Monthly Archives: April 2019

New Record on the S&P

Seven months ago on 20th September 2019, the S&P made a new record high at 2930 – and from that level began a correction. Corrections are completely normal and even healthy events which occur regularly during the course of a bull trend. This ten-year bull trend began on 6th and 7th of March 2009 when the S&P made an intra-day low of 666.79 on 6th and then made its lowest close at 676.53 on 7th.

The fall in the market had been caused by an American banking crisis which later became known as the “sub-prime crisis” when Lehman Brothers collapsed. What followed was an inordinate monetary policy stimulation of the world economy during which more than $12 trillion worth of quantitative easing (QE) was done to try to avoid a repeat of the Great Depression of 1929. Read More

Mathunjwa Backs Down

On 16th January this year we ran an article in which we suggested that the confrontation between AMCU and Sibanye was a microcosm of the inevitable post-election battle between the government and the union movement. We concluded that article with the following:

“To us it looks as though Mathunjwa is in a very difficult position. He has committed himself and his followers to a battle that he will probably lose. Sibanye is not under any financial pressure, but AMCU members are. And if Mathunjwa loses this battle it will probably destroy his reputation as a fiery populist and it will be a significant victory for sensible economics in South Africa.”

Now Mathunjwa, who became South Africa’s most feared and populist union leader in the platinum strike of 2014, has indeed backed down and accepted a humiliating defeat at the hands of Sibanye and Neal Froneman. Read More


One of the outstanding achievements of the ANC since it took office in 1994 has been to maintain the relative integrity of the currency. The currency of a country is like the shares of a listed company. If a listed company is well-managed and expected to be profitable then its shares will rise in the market. If a country is perceived to be well-managed and to have an economy that is growing, its currency will strengthen against the currencies of other countries. So the rand has always been the best barometer of overseas perceptions of how well this country is being run from an economic point of view.

The rand has certainly fallen against first world currencies since 1994, but it has not descended into hyper-inflation. In most of the rest of Africa, once independence and democracy were achieved there followed a period of relative opulence, especially among the ruling class. Government jobs were given out freely and salaries increased above the inflation rate. The size of the government ballooned as private enterprise shrank. This was usually accompanied by a declining in tax collections due to a combination of economic stagnation, corruption and a steady fall in the ability of the government to collect taxes. With burgeoning expenses, the government then inevitably fell into the trap of printing money. In Zimbabwe this ultimately reached record levels leading to the collapse of the currency. Read More

Institutional Blindness

The Business Day reported on 10th April 2019 on the Investment Forum in Sandton where several asset managers talked about the major share collapses of the past three years – most notably Steinhoff, EOH and Tiger Brands. The big institutions and major fund managers (like Alan Grey, PSG and Coronation) lost hundreds of billions of rands when these stock market “darlings” suddenly collapsed.

But in each of these cases, there was clear technical evidence that all was not well long before they collapsed.


In the case of Steinhoff, the share made a perfect declining triple top at least 15 months before the Viceroy report came out and caused the share to collapse. Consider the chart:

Steinhoff (SNH) January 2016 to April 2019 – Chart by ShareFriend Pro (Click to Enlarge Image)

Read More


From time to time, listed companies may take the decision to “unbundle” one of their subsidiaries or strategic investments to their existing shareholders. This means that they decide to give their shares in that subsidiary (or strategic investment) to their shareholders in direct proportion to the number of shares which the shareholders are holding on a specific date.

Their reasons for doing this are varied, but usually it comes down to a decision that the board has taken that the subsidiary or strategic investment concerned is no longer part of their “core” business.

For example, if company “A” owns 70m shares in company “B” and company “B” has a total of 100m shares in issue, then company “B” is a 70% subsidiary of company “A”. If the board of directors of company “A” decide that company “B” is not part of their core business, they might decide that, instead of trying to sell their shareholding in that company, they will unbundle it to their existing shareholders. If company “A” has 700m shares in issue at the time, then the shareholders of company “A” will each get 10 company “B” shares for every 100 company “A” shares that they hold – on a specified date. Read More

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