ARTICLES

Elimination of the Bears

The surprising upside breakout of the S&P500 above its previous cycle high (2130 on 21-5-15) means that the bull trend which began in March/April 2009 (see the red arrow on the chart below) is now continuing. Consider the chart:

This great bull market, now more than 7 years old, looks set to break all records. Analysts in America point to the fact that the S&P500 is on a forward earnings multiple of 17 – which is a little higher than the average of around 15, but still nowhere near dangerous territory.

Technically, the extended sideways market over the past year lays the foundation for a strong upward move, now that there has been a clear up-side breakout. Generally, the longer the sideways market (or period of consolidation) the stronger the subsequent up-move. So we are expecting a vigorous and protracted continuation of this bull market.

The underlying driver will be the extraordinary monetary stimulation which has been applied to the world economy over the past five years. As confidence levels recover among consumers and businesses, we can expect the stock market to begin to discount massive increases in profit levels across every sector and industry.

And, as the bull gathers momentum, you can expect the bears to appear. These will be a variety of so-called stock market experts who for one reason or another decide to predict that the great bull market is at its end. They will publicly proclaim that a downward bear trend is imminent and that you should get out of the stock market now. However, a few weeks or months down the line, when the bull is making yet another new record high and everyone who followed their advice has lost a sizeable amount of money, they will be discredited and quickly forgotten. Then the next bear will appear with a similar story, perhaps based on different logic – and, in time, he too will be relegated to the scrap-heap. Eventually, no one will be willing to risk calling the top of the market. We call that process the elimination of the bears.

And here is the kicker. Once all the bears have been eliminated and there is no one left to call the market peak, that is the time to get scared and take your money out of the market. But while there are people still calling the top of the market in the media, you can be pretty certain that the great bull trend remains solidly in tact.

DISCLAIMER

All information and data contained within the PDSnet Articles is for informational purposes only. PDSnet makes no representations as to the accuracy, completeness, suitability, or validity, of any information, and shall not be liable for any errors, omissions, or any losses, injuries, or damages arising from its display or use. Information in the PDSnet Articles are based on the author’s opinion and experience and should not be considered professional financial investment advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Thoughts and opinions will also change from time to time as more information is accumulated. PDSnet reserves the right to delete any comment or opinion for any reason.

PDSNET ARTICLES

Bell Equipment

We are often asked what prompts us to add a share to the Winning Shares List. The answer is that it is a variety of factors – but usually because the share appears to be very cheap in relation to its fundamentals. In other words, we expect it to be upwardly re-rated as its fundamental value becomes recognised by the institutional fund managers. A

JSE All Time Record High

On Friday last week, the 12th of July 2024, the JSE Overall index closed at 81686 – an all-time record high. Consider the chart:

The chart shows that the Overall

Construction

The entire construction industry was decimated by the 2008 sub-prime crisis, the ANC under Jaco Zuma’s presidency and then finally by the pandemic in 2020. Hundreds of thousands of jobs were lost and massive companies like M&R were reduced to penny stocks on the JSE.

The JSE Construction and Materials Index (JS5011)

Murray & Roberts

A company’s debt is critical in establishing the risk inherent when investing in its shares. High debt levels expose the company to high interest and capital payments and can swallow up a large part of whatever profits it makes. Low debt levels give the company the headroom to invest in further growth either organically

Mr Price

Mr Price is a well-known and focused retailer of clothing in South Africa. It is a quintessentially South African company, and its performance is a direct reflection of the state of the economy and the level of consumer spending. It is an extremely well-managed company in a very tough and competitive market. Clothing is sold by many dedicated outlets in South Africa and almost

Uncertainty = Risk = Volatility

We live in uncertain times. Among the sources of this uncertainty are the final outcome of the recent local elections (i.e. what the shape of our future government will take) and the prospect of the American elections on 5^th November 2024. In the background are the wars in Ukraine and the Middle East which constantly threaten to escalate.

The uncertainty

Winning Shares List

Investment in the share market is not about certainties – it is about probabilities.

Success comes from bending the odds in your favour, so that it becomes like playing a roulette table where you have a 60% or 70% chance of winning.

That, of course, means that you must fully expect to lose 30% or

Wall Street and the Rand

As South Africa edges closer to election day, the ANC has been desperately doing everything in its power to pass populist measures to bolster its waning support, especially with the country’s lower income groups. This includes the signing of the highly controversial National Health Insurance (NHI) bill into law by President Ramaphosa.

There

Pan African Resources

In our opinion, the gold price in US dollars should continue to perform well for the rest of 2024 with the potential for rising inflation and increasing political instability in various parts of the world. The upward trend will, of course, be marked by corrections, but the overall direction of the trend is clear. Consider the chart:

Market Overview

This week, the US Federal Reserve Bank’s monetary policy committee (MPC) held interest rates unchanged at their historically high levels and said that they intended to hold rates at these high levels for longer than previously expected. This information was followed by the April 2024 non-farm job creation number which came in at 175 000 – considerably