Monthly Archives: January 2019


Lewis (LEW) is a retailer of furniture and electrical appliances operating through 779 stores under the Lewis (494 stores), Beares (119 stores), Best Home (133 stores), and most recently, United Furniture Outlets (33 stores) brands. Of these stores, 116 are in neighbouring countries.

The company does 65,7% of its business on credit and offers customers credit insurance and other financial products. In the middle of 2015, the company’s insurance business and credit business came under scrutiny and it was forced to repay customers for what were considered to be illegal insurance and other fees. This had a significant impact on the company’s share price which fell from around R100 to as low as R25. Read More

Wall Street in Context

On our website ( there is a section which deals with how we see the stock markets of the world in the context of their history. We call it “Our Background Approach”. It sets out the context of the current situation on Wall Street as we see it.

To this background approach we have added an excellent tube of a lecture given by Jeff Diest ( which you should take the time to watch.

The New York Stock Exchange (NYSE) is on track to reach its tenth year in a bull trend – which is an all-time record. Experts and analysts are at a loss to explain its continued upward trend. No bull market in history has ever gone on for this long. But what they are missing is that, as Diest says, we are in completely uncharted territory.

We simply have no way to assess the impact of the unprecedented monetary policy stimulation of the world economy over the past decade.

Two points we can be certain of are that the quantitative easing (creating and injecting over $12,5 trillion into the world economy):

  1. is achieving its objective of putting the world economy into a boom phase.
  2. is only just beginning to be discounted into world markets.

Read More


Telkom was originally a state-owned enterprise similar to SAA or Eskom. The company went  through some difficult times, retrenching 4500 employees in an effort to right-size and remain profitable. Today Telkom is owned about 40% by the government and 12,5% by the Public Investment Corporation – which means that it is still government controlled – but it has a very substantial private sector ownership and is essentially independent.

The company consists of five operating divisions –

  1. Openserve, which is an internet connectivity provider with the largest open access network in South Africa,
  2. Telkom Consumer is a fixed broadband and internet service provider,
  3. BCX is a technology company,
  4. Gyro looks after masts, towers and property development and
  5. Yellowpages, which is a marketing and advertising company.

In its results for the six months to 30th September 2018, the group reported adjusted headline earnings per share (HEPS) up 10,3% to 328,6c. The CEPO, Sipho Maseko described the results as “satisfactory” in a difficult economy. Read More

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

Read More

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