David Shapiro back into ‘Raging Bull’ mode on SA stocks - and globally. Here’s why.
Summary
TLDRIn this business news briefing, South Africa's favorite stock broker, David Shapiro, discusses the cyclical nature of the stock market and the potential for a bull market phase. He highlights the impact of interest rate changes on the market, suggesting that a decrease in rates could boost equity and bond markets. Shapiro also touches on the importance of the release of AI technology and its influence on market perspectives. He expresses optimism about South Africa's economic growth, emphasizing the need for bold moves by the Reserve Bank and the potential of commodity sectors to drive the market. Additionally, he mentions the significance of fast internet access for keeping up with global technological advancements.
Takeaways
- 📈 The conversation discusses a potential shift into a bull market phase for South Africa, driven by a global market upturn and the impact of interest rate changes.
- 🌐 There's a recognition that global markets have been challenging due to high interest rates, but recent developments, such as the release of ChatGPT, have provided a fresh perspective.
- 📉 The script highlights the importance of interest rate cuts as a catalyst for market growth, with expectations of a series of cuts through to the end of 2025.
- 💼 The discussion touches on the economic pressures faced by businesses due to high borrowing costs, emphasizing the need for significant rate reductions to stimulate growth.
- 📊 The speakers express optimism about the South African market, suggesting that it offers great value, particularly in small and mid-cap stocks, which are expected to outperform.
- 🏭 There's a focus on the commodity sector as a potential driver of the South African market, with mentions of recent movements in platinum shares indicating a possible turnaround.
- 🚀 The conversation includes a mention of Elon Musk and Starlink, suggesting that improved internet access could be a significant factor in South Africa's development.
- 🌟 The script references the influence of key business figures and their positive outlook on South Africa's economic prospects, citing factors like the government of national unity and infrastructure investment.
- 📉 The speakers discuss the challenges faced by certain companies, such as Metrofile and Arc Invest, suggesting that a slowdown in business volumes could be a concern.
- 💡 There's an emphasis on the need for careful stock selection, as not all companies or sectors may benefit equally from the anticipated market upturn.
Q & A
How long has the relationship between the interviewee and South Africa's favorite stock broker been?
-The relationship has been going on longer than Nelson Mandela was in jail, which is over 27 years, as they first went on air together 27 and a half years ago.
What significant event in 2022 is mentioned in the script that influenced the market?
-The release of ChatGPT in November 2022 is mentioned as an event that put a different perspective on the market.
What is the current expectation regarding interest rates globally and in South Africa?
-The expectation is that interest rates will start to drop, which is likely to lead to a bull market. The debate is about the extent of the rate cuts, whether it will be 50 points or 25 points.
Why are interest rates dropping significant for the economy?
-Interest rate drops are significant because they boost confidence in the economy, allow businesses to borrow at lower costs, and stimulate spending and economic growth.
What is the current state of the United States' labor market according to the script?
-The labor market in the United States is starting to feel the pressure and is slowing down, which is a point of concern for policymakers.
What is the term 'small and midcaps' referring to in the context of the stock market?
-Small and midcaps refer to companies with a smaller market capitalization, typically those that are not as large as the major industry leaders but are larger than the smallest companies.
What does the script suggest about the future of the commodity market, particularly in South Africa?
-The script suggests that the commodity market, especially in South Africa, might be a surprise factor for an upside turn, with Platinum shares showing signs of recovery.
What is the significance of Elon Musk's Starlink in South Africa according to the script?
-The script highlights the importance of Elon Musk's Starlink for South Africa, as it could provide fast internet access, which is essential for keeping up with technological advancements globally.
What are the two factors mentioned in the script that are making certain investment gurus upbeat about South Africa?
-The two factors mentioned are the government of national unity being sustained and the efforts of ESKOM to keep South Africa away from load shedding.
What is the concern regarding Metrofile and Arc Invest as per the script?
-The concern is that Metrofile's technology may have fallen behind, and for Arc Invest, the issue is that the intrinsic value of the underlying businesses doesn't match the share price, leading to a deep discount.
Outlines
📈 Pioneering Business Broadcasting and Market Insights
The conversation begins with a reflection on the long-standing partnership between the two speakers, dating back to the inception of Business Radio 27 years ago. They discuss the evolution of business broadcasting and the guest's role as a pioneer in the field. The discussion shifts to the current economic climate, with a focus on the potential for a bull market in South Africa. The speakers analyze global market trends, including the impact of high interest rates and the recent release of AI technology, which has shifted market perspectives. They also touch on the importance of confidence in the economy and the need for lower interest rates to stimulate business growth.
🌟 Small and Midcap Opportunities Amid Market Shifts
The second paragraph delves into the potential for investment in small and midcap companies, particularly in the context of a changing global market. The speakers discuss the current state of the US labor market and the pressure it faces, leading to expectations of interest rate cuts. They also debate the outlook for South Africa's monetary policy, with hopes for aggressive rate cuts to stimulate the economy. The conversation includes insights from investment experts who highlight the value of South African stocks, especially in the small and midcap segment, and the importance of identifying companies poised for growth in a rapidly changing world.
🛑 Commodity Market Dynamics and Economic Stimulus
In this segment, the speakers focus on the commodity market, particularly the platinum sector, as a potential driver for South Africa's market. They discuss the recent decision by Sab Stillwater to cut production and its impact on platinum prices. The conversation also touches on the broader economic context, including the slowing Chinese economy and the need for stimulus measures to boost global growth. The speakers express optimism about the potential for a market turnaround, driven by commodity prices and positive developments in South Africa's political and economic landscape.
🚀 Tech Innovations and the Importance of Fast Internet
The final paragraph discusses the rapid pace of technological innovation and its importance for South Africa's development. The speakers highlight the potential impact of Elon Musk's Starlink on the country's internet infrastructure and the broader implications for economic growth. They also touch on the challenges faced by certain companies, such as Metrofile and Arc Invest, in keeping up with technological advancements and market demands. The conversation concludes with a call for South Africa to prioritize fast internet access to stay competitive in the global market and to leverage new technological products.
Mindmap
Keywords
💡Stock Broker
💡Business Radio
💡Interest Rates
💡Bull Market
💡Artificial Intelligence (AI)
💡Equity Markets
💡Bond Markets
💡Commodity
💡Small and Midcaps
💡Portfolio
💡Rand Hedge
Highlights
David is recognized as a pioneer in business radio and TV in South Africa.
The discussion reflects on the cyclical nature of South Africa's stock market over the past 27 years.
There's a potential shift to a bull market driven by global interest rate changes.
The release of AI technology like Chat GPT has influenced market perspectives.
Interest rates globally are expected to drop, which historically boosts markets.
Confidence in the economy is linked to interest rates and consumer spending.
The importance of lower interest rates for business growth is emphasized.
There's a debate on the extent of the upcoming interest rate cut by the FED.
South Africa's central bank is expected to follow global trends in interest rate cuts.
The potential for commodity markets in South Africa to surprise on the upside is discussed.
The significance of the government of national unity for South Africa's economic outlook.
The impact of global technological advancements on South Africa's development.
Elon Musk's potential involvement with South Africa's internet infrastructure is noted.
The investment potential in small and mid-cap stocks in South Africa is highlighted.
The importance of selecting individual stocks over index tracking is discussed.
Reports on companies like Metrofile and Arc Invest indicate a slowing business volume.
The intrinsic value of companies and their share prices may not align due to market dynamics.
Transcripts
[Music]
South Africa's favorite stock broker and
I have had a
long relationship going back sure David
longer than Nelson Mandela was in jail
and I can actually say that with some
confidence now because this is our first
edition of business business news
briefing
and we had the first edition of Business
Radio 27 A2 years ago at the sabc you
remember that you remember coming into
those studios in the dungeon I do very
much and it was very short it wasn't and
I have to credit you with actually being
the pioneer of business radio and
business TV and I think you set the pace
which of course has grown dramatically
since then but you were a Pioneer yeah I
got lucky I was I went to the sabc if
you recall
1991 after medo was led out of jail and
then spent some time spent some time
there and got to understand a little bit
more about broadcasting because
broadcasting for most South African
journalists was there wasn't really a
place that you could go and learn from
and then as we went forward in when I
started manone web Dave remember then we
wanted to make we wanted to make some
cheap content cuz it was so small and
then you came into those Studios of the
sabc anyway so it's 27 and 1/2 years ago
that you and I were on air for the first
time so this being the first bus news
brief you're the only person that I
could be talking to so thank you again
for all the service you've given to
South Africa and indeed to our community
it's extraordinary though when you have
a look at South Africa because talking
about all those years ago reminds me
that we go in Cycles don't we South
Africa has gone through in those 27
years sometimes where people were
rushing into the stock market and other
times where they were just selling
anything they could of South Africa and
right now I get a feeling we might be
going back into the bull
phase are we going into a bull market
there's no doubt about that Global ball
market and aleec I don't think people
appreciate uh the kind of Market we're
going into I think what we forget and
I'm just giving a quick Global
Perspective we've had four years of very
difficult markets in which interest
rates globally have gone up dramatically
the only thing that kind of offset it or
cushioned it was an event in November 22
when with the release of chat GPT which
put a different perspective on the
market but if it wasn't for the release
of artificial intelligence of that of
the money that was spent there we would
have gone through two and a half three
years of very difficult markets dragged
down by high interest rates and the
impact that it had not only on
businesses but consumers but what's
happened now that's being reversed from
probably Wednesday when the FED meets to
our meeting on Thursday you're going to
we going to start a succession of
interest rates which could go on right
through to the end of 2025 and when
rates come down Alec then markets go so
I think we going into a very strong
phase of equity markets and probably
Bond markets as well it's an interesting
point you make there because over the
long term when interest rates start
dropping is the time you should be
owning
shares exactly and the reason is obvious
because I think it's number one
confidence you'll see that from Once
rates go down and confidence returns
into an economy mainly because people
are getting more money in the back
pocket and they start to spend it Al
companies are not dragged down by
interest ratees I was looking at growth
point uh results the other day you know
when you're paying this rates it's
almost impossible to make ends meet you
know the prime rate not that growth
point would pay these levels but the
prime rate's 11 and 3/4% and it no
business can survive if you're borrowing
money at those kind of levels so we need
rates to come down dramatically you know
it's the same kind of thing in the
United States where rates are you know
over 5% so it's very difficult uh for
businesses to move forward and therefore
when rates start coming down it's it's
it's a big driver of economic growth how
confident are we that interest rates
will be cut on Wednesday in the United
States and then triggering similar Cuts
around the world it's not a debate of
whether they will be cut it's the rate
at which they're going to be cut the big
debate is it going to be 50 points is it
going to be 25 points and whatever
there's if in fact I can't find any
Clear View because there is so much
around is the camp that believes that
the FED has got a dual mandate which is
not only inflation it's also a
employment and the labor market in the
US is starting to feel the pressure it's
slowing down and you don't want it to
slow down too much you know that you you
bring about a recession so I think you
will find the two camps those who
believe a 50 point necessary I think
it's almost 60% of uh views that it
would be 50 points the others is it
could be 25 points so whatever is it
doesn't matter it's only that if it's 25
this meeting it'll be another succession
of 25 points right through to the end of
25 where the general view in the US is
that rates could come down by as much as
222 2 2 qu% 225 basis points of that
which will make a huge difference to to
spending and confidence in the US and we
will follow suit we need to come
dramatically we need a lot more than 220
25 points I think a good 45% down here
so what are you expecting on Thursday in
South Africa given that the FED is going
to make their decision on Wednesday I
hope they change their minds I hope the
FED is 50 and I hope we're more than 25
because I think that at in in South
Africa I'm in the camp that we need
growth we really need something to
kickart take start with economy and I
think is almost in my view tokenism and
I think sometimes the Reserve back needs
to be a little bold in understanding
what the what the underlying economy is
doing we need it Al we need it here and
it's you pick it up in the results I
know that markets are running ahead and
share prices are picking up but you need
that's one part of the equation the
other part is the actual real economy
where people are under huge pressure in
terms of just making ends meat so I'm
hoping that the reserve bank's a little
bold and goes beyond just qu% we had the
first bus news investment conference on
Thursday here in hermanus and David CH
David chapiro was absent but you will be
I hope with us in March but we did have
pit fun and S Jacobs and their message
was very clear it was watch out in the
United States those markets or there
certain stocks there that are very toppy
but South Africa is offering great Great
Value and particularly what they call
small and midcaps maybe you can just
unpack what that means small and midcaps
and then indeed if there are any views
of theirs that you would
share I I think we all going to
benefit in other words I don't think I I
know there's a view that America is
overpriced I don't share the view that
America is going to come down because
you will find the market continuing
upward even though you might find the
daating if I can explain that it means
that uh a lot of these companies the
tech companies that have led the way and
I think are still going to be relevant
for the next decade simply because they
have so much power and so much money
what might happen Alec is that they
might not increase at the same Pace that
they have but I don't think they're
going to fall over and I think where pit
and S are right yes there will be a
shift towards other businesses that will
catch up but you've got to know which
other businesses are going to catch up
because things have changed from Co just
to give you a view on that without
taking up too much time in this
conversation American beer sales were
down for were down to a 43 year mow and
why because habits have changed so
before we you know before we start
making predictions we've got to
understand how things things have
changed in the world and and which
companies are now going to benefit so
it's very important this could be a
subject of a whole discussion so you've
got to be very careful where you put
that money if you're taking it away from
Tech from our point of view the one
thing that has held us back here in this
market has been number one that we're
still very heavily reliant on a lot of
our offshore businesses but on the but
the one area that I'm stared to look for
the turn around and it might be
premature is on the commodity side and I
think that's going to be what's the word
I'm trying to say the one area that's
going to surprise us on the upside we've
been dragged down by China we've been
dragged down by concerns about global
growth but Alec if you look today even
today Platinum shares all of a sudden
from the very low levels are going up
and it's only been the and I say hold on
a sec Platinum price not doing much why
are these shares going up so fast why is
the slot money coming in and I think
that's going to be one of our surprise
factors is going to be on the commodity
side it it I might be premature I might
be too early but I'm looking for the
science of what can drive our market and
I think it's going to come from that
area now that's so interesting you make
a a point of that because s Jacobs
disclosed to us that he has started
buying Platinum shares on the strength
of the first person blinking which was
uh Sab Stillwater who cut 200,000 oun
off the Still Water Production last week
and he said it's been like all of the
Platinum companies have been looking at
each other and seeing the prices fall
but nobody has reacted and cut their
output to improve the demand sorry
improve the price and he says that he
saw this as a big thing last week he
took that as a signal and interesting
the point you make about the Platinum
sheares today uh which this is Monday
the 16th of September angular Platinum
up again uh and we seeing some of the
pre other precious me metal stocks going
too so are you nibbling in there David
given that they these Shares are down at
y multi-year lows it's I haven't started
yet but that doesn't mean I still think
there's plenty of time to make that
decision plenty of time and I think that
what will happen if I looked at CH today
the numbers coming out of there are
really poor and that economy is
struggling if I could say that if that's
a right word it's not really struggling
it's slowing down but I think we're
going to see stimulus coming there I
think the authorities there the
government there has to do something and
I think once the market gets a whiff of
that and it starts coming through you
know the iron oil price which is in the
low 90s now which is a very low level
it's normally a that's normally a level
from which it bounces we talking about
Platinum copper remember when BHP made
the bid for angos copper was 11,000 it's
now down in the 9000s early 9,000 so I
think all of these things will come
right in a global economy that is
starting to pick up and Al you said
markets are made of swings and
roundabouts and ups and down no one
rings the bell and says to you f up and
Alec and says Alec I think it's time for
you to
it happens so fast you know what I mean
and it happens with immense speed so
you've got to be when you start to see
these signals then you've got to make
the commitment and I'm very bullish for
the next couple of months next couple of
months starting and then into
2025 the other bull factors that s was
talking about in more broad terms were
the government of national Unity which
he believes will hold and then we had
the chairman of esim
MTI who was one of our key presented a
keynote that was so well received not
least by the investment gurus who were
there those are the two factors that is
making s Jacobs and and 361 and pit Fon
and the recm guys feel very upbeat about
South Africa what's your view on those
two government of national Unity being
sustained and esum being able to keep us
a away from lad cheating I think that's
a very that's those are positive moves
but I have to just mention one thing and
what I like about sigh and pit is that
they are not index trackers in other
words they buy portfolios they buy a
parcel of
shares okay and I'll tell you why I say
that because when I do the analysis of
the South African
Market 70% of the company IES of market
cap are made up of businesses who earn
less than 25% in South Africa in fact
I'm being generous with 25% I think
that'd earn probably 15 or less than 15%
of the income in South Africa the other
10 there's another 10% which of the m is
at foreign dollars but 80% of our market
for all intents and purposes is Rand
hedge and it's made up of old economy
stocks British American Tobacco uh call
the I call the resource companies old
economy and so on so the only 20% and
even that might be exaggerated of our
Market is saing and that's important now
if you're pit and if you're sigh and
you're focus on some really good
underlying businesses you're going to do
well you know what I mean you might even
see a PPC which is being slaughtered
absolutely trashed turn around at a
level that you can't believe as fixed
investment starts to happen here because
of the factors that you mentioned esum
government and National Unity the
transet all of those coming more
investment in infrastructure and that so
those companies your favorites Wilson
Bailey companies like that will start to
do incredibly well but you've got to
pick your stocks you can't just say I'm
going to buy the cetric or something
because then you probably not going to
do as well as an individual portfolio I
think that's where pit and are very
strong they talk about small and midcaps
and you've actually put your finger on
the button there Dave before we go two
last things the Elon Musk announcement
or reference from president Raposa last
week saying that he's now talking to
Elon this is on starlink we know that
the African countries have got starlink
and it's a fabulous product in South
Africa it's not coming yet because Elon
doesn't want to give away 30% to
politically well connected people he
refuses to do that but now we see almost
a change in Attitude by the by the
president saying he's talking to Elon
he's bringing come back here Elon come
to South Africa that's got to be a
little bit of an a bit of a ball Factor
you know why Alec
because um the world is moving at such a
fast pace I'm a big AR person I love big
Tech and I look at it all the time
and you can't keep Pace with it and it's
not only technology it's not only at
that level it's in the pharmaceutical
areas that we're seeing the weight loss
drugs so there's so much development
taking place in the world now which is
going to dominate where the spending is
and how we live and South Africa has to
make it the one thing that links us is
fast internet is in other words access
to all these new technological products
so it's when we hear that kind of stuff
it's very important for us we can't fall
back on on development that's that to me
is one of the biggest areas that we have
to that we have to focus on hoping that
it does happen that we are able to use
these products because it's essential
for us not to fall behind the rest of
the world and my last point is we've had
a couple of interesting companies
reporting today
metrofile Arc invest do you know much
about these two business businesses I
know metral very much it's part of svest
it goes back to the to to the late 80s
to so I know the company have a big
problem in fact if I look at oceo is
also out today as well as what are the
issues there is we starting to see
volumes fall and even if you follow the
retailers are sorry if I'm going
slightly off track but there's a point
that I want to make on vran and that's
slow down in business when volume start
to fall for that for concern and even in
the grow looking at both of those
results metral maybe their technology
has fallen behind I thought they keep up
but it's also an indication of a slowing
down of business with all the two the
underlying businesses are very good Alec
and they frustrated because their
intrinsic value doesn't match the share
price and other was is a deep discount
and I think one of the reasons is that
you're not quite sure what you're buying
no little bits of everything and the
same as the old days in rem gr when you
used to buy REM gr you knew you were
buying richmont in there or British
American Tob back what was then
rothman's or whatever it was so you
could identify what you were buying and
that's why you bought it I still think
Arc has got to refine its portfolio that
it's a couple of good businesses in
there that trct uh investors and the
discount will
nrow David chapiro South Africa favorite
stock broker and I'm Alec hog from
bus.com
[Music]
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