ARTICLES

Where to now

It is now possible to see that the latest downward move on Wall Street is in fact a major correction – mainly because it has fallen between 10% and 20% - at least on an intraday basis. Our expectation, however, is that the upward move on the four days from Friday 28^th January to Tuesday 2^nd February represent a “bull trap” - which means that the correction will fall further. In fact, we expect it to break down through the support level at 4300 and head to somewhere between 3800 and 4000 before it bottoms.

Obviously, this further fall will be accompanied by a disappearance of those bulls who have been intent on “buying the dips”. And some of them will certainly be afraid that what they are looking at is the beginning of a major bear trend.

But we do not think it is. Our reasons for believing that the 13-year-old bull market is still intact are essentially fundamental. The American and world economies are not heading towards a recession – very much the contrary. From a purely objective point of view, interest rates are at record lows in most first world countries, including America – and those same countries have been furiously printing and injecting money into their economies since COVID-19 began at the beginning of 2020 (and before).

In our view, quantitative easing (Q/E) will have to end, and rates will have to rise to at least 3% or 4% in America before they begin to have a material impact on the profits of listed companies. And we simply don’t see that happening this year – or next. So, our opinion is that, following the completion of this correction, Wall Street and the markets of the world will resume their upward momentum at least until the end of 2023 – and probably beyond.

This viewpoint is echoed in the continuing rise in the oil price:

As you can see here, North Sea Brent oil has recently made another post-COVID19 record high at $92 per barrel. It is rising steadily in a strong upward channel, which we have mentioned to you on a number of previous occasions. If the world economy is headed into a recession, then why is oil rising like this?

The simple fact of the matter is that economists generally have and are completely under-estimating the long-term impact of Q/E. It’s almost as if they believe that the $20 trillion or so that has been injected into the world economy over the past 11 years is irrelevant – that its effects are already somehow discounted. Our view is that the true impact of this massive monetary stimulation is only now beginning to be felt economically and that some kind of unprecedented asset blow-off is in the making.  

The world is awash with cash. That is why commodities like oil are rising and why stock markets are continuously make new record highs. Investors are seeking real assets to protect them from the impending debasement of paper currencies.

As a private investor your approach should be to prepare yourself to take advantage of the recovery from the current correction. Try to perceive the moment at which the S&P500 reaches its lowest point and then look for those quality shares on the JSE which have off-loaded the most. Be aware that the rand is more likely to strengthen from its current level than to weaken.

And then formulate a strategy for assessing the longer-term systematic risk in the market. Undoubtedly, this great bull market will come to an end eventually. Where do you want to be financially when that happens? And how will you know that it is imminent?

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

The Debtors' Book

A BIT OF HISTORY

Many years ago, in 1982 when I started this business (which became “PDSnet”), I ran advertisements in both the Rand Daily Mail (RDM) and in the Star – which were the two most widely read newspapers in Johannesburg at the time. At that time, we were a very small business and had no credit rating at all. Despite this the RDM immediately

WeBuyCars - Results

The financial results of companies show how profitable they are and give a good indication of their share’s risk and potential return. WeBuyCars (WBC) is a recent listing which came to the JSE on the 11^th of April 2024. Unlike other listed motor vehicle companies, it is a company which specialises in the purchase and sale

Choosing Winners

We are often asked how we go about selecting the shares to put on to the Winning Shares List (WSL). Right now, there are 102 shares on the list with 5 having gone down since they were added, 94 are up and 3 are unchanged. On an annualised basis, 24 of them are performing at above 100% per annum.   

As a private investor,

Kore Revisited

Kore (KP2) remains at once the most exciting and most risky investment on our Winning Shares List (WSL) at the moment. We originally added it to the list just over a year ago on 16^th May 2024 at a price of 20c. It subsequently rose to a high of 83c on 3^rd October 2024 and we published an article

Rand Strength 2025

The strength of the rand is both a critical and a complex issue for private investors on the JSE. Our currency is influenced by two primary forces:

1. Our local economy’s prospects
2. The rand’s role as a leading emerging market currency

These, in turn, are

Sibanye Revisited

In these uncertain times, when nobody really knows to what extent Trump will back down on the international trade war which he has initiated, many investors are moving into precious metals as a hedge against the weakness of paper currencies (especially the US dollar) and paper assets like equities and bonds.

The problem

Smart Local Investors

The last two months have been wild on the markets – mainly because of Trump’s ill-advised, on-again, off-again tariff policies. The issue now is:

Will this morph into a full-blown bear trend? Or is this correction almost over?

From his election victory on the 6^th of November 2024,

Jerome Powell

The Federal Reserve Bank (“the Fed”) is completely outside the control of the President and Executive Branch of the US government. The chairman of the Fed is appointed for a renewable 4-year term by the President. The President cannot remove the Chair without cause. The current chairman, Jerome Powell was appointed by Trump during his first term as President and reappointed by

Uncertainty Soars

Investors are by their very nature risk takers, but they are always trying to reduce the risk which they have to take to a minimum. Donald Trump, with his threat of an international trade war and his on-again, off-again tariffs has significantly increased the level of risk in markets across the world. This can be seen in the extraordinary volatility in the S&P500

Liberation Day

Trump has done the unthinkable. He has deliberately engineered the collapse of the US and world stock markets in the nonsensical belief that somehow an international trade war will make Americans richer. Nothing could be further from the truth. His actions have taken the S&P down from its all-time record high of 6144.15 on 19^th February 2025 to Friday’s