ARTICLES

Two Elections and Two Wars

As the New Year begins, private investors should consider the most important factors which are likely to impact on the prices of shares and the profits of companies listed on the JSE. Some of these factors are local, like the general election which is expected to take place sometime in May, and some are international like the oil price, the strength of the American economy, or the outcome of the US presidential elections.

It now seems highly likely that the ANC will not be returned with a majority in Parliament in the general election later this year. Even their own polling indicates that they will almost certainly be forced to compromise with at least one other party after the results are in. The DA’s polling indicates that the ANC will get 39% of the vote while they will get 32% - and that therefore their alliance of minor parties may get sufficient votes in total to displace the ANC completely.

Given the extraordinary mismanagement of the economy which has characterized the ANC’s 30 years in office, such a development could certainly be expected to have a significant long-term impact on equity prices.

The price of oil is an incredibly important factor, both locally and internationally because it impacts directly on inflation rates and growth levels around the world. Since President Biden’s visit to Saudi Arabia in mid-2022, the oil price has been in a downward trend – and there is no indication that it will rise significantly during 2024.

The lower oil price has almost certainly been the most important factor in enabling the US economy to enjoy a “soft landing” despite the 10 interest rate hikes totalling 5% which have been implemented there. The soft landing of the US economy together with the massive job creation and rising stock market during the Biden presidency will be major factors in his favour in the presidential elections in November 2024.

At the same time the lower oil price is impacting directly on the situation in Ukraine. The cumulative impact of drop in the oil and gas prices combined with significantly lower volumes over the past year has damaged the Russian economy badly, at a time when it can least afford it.

Russia’s desperate need for additional soldiers to fight in that war has resulted in them offering foreign nationals’ Russian citizenship and a signing up bonus of $2000 to join the fight against Ukraine. This offer is appealing to migrants from Kazakhstan, Uzbekistan, Kyrgyzstan, Turkmenistan, and Tajikistan. It is also attractive to potential migrants from other countries like Cuba, Ethiopia, Nepal, and Syria. But the quality of the troops which it produces is highly suspect and their morale is very fragile.    

Ukraine is also feeling the need for more soldiers with President Zelensky suggesting the conscription of a further 500 000 people.

In our view, the war will continue until Russia runs out of financial, human, and military resources – and it is difficult to predict exactly when that might happen. Our view is that NATO, including America, will find a way to continue supporting Ukraine because the prosecution of this war is highly beneficial to them. It is accomplishing their need to deal with Putin’s megalomania and to degrade Russian military capability.

It is difficult to predict what will happen in the US presidential elections, but we believe it is becoming increasingly difficult for Donald Trump to win. He is facing ninety-one criminal charges in four cases at both the Federal and state levels. The US Supreme Court is now considering the decision of the Colorado supreme court to remove him as a candidate from the primary ballot in that state.

In addition, while Biden has not been doing well in the polls, the Democrats have been winning minor elections all around the country. Much of this has to do with the massive loss of support for Republicans following the Roe Vs Wade decision which deprived women of important personal rights.

Overall, we are positive about the prospects for equity markets and the JSE in the year ahead. With two critical elections and the on-going prosecution of the wars in Gaza and Ukraine (which are in our view connected), we see it as a year in which the forces of fascism both here in South Africa and elsewhere are likely to be substantially diminished.

The S&P500 index is on the brink of breaking up to a new all-time record high and it is our view that, when this happens, it will presage a substantial further upward move in stock markets around the world including the JSE.

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PDSNET ARTICLES - JANUARY 2020

The Corona Correction

One of the enduring characteristics of markets is that they over-react. The size of their over-reaction depends on exactly where they are in the cycle and whether sentiment at the time is generally negative or positive. The S&P made a new all-time record high on the day before Martin Luther King Jr Day (20th January 2020) – after a consistent run which has lasted since the beginning of October 2019 – almost four

Kumba

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Is Old Mutual Cheap?

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The Discount to Tencent

It is commonplace for investment holding companies to trade at a discount to the value of their underlying assets. This discount is usually around 20% to 30% depending on the assets held. Efforts are often made to “unlock” this value into the hands of shareholders by “unbundling” the assets directly into the hands of those shareholders. Private investors can sometimes score a windfall by buying into an

2020 Prediction

Predicting what will happen on the JSE in 2020 is immensely difficult. There are many variables, each of which is complex in its own right. However, some things appear reasonably clear to us. They are:

• The dominant prediction for 2020 is that Wall Street will continue on its upward journey with the S&P500 breaking a series of new highs during

2020 Prediction

Predicting what will happen on the JSE in 2020 is immensely difficult. There are many variables, each of which is complex in its own right. However, some things appear reasonably clear to us. They are:

• 1. The dominant prediction for 2020 is that Wall Street will continue on its upward journey with the S&P500 breaking a series of new highs during the year. In this process it will go through at least one major correction