ARTICLES

Two Elections and Two Wars

As the New Year begins, private investors should consider the most important factors which are likely to impact on the prices of shares and the profits of companies listed on the JSE. Some of these factors are local, like the general election which is expected to take place sometime in May, and some are international like the oil price, the strength of the American economy, or the outcome of the US presidential elections.

It now seems highly likely that the ANC will not be returned with a majority in Parliament in the general election later this year. Even their own polling indicates that they will almost certainly be forced to compromise with at least one other party after the results are in. The DA’s polling indicates that the ANC will get 39% of the vote while they will get 32% - and that therefore their alliance of minor parties may get sufficient votes in total to displace the ANC completely.

Given the extraordinary mismanagement of the economy which has characterized the ANC’s 30 years in office, such a development could certainly be expected to have a significant long-term impact on equity prices.

The price of oil is an incredibly important factor, both locally and internationally because it impacts directly on inflation rates and growth levels around the world. Since President Biden’s visit to Saudi Arabia in mid-2022, the oil price has been in a downward trend – and there is no indication that it will rise significantly during 2024.

The lower oil price has almost certainly been the most important factor in enabling the US economy to enjoy a “soft landing” despite the 10 interest rate hikes totalling 5% which have been implemented there. The soft landing of the US economy together with the massive job creation and rising stock market during the Biden presidency will be major factors in his favour in the presidential elections in November 2024.

At the same time the lower oil price is impacting directly on the situation in Ukraine. The cumulative impact of drop in the oil and gas prices combined with significantly lower volumes over the past year has damaged the Russian economy badly, at a time when it can least afford it.

Russia’s desperate need for additional soldiers to fight in that war has resulted in them offering foreign nationals’ Russian citizenship and a signing up bonus of $2000 to join the fight against Ukraine. This offer is appealing to migrants from Kazakhstan, Uzbekistan, Kyrgyzstan, Turkmenistan, and Tajikistan. It is also attractive to potential migrants from other countries like Cuba, Ethiopia, Nepal, and Syria. But the quality of the troops which it produces is highly suspect and their morale is very fragile.    

Ukraine is also feeling the need for more soldiers with President Zelensky suggesting the conscription of a further 500 000 people.

In our view, the war will continue until Russia runs out of financial, human, and military resources – and it is difficult to predict exactly when that might happen. Our view is that NATO, including America, will find a way to continue supporting Ukraine because the prosecution of this war is highly beneficial to them. It is accomplishing their need to deal with Putin’s megalomania and to degrade Russian military capability.

It is difficult to predict what will happen in the US presidential elections, but we believe it is becoming increasingly difficult for Donald Trump to win. He is facing ninety-one criminal charges in four cases at both the Federal and state levels. The US Supreme Court is now considering the decision of the Colorado supreme court to remove him as a candidate from the primary ballot in that state.

In addition, while Biden has not been doing well in the polls, the Democrats have been winning minor elections all around the country. Much of this has to do with the massive loss of support for Republicans following the Roe Vs Wade decision which deprived women of important personal rights.

Overall, we are positive about the prospects for equity markets and the JSE in the year ahead. With two critical elections and the on-going prosecution of the wars in Gaza and Ukraine (which are in our view connected), we see it as a year in which the forces of fascism both here in South Africa and elsewhere are likely to be substantially diminished.

The S&P500 index is on the brink of breaking up to a new all-time record high and it is our view that, when this happens, it will presage a substantial further upward move in stock markets around the world including the JSE.

DISCLAIMER

All information and data contained within the PDSnet Articles is for informational purposes only. PDSnet makes no representations as to the accuracy, completeness, suitability, or validity, of any information, and shall not be liable for any errors, omissions, or any losses, injuries, or damages arising from its display or use. Information in the PDSnet Articles are based on the author’s opinion and experience and should not be considered professional financial investment advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Thoughts and opinions will also change from time to time as more information is accumulated. PDSnet reserves the right to delete any comment or opinion for any reason.

PDSNET ARTICLES

Correction

The progress of the S&P500 index of the 500 largest companies on Wall Street is important because stock markets around the world, including the JSE, tend to follow it sooner or later.

On 19^th January this year, something momentous happened when the S&P broke above its previous all-time record high

Shoprite

In their article on 10^th April 2024, Checkers sweeps Pick n Pay as it opens 5 new stores in one day., Businesstech drew attention to the fact that Shoprite had taken over five stores from Pick ‘n Pay on the East Rand. Pick

WeBuyCars

In a few days’ time, Transaction Capital (TCP) will unbundle and separately list its second-hand car sales company, WeBuyCars (WBC). The main benefit of this is to release the value of WBC into the hands of its shareholders. When the listing is complete, on 11^th April 2024, WBC will have a total of 417,2m shares in issue which are expected to

Gold and Harmony

In our last Confidential Report, published on 6^th March 2024, we drew your attention to the fact that the US dollar price of gold was about to break up through a critical resistance level at $2060. Gold has now moved up to $2166 so this observation provided an opportunity for private investors to make a significant capital gain, either in actual gold

Reverse Takeover

At the end of October 2023, Mix Telematics (MIX) was a relatively small fleet management company with a market capitalisation of just R2,3bn listed on both the JSE and the American NASDAQ. Its shares on the JSE were wallowing at a low of 380c. This compares with its competitor, Karoo (KRO), also listed on the JSE, but which was at the time, more

Rare Opportunity

You may not have been aware of it, but last week, between Monday and Friday, there was an opportunity to make an 80% profit on your capital. This opportunity occurred because of insider trading on a little known and traded share called Quantum Foods (QFH) in the poultry and animal feeds business.

Generally, the poultry business is

Excessive Bullishness

On Friday last week, the S&P500 index posted yet another new record closing high, but this time just one point higher than the previous day at 5088. This means that the index, which measures the progress of the 500 largest companies on Wall Street, has been climbing without a significant correction for nearly four months. Consider the chart:

Lessons from Transcap

As a private investor it is very important that you study what has happened in the past and learn from it. The progress of Transaction Capital (TCP) has provided us with an excellent opportunity to examine and learn from a complete cycle in an institutional favourite share. We can examine the entire cycle and see how to profit from it. In this regard, it is important

Sasol

Sasol is a company originally established in September 1950 by the National Party, to counter the possibility of petrochemical sanctions against the old South Africa. Essentially, Sasol used South Africa’s enormous coal reserves to generate about one third of its fuel requirements. Subsequently, Sasol became involved in the chemical industry which now accounts for about

4Sight

The world has, in the last twenty years, entered what has been characterised as the 4^th Industrial Revolution (4IR). It has been described as “... the biggest structural change of the past 250 years — a transformation of scale, scope and complexity unlike anything humankind has experienced before.” In simpler terms, 4IR refers to the digital convergence of