You're listening to Strictly Business Podcast with Lindsay Williams.
JSC has closed its doors for another day, so it's time for the 5 o'clock shadow.
And as always on a Thursday, I speak to Viv Govender from Randsuisse in
Johannesburg, and also David Shapiro from Sasson Securities.
But David Shapiro is temporarily not with us.
I'm sure he's going to join the call as we go along.
So let's start with you, Viv.
And I was going to anyway, because I spoke to David on Monday and I said to him, I
put the question to him, what is it going to take...
for the markets to have a hit because of what's going on in the world?
Is it going to have to be a small nuclear device or something like that that is
going to spark a sell-off?
Because here we are, last night, S&P 500, all-time record highs again.
War?
What war?
Look, I think a couple of things are happening.
Firstly, is that we are in the midst of one of those great technological
revolutions that seems to be heading up,
up and away without much of a...
of a slowdown.
So, I mean, the demand that's coming through for things like, you know, Nvidia
chips and Micron, you know, it goes BEMI and, you know,
it goes to the Bloom Energy and all those kind of things.
It's just, you know, hitting new all-time highs and that's pushing markets up.
Secondly, we had results.
I mean, bank results are awesome at the moment.
You know, these guys are making a fortune on trading and investment banking.
So, that's obviously going to help.
You know, you're never going to short a stock just because the world looks bad if
that stock's giving you a lot of profits.
You know what I mean?
So, that's one thing.
Just before you go on, I want to get on to the banks because I've got to be in my
bonnet about the banks.
The banks are doing fantastically well.
I mean, some of these numbers are eye-watering.
But the banks are not doing the traditional banking as we know it.
They are trading.
They've got the trading floors, which you quite rightly pointed out,
which are making gargantuan amounts of money.
And also, I think in that quarter, there were $33 billion worth of share buybacks
from banks.
So it's not so much a bank as a casino.
That is the cynical view, Viv.
There must be other stuff going on, you know, funding AI and all that sort of
thing.
But on the other hand, without the Trump factor, I don't think these banks would be
doing so well.
Yeah, look, I mean, firstly, in a large extent, banking is commoditized at the
moment.
If you think about it.
I mean, it's not about a branch manager that knows your name and can deal with you
for most people out there.
It's just basically an app that you're using, and that app is pretty much
transferable between a bunch of different banks.
It's not really a big differentiator.
There isn't that relationship they used to have with banks in the past where you had
your local branch and your local manager that knew you and you had to do whatever
business you had
there.
Nowadays, it's become a lot more depersonalized, and therefore that part of
the business is unlikely to be profitable in a large scale.
And the second thing is that I think the pent-up demand for investment banking,
especially in mergers and so on, because of, like, you know,
Lina Khan at the FTC, she basically kind of stopped most of that stuff during her
term.
And so when the Trump administration came in and she was, you know, removed, you
know, a lot of pent-up bank, you know, merger demand came through that helped us
out.
And finally, you know, the last year has been quite volatile.
We had Liberation Day.
We've had whatever we had, you know, over the last year with terms of tariffs and so
on.
There's been moving markets around and obviously banks have made a bit of money
on volatility.
It's very interesting you talk about the way that banks have changed and the sort
of business that they used to make money from from
people like you and I.
It's just not there anymore because of the app because I was bemoaning the fact
because of a technical issue with one
of my accounts.
I bemoan the fact that I didn't rather...
have the ability to call up my branch manager and pop in and see her.
She was a lovely woman called Kathy.
Kathy, if you're listening, how are you?
And she was a gentle woman, you know, and she would sit down and say, don't worry,
Lindsay, have a cup of tea and I'll fix it.
And she would fix it because I'm an idiot when it comes to certain things, believe
it or not.
And those days are completely gone.
So, yes, I suppose technology is changing banking,
but is it risky to be reliant on buybacks and the skills of your trading floor?
It is quite risky to be reliant on that.
That is, of course, something I think that probably is a more volatile thing.
The merger is probably more dependable if, of course,
the termination continues and we don't have the regulatory hurdles we had in the
past.
I do, however, think that, you know, what's happened in terms of the banking
sector, and it's obvious seeing the stuff happening right now with private credit,
that I think is one of the big untold stories out there, or the undercover
stories out there,
where there's been a lot of issues with basically the private credit market out,
where people are, you know, talking about,
you know, some of that debt might not be properly valued on people's books.
I think it's something that we've been better in the normal banking sector, but I
think after 2008, people got a bit too nervous and too...
uh you know over regulated with things like basel iii and that a lot of stuff
moved off that the the normal big banks into like the private credit market
uh so yeah i i do think it's it's uh it's interesting but one thing i do think also
is that banking is becoming commoditized it's not
one of the sectors i think that's going to be making uh or the long the huge profits
unless they They are going to be taking the big swings with things like
trading.
You were talking about private credit.
I've got an interview tomorrow talking about private credit in the developed
markets versus the emerging markets.
Because, as you said, the developed market private credit asset class has come under
intense scrutiny.
I think it was Jamie Dimon, as high profile a fellow as that, was talking at a
conference a week or so ago.
And he brought it up.
And I saw another screaming headline, is private credit the new subprime?
Is it going to bring the market down?
So if the war doesn't bring it down, then private credit will.
If it's in the headlines, then it's probably not going to.
Let's talk about some other numbers now, specifically the tantalizing numbers we
had out of Taiwan
Semiconductor. This must have interested you very strangely.
Look, I mean, there was an interview with a podcast.
I don't know if you ever watched him, Dvokis Patel.
Pretty much everything he does on tech is very, very important.
the biggest He gets the really big interviews, Elon Musk, Jensen Wang, Dario
Mori, the guy from Anthropic, etc.
He does his big, big tech interviews.
And he had Jensen Wang on, I think yesterday.
And Jensen Wang, the interesting thing was, he's been a draw cash as well.
He's been pushing the idea that these companies are under investing if they
believe AI is coming through in the kind of like the what the market or
the predicting market says is coming through that rate is coming to, you know,
Dario Mori was like pushed quite there's a meme about how
He was pushed by Dvokish and kept on saying, no, we can't do that.
And Dvokish was saying, you're just under-investing, this is what you actually
believe.
And they did the same thing with Jensen Wong yesterday as well.
And the interesting thing is that even Jensen Wong, who seems to be one of the
most, as they term, AI-pulled CEOs out there,
in terms of his entire valuation of his company is pretty much dependent on AI.
Even he doesn't quite invest in the infrastructure and in AI at the rate you
would think he would
if...
He really believed the forecast that people have out there for when AGI and ASI
and adoption is going to be coming through.
And so, yes, with TSMC right now, I mean, this year price, like you said, is up 30
plus percent just this year alone.
Up in the last five years, more than doubled.
And most of it happened in the last year, basically.
And the thing is that these companies, these infrastructure companies are
investing and they are pushing the AI thing,
but they are not believing.
the numbers, I think, or the trends that we are seeing from Anthropic and OpenAI.
And therefore, there's still that continuing bottleneck, allowing them to
sell as much as they want to in the sector going forward.
Yeah, but that's in sharp contradiction to a couple of the discussions that we've had
in the past.
You said, you know, is it going to be possible to invest as much as they need to
invest?
Because the infrastructure simply can't take it.
Something will go pop.
So it's all very well saying, yes, the demand will be there.
But can we actually fulfill that demand because of, I don't know, energy or
whatever, as I say,
a creaking infrastructure?
What would you say to that?
The thing is that the demand is there.
And what's happening now is that we can't fulfill the demand.
For instance, if you use Claude, you've seen the kind of slowdown that's happened
to Claude recently, you know what I mean?
Yes.
Over the last few months.
And it's because they can't actually service the amount of demand coming
through.
But this is like a very, very privileged problem to have.
It just shows that the demand out there in the marketplace is gigantic.
And what you should be doing when that happens is raising your prices to reduce
demand.
There needs to be some demand destruction out there.
And I think that is what is the next step here.
And that just makes these companies even more profitable.
I mean, if TSMC and ASML have to increase their prices just to basically make sure
that
they can match demand and supply, that just means that they are going to have a
lot more profits.
At what stage are we in the AI boom or the AI journey?
I hate using that word, but I'm going to.
The AI journey.
How far are we along?
I mean, if you could say the same thing by using a comparison with the mobile
telephony market,
you could have shown Vodacom or Vodafone rather, seen its share price progression.
What would you say we're at?
Would you say we're at least a quarter of the way through?
I don't think this is a comparison.
I think the comparison you want to put out is like the Industrial Revolution.
Is this the point where we have the Industrial Revolution really taking off
the world?
I don't think so.
I think this is the point at which you are seeing like, you know, the moles in
Manchester and like, you know, a couple of places in Europe taking off.
It hasn't gone to like, you know, the Americas.
It hasn't gone around the world.
We haven't really seen the adoption.
in place in some parts of the world.
Like I said, self-driving vehicles, Waymo, is already in the US.
Have you seen them happen in the Netherlands yet?
I have not seen them in South Africa at the moment.
No, definitely not.
But the technology is here.
And you can imagine, just that alone, if the technology stopped today,
just the adoption of what's already out there in the world would be earth
shattering.
And the problem is it's not stopping right there.
We saw just last week that the announcement about Muthos and
all the stuff that it's doing with regards to finding zero-day exploits in software.
That is something that we just haven't even considered in the world, because you
take that technology and look,
it's not smarter than the smartest hacker.
The smartest hacker is smarter than this computer.
The thing is that the smartest hacker is not going to be able to spend all this
time finding all these hacks, and there's not many people at that level.
What we have right now is a commoditized smart hacker that can look at every piece
of software and find
all the low-hanging fruit when it comes to exploits and put them together and make
combination exploits.
You know what I mean?
No software in the world right now, big software especially, is able to be secure
in that environment.
That means all banking, all online transactions, all websites, databases,
if you have possible to be hacked, it will be hacked.
And that's already something that exists in the world right now.
And that won't be just the end.
It will be something actually smarter next year.
And in a couple of years' time, maybe it'll be smarter than the smartest hacker.
I mean, the future is here, but it's just not evenly distributed.
And I think that's what the stage is.
We're not at the stage where, for instance, Africa has electricity.
We're at the stage where a few plants in Manchester and in London, in England,
basically, have the steam engine.
And that, I think, is where the situation is right now.
So right at the beginning, goodness me, that's quite exciting and also quite scary
because I'll be having conversations.
that I won't even begin to understand.
I'm battling to understand the conversations I have with you at the
moment.
In the future, I'm going to be blown out of the water.
But I'll learn, Viv.
I'll adapt.
Okay, let's have a look at some real markets now.
The dollar round is 16.42, British pound against the round 22.22,
and the euro round is 19.34, all barely changed on the day.
A euro dollar, 1.1810.
It's the dollar after a...
A fairly decent end to the first quarter, i.e.
the month of March.
It was war-inspired.
The dollar's on the slide again.
British pound, 135.30.
Gold price, 4,808.
It's gone very, very quiet recently.
It's become a dollar play, Viv.
It's not a war play anymore.
It's not a central bank play.
It's purely a dollar play.
Dollar goes down, gold goes up.
4,808.
It's up a third of a percent today, or $17 per.
ounce.
Platinum is down another $7.23 and palladium is barely changed at
$15.87.
Let's have a look at oil now because with the risk on trade on equity markets,
that also implies that oil will be down.
But in fact, oil is up again.
It's up suddenly 3%, just under 3% for Brent crude, $97.70.
And West Texas crude is $93.24, which is up 2.1%.
I have to look at copper because copper, the New York version of copper anyway,
went to a record high over the last day or so.
It's pulled back a little bit, but it's still $6.07 per pound, which is just down
very slightly,
as I said.
Other commodities, not much going on there.
The South African 10-year bond yield, 8.48%,
and that is seven basis points higher on the day.
US tenure.
is what if a screen could work but it's suddenly frozen i'll go to the s&p first
uh 70 52
7050 for the june feud and that is down just a tad eight points us 10
year now if i can get it no it won't do it for me uh bitcoin has had a bit of a run
recently got up to 75 000 earlier on
today it's just above 73 000 at the moment Right, I've got to look at the JSC VIV.
I don't know if you've been watching it.
It hasn't been a busy week for results.
In fact, there's been barely any results out this week.
So it's been very quiet, especially with the gold price and the platinum price
doing what it's doing.
And so I've got on the upside Harmony, 4% better.
Boxer, the retailer, up 2.7%.
Mr.
Price up 2.6%.
And on the downside, Valterra, 5.5% down.
Northam's.
Down three and three quarters of a percent.
So it's the white metal producers going down.
Otesia is a 3.6% loser.
Alphamin down 2.9 and HCI down
2%. Any other corporate stories that have caught your eye since we last spoke, Viv?
Not really.
I mean, I think the big thing I have to say is that, you know, the reason that the
market's kind of down,
it's just like a rule of thumb I have at the moment is you want to sell at the end
of this week.
Every week, Friday, basically, the S&P ends up negative.
I don't know if you noticed that in the South of War.
So basically, we've had a very strong week.
We're up about 10% from lows in the market.
And we're heading into another weekend tomorrow.
And the market, I think, is probably going to set up.
And that's probably why we are seeing oil prices higher.
And that's probably why we are seeing...
you know, the kind of movements we're seeing at the moment in markets.
It's just because it's the end of the week, you have two days when you can't do
much, and you're going to be, you know, quite brave to be,
you know, as fully in the market as you were maybe Monday.
Yeah, very good assessment.
Okay, let's enjoy the relatively quiet time.
And Viv will speak again next week.
Just very quickly, the all share on the JSC today closed down half a percent,
118,708 and the top 40,
110,000
833 and that was a 0.6 percent loser thanks very much for your solo efforts
this afternoon viv
governor is from rand swiss in jahannesburg and that was the five o'clock
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