ARTICLES

Market Update

The S&P500 has virtually completed its seventh “mini-correction” on Friday the 4th of June 2021, since the V-bottom of the pandemic in March 2020. It exceeded its previous all-time high closing level of 4232.6, reaching an intra-day high of 4233.45. That it would probably go to a new record high was indicated by its record intra-day high of 4234.12 made on 1^st June 2021, immediately after the Memorial Day holiday. Further new record high closes are evidently imminent as international investment sentiment surges back towards “risk-on”. Consider the chart:

The strong upward move has gained new momentum from Joe Biden’s proposed $6trillion budget proposal and is boosted by good quarterly results from the S&P500 companies. Interest rates remain low and investment optimism is rife.

The shift towards “risk-on” is impacting on the currencies of emerging markets as more and more overseas investors, faced with zero or negative real interest rates at home, join the search for real returns on their money. The rand, which, in our opinion, has been under-valued for some years, is strengthening rapidly.

On Friday evening (4^th June 2021) the rand was pushed to new highs at R13.4311 to the US dollar. Consider the chart:

In our view the rand is now, perhaps, a little over-bought in the short-term and some sort of correction seems probable. Nonetheless, its strength means that the rising oil price has been largely offset for South African motorists.

The price of North Sea Brent oil has broken up through resistance at $69 and is now trading at $71.89. This reflects the fact that demand for motor vehicles continues to rise worldwide as the international economic recovery gains momentum. The growing take-up of electric vehicles is not yet sufficient to dampen oil demand significantly. Consider the chart:

It is now apparent that the world economy is in a strong economic boom which is reflected in rising share and commodity prices. South African economic recoveries have always been “export-led” and this recovery will be no different. Despite our various efforts at beneficiation, we remain primarily an exporter of commodities and we are enjoying a commodity bonanza as everything from coal and iron to gold and platinum rise to new highs.

The affluence which this has created is working its way through the JSE, impacting commodity shares first, of course, but spreading to other sectors, most of which are recovering quickly. This is a time to be fully invested, but to keep a wary eye out for that correction which we predicted in last month’s Confidential Report.

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

Exponential Growth

The  S&P 500 index is important because all the stock markets around the world tend to follow it. If the S&P is in a bull trend then London, Tokyo and the JSE will also be in a bull trend – and vice versa.

The S&P500 index began 68 years ago on 4 th March 1957 with an initial value of 43,73. It took nearly

The US Jobs Market

International investors who trade on Wall Street are generally negative about any good news from the economy because it tends to make the monetary policy committee (MPC) more hawkish and less likely to reduce interest rates. The opposite is also true. But there comes a point where bad news is so bad that investors begin to fear that the US economy is heading

Jackson Hole

Once a year in late August central bankers and academics congregate in Jackson Hole to discuss the state of the economy and consider the way forward. Traditionally, the Chair of the Federal Reserve Bank (“the Fed”) addresses the meeting and gives direction to its thinking on monetary policy in the US. This year, the comments of Jerome Powell resulted in the

Choppies

Choppies is a supermarket chain which operates in Botswana, Namibia and Zambia. It is listed both on the Johannesburg Stock Exchange (JSE) and on the Botswana Stock Exchange (BSE). Notably, the company has resisted the temptation to re-enter the highly competitive and cut-throat retail market in South Africa, having exited that market in 2020 due to sustained losses. Despite

Gold Resistance

All investments throughout the world can be ranked on a scale from high risk to low risk. As a general rule, in the world of investment, risk and return rise together. In other words, as the risks in an investment increase, so does the return necessary to attract investors.

At the one end of the scale there are very low risk investments

Sibanye takes off

We have been writing about Neal Froneman and Sibanye for years now. Beginning in 2013, Froneman assembled the Sibanye group over a period of 7 years, buying up mining operations both in South Africa and America at bargain prices. Initially he bought precious metals producers, but more recently he has been diversifying into base metals like zinc and lithium which

The 16 Year Bull Trend

Since the Second World War, the stock markets of the world, including the JSE, have always tended to follow the New York Stock Exchange (NYSE) - and the NYSE is best measured by the S&P500 index (S&P) of its 500 largest companies.

For this reason, we believe it is important for private investors to constantly

CA Sales Revisited

Retailing in Africa is difficult with many of our leading retailers having attempted to open stores in countries to the North of us without notable success. These countries are often unstable and volatile politically. Getting adequate stock to branches has proved problematic and expensive.

It is not surprising therefore that a company has been

Bluetel

Bluetel (BLU) is a company involved in pinless top-ups, prepaid electricity, ticketing and universal vouchers. As such it is a company with substantial repeat business from existing customers. This type of business model is attractive to investors because it implies minimal working capital and strong cash flows.

Bluetel’s purchase

The Debtors' Book

A BIT OF HISTORY

Many years ago, in 1982 when I started this business (which became “PDSnet”), I ran advertisements in both the Rand Daily Mail (RDM) and in the Star – which were the two most widely read newspapers in Johannesburg at the time. At that time, we were a very small business and had no credit rating at all. Despite this the RDM immediately