ARTICLES

Gold shares up 225%

On 24^th June 2019 we published an article under the heading “New Gold Bull” in which we drew your attention to the fact that the US dollar price of gold had broken up convincingly above resistance at around $1340. Below is the chart which we included with that article.

You can see here the clear upside breakout above the upper resistance line in the “wedge formation” in gold. That gave a clear signal that the period of sideways movement which had lasted for six years was over and a new upward trend was about to commence.

Over the year which has followed the price has surged to $2061 – a gain of 54%.

For South African investors, that gain has been amplified and extended by the 21% fall in the rand/dollar exchange rate over the same period. Together these two effects have resulted in a massive surge in the price of gold shares. Consider the chart of the JSE gold index over the same time period:

At the time that our article was published (24-6-19) the JSE gold index was at 1998. It closed last night at 6507 – a gain of 225,7% in just over 1 year.

What is the cause of this massive surge in gold shares? The underlying cause is the expected fall in the purchasing power of paper currencies following their continuous debasement (in the form of record low interest rates and quantitative easing) in the ten years after the sub-prime crisis of 2008. This has now been further extended by the extraordinary monetary stimulation in response to the corona pandemic which has seen a widespread resumption of quantitative easing and a return of effective interest rates to zero in most first world countries.

Smart investors are aware that you cannot expand the money supply so radically without debasing it. Added to that, there is little incentive to hold US treasuries because they are offering negative real returns. This makes gold the obvious choice for the protection of wealth.

The massive monetary stimulation of the world economy over the past decade will, in our opinion, result in an economic boom of monumental proportions over the next few years. That will certainly be accompanied by rising inflation which will be very difficult for central banks to contain.

This means that shares on world markets (including the JSE) are going to continue rising, including gold shares. In our article we suggested that the upside break in the dollar price of gold “could represent an opportunity for private investors”. Today, after a 225% gain, we are saying that the opportunity is not over – it has just expanded to include almost all high-quality equities.

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

Balwin

The JSE property index (J253) has fallen over 68% since December 2018, firstly because of the adverse report about the Resilience group in January 2018 and then because of the pandemic in March 2020. This has left the index trading at a fraction of its underlying value – which represents an opportunity for private investors.
Among the property shares there are some which we believe represent bargains,

The Great Bull

We have often stressed the importance of understanding the long-term context within which the share market is moving. It is very difficult to see what is likely to happen in the future unless you go back in history and study how we arrived at this point. In this context, it is important to understand that, these days, the major markets of the world generally move together – and they all follow Wall Street.

The Confidential Report - October 2020

America
Technically, September 2020 was a correction month on Wall Street, with the S&P500 falling about 9,3%. The market was certainly due for some sort of correction following its record high of 3580 on 2^nd September. Consider the chart:

The Relationship between Fundamental and Technical Analysis

There are generally two approaches to share assessment – fundamental and technical analysis. The fundamentalist is trying to answer the question, “How good will the company be as a generator of dividends in the future?” while the technician is looking for patterns in the share’s price and volume charts to improve his predictions of where the share

Oil

The Oil market is usually an excellent barometer of the state of the world economy. When there is growth, people buy more cars and drive more, more products are consumed which means they have to be transported to retail outlets – usually by an internal combustion engine of some sort.
The COVID-19 pandemic caused the oil price (North Sea Brent) to collapse to prices below $20 a barrel

Alviva

There is plenty of value for private investors on the JSE at the moment. The big institutions are focusing on the large blue-chip shares and ignoring the smaller companies, but some of those smaller companies offer really good opportunities. We think that Alviva (AVV) is worthy of your consideration.  
Alviva describes itself as,

Two interesting shares.

Warren Buffett has famously been quoted as saying “Be fearful when others are greedy and greedy when other are fearful”. Right now, investors are understandably fearful and for that reason there are some unusual opportunities in the market. The shares which would obviously benefit in the post-COVID-19 period have already moved – shares like Prosus and Sibanye. In fact, mining

The Confidential Report - September 2020

America
The new approach to monetary policy, announced by Jerome Powell (Chairman of the Federal Reserve Bank) on 27^th August 2020, has been interpreted by the market as substantially more dovish, with the immediate result that the S&P500 broke up to new record highs – well above the previous high of 3386 made on 19^th February 2020, before the advent

Shoprite Buy Signal

For many decades the grocery retail sector in South Africa has been dominated by two major players – Pick ‘n Pay and Shoprite. During much of that time, Raymond Ackerman dominated the market and Shoprite/Checkers played second fiddle under former CEO, Whitey Basson. Following Ackerman’s retirement, Pick ‘n Pay went into a slump and Basson was able to steer Shoprite into a position of dominance by

City Lodge Rights Issue

The COVID-19 pandemic has hit few listed companies on the JSE as badly as City Lodge. Business and holiday travel has slowed to a crawl and occupancy in the second half of March 2020 fell to a dismal 16,7%. KPMG, the City Lodge auditors, drew attention to the fact that in the 9 months to 31^st March 2020 the company lost R316 000 which left it in a position where its liabilities