10 August 2021 By PDSNET

The announcement by President Ramaphosa of his cabinet reshuffle has received a mixed response from investors. On the one hand, it is clear that he has moved to consolidate his position within the government which should mean that his reform process should be less impeded than it has been. On the other he appears to have been obliged to lose Finance Minister Tito Mboweni either because Mboweni wanted to resign or because he was under pressure from the union movement – or perhaps a combination of both.

Whatever the reason, the new Minister of Finance, Enoch Godongwana, is being perceived as a step backwards and this is reflecting in the rand/US dollar exchange rate. Since the announcement, the rand has lost almost 3% of its value against the US dollar. Clearly, overseas investors do not rate Godongwana and are somewhat disturbed by rumours of his past involvement in corrupt activities.

In any event, the rand which was recovering steadily from recent lows caused by the civil unrest is once again on a weakening path. Godongwana as Minister of Finance is a largely unknown force, but most are convinced that he will not be as disciplined as Mboweni was – and that probably means more taxpayer money going to state-owned enterprises and at least a slower reduction in the government debt. Consider the chart:

South African rand/US dollar: March 2021 - 6th August 2021. Chart by ShareFriend Pro

Here you can see the long-term strengthening pattern that was interrupted firstly by a shift to “risk-on” in international markets following the scare over the spread of the delta variant of the virus in America and then by the 9 days of civil unrest in Natal and Gauteng. Once the unrest was behind us, the rand began once again to strengthen. Then you can see the impact of the cabinet reshuffle and the loss of Mboweni. The rand has almost come back to touch the long-term trendline – and may still weaken further as international investors reassess the risks of investing here.

We believe that the rand is still fundamentally under-valued against first world currencies and remains in a long-term strengthening pattern. While we see the advent of Godongwana as a negative, unless he does something radical, the strong case for investing in South Africa will re-assert itself over time and the rand will continue to get stronger.

We also see a relationship between the strength of the rand and the new record highs on the S&P500. Confidence in the US economy equates to a general move towards “risk-on” in the international investment community – and that is always going to be good for emerging markets, especially South Africa. The high real rates of return which are available on our government bonds will lure investors away from the security of US and European T-bills, provided we can avoid shooting ourselves in the economic foot.


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.

Share this article:


The Anatomy of the Bear

As the bear market unfolds on Wall Street you either hold shares or you are sitting in cash. For those who are holding shares, as we have said consistently, you need to watch your stop-loss levels very closely because you are operating in a market where the odds are decidedly against you.

For those in cash, your position is

Bear Trend

We never regarded the COVID-19 fall of the S&P500 in March 2020 as a bear trend. In our view it was always a technical aberration caused by the “black swan” event of the pandemic. It caused a temporary downward spike which lasted from February to August 2020, but it was never a true bear market.

Then on Monday

Uncharted Territory

The world has entered a turbulent time, the outcome of which will largely determine the future order of things. There are six great areas of uncertainty which the private investor should formulate a coherent opinion on:


  • The war in Ukraine is in reality the remnants of the cold war, a low-level conflict

Triple bottoms

Investors should be riveted to the progress of the S&P500 index these days. As we said in our article three weeks ago, the S&P is teetering on the edge of a bear trend. Following that article, the index climbed back up and then on the US Memorial Day weekend it encountered significant

Basic Fundamentals

Public, listed companies are required to report back to their shareholders on a regular basis. They must produce audited financial statements after the first six months of their financial year (interims) and then again at the end of the financial year (finals). Listed companies must produce these statements within 3 months of the end of their

Teetering on the Edge

Last Friday, the S&P500 actually dipped into bear market territory during the trading day. It went as low as 3811.28 before staging a remarkable recovery in afternoon trade to close at 3901.36. This resulted in Friday’s candle becoming what is known as a “hammer” – a candle with a very short body and a long downward

Bitcoin versus Gold

Cryptocurrencies cannot really be considered an investment because they have no fundamentals. Their value is derived exclusively from the belief of the people who invest in them. When belief in Bitcoin is strong the price rises and when it is weak, the price falls.

Bitcoin cannot be regarded as a “safe haven” asset


Most investors would probably agree that there is a considerable amount of uncertainty in equity markets at the moment. From a fundamental perspective, that uncertainty has come about because of:

  1. The force with which the central banks of the world (especially the US Fed) will “stamp on the brakes” to reduce

Powells Punch

In November last year we wrote the following about the U.S. economy in the Confidential Report:

…what if the Fed is wrong about inflation and it persists at the current high levels or even increases? September was the 5th month where inflation was above 5%. If they are wrong, then they will need to raise interest


Nineteen months ago on 2nd of September 2020 in the Confidential Report, we recommended buying Lewis shares when they were trading for just 1668c. The share has now moved up to 4670c – a gain of 180%. Amazingly, it remains excellent value today despite this substantial rise in its price.

The company has 817 stores with 84%