1 00:00:00,600 --> 00:00:04,160 Speaker 1: The Money Show, Investment School twenty three minutes now to 2 00:00:04,280 --> 00:00:06,680 Speaker 1: eighth the time. So the world suddenly looks like quite 3 00:00:06,680 --> 00:00:08,799 Speaker 1: a dangerous place to invest in. Where are you going 4 00:00:08,880 --> 00:00:11,719 Speaker 1: to put your money? Oil prices are doing what they're doing. 5 00:00:11,760 --> 00:00:14,720 Speaker 1: You've got Trump, You've got Iran, You've got Israel, You've 6 00:00:14,760 --> 00:00:17,959 Speaker 1: got the whole bit. A. I wasn't that supposed to 7 00:00:17,960 --> 00:00:19,760 Speaker 1: be the fail safe? You put your money in there, 8 00:00:19,800 --> 00:00:24,840 Speaker 1: it'll be fine. So despite all of that, could actually 9 00:00:25,280 --> 00:00:28,040 Speaker 1: the best place to put your money be here at home? 10 00:00:28,120 --> 00:00:31,040 Speaker 1: Could home be where your money is? Well, we'll talk 11 00:00:31,080 --> 00:00:33,519 Speaker 1: about that in investment school this evening, Gary Boys. And 12 00:00:33,560 --> 00:00:36,160 Speaker 1: you know he's a portfolio manager director at rand Swiss, 13 00:00:36,360 --> 00:00:38,840 Speaker 1: but a big welcome to investment school for the first time. 14 00:00:38,880 --> 00:00:42,159 Speaker 1: To Yucko, Chris Quits, a portfolio manager at sun Lam 15 00:00:42,280 --> 00:00:46,440 Speaker 1: Investments as Multi Manager and Glacier invest A gentlemen, good evening, 16 00:00:46,479 --> 00:00:51,360 Speaker 1: A Yucko, Chrisipher may start with you. I suppose we 17 00:00:51,400 --> 00:00:55,040 Speaker 1: would start our investment case for South Africa with where 18 00:00:55,040 --> 00:00:57,560 Speaker 1: our politics is at the moment, and strangely, our politics 19 00:00:57,640 --> 00:00:58,600 Speaker 1: is in quite a good place. 20 00:01:00,160 --> 00:01:02,480 Speaker 2: Yeah, good evening, Stephen, Thank you very much for having me. 21 00:01:02,560 --> 00:01:06,440 Speaker 2: It's a great to be here. As you said, politics 22 00:01:06,640 --> 00:01:09,080 Speaker 2: isn't actually isn't a great place actually, So it all 23 00:01:09,120 --> 00:01:11,960 Speaker 2: started with the with the G and U right, So 24 00:01:12,520 --> 00:01:16,039 Speaker 2: the right people got on the bus proverbially, and the 25 00:01:16,160 --> 00:01:18,600 Speaker 2: and the and the right people stayed off the bus. 26 00:01:19,920 --> 00:01:23,360 Speaker 2: That kind of led to a sequence of events, a 27 00:01:23,440 --> 00:01:25,960 Speaker 2: virtuous cycle kind of if you if you want to 28 00:01:26,000 --> 00:01:29,679 Speaker 2: see it that way. That that started off with with 29 00:01:29,840 --> 00:01:34,080 Speaker 2: us getting a bit more energy security, with a few 30 00:01:34,080 --> 00:01:37,880 Speaker 2: bumps along the road, but we seem to be there now. 31 00:01:39,000 --> 00:01:44,280 Speaker 2: That culminated in Operation Willindlela, which kind of is being 32 00:01:44,360 --> 00:01:48,600 Speaker 2: implemented in two phases. So phase one was the the 33 00:01:48,640 --> 00:01:50,960 Speaker 2: clearing of the backlock, so to speak. So you can 34 00:01:51,000 --> 00:01:54,000 Speaker 2: think about the long awaited. 35 00:01:54,840 --> 00:02:02,560 Speaker 3: Uh, the the long waited kind of clearing of all 36 00:02:02,600 --> 00:02:05,160 Speaker 3: of the all of the all. 37 00:02:05,000 --> 00:02:06,680 Speaker 1: Of the problems that we had had for such a 38 00:02:06,720 --> 00:02:08,720 Speaker 1: long time, like load jelling for example. 39 00:02:09,800 --> 00:02:13,200 Speaker 2: And and and then we have a government debt that 40 00:02:13,240 --> 00:02:16,560 Speaker 2: seems to be coming under control. We have inflation and 41 00:02:16,680 --> 00:02:20,360 Speaker 2: interest rates that's a little bit in the balance now. 42 00:02:20,600 --> 00:02:23,600 Speaker 2: And then obviously we got off the FATF gray list, 43 00:02:23,880 --> 00:02:27,720 Speaker 2: which was which was amazing. So so now we're looking 44 00:02:27,720 --> 00:02:29,959 Speaker 2: towards the twenty twenty sixth Loggal government election to see 45 00:02:30,000 --> 00:02:33,920 Speaker 2: whether whether the virtual cycle can continue. 46 00:02:34,120 --> 00:02:37,160 Speaker 1: So Gary, I suppose in a way what happened, I 47 00:02:37,160 --> 00:02:39,120 Speaker 1: mean in last year. I'm always reminded of this by 48 00:02:39,120 --> 00:02:41,359 Speaker 1: people we talked to that last year was a game 49 00:02:41,400 --> 00:02:43,200 Speaker 1: of two halves, you know. In the second half of 50 00:02:43,240 --> 00:02:45,960 Speaker 1: the things seemed to really accelerate. And is it just 51 00:02:46,000 --> 00:02:51,320 Speaker 1: that the formation of the National Coalition actually allowed reform 52 00:02:51,480 --> 00:02:53,640 Speaker 1: to happen. Now, some of it had started before, but 53 00:02:53,760 --> 00:02:55,880 Speaker 1: we started to really see the momentum of that. And 54 00:02:55,919 --> 00:02:59,040 Speaker 1: then Marcus also, partly because the DA is there, partly 55 00:02:59,080 --> 00:03:01,920 Speaker 1: because the kind of let me call it the reformist 56 00:03:01,919 --> 00:03:03,320 Speaker 1: wing of the A and C is in charge, by 57 00:03:03,400 --> 00:03:07,239 Speaker 1: which I mean the President. That that then gave people 58 00:03:07,400 --> 00:03:10,079 Speaker 1: confidence that the reforms will continue. 59 00:03:10,919 --> 00:03:13,560 Speaker 4: I think certainly, you know, the work that was done, 60 00:03:13,800 --> 00:03:17,000 Speaker 4: you know, by South African leadership, we can't really discount that. 61 00:03:17,080 --> 00:03:19,480 Speaker 4: I think it's important to acknowledge that a lot of 62 00:03:19,520 --> 00:03:22,720 Speaker 4: work was done. Having business friendly leaders in place is 63 00:03:23,000 --> 00:03:27,760 Speaker 4: key for investor confidence specifically internationally. But at the same time, 64 00:03:27,760 --> 00:03:29,639 Speaker 4: I think we need to look at the more macro 65 00:03:29,680 --> 00:03:32,000 Speaker 4: picture as well and just how much heavy lifting something 66 00:03:32,080 --> 00:03:34,679 Speaker 4: like a rocket and gold price did for South African markets. 67 00:03:35,000 --> 00:03:37,480 Speaker 4: So if you look at you know, the JS for example, 68 00:03:38,040 --> 00:03:40,280 Speaker 4: the gold, the gold sector almost got I think it's 69 00:03:40,280 --> 00:03:43,160 Speaker 4: almost maybe even more than a quarter of the top 70 00:03:43,160 --> 00:03:46,080 Speaker 4: forty is now accounted for by Harmony Goldfield's Angler Gold. 71 00:03:46,560 --> 00:03:50,040 Speaker 4: And obviously the super normal profits that these businesses were playing, 72 00:03:50,360 --> 00:03:53,320 Speaker 4: these businesses were making also fed into the fiscus as well, 73 00:03:53,360 --> 00:03:56,800 Speaker 4: which which eased some of the constraints. So from a 74 00:03:56,840 --> 00:03:59,880 Speaker 4: market perspective, that certainly helped. It helped to accelerate our 75 00:04:00,000 --> 00:04:04,320 Speaker 4: currency stronger. We often see it as a commodity laid 76 00:04:04,440 --> 00:04:07,960 Speaker 4: currency that that commodity prices and the South African round, 77 00:04:08,080 --> 00:04:10,360 Speaker 4: you know, move very much in tandem. The correlation is 78 00:04:10,480 --> 00:04:13,520 Speaker 4: very high. And and with with kind of the rocketing 79 00:04:13,560 --> 00:04:17,080 Speaker 4: precious metals price that that fed into the investment narrative 80 00:04:17,120 --> 00:04:19,440 Speaker 4: around South Africa and certainly around our index as well. 81 00:04:19,520 --> 00:04:22,000 Speaker 4: So I think we did also get a little bit lucky. 82 00:04:22,040 --> 00:04:24,520 Speaker 4: But but you know, kind of the points made earlier, 83 00:04:24,600 --> 00:04:27,440 Speaker 4: I mean absolutely, I think we're now over three hundred 84 00:04:27,520 --> 00:04:30,040 Speaker 4: days of no load shedding. I don't want to drink that, 85 00:04:30,080 --> 00:04:32,320 Speaker 4: I think we should say very quietly just in case 86 00:04:32,960 --> 00:04:35,120 Speaker 4: for that yeah, and I don't I don't know how 87 00:04:35,200 --> 00:04:37,960 Speaker 4: secure this is because South Africa is obviously an oil 88 00:04:38,000 --> 00:04:41,400 Speaker 4: importer as well, and we obviously run big diesel generators, 89 00:04:41,440 --> 00:04:43,800 Speaker 4: and you know, looking at it, you know it's a 90 00:04:43,920 --> 00:04:48,279 Speaker 4: very I suppose, binary, very murky situation. And we're talking 91 00:04:48,360 --> 00:04:50,919 Speaker 4: just just off air. I haven't seen volatility like this, 92 00:04:51,240 --> 00:04:53,760 Speaker 4: and certainly not an interest rate expectations. I mean obviously 93 00:04:53,760 --> 00:04:56,960 Speaker 4: have the Salavar today as well, since probably two thousand 94 00:04:56,960 --> 00:04:59,520 Speaker 4: and eight. I mean it's globally I'm talking. I'm talking 95 00:04:59,520 --> 00:05:02,880 Speaker 4: about globe just just the price is moving all over 96 00:05:02,920 --> 00:05:05,200 Speaker 4: the place, and the idea that if we don't see 97 00:05:05,200 --> 00:05:09,760 Speaker 4: a quick resolution to the Iranian conflict, you know, remember 98 00:05:09,800 --> 00:05:12,640 Speaker 4: with that strategic reserves released, you know, we see oil 99 00:05:12,680 --> 00:05:14,760 Speaker 4: heading to one hundred and fifty dollars a barrel, and 100 00:05:14,839 --> 00:05:19,000 Speaker 4: if we if we just you know, the highest oil 101 00:05:19,000 --> 00:05:20,720 Speaker 4: price ever come one hundred and forty four dollars a 102 00:05:20,760 --> 00:05:22,880 Speaker 4: barrel for you know, the time value of money, and 103 00:05:23,160 --> 00:05:26,040 Speaker 4: we adjust that for inflation, that's north of two hundred 104 00:05:26,080 --> 00:05:28,200 Speaker 4: dollars a barrel. That's very possible. If the straits of 105 00:05:28,200 --> 00:05:31,080 Speaker 4: all most stay closed and we start seeing damage infrastructure, 106 00:05:31,400 --> 00:05:34,600 Speaker 4: I don't know how our energy security looks like in 107 00:05:34,640 --> 00:05:37,640 Speaker 4: that environment, and I think, yes, you know, the energy 108 00:05:37,640 --> 00:05:39,640 Speaker 4: story is a lot better than it was, but we 109 00:05:39,720 --> 00:05:41,839 Speaker 4: are really we feel like we're on the precipice at 110 00:05:41,839 --> 00:05:44,800 Speaker 4: the moment, and again not because of necessarily local events, 111 00:05:44,800 --> 00:05:48,160 Speaker 4: but more the geo geopolitical events feeding into the story. 112 00:05:48,360 --> 00:05:50,640 Speaker 1: So y echo, Chris. I mean, the point about our 113 00:05:50,640 --> 00:05:52,880 Speaker 1: goal chase is such an important one because that was 114 00:05:53,200 --> 00:05:55,840 Speaker 1: not something in our control last year. At the very 115 00:05:55,880 --> 00:05:59,760 Speaker 1: beginning of the year, everybody kept telling me, look, gold 116 00:05:59,760 --> 00:06:01,640 Speaker 1: price is going to stay high for at least as 117 00:06:01,720 --> 00:06:04,760 Speaker 1: long as the Trump presidency, and I completely agree with that. 118 00:06:05,279 --> 00:06:08,520 Speaker 1: Now suddenly we have kind of the worst part of 119 00:06:08,560 --> 00:06:11,919 Speaker 1: the Trump presidency and gold drops like a stone. 120 00:06:13,680 --> 00:06:17,239 Speaker 2: Yeah, that's a very interesting one. So just to color 121 00:06:17,640 --> 00:06:20,799 Speaker 2: that in a little bit. So up until end feb 122 00:06:21,080 --> 00:06:24,599 Speaker 2: the Aussie did fifty four point five percent on a 123 00:06:24,600 --> 00:06:29,920 Speaker 2: one year basis, so everything looked amazing. As Gary said, 124 00:06:29,960 --> 00:06:34,360 Speaker 2: there was the hope for lower interest rates, and that's 125 00:06:34,400 --> 00:06:37,800 Speaker 2: all been written back. In fact, our futures are now 126 00:06:37,839 --> 00:06:41,279 Speaker 2: pricing and something like ninety basis points of interest rate hikes. 127 00:06:41,279 --> 00:06:43,400 Speaker 2: We don't think that's going to happen, but it just 128 00:06:43,440 --> 00:06:49,600 Speaker 2: shows just goes to show how things have changed. The 129 00:06:50,720 --> 00:06:54,600 Speaker 2: gold coming down, the gold price coming down is a 130 00:06:54,720 --> 00:06:57,240 Speaker 2: very interesting one. So you would think that in an 131 00:06:57,320 --> 00:07:00,279 Speaker 2: environment like we are currently that they would be flight 132 00:07:00,400 --> 00:07:03,360 Speaker 2: to safety and that gold would actually rally. But what 133 00:07:03,440 --> 00:07:08,840 Speaker 2: we've seen is that the hike in the oil price 134 00:07:08,920 --> 00:07:12,440 Speaker 2: has led to inflation expectations going through the roof, and 135 00:07:12,600 --> 00:07:16,520 Speaker 2: that has actually led to interest rate hikes being priced in, 136 00:07:16,600 --> 00:07:19,320 Speaker 2: or at least in the case of the FED, all 137 00:07:19,320 --> 00:07:22,480 Speaker 2: the interstrate cuts being priced out. Now gold being a 138 00:07:22,560 --> 00:07:24,960 Speaker 2: non yielding assets. In other words, if you keep gold, 139 00:07:25,240 --> 00:07:28,520 Speaker 2: it doesn't give you any interest in the bank. In 140 00:07:28,600 --> 00:07:32,600 Speaker 2: that sense, gold looks a little bit less enticing. And 141 00:07:32,640 --> 00:07:38,440 Speaker 2: then the other thing is if the market doesn't think 142 00:07:38,520 --> 00:07:42,000 Speaker 2: this is an all full down scenario yet, then we 143 00:07:42,120 --> 00:07:44,679 Speaker 2: don't see that flight to safety. So in other words, 144 00:07:44,680 --> 00:07:47,720 Speaker 2: the fact that the gold price hasn't continued to really 145 00:07:48,360 --> 00:07:53,880 Speaker 2: actually is, in a weird way, slightly a good sign 146 00:07:54,440 --> 00:07:57,120 Speaker 2: because it tells us that the market is not yet 147 00:07:57,160 --> 00:08:02,040 Speaker 2: pricing in a doomsday scenario. But perhaps we want to 148 00:08:02,120 --> 00:08:03,200 Speaker 2: unpack that a little bit more. 149 00:08:03,360 --> 00:08:08,080 Speaker 1: Yeah, well, they certainly should be. According to Garry at 150 00:08:08,120 --> 00:08:12,920 Speaker 1: least there's I suppose the other question. If you want 151 00:08:12,960 --> 00:08:16,040 Speaker 1: to put money into the South African South African shares, 152 00:08:16,640 --> 00:08:18,760 Speaker 1: you want to look at how cheap we are compared 153 00:08:18,800 --> 00:08:21,160 Speaker 1: to other assets. So you know, you're looking for a 154 00:08:21,240 --> 00:08:23,480 Speaker 1: valuation gap. What do you think the value should be 155 00:08:23,480 --> 00:08:25,840 Speaker 1: in what the market thinks it is. I'm probably not 156 00:08:25,920 --> 00:08:28,360 Speaker 1: using quite the right language, but this is investment school, 157 00:08:28,360 --> 00:08:31,480 Speaker 1: you know what I mean? So is our market still cheap? 158 00:08:31,560 --> 00:08:33,800 Speaker 1: Is there still a gap between what the value should 159 00:08:33,880 --> 00:08:36,400 Speaker 1: really be and what it currently is? 160 00:08:37,080 --> 00:08:39,920 Speaker 4: Well, I think working out what the intrinsic value on shares, 161 00:08:40,720 --> 00:08:44,000 Speaker 4: that's I mean, there's so many different ways of doing it, 162 00:08:44,040 --> 00:08:46,079 Speaker 4: and there's there's so much that goes into it, and 163 00:08:47,000 --> 00:08:48,599 Speaker 4: you know, there's so much you can argue because so 164 00:08:48,679 --> 00:08:51,439 Speaker 4: much of it does actually ultimately become subjective, you know, 165 00:08:51,480 --> 00:08:53,840 Speaker 4: And that's finding where your intrinsic value is. That's I 166 00:08:53,840 --> 00:08:57,040 Speaker 4: suppose the whole game of investing looking at the South 167 00:08:57,080 --> 00:09:01,520 Speaker 4: African market, you know, it's a South African market is 168 00:09:01,520 --> 00:09:04,360 Speaker 4: such a disparate place you've got you know, the gold 169 00:09:04,400 --> 00:09:06,840 Speaker 4: mining shares which have taken over the top forty at 170 00:09:06,880 --> 00:09:09,480 Speaker 4: the moment, are now incredibly volatile you know, bringing a 171 00:09:09,520 --> 00:09:11,680 Speaker 4: lot of volatility into our market. And you know that 172 00:09:11,840 --> 00:09:14,520 Speaker 4: kind of north of fifty percent run that we're talking 173 00:09:14,559 --> 00:09:16,960 Speaker 4: about in dollar terms, you know, quickly unwinding. I mean, 174 00:09:17,000 --> 00:09:19,360 Speaker 4: we're in a correction territory. We're falling a lot faster. 175 00:09:19,960 --> 00:09:23,560 Speaker 4: But it's because of that link. That segment of the 176 00:09:23,600 --> 00:09:26,160 Speaker 4: market I think maybe a little bit hot, but you know, 177 00:09:26,240 --> 00:09:28,480 Speaker 4: it's commodities. It's going to be volatile. We've seen the 178 00:09:28,520 --> 00:09:31,600 Speaker 4: resource index up and down massively in the last couple 179 00:09:31,679 --> 00:09:33,640 Speaker 4: of weeks, and that's to be expected as a very 180 00:09:33,640 --> 00:09:36,559 Speaker 4: cyclical industry. And you know, you price off the commodities, 181 00:09:36,760 --> 00:09:38,640 Speaker 4: your price the stocks off the commodity, So it's going 182 00:09:38,679 --> 00:09:40,760 Speaker 4: to happen. But if you look at the maybe the 183 00:09:40,800 --> 00:09:42,679 Speaker 4: South African ink segment of the market, so you look 184 00:09:42,720 --> 00:09:45,080 Speaker 4: at the South African banks, for example, and you compare 185 00:09:45,120 --> 00:09:48,160 Speaker 4: that to global counterparts, it's still very very cheap. You're 186 00:09:48,200 --> 00:09:52,160 Speaker 4: training mostly on your single digit, upper single digit multiples. 187 00:09:53,240 --> 00:09:56,400 Speaker 4: They don't look particularly extended, and I think there's there's 188 00:09:56,600 --> 00:09:59,680 Speaker 4: quite a large risk premium that the market, and specifically 189 00:09:59,679 --> 00:10:03,480 Speaker 4: Internet national investors bake into our local financial institutions because 190 00:10:03,520 --> 00:10:05,800 Speaker 4: they look at the sovereign risk and they price that 191 00:10:05,920 --> 00:10:08,599 Speaker 4: off the credit ratings agencies and say, well, this is 192 00:10:08,640 --> 00:10:10,760 Speaker 4: what the banks must be in South Africa. And I 193 00:10:10,840 --> 00:10:14,000 Speaker 4: think as South Africans, I mean maybe maybe it's my 194 00:10:14,080 --> 00:10:16,120 Speaker 4: perspective as well, because I sit here and we deal 195 00:10:16,160 --> 00:10:19,400 Speaker 4: with the banks, and you kind of have a feeling 196 00:10:19,400 --> 00:10:22,679 Speaker 4: of safety around our big four, Big five banks. But 197 00:10:23,080 --> 00:10:25,760 Speaker 4: at the same time, you know, our banks are well capitalized. 198 00:10:25,880 --> 00:10:27,640 Speaker 4: You know, you look at our banks going through the 199 00:10:27,960 --> 00:10:31,080 Speaker 4: two thousand and eight global financial crisis for example, I mean, 200 00:10:31,120 --> 00:10:34,480 Speaker 4: they performed exceptionally welcome compared to overseas counterparts, yet they 201 00:10:34,480 --> 00:10:37,640 Speaker 4: traded as significant discount. So I think that is potentially 202 00:10:37,679 --> 00:10:40,720 Speaker 4: a very interesting segment of the market. You look at 203 00:10:40,760 --> 00:10:43,280 Speaker 4: our retailers. I think our retailers have been undervalued for 204 00:10:43,360 --> 00:10:46,200 Speaker 4: a while. The problem is now, as we were discussing 205 00:10:46,200 --> 00:10:48,920 Speaker 4: interest rate expectations moving all over the place, these are 206 00:10:49,000 --> 00:10:52,400 Speaker 4: typically quite interst rate sensitive stocks, and we were talking 207 00:10:52,440 --> 00:10:54,400 Speaker 4: about what's happening with the FED. I mean, on Monday, 208 00:10:54,760 --> 00:10:57,600 Speaker 4: we literally went from pricing in a cut to pricing 209 00:10:57,640 --> 00:11:00,760 Speaker 4: into a hike to kind of settling the day. We 210 00:11:00,800 --> 00:11:02,400 Speaker 4: don't think there's going to be a high area cut 211 00:11:02,600 --> 00:11:05,360 Speaker 4: and that's a weird situation. But let's say things do 212 00:11:05,400 --> 00:11:08,439 Speaker 4: get a little bit worse. Preserve thanks speaking today saying 213 00:11:08,480 --> 00:11:11,400 Speaker 4: that you know, potentially, you know, this is going to 214 00:11:11,440 --> 00:11:14,000 Speaker 4: be quite a you know, maybe twenty and twenty seven, 215 00:11:14,200 --> 00:11:17,120 Speaker 4: twenty eight, maybe we're going to see inflation returning if 216 00:11:17,160 --> 00:11:20,120 Speaker 4: this oil supply shock goes on for another month or two. 217 00:11:20,960 --> 00:11:23,360 Speaker 4: You know, there's different scenarios, but that that typically is 218 00:11:23,520 --> 00:11:26,080 Speaker 4: bad for our retail sector. And while our restale sector 219 00:11:26,120 --> 00:11:29,119 Speaker 4: I think a month ago was looking very very attractive 220 00:11:29,760 --> 00:11:33,239 Speaker 4: suddenly maybe not so much specifically in the credit retailers, 221 00:11:33,280 --> 00:11:35,280 Speaker 4: but you know, again, you look at a day like 222 00:11:35,280 --> 00:11:36,800 Speaker 4: today and you've got shop Right up three and a 223 00:11:36,840 --> 00:11:40,400 Speaker 4: half percent, and shop Right even at a nineteenpe still 224 00:11:40,400 --> 00:11:42,719 Speaker 4: looks cheap to me because in my valuation terms, I 225 00:11:42,760 --> 00:11:44,640 Speaker 4: look at this and I say, this is becoming more 226 00:11:44,640 --> 00:11:47,240 Speaker 4: and more like Amazon. Amazon delivers in one day, Shopright 227 00:11:47,280 --> 00:11:49,920 Speaker 4: delivers in sixty minutes. Yea, this is a tech company, 228 00:11:50,440 --> 00:11:53,280 Speaker 4: a techn logistics company that's being priced as a grosser. 229 00:11:53,679 --> 00:11:56,480 Speaker 4: So I think, you know, there's lots of individual cases, 230 00:11:56,480 --> 00:11:58,600 Speaker 4: and then you look across our small and MidCap sector. 231 00:11:58,840 --> 00:12:01,120 Speaker 4: I mean, these just don't have price discovery. There are 232 00:12:01,120 --> 00:12:05,480 Speaker 4: some fantastic gems in there that because large institutions just 233 00:12:05,480 --> 00:12:09,280 Speaker 4: got access them, they tend to get kind of chucked out, 234 00:12:09,559 --> 00:12:11,320 Speaker 4: you know, the baby gets chucked out of the bath water. 235 00:12:11,520 --> 00:12:14,920 Speaker 4: And I think the are opportunities for for individual investors 236 00:12:14,920 --> 00:12:17,199 Speaker 4: to really make some interesting calls. 237 00:12:17,600 --> 00:12:20,720 Speaker 1: Investment School tonight is South Africa the place to invest 238 00:12:20,840 --> 00:12:24,480 Speaker 1: right now? Gary Boysen's portfolio manager director at Round Swiss Yacko. 239 00:12:24,559 --> 00:12:27,200 Speaker 1: Chris Qwitz is a portfolio manager. Some of them investments 240 00:12:27,280 --> 00:12:30,559 Speaker 1: multi manager and Glacier invest Another few minutes to go, 241 00:12:30,640 --> 00:12:34,960 Speaker 1: it's the money show Investment School. Well we're speaking to 242 00:12:35,200 --> 00:12:38,080 Speaker 1: are we're speaking about South Africa the investment case for 243 00:12:38,320 --> 00:12:42,040 Speaker 1: South Africa right now. Gary Boyson's portfolio manager directed a 244 00:12:42,080 --> 00:12:44,800 Speaker 1: Round Swiss Jacko. Chris Kurtz is portfolio manager. Some of 245 00:12:44,840 --> 00:12:48,719 Speaker 1: them investments, multi manager and Glacier invest Jacko, Chris. I mean. 246 00:12:48,760 --> 00:12:51,520 Speaker 1: One of the other things that's really changed and has 247 00:12:51,559 --> 00:12:55,160 Speaker 1: suddenly become so important again, thank you, Donald Trump, is 248 00:12:55,360 --> 00:12:59,079 Speaker 1: the credibility of your central bank. We have a governor 249 00:12:59,240 --> 00:13:02,559 Speaker 1: halfway through as the term. He I think I can 250 00:13:02,600 --> 00:13:06,640 Speaker 1: say he successfully lowered our inflation target team. Yeah, I'm sure, 251 00:13:06,679 --> 00:13:08,560 Speaker 1: we'd disagree, but I could probably put it like that. 252 00:13:09,559 --> 00:13:12,200 Speaker 1: How important is that right now in terms of strengthening 253 00:13:12,240 --> 00:13:15,160 Speaker 1: the investment case for South Africa? 254 00:13:15,240 --> 00:13:17,880 Speaker 2: I think it's very important. I think having a credible 255 00:13:17,920 --> 00:13:21,640 Speaker 2: central bank is extremely important, and I think it's all 256 00:13:21,679 --> 00:13:25,439 Speaker 2: about inflation expectations and whether the central bank is able 257 00:13:25,480 --> 00:13:32,360 Speaker 2: to anchor them. So you can see inflation expectations almost 258 00:13:32,600 --> 00:13:35,160 Speaker 2: like if you look at it from the top, it's 259 00:13:35,160 --> 00:13:37,439 Speaker 2: going to look like concentric circles, but if you look 260 00:13:37,440 --> 00:13:40,520 Speaker 2: at it from the side, it looks almost like a spiral. 261 00:13:42,120 --> 00:13:47,240 Speaker 2: And how inflation expectations work is if the central bank 262 00:13:47,320 --> 00:13:50,240 Speaker 2: is able to anchor those at a point and in 263 00:13:50,240 --> 00:13:55,640 Speaker 2: this case it's the much hallowed three percent with a 264 00:13:55,760 --> 00:13:58,640 Speaker 2: target band plus one minus one. But actually we are 265 00:13:58,679 --> 00:14:01,120 Speaker 2: now at a point target, which is good because it 266 00:14:01,160 --> 00:14:07,040 Speaker 2: puts us in the same ballpark as say, there's the 267 00:14:07,080 --> 00:14:12,640 Speaker 2: central banks of the US and England and the European Union. 268 00:14:12,880 --> 00:14:14,719 Speaker 2: But it also puts us on the same footing as 269 00:14:14,720 --> 00:14:17,640 Speaker 2: most of our emerging market peers. So it really was 270 00:14:17,720 --> 00:14:20,880 Speaker 2: time for us to become a grown up emerging market 271 00:14:20,320 --> 00:14:24,960 Speaker 2: so to speak, and to get this lower inflation target 272 00:14:24,960 --> 00:14:28,040 Speaker 2: in place, but to come back to my point around 273 00:14:28,360 --> 00:14:33,440 Speaker 2: the spiral. If you put yourself in the shoes of say, 274 00:14:33,480 --> 00:14:38,560 Speaker 2: the main wage negotiator of a large labor union, and 275 00:14:38,760 --> 00:14:44,080 Speaker 2: you expect three percent inflation to be the reality, So 276 00:14:44,120 --> 00:14:46,720 Speaker 2: in other words, your central bank governor and your central 277 00:14:46,760 --> 00:14:52,840 Speaker 2: bank is credible enough to really anchor that expectation, then 278 00:14:53,160 --> 00:14:56,560 Speaker 2: you will definitely start at that three percent, and you 279 00:14:56,640 --> 00:15:00,600 Speaker 2: might adjust upwards, say two or three percent. But if 280 00:15:00,640 --> 00:15:03,560 Speaker 2: you don't believe it, and you actually think that it's 281 00:15:03,600 --> 00:15:06,760 Speaker 2: going to be, say nine percent in reality, then you 282 00:15:06,840 --> 00:15:10,440 Speaker 2: might start with a twelve fifteen percent claim or at 283 00:15:10,440 --> 00:15:15,080 Speaker 2: twelve fifteen percent requirement. So in that sense, it all 284 00:15:15,680 --> 00:15:21,160 Speaker 2: revolves towards this point, and it becomes this virtual cycle. 285 00:15:21,240 --> 00:15:24,040 Speaker 2: To use that term for the second time in this 286 00:15:24,160 --> 00:15:25,520 Speaker 2: in this investment school. 287 00:15:26,600 --> 00:15:30,240 Speaker 1: Gary, I mean right now, at a time when central 288 00:15:30,280 --> 00:15:33,240 Speaker 1: bank independence is not being taken for granted in some 289 00:15:33,280 --> 00:15:35,960 Speaker 1: of the places that invented it, by which I mean 290 00:15:36,000 --> 00:15:38,360 Speaker 1: the US, suddenly it would seem to me to become 291 00:15:38,520 --> 00:15:41,800 Speaker 1: more important that our central bank is so independent, and 292 00:15:42,400 --> 00:15:45,040 Speaker 1: I must just stress robust and its independence. 293 00:15:45,680 --> 00:15:48,720 Speaker 4: Of course I mean this. You know, the history is 294 00:15:48,760 --> 00:15:52,040 Speaker 4: littered with countries that remove the independence of the central 295 00:15:52,080 --> 00:15:55,120 Speaker 4: bank and economies that have been destroyed. And as much 296 00:15:55,120 --> 00:15:56,840 Speaker 4: as you know, I think we are going to go 297 00:15:56,880 --> 00:15:59,480 Speaker 4: into a very difficult time now, you know, with a 298 00:15:59,720 --> 00:16:04,000 Speaker 4: supple shock, as we are potentially seeing higher, higher inflation. 299 00:16:04,320 --> 00:16:08,160 Speaker 4: The temptation is always to to let interest rates drag 300 00:16:08,760 --> 00:16:11,600 Speaker 4: and that's it's it's an incorrect move. I mean, the 301 00:16:11,640 --> 00:16:13,760 Speaker 4: reason the central bank titans the first the reason that 302 00:16:13,800 --> 00:16:16,000 Speaker 4: we have a hawkish central central bank in this environment 303 00:16:16,320 --> 00:16:19,440 Speaker 4: is to create price stability, which you know that in 304 00:16:19,480 --> 00:16:23,000 Speaker 4: itself you know, is absolutely critical for long term growth 305 00:16:23,480 --> 00:16:25,680 Speaker 4: and and you know you don't do that, you have 306 00:16:25,760 --> 00:16:30,160 Speaker 4: hyper inflation, you have all sorts of terrible, terrible outcomes. 307 00:16:30,200 --> 00:16:32,640 Speaker 4: So yeah, I think, you know, I agree, it is 308 00:16:32,720 --> 00:16:37,520 Speaker 4: absolutely critical. And I think we are very fortunate in 309 00:16:37,720 --> 00:16:40,440 Speaker 4: the strength of the South African Reserve Bank as an institution. 310 00:16:40,720 --> 00:16:42,960 Speaker 4: It has done exceptional things and I think it's one 311 00:16:43,000 --> 00:16:45,480 Speaker 4: of the reasons that that South Africa to a large 312 00:16:45,520 --> 00:16:49,440 Speaker 4: extent has avoided the worst case scenario in the last 313 00:16:49,480 --> 00:16:50,800 Speaker 4: say twenty five years. 314 00:16:52,440 --> 00:16:55,120 Speaker 1: Echos, Okay, we're going to invest in South Africa. There's 315 00:16:55,120 --> 00:16:57,880 Speaker 1: some obvious ones. I mean, shop rights already been mentioned, 316 00:16:57,920 --> 00:16:59,960 Speaker 1: is always mentioned in an investment school for some reason. 317 00:17:00,640 --> 00:17:03,440 Speaker 1: I mean, you would think that with oil prices where 318 00:17:03,440 --> 00:17:05,560 Speaker 1: they are, Cecil would be the obvious one, and in 319 00:17:05,560 --> 00:17:07,959 Speaker 1: fact there is. The shape performance over the last two 320 00:17:07,960 --> 00:17:09,360 Speaker 1: weeks has been highly variable. 321 00:17:11,400 --> 00:17:15,440 Speaker 2: Yeah, it's a good point. So Cecil has never been, 322 00:17:16,440 --> 00:17:19,000 Speaker 2: at least in my mind, a very high quality name. 323 00:17:19,320 --> 00:17:24,800 Speaker 2: So you would invest in Cecil almost on a punt, 324 00:17:25,000 --> 00:17:28,880 Speaker 2: rather than with an expectation that it's going to produce 325 00:17:30,880 --> 00:17:34,359 Speaker 2: very good free cash flows and all of those things 326 00:17:34,400 --> 00:17:37,800 Speaker 2: that we associate with the high quality name. As you say, 327 00:17:37,800 --> 00:17:40,160 Speaker 2: it has been a beneficiary of the higher oil price, 328 00:17:40,560 --> 00:17:45,919 Speaker 2: but previously it was hamstrung by some of its projects 329 00:17:45,960 --> 00:17:51,439 Speaker 2: in the US that there have been money killers, So 330 00:17:51,840 --> 00:17:54,160 Speaker 2: it's been eating all of this free cash flow almost 331 00:17:54,240 --> 00:17:56,919 Speaker 2: very similar to some of the you mentioned AI in 332 00:17:56,960 --> 00:18:00,280 Speaker 2: your introduction. So some of these AI names have high 333 00:18:00,280 --> 00:18:02,360 Speaker 2: capics at the moment, and and and there's a few 334 00:18:02,400 --> 00:18:06,919 Speaker 2: worries around their ability to generate free cash flow. So 335 00:18:06,920 --> 00:18:10,040 Speaker 2: in a very similar way, Cecil was was kind of. 336 00:18:11,880 --> 00:18:13,760 Speaker 3: On this this. 337 00:18:15,080 --> 00:18:21,080 Speaker 2: Escapade to to create new projects and and we've seen 338 00:18:21,119 --> 00:18:24,880 Speaker 2: in the past that can be a big hit and miss. 339 00:18:25,440 --> 00:18:29,119 Speaker 1: H and so clearly even though we as South Africa 340 00:18:29,200 --> 00:18:32,480 Speaker 1: might be about to enter some kind of oil difficulty. 341 00:18:33,240 --> 00:18:35,880 Speaker 1: You don't see that where where in South Africa would 342 00:18:35,880 --> 00:18:38,199 Speaker 1: you be putting your money in? And you have to 343 00:18:38,680 --> 00:18:41,000 Speaker 1: as a condition of being on the program disagree with Gary. 344 00:18:42,359 --> 00:18:45,919 Speaker 2: Okay, I I love to disagree, So thank you for 345 00:18:45,960 --> 00:18:50,840 Speaker 2: the for the opportunity. Now I I would look towards 346 00:18:50,880 --> 00:18:56,960 Speaker 2: the financials. Actually, I think the financials. So Gary did 347 00:18:57,040 --> 00:18:59,919 Speaker 2: mention the banks, but also our insurance insurance. And I'm 348 00:19:00,080 --> 00:19:02,240 Speaker 2: saying that just because I worked for one, this is 349 00:19:02,280 --> 00:19:04,920 Speaker 2: not a this is not a paid a paid advert 350 00:19:05,840 --> 00:19:09,520 Speaker 2: but but really there's there's some very high quality insurance 351 00:19:09,600 --> 00:19:12,920 Speaker 2: names in the in the essay context. Just to put 352 00:19:13,080 --> 00:19:15,399 Speaker 2: a bit more meat around the bone of some of 353 00:19:15,400 --> 00:19:17,159 Speaker 2: the points that Gary made, which I actually thought were 354 00:19:17,280 --> 00:19:19,119 Speaker 2: very good one so I'm gonna I'm gonna agree with 355 00:19:19,160 --> 00:19:21,399 Speaker 2: them and then and then move away to disagree but 356 00:19:21,440 --> 00:19:25,080 Speaker 2: some but just to reiterate that point. So so bunyea, 357 00:19:25,160 --> 00:19:27,399 Speaker 2: I just quickly looked it up. That's three hundred and 358 00:19:27,440 --> 00:19:31,600 Speaker 2: four percent last year. Sure, in that same year, Shop 359 00:19:31,640 --> 00:19:35,000 Speaker 2: Right did minus six in a year where the market 360 00:19:35,040 --> 00:19:39,320 Speaker 2: did forty one or forty two. So in other words, 361 00:19:40,359 --> 00:19:43,720 Speaker 2: the market does look cheap in pockets, and if you're 362 00:19:43,720 --> 00:19:47,919 Speaker 2: looking for cheap, high quality companies, then I'd say Bitcorp, 363 00:19:48,480 --> 00:19:52,760 Speaker 2: Shop Right Woolies and Pepcore and you can throw and 364 00:19:52,800 --> 00:19:56,320 Speaker 2: clicks there as well would be some of those very 365 00:19:56,400 --> 00:19:59,320 Speaker 2: high quality essay inc names. And I at the start 366 00:19:59,320 --> 00:20:01,760 Speaker 2: of the year I say to my clients, this is 367 00:20:01,800 --> 00:20:07,000 Speaker 2: going to be an essay in gear. So I'd say Financials. 368 00:20:07,800 --> 00:20:13,040 Speaker 2: You can almost throw a dart there. Then those five names. 369 00:20:13,400 --> 00:20:16,000 Speaker 1: Thank you very much. Indeed, echo Chris Kurtz really appreciate 370 00:20:16,000 --> 00:20:18,760 Speaker 1: a portfolio manager at sun Lum Investments Multi Manager and 371 00:20:18,760 --> 00:20:22,640 Speaker 1: Glacier invest I'd give Gary Boyson a chance to respond 372 00:20:22,640 --> 00:20:25,280 Speaker 1: to that, but then he wouldn't leave here frustrated. He 373 00:20:25,400 --> 00:20:29,600 Speaker 1: of course his portfolio manager director at Ranswiskary thanks for 374 00:20:29,640 --> 00:20:30,120 Speaker 1: coming in.