Category Archives: Market Reports

The Confidential Report – December 2018


America

The American economy continues to grow rapidly. A survey of fund managers by Bank of America in September 2018 showed that on average they currently expect the S&P500 index to rise at least 12% more before peaking. They are allocating a further 10% of their cash flows to US stocks than they did in October 2018 – especially into the high-tech stocks like Facebook, Amazon, Apple, Netflix and Google (the “Faangs). On average they felt that the S&P would peak at 3056. On 4th December 2016, we predicted in an article, on the basis of a Point and Figure horizontal count, that the S&P would go to 3027. Now, finally, two years later, American fund managers are agreeing with us. In fact we believe that the S&P will go much higher than that before it turns.

S&P500 Index September to November 2018 – Chart by ShareFriend Pro

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The Confidential Report – November 2018


October Month

October month is never a good month for investors. Historically, the 1929 crash and the 1987 crash began in October and several other Octobers over the decades have been bad. Always, some investors will tend to get out of the market in October or in anticipation of a fall in October. This makes the October problem self-fulfilling to some extent and this year was no exception. Analysts have for a while been saying that world stock markets are over-priced based on the fact that the bull trend is now in record territory having been going on for nearly ten years (an opinion which we do not agree with). So, when October month comes along there is what appears to be good justification to get out of the market. Read More

The Confidential Report – October 2018


South Africa has become a battleground between good and evil, every bit as exciting and unpredictable as Game of Thrones or Harry Potter. On the one hand the forces of populism are seeking to drag the country backwards towards racism, entitlement, maladministration, corruption, nepotism and incompetence. On the other, the “good men” of the ANC like Ramaphosa, Gordhan, Manuel, Nene and others are striving to pull the country back from the brink – eliminating corruption, installing competent people in the SOEs and adopting better laws to govern key sectors. The good guys have already won many preliminary battles and weakened the position of the bad guys quite considerably. For example, the elimination of nuclear energy from our resource plan is a major step forward – and so is the Constitutional Court judgement which allows labour brokers to continue in business. There are obviously many more battles to be fought – and much has to be delayed until after the election in May next year. But the trend is in the right direction. At the same time, as we have been conducting our own internal battles, the battles of other emerging economies (like Turkey and Argentina) and the decisions of the American president have impacted on us. This is most visible in the volatility of our currency which continues to be the best and clearest barometer of exactly where South Africa is and how it is doing. If you want to know how good or bad things really are, study the rand/US$ chart. Everything of importance in this country, both internal and external is discounted there. Go to: https://www.forexforecasts.co.za/resources/live-charts/ Read More

The Confidential Report – September 2018


Political

The DA’s loss of Nelson Mandela Bay and its near loss of Tshwane are perhaps a sign of the shift in political power since Cyril Ramaphosa took over as president. Without the political incompetence of Zuma to work off, the DA appears to have descended into in-fighting and has clearly lost some support. The ANC, on the other hand, appears to have benefited from Ramaphosa’s on-going reform of key government institutions – such as the National Prosecuting Authority and with the new Integrated Resource Plan (IRP) which eliminates nuclear power and moves strongly in the direction of renewable energy sources. The EFF is doing its best to be king-maker in the hotly contested administrations like Tshwane. The weakening of DA support will be a major factor in the 2019 elections.

Steady and essential clean-up of state owned enterprises (SOE) by Pravin Gordhan, with the backing of the president is vital to the recovery of the South African economy. The recent settlement with the public enterprises director general, Richard Seleke, is a good example. Seleke was implicated in various Gupta-linked e-mails and came to some negotiated agreement with the presidency to step down. The nature of the agreement is not known, but it is clear that the process of getting rid of captured senior officials at the SOEs continues. Gordhan has come in for criticism from the EFF for being too autocratic and engaging in a “reign of terror” – but perhaps that is exactly what was needed. South Africa cannot afford to delay in this clean up. Seleke also faces criminal charges from OUTA for his involvement in state capture. Read More

The Confidential Report – August 2018


Political

President Ramaphosa has been steadily consolidating his power within the ANC and this bodes well for the country. His recent successes in the provincial elective conferences in Natal and Gauteng have seen his supporters elected to key positions in those provinces and a consequent loss of power for the Zuma camp. In Natal, the positions of deputy chairman and secretary are now occupied by Ramaphosa supporters. At the same time, in Gauteng, the position of deputy chairman was won by Lesufi – a Ramaphosa supporter. These changes will help to ensure some unity within the ruling party which has been deeply divided. That will bolster its position in the 2019 elections. Ramaphosa will only be able to address the more serious structural anomalies in the SA economy once he has a sufficiently strong grip on power. Read More