PDSnet Articles

Showdown at Sibanye


It is no secret that, for this country’s economy to really begin to make progress, the populist power of the union movement is going to have to be curtailed at some point. The unions embody the so-called “structural problems” in our economy which economists constantly and euphemistically refer to for three reasons:

  1. The high unemployment level is a direct result of employers being reluctant to take on new employees because, once employed, it is extremely difficult to get rid of an employee. The labour legislation requires three letters of warning, meetings and negotiations. It is a time-consuming and expensive process. From an employer’s perspective it is often better to simply avoid employing new people. What needs to happen here is that the labour legislation needs to become considerably more employer-friendly to level the playing field in collective bargaining.
  2. At the same time, we have a completely excessive civil service with far too many ministers and far too many people employed by government and quasi-government organisations. Probably, the civil service could be cut in half. Our government cannot afford to pay so many civil servants and ministers – nor does it need to.
  3. And then there is the question of the 200-odd state-owned enterprises (SOE) which are sucking the life-blood out of the South African economy and which are a major concern for the ratings agencies. The simple truth is that many of them do not need to be government-owned and should be privatised as soon as possible. They are a constant drain on the fiscus. We desperately need to return to Adam Smith’s idea of laissez-faire, which is that “the least government is the best government”.

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The Year Ahead


2019 is going to be an interesting year both locally and internationally.

In our view, the American economy is almost certain to continue growing rapidly – and that growth must, sooner or later, be reflected in share prices.

In our last article we suggested that the collapse in the S&P500 index over December was unprecedented and suggested that it was probably due to the temporary shut-down of the US government (clearly caused by Trump) at a time when most investors were away on holiday. We suggested that as soon as they returned, we would probably see a “V bottom”.

That “V bottom” is now well on its way. Consider the chart:

S&P500 Index August 2018 to January 2019 – Chart by ShareFriend Pro

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Trump’s Debt Stand-off


At the time of the previous article we said that we thought that the S&P500 index had found some support at its “triple bottom” at 2632 – we were wrong. Consider the chart:

S&P500 Index August to December 2018 – Chart by ShareFriend Pro

The triple bottom was broken decisively and this resulted in severe investor disappointment. At the time of writing, the S&P has fallen for 7 straight days and reached a low of 2351. Read More

S&P500 Support


Investors have been nervously watching the progress of Wall Street against the background of mounting allegations against Donald Trump and senior members of his staff, and the “trade war” which he has instigated against China. At the same time, investors are also concerned that the continuing strength of the US economy will result in a more rapid increase in interest rates going forward.

The effect of this nervousness has been to take the S&P500 index into a correction from its all-time high of 2930 made on 20th September 2018. The fears usually associated with October month are now well behind us and it is unusual for markets to be in a corrective phase over the festive season – but then the political situation in America is nothing if not unusual. Read More

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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