Monthly Archives: May 2018

Lessons From Steinhof


The loss by Coronation of R14bn in the Steinhof debacle shows the weakness of fundamental analysis when compared with technical analysis. Altogether, mostly big institutions lost at least R200bn from the Steinhof collapse.

Coronation, taking a primarily fundamental approach, focused its analysis on predicting the probable future dividends to come out of Steinhof – and then discounted that, using an internal rate of return (IRR), to arrive at a net present value for the share which they could then compare to the current share price. Read More

Bitcoin Revisited


On the 8th of December last year we wrote an article on the extraordinary rise in the US dollar price of Bitcoin. We suggested that what we were looking at was an asset bubble that would inevitably burst – mainly because its chart was exponential – and that cannot be sustained. We compared it to the Tulip Mania which gripped Holland in the 17th century.

A few days after our article, Bitcoin’s price began to “tank” falling from $18 786 to $7 246 in just six weeks. Then it stabilised and managed to rise off that low to make a new cycle high at $11538 – where it made a clear “double top formation”. Read More

The Confidential Report – May 2018


Political

One of the legacies of the Zuma era is a massive and inefficient civil service. Years of “jobs for pals” and rampant nepotism has seen the civil service grow to unmanageable proportions. The economist Dawie Roodt has estimated that, including the state owned enterprises (SOE), the civil service now employs about 3 million people. In the February budget, the government estimated that it would spend in total R1,68 trillion – out of which more than R585bn would be civil service salaries. That is just over 35%. This means that the enormous civil service is sucking up funds which could be better spent on development. The challenge is to reduce the size of the government, beginning with the number of ministers. It has been estimated that South Africa could probably manage with roughly two thirds of the number of ministries that it has. Over time, the effect of that on the economy would be enormous. Read More