <a href="https://justonelap.com/events/" rel="nofollow" target="_blank">Solvency and liquidity in the time of COVID-19</a></li> <li>28 May – Garth McKenzie</li> </ul> <a href="http://www.simonbrown.co.za/portfolio" rel="noopener nofollow" target="_blank">* I hold ungeared positions.</a> <ul> <li><a href="https://justonelap.com/etf-track-your-favourite-with-the-jse/" rel="nofollow" target="_blank">Track your favourite ETF with the JSE</a></li> </ul> JSE – The JSE is a registered trademark of the JSE Limited. JSE Direct is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Market disconnect? (#397)

Lockdowns being extend everywhere (Spain +15 days, Italy +2 weeks, US wait and see, but likely end April) ZAR blowing out US jobless claims 6.6m this week Unemployment at 4.4%, non-farm payroll down 701k jobs (first down in a decade), -100k expected Numbers don’t add up, latter is only to mid March Lots of lagging data, two issues here, one is data coming out at record worst, and even just a 1 month delay makes data largely useless Woolies update Famous Brands bails on GBK Spur suspends franchise fees amid Covid-19 closures Nampak gets their R1.5billion for selling glass biz Anchor reports record demand for fixed-income assets British American Tobacco working on COVID-19 vaccine

Lockdowns being extend everywhere (Spain +15 days, Italy +2 weeks, US wait and see, but likely end April) ZAR blowing out US jobless claims 6.6m this week Unemployment at 4.4%, non-farm payroll down 701k jobs (first down in a decade), -100k expected Numbers don’t add up, latter is only to mid March Lots of lagging data, two issues here, one is data coming out at record worst, and even just a 1 month delay makes data largely useless Woolies update Famous Brands bails on GBK Spur suspends franchise fees amid Covid-19 closures Nampak gets their R1.5billion for selling glass biz Anchor reports record demand for fixed-income assets British American Tobacco working on COVID-19 vaccine

MarketStandard with Dineo Tsamela & Simon Brown (06 Apr 20)

Simon Shares New weekly podcast in the RSS feed every Monday late morning. BUT only in the RSS feed, not on the website. So subscribe to the feed, it is here. Upcoming events;  09 April ~ JSE Power Hour: Trader’s game plan  Lockdown, day six as I record (seven as you listen). COVID-19 numbers globally continue to rise, but I'm watching Italy. They're now at three weeks of lockdown and are seeing daily new cases decline, but still at 4,000 a day. I am also seeing reports that they'll extend lockdown to after Easter, which is bad news for us. Our new cases are minimal, but still likely to spike higher and come the end of three weeks surely we'll be winning but not wanting to let the virus back in the front door, so lockdown extended? My thinking is extended to first weekend in May. It's after the two public holidays and means we'd have been in lockdown for 5 weeks. Longer term we're waiting for a vaccine, and that's 2021 at best, so even if lockdown gets lifted, heavy restrictions will be the norm and new lockdown periods very likely if the virus starts to spread with speed. Remember all data is two weeks old due to a 14 day incubation period. Overall I agree with our governments response and think the president and health minister are doing a great job under unimaginable conditions. Hardest hit is without doubt small business. Closing for even just 21 days with zero revenue can kill a business, even a strong one. SaySiyaBonga.co.za We also have extreme inequality in South Africa that makes lockdown frankly just not impossible for most South Africans. It's easy in Bryanston, but impossible in Alex and add in poverty we have an entire extra layer of impossible.  First quarter moves;  Top40 - 19.8% Indi25 -6.7% Fini15 -40.2% Resi10 -25.9% SA Property - 48.9% ZAR/USD -28.2% S&amp;P500 - 20.0% FTSE 100 -24.8% Nikkei225 - 20.0% Gold +4.2% Brent oil - 61.4%    Questions is if the worst is behind us and the honest answer is that nobody knows. We've seen a massive rally in the last ten days, but that is more about liquidity as governments (especially the US) pump cash into the system. Certainly rallies of around 15% in a bear market are totally normal, we saw about half a dozen during the 2008/9 crisis. I also don't think the market is going to be able to ignore the horror data that will be coming out over the next many months. The other issue is that markets try and price in the future, but our forward view is limited to days, maybe weeks. Markets want to price in the next 12-18 months and we have zero visibility that far out. The data for the rest of 2020 will be bad, very bad. But we have no real idea or reference as to just how bad. We're going to see a number of bankruptcies, large and small, local and global. Some are easy to spot; airlines, high debt companies, cruise companies. But a lot will surprise us. I continue to only buy ETFs (ASHGEQ my preferred).  Subscribe to our feed here Subscribe or review us in iTunes   Hello junk And now we're junk. Full junk status, or in the lingo ~ non investment grade. The outlook was negative and this is significant, means we can go further into junk status at the next review in October. Ideally we don't want to slip too far down that status because it makes coming back that very much harder. The immediate response was the local market green, Rand weaker at R17.95/USD and bonds about 1.5% higher yields. The yields are what matters. We issue new bonds every week to cover costs, so far his weeks auction was over subscribed and that's what I expect. We're not actually at risk of default so the +11% yield is very attractive. Also with SARB buying in the secondary market we've got lots of liquidity. But overall, it was pretty much priced in, now government needs to get us out. Practically we're now also out of the Citi World Government Bond Index (WGBI) at the end of April. This will see selling in our bonds, also a lot of mandates don't allow junk bonds, so more selling. The flip side is a lot of mandates only want junk bonds (for yield albeit at higher risk). So in a way we've gone from a tiny fish in a giant pond to a large one in a large pond. Nice, but still not want any country wants. We'll also see the local banks downgraded to junk, when the sovereign is junk so go the banks. But it will potentially increase their borrowing costs and that will be passed onto consumers.   Question from Njabulo Nsibande What happens if all REITs or the top ten REITs (as they make up about 50% in the case of CoreShares income property fund) in an ETF all go bankrupt. JSE – The JSE is a registered trademark of the JSE Limited. JSE Direct is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Simon Shares New weekly podcast in the RSS feed every Monday late morning. BUT only in the RSS feed, not on the website. So subscribe to the feed, it is <a href="http://feeds.feedburner.com/MaudeStreetOnlineRadio-Jsedirectfull" rel="nofollow" target="_blank">here</a>. Upcoming events; <ul> <li>09 April ~ <a href="https://justonelap.com/events/" rel="nofollow" target="_blank">JSE Power Hour: Trader’s game plan</a></li> </ul> Lockdown, day six as I record (seven as you listen). COVID-19 numbers globally continue to rise, but I'm watching Italy. They're now at three weeks of lockdown and are seeing daily new cases decline, but still at 4,000 a day. I am also seeing reports that they'll extend lockdown to after Easter, which is bad news for us. Our new cases are minimal, but still likely to spike higher and come the end of three weeks surely we'll be winning but not wanting to let the virus back in the front door, so lockdown extended? My thinking is extended to first weekend in May. It's after the two public holidays and means we'd have been in lockdown for 5 weeks. Longer term we're waiting for a vaccine, and that's 2021 at best, so even if lockdown gets lifted, heavy restrictions will be the norm and new lockdown periods very likely if the virus starts to spread with speed. Remember all data is two weeks old due to a 14 day incubation period. Overall I agree with our governments response and think the president and health minister are doing a great job under unimaginable conditions. Hardest hit is without doubt small business. Closing for even just 21 days with zero revenue can kill a business, even a strong one. <a href="https://saysiyabonga.co.za/" rel="noopener nofollow" target="_blank">SaySiyaBonga.co.za</a> We also have extreme inequality in South Africa that makes lockdown frankly just not impossible for most South Africans. It's easy in Bryanston, but impossible in Alex and add in poverty we have an entire extra layer of impossible. <ul> <li>First quarter moves; <ul> <li>Top40 - 19.8%</li> <li>Indi25 -6.7%</li> <li>Fini15 -40.2%</li> <li>Resi10 -25.9%</li> <li>SA Property - 48.9%</li> <li>ZAR/USD -28.2%</li> <li>S&amp;P500 - 20.0%</li> <li>FTSE 100 -24.8%</li> <li>Nikkei225 - 20.0%</li> <li>Gold +4.2%</li> <li>Brent oil - 61.4%</li> </ul> </li> </ul> Questions is if the worst is behind us and the honest answer is that nobody knows. We've seen a massive rally in the last ten days, but that is more about liquidity as governments (especially the US) pump cash into the system. Certainly rallies of around 15% in a bear market are totally normal, we saw about half a dozen during the 2008/9 crisis. I also don't think the market is going to be able to ignore the horror data that will be coming out over the next many months. The other issue is that markets try and price in the future, but our forward view is limited to days, maybe weeks. Markets want to price in the next 12-18 months and we have zero visibility that far out. The data for the rest of 2020 will be bad, very bad. But we have no real idea or reference as to just how bad. We're going to see a number of bankruptcies, large and small, local and global. Some are easy to spot; airlines, high debt companies, cruise companies. But a lot will surprise us. I continue to only buy ETFs (<a href="https://justonelap.com/etf-understanding-the-ashburton-1200-etf/" rel="nofollow" target="_blank">ASHGEQ</a> my preferred). <ul> <li>Subscribe to our feed <a href="http://feeds.feedburner.com/MaudeStreetOnlineRadio-Jsedirectfull" rel="nofollow" target="_blank">here</a></li> <li>Subscribe or review us in <a href="https://itunes.apple.com/za/podcast/jsedirect-on-justonelap.com/id962733842" rel="nofollow" target="_blank">iTunes</a></li> </ul> Hello junk And now we're junk. Full junk status, or in the lingo ~ non investment grade. The outlook was negative and this is significant, means we can go further into junk status at the next review in October. Ideally we don't want to slip too far down that status because it makes coming back that very much harder. The immediate response was the local market green, Rand weaker at R17.95/USD and bonds about 1.5% higher yields. The yields are what matters. We issue new bonds every week to cover costs, so far his weeks auction was over subscribed and that's what I expect. We're not actually at risk of default so the +11% yield is very attractive. Also with SARB buying in the secondary market we've got lots of liquidity. But overall, it was pretty much priced in, now government needs to get us out. Practically we're now also out of the Citi World Government Bond Index (WGBI) at the end of April. This will see selling in our bonds, also a lot of mandates don't allow junk bonds, so more selling. The flip side is a lot of mandates only want junk bonds (for yield albeit at higher risk). So in a way we've gone from a tiny fish in a giant pond to a large one in a large pond. Nice, but still not want any country wants. We'll also see the local banks downgraded to junk, when the sovereign is junk so go the banks. But it will potentially increase their borrowing costs and that will be passed onto consumers. Question from Njabulo Nsibande What happens if all REITs or the top ten REITs (as they make up about 50% in the case of CoreShares income property fund) in an ETF all go bankrupt. JSE – The JSE is a registered trademark of the JSE Limited. JSE Direct is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Hello junk (#394)

This week’s episode of JSE Direct is courtesy of OUTvest, our preferred supplier in retirement products.  Simon Shares  April was the best month for equity markets since 1987! Local ten year bonds are on a tear, just a week after we exited the World Government Bond Index the yields are back at pre-junk levels and even better as they trade below 8%. This is the search for yield playing out. If their mandate allows investors want yield, the rest they don't care about. This has also seen the Government Retail Bonds locally drop their April rate of 11.5% to 10% for May and likely will fall further in June. PMI shocker. The headline number was fine but that was due to some oddities. The real kicker was the business activity index that collapsed to an all-time low of 5.1 index points in April. During the 2008/9 crisis the lowest levels were low 30s. Oil bouncing higher, albeit at US$30 Brent is still over 50% off the January levels. Comair (JSE code: COM) went into business rescue less than a week after an update detailed no flying until October / November. They hope to be able to restructure and come back by then, but the airline industry globally is in melt down and locally we have three airlines in some form of bankruptcy (SAA and SA Express the other two). Metrofile* (JSE code: MFL) updated the market on their proposed 330c delisting and the short answer is that it is still on but is delayed indefinitely. Pratically trying to raise capital and get all the Is doted and Ts crossed is largely not practical under lockdown. But the buyer also wants to get a better understanding of the business post lockdown. I hold the stock and am happy to continue holding as I'd rather it not be delisted. But price had dropped to 220c on the news, currently 250c. Lockdown does hurt the company a little, most work in contractual. But the issue is how many clients don't survive and of those who do will they require less boxes? In very tough times for REITs Equites (JSE code: EQU) results really shone. Debt is low, distributions solid and they have very few clients not able to pay rentals as they state "since 29 February 2020, we have collected 92.8% and 100% of the contractual rental due in terms of our lease agreements in SA and the UK, respectively". This is largely as they are in the business of fancy logistics. No retail, no offices and many online customers, especially in the UK which os some 25% of their business.  Upcoming events;  13 May ~ Know your derivatives: CFDs, indices and FX 20 May ~ Trading 101: Getting started in trading 21 May ~ Solvency and liquidity in the time of COVID-19 28 May – Managing risk as a trader with Garth McKenzie   Subscribe to our feed here Subscribe or review us in iTunes   Property losing REIT Status A REIT ~ Real Estate Investment Trust is essentially a special purpose vehicle for listed property stocks. In South Africa the most notable requirement is that 75% of 'distributable income' is paid to shareholders as a taxable dividend. This absolves the REIT of tax liability but that dividend received by shareholders is taxed as income, not the 20% dividend withholding tax (DWT). So depending on your marginal tax rate, it cold be higher or lower than DWT. With this in mind I asked Redefine CEO Andrew Konig about this on my show on Tuesday. The company had some 33c per unit of distributable income due to investors but did not declare it rather saying they'd decide at yearend in August 2020. This is perfectly legal as this was an interim distribution and they only need to be paid annually. Now that 75% rule is a SARS issue as it regards taxation, it is not a IFRS concept and as such it is a murky issue. So the REIT industry is engaging SARS in case some REITs can't pay the distribution. There could be lots of options such as delaying the payment and maybe spreading it our over a number of years. But if they lose REIT status frankly the property companies would unravel as the tax advantage from that status is huge and how they operate. As such I expect industry and SARS to come to some sort of agreement. But what Andrew Konig said was that liquidity issues were of more a concern for REITs. Frankly their ability to actually pay anything and liquidity is a part of the companies act so is more immovable than the SARS REIT definition and allowances. This is the bind property stocks find themselves in. Debt that needs to be paid, income (rentals under pressure) and legal requirements to pay distributable income. There is going to have to be lots of clever thinking to get through this crisis. * I hold ungeared positions. JSE – The JSE is a registered trademark of the JSE Limited. JSE Direct is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

This week’s episode of JSE Direct is courtesy of <a href="https://www.outvest.co.za/what-we-offer/retirement-annuities" rel="noopener nofollow" target="_blank">OUTvest, our preferred supplier in retirement products</a>. Simon Shares <ul> <li>April was the best month for equity markets since 1987!</li> <li>Local ten year bonds are on a tear, just a week after we exited the World Government Bond Index the yields are back at pre-junk levels and even better as they trade below 8%. This is the search for yield playing out. If their mandate allows investors want yield, the rest they don't care about.</li> <li>This has also seen the Government Retail Bonds locally drop their April rate of 11.5% to 10% for May and likely will fall further in June.</li> <li>PMI shocker. The headline number was fine but that was due to some oddities. The real kicker was the business activity index that collapsed to an all-time low of 5.1 index points in April. During the 2008/9 crisis the lowest levels were low 30s.</li> <li>Oil bouncing higher, albeit at US$30 Brent is still over 50% off the January levels.</li> <li>Comair (JSE code: COM) went into business rescue less than a week after an update detailed no flying until October / November. They hope to be able to restructure and come back by then, but the airline industry globally is in melt down and locally we have three airlines in some form of bankruptcy (SAA and SA Express the other two).</li> <li>Metrofile* (JSE code: MFL) updated the market on their proposed 330c delisting and the short answer is that it is still on but is delayed indefinitely. Pratically trying to raise capital and get all the Is doted and Ts crossed is largely not practical under lockdown. But the buyer also wants to get a better understanding of the business post lockdown. I hold the stock and am happy to continue holding as I'd rather it not be delisted. But price had dropped to 220c on the news, currently 250c. Lockdown does hurt the company a little, most work in contractual. But the issue is how many clients don't survive and of those who do will they require less boxes?</li> <li>In very tough times for REITs Equites (JSE code: EQU) results really shone. Debt is low, distributions solid and they have very few clients not able to pay rentals as they state "since 29 February 2020, we have collected 92.8% and 100% of the contractual rental due in terms of our lease agreements in SA and the UK, respectively". This is largely as they are in the business of fancy logistics. No retail, no offices and many online customers, especially in the UK which os some 25% of their business.</li> </ul> Upcoming events; <ul> <li>13 May ~ <a href="https://justonelap.com/events/" rel="nofollow" target="_blank">Know your derivatives: CFDs, indices and FX</a></li> <li>20 May ~ <a href="https://justonelap.com/events/" rel="nofollow" target="_blank">Trading 101: Getting started in trading</a></li> <li>21 May ~ <a href="https://justonelap.com/events/" rel="nofollow" target="_blank">Solvency and liquidity in the time of COVID-19</a></li> <li>28 May – <a href="https://justonelap.com/events/" rel="nofollow" target="_blank">Managing risk as a trader with Garth McKenzie</a></li> </ul> <ul> <li>Subscribe to our feed <a href="http://feeds.feedburner.com/MaudeStreetOnlineRadio-Jsedirectfull" rel="nofollow" target="_blank">here</a></li> <li>Subscribe or review us in <a href="https://itunes.apple.com/za/podcast/jsedirect-on-justonelap.com/id962733842" rel="nofollow" target="_blank">iTunes</a></li> </ul> Property losing REIT Status A REIT ~ Real Estate Investment Trust is essentially a special purpose vehicle for listed property stocks. In South Africa the most notable requirement is that 75% of 'distributable income' is paid to shareholders as a taxable dividend. This absolves the REIT of tax liability but that dividend received by shareholders is taxed as income, not the 20% dividend withholding tax (DWT). So depending on your marginal tax rate, it cold be higher or lower than DWT. With this in mind I asked <a href="https://www.moneyweb.co.za/moneyweb-radio/moneyweb-now/5-may-may-kicks-off-with-horrific-pi-numbers-and-could-property-stocks-lose-their-reit-status/" rel="noopener nofollow" target="_blank">Redefine CEO Andrew Konig about this on my show on Tuesday</a>. The company had some 33c per unit of distributable income due to investors but did not declare it rather saying they'd decide at yearend in August 2020. This is perfectly legal as this was an interim distribution and they only need to be paid annually. Now that 75% rule is a SARS issue as it regards taxation, it is not a IFRS concept and as such it is a murky issue. So the REIT industry is engaging SARS in case some REITs can't pay the distribution. There could be lots of options such as delaying the payment and maybe spreading it our over a number of years. But if they lose REIT status frankly the property companies would unravel as the tax advantage from that status is huge and how they operate. As such I expect industry and SARS to come to some sort of agreement. But what Andrew Konig said was that liquidity issues were of more a concern for REITs. Frankly their ability to actually pay anything and liquidity is a part of the companies act so is more immovable than the SARS REIT definition and allowances. This is the bind property stocks find themselves in. Debt that needs to be paid, income (rentals under pressure) and legal requirements to pay distributable income. There is going to have to be lots of clever thinking to get through this crisis. <a href="http://www.simonbrown.co.za/portfolio" rel="noopener nofollow" target="_blank">* I hold ungeared positions.</a> JSE – The JSE is a registered trademark of the JSE Limited. JSE Direct is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Property losing REIT status (#398)

2020 predictions show Every year Marc Ashton, Keith McLachlan and Simon Brown do a predictions show. Three wild and wooly predictions for the markets followed by a call on the Top40 and ZAR for the year ahead. Importantly we start each show with a review of the previous years predictions and you’ll find the 2019 predictions show here.  Subscriber to our feed here Subscribe or review us in iTunes  JSE – The JSE is a registered trademark of the JSE Limited. JSE Direct is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

2020 predictions show Every year <a href="https://twitter.com/zamarcashton" rel="noopener nofollow" target="_blank">Marc Ashton</a>, <a href="https://twitter.com/keithmclachlan" rel="noopener nofollow" target="_blank">Keith McLachlan</a> and <a href="https://twitter.com/zamarcashton" rel="noopener nofollow" target="_blank">Simon Brown</a> do a predictions show. Three wild and wooly predictions for the markets followed by a call on the Top40 and ZAR for the year ahead. Importantly we start each show with a review of the previous years predictions and you’ll find the 2019 predictions show <a href="https://justonelap.com/podcast-2019-predictions-show/" rel="nofollow" target="_blank">here</a>. <ul> <li>Subscriber to our feed <a href="http://feeds.feedburner.com/MaudeStreetOnlineRadio-Jsedirectfull" rel="nofollow" target="_blank">here</a></li> <li>Subscribe or review us in <a href="https://itunes.apple.com/za/podcast/jsedirect-on-justonelap.com/id962733842" rel="nofollow" target="_blank">iTunes</a></li> </ul> JSE – The JSE is a registered trademark of the JSE Limited. JSE Direct is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Predictions 2020 (#383)

Upcoming events;  09 April ~ JSE Power Hour: Trader’s game plan  New weekly podcast in the RSS feed every Monday late morning. BUT only in the RSS feed, not on the website. So subscribe to the feed, it is here.  Subscribe to our feed here  Sign up for email alerts as a new show goes live   Lockdown T-1 day Will lockdown hurt the economy? Yes it absolutely will. Exactly how much we have no idea, but our economy is largely shutting down for three weeks (at a minimum). The impact too GDP, business (small and large but especially small) will be huge and right now is not quantifiable. How do we pay for it? We print money and take on state debt. Is this bad? Sure, under normal conditions. This is not normal conditions. This is a global emergency and it requires drastic measure. The extra and more expensive debt and more cash printed is all bad, but right now saving people and the country and its people takes priority over the economy. I know a broken economy is going to hurt, but no country or no people would make an economy moot. One point is that if we print money and run our debt higher, we're not doing it alone as a country, so the impact may be muted as all countries end up with way worse debt to GDP levels and weaker currencies making it all moot. Will Moodys downgrade us on Friday? Probably, maybe? But at this point nobody cares. Really, nobody does. The entire global economy is at risk of junk status. Also the local market and government bonds are way worse off than what a downgrade would have caused. Will lockdown be only three weeks? Initially sure. But most health experts say that after the initial lockdown the economy opens again, the virus returns and we go into another lockdown and this process continues for months if not the rest of 2020. Losers? Pretty much everybody. Especially those with debt and high fixed costs. Tourism and entertainment industries extra especially. Winners? No real winners but food retailers and to a degree food producers will remain operational but likely with higher costs from their implementing COVID-19 restrictions and protective measures. And we'll be shopping less and spending less. Example; Shoprite to pay shop floor and distribution staff R102 million 'appreciation' bonus.  Commodity prices are flying as mines move onto care and maintenance. As such miners are also have a great few days. But if they don't get back to mining soon, they're only selling stock piles and that eventually runs out. Have we hit bottom yet? I do not think so. Price action is moderately suggesting we have. But I suspect the markets will get solidly spooked when we start seeing the economic data. We'll get data that will be the worst every recorded, it'll take a strong market to not freak about that. Further the market seems to be thinking COVID-19 will be over in the next month or so. I think COVID-19 will potentially remain a problem well into 2021, we'll just be better at managing it. What's happening to dividends? We've seen a number of companies delay their dividends by up to six months. They're protecting cash in very uncertain times. At this point it has only been delays in payment, but at some point we may start seeing already declared dividends being cancelled. I have no idea how that process works, I assume the board has the right to reverse a decision they took early about dividend payment? Further we're seeing results coming out and dividends being passed as boards protect their cash. I am happy with this, but I don't need the dividend income, many do. What am I buying? ETFs, ASHGEQ. Sure lots is cheap, price wise. But is it offering value? We can not know as we simple do not know how this plays out. I have made two purchases so far in March, doubling my usual monthly spend (excluding tax-free). But I am not going in boots and all. There will be lots of time for buying stocks. We won't wake up one morning and suddenly everything is back to pre-crash levels. It'll be slow and volatile with a recovery to the peaks maybe as long as 4 years, potentially as short as two. We've got lots of time to buy, don't panic buy. Is US$2trillion a lot? Nope, US Federal national deb in 2019 was some US$22trillion. Staggering numbers, but the proposed US 'package', while large is not that seriously big in total terms. Any good news? Our government is doing this right. Not all countries are, some are doing a horror job. We're not. Load shedding is gone for now. With the economy shut down demand for electricity has collapsed and as such Eskom can cope with the reduced demand. Will local interest rates drop further? Yes. Further SARB has announced “As a further measure to add liquidity to the market, the SARB will commence a programme of purchasing government securities in the secondary market.”. The R186 is already 1.5% lower on this news. The SARB is essentially creating liquidity for those who want to exit their government bonds and receive the cash. How do they pay for this? They print money, that weakens the ZAR, but everybody is printing so that moot. It may spike inflation, but ain't nobody shopping, so maybe that also moot. Perhaps the best time ever to print money? Crisis of leadership A number of political leaders being exposed. But also in business. We essentially had eight days of warning about the lockdown, and anybody looking at what was happening in Italy, China and the like should have seen lockdown coming a mile off. But now leaders are stuck in the headlights, no plan, no idea, putting staff at risk. Should the JSE close down? No. JSE – The JSE is a registered trademark of the JSE Limited. JSE Direct is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Upcoming events; <ul> <li>09 April ~ <a href="https://justonelap.com/events/" rel="nofollow" target="_blank">JSE Power Hour: Trader’s game plan</a></li> </ul> New weekly podcast in the RSS feed every Monday late morning. BUT only in the RSS feed, not on the website. So subscribe to the feed, it is <a href="http://feeds.feedburner.com/MaudeStreetOnlineRadio-Jsedirectfull" rel="nofollow" target="_blank">here</a>. <ul> <li>Subscribe to our feed <a href="http://feeds.feedburner.com/MaudeStreetOnlineRadio-Jsedirectfull" rel="nofollow" target="_blank">here</a></li> <li><a href="http://feedburner.google.com/fb/a/mailverify?uri=MaudeStreetOnlineRadio-Jsedirectfull" rel="nofollow" target="_blank"> Sign up for email alerts </a>as a new show goes live</li> </ul> Lockdown T-1 day Will lockdown hurt the economy? Yes it absolutely will. Exactly how much we have no idea, but our economy is largely shutting down for three weeks (at a minimum). The impact too GDP, business (small and large but especially small) will be huge and right now is not quantifiable. How do we pay for it? We print money and take on state debt. Is this bad? Sure, under normal conditions. This is not normal conditions. This is a global emergency and it requires drastic measure. The extra and more expensive debt and more cash printed is all bad, but right now saving people and the country and its people takes priority over the economy. I know a broken economy is going to hurt, but no country or no people would make an economy moot. One point is that if we print money and run our debt higher, we're not doing it alone as a country, so the impact may be muted as all countries end up with way worse debt to GDP levels and weaker currencies making it all moot. Will Moodys downgrade us on Friday? Probably, maybe? But at this point nobody cares. Really, nobody does. The entire global economy is at risk of junk status. Also the local market and government bonds are way worse off than what a downgrade would have caused. Will lockdown be only three weeks? Initially sure. But most health experts say that after the initial lockdown the economy opens again, the virus returns and we go into another lockdown and this process continues for months if not the rest of 2020. Losers? Pretty much everybody. Especially those with debt and high fixed costs. Tourism and entertainment industries extra especially. Winners? No real winners but food retailers and to a degree food producers will remain operational but likely with higher costs from their implementing COVID-19 restrictions and protective measures. And we'll be shopping less and spending less. Example; <a href="https://www.fin24.com/Companies/Retail/shoprite-to-pay-shopfloor-and-distribution-staff-r102-million-appreciation-bonus-20200325" rel="noopener nofollow" target="_blank">Shoprite to pay shop floor and distribution staff R102 million 'appreciation' bonus. </a> Commodity prices are flying as mines move onto care and maintenance. As such miners are also have a great few days. But if they don't get back to mining soon, they're only selling stock piles and that eventually runs out. Have we hit bottom yet? I do not think so. Price action is moderately suggesting we have. But I suspect the markets will get solidly spooked when we start seeing the economic data. We'll get data that will be the worst every recorded, it'll take a strong market to not freak about that. Further the market seems to be thinking COVID-19 will be over in the next month or so. I think COVID-19 will potentially remain a problem well into 2021, we'll just be better at managing it. What's happening to dividends? We've seen a number of companies delay their dividends by up to six months. They're protecting cash in very uncertain times. At this point it has only been delays in payment, but at some point we may start seeing already declared dividends being cancelled. I have no idea how that process works, I assume the board has the right to reverse a decision they took early about dividend payment? Further we're seeing results coming out and dividends being passed as boards protect their cash. I am happy with this, but I don't need the dividend income, many do. What am I buying? ETFs, <a href="https://justonelap.com/etf-understanding-the-ashburton-1200-etf/" rel="nofollow" target="_blank">ASHGEQ</a>. Sure lots is cheap, price wise. But is it offering value? We can not know as we simple do not know how this plays out. I have made two purchases so far in March, doubling my usual monthly spend (excluding tax-free). But I am not going in boots and all. There will be lots of time for buying stocks. We won't wake up one morning and suddenly everything is back to pre-crash levels. It'll be slow and volatile with a recovery to the peaks maybe as long as 4 years, potentially as short as two. We've got lots of time to buy, don't panic buy. Is US$2trillion a lot? Nope, US Federal national deb in 2019 was some US$22trillion. Staggering numbers, but the proposed US 'package', while large is not that seriously big in total terms. Any good news? Our government is doing this right. Not all countries are, some are doing a horror job. We're not. Load shedding is gone for now. With the economy shut down demand for electricity has collapsed and as such Eskom can cope with the reduced demand. Will local interest rates drop further? Yes. Further SARB has announced “As a further measure to add liquidity to the market, the SARB will commence a programme of purchasing government securities in the secondary market.”. The R186 is already 1.5% lower on this news. The SARB is essentially creating liquidity for those who want to exit their government bonds and receive the cash. How do they pay for this? They print money, that weakens the ZAR, but everybody is printing so that moot. It may spike inflation, but ain't nobody shopping, so maybe that also moot. Perhaps the best time ever to print money? Crisis of leadership A number of political leaders being exposed. But also in business. We essentially had eight days of warning about the lockdown, and anybody looking at what was happening in Italy, China and the like should have seen lockdown coming a mile off. But now leaders are stuck in the headlights, no plan, no idea, putting staff at risk. Should the JSE close down? No. JSE – The JSE is a registered trademark of the JSE Limited. JSE Direct is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.

Hard, but necessary  (#393)

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