The 5 o' Clock Shadow with Schalk Louw

You're listening to Strictly Business Podcast with Lindsay Williams. The JSC has closed its doors for another day so it's time for the 5 o'clock shadow and for the first time on a Wednesday in 2026, it's the 5 o'clock shadow with Skalk Lowe, Portfolio Manager at PSG Wealth in Cape Town, Old Oak Division.

Now Skalk, I think about you every day and it's not because of you taking up golf or other matters which need not detain us, is because every time I look at my screen or I get a message from someone, it's always to do with commodities. And it's literally every single day. And I'm looking at a graph of the CRB index, but I don't want to start with the overall picture. I wanna start with what was our favorite last year, and that is gold.

Incredible, 4,667, I think was the high that printed intraday since we've last spoken. Who can believe it? I mean, I don't want to say I would not believe it, because naturally you and I had this conversation, and I've been positive on gold for many moons, and I haven't lost that, let's call it, somebody asked me this morning, have you started selling any of your gold positions? And the answer is no. And we'll get back to that. But as you mentioned, gold, 72% year-on-year.

I mean, the poor man's gold, silver, 192%, close to being a two-bagger. And then we went into 2025. It took up to April for the ugly stepsisters. And when we turned back the clock 17 years or 16 years ago, it was definitely not the ugly stepsisters because you would have paid more than double, double the gold to get platinum. And then platinum took the pattern in April and just started running. And year on year, that's what? 153% up as well.

But when you look at palladium, palladium is also, what was it? 108, 109% rhodium up 113%. And why I'm mentioning these commodities because it's very important because... All of these commodities, we'd be either the top producer in the world or the second largest producer in the world or in gold's case, the eighth largest producer in the world. Hence the fact where a lot of people say, well, Rand 1640 odd levels. I went, why? Isn't that way too strong? Hell no. Hell no. No, it's on a run.

This is, to me, it's a secular bull market. But anyway, and you didn't mention copper or did you mention copper because you were rattling off the metals, but copper going as well and coinciding or not so much coinciding, but along with Anglo-American reinventing itself. It's been doing it over the years, but it suddenly reinvented itself as a copper company, I suppose, with the tech corporate activity. Yeah, but spare a thought for them. I mean, when did they get rid of Volterra?

Oh, Volterra, yeah. They... *laughter* A class half fun story, isn't it? Isn't it great that we've got copper? Yeah. Isn't it horrible that we don't have white metals? Yeah When did they get rid of it? It was February last year, we just mentioned. At the bottom. Platinum did absolutely nothing. It was actually quite underprecious. Stayed at these $900 per ounce levels and then they got rid of Volterra the platinum miners just went like, "Okay, thank you very much. There we go." That was a sign.

But it's very interesting and it's so good for South Africa because no matter what fancy economists say that we diversified our portfolio of economic activity in South Africa, the fact is South Africa is still a commodity-based economy. And if this run continues then the round will be 1450 not 1650, don't you think? I love that you say 1450 because a lot of people say, Oh, we could see 15 Rand levels. So let's just do a quick economics 101.

I'm not going to give the full purchasing power lesson because then this is going to be a typical 5 o'clock shadow, 45 minute thing again. But purchasing power parity since 1994 and I've used May 1994 for the specific reason that is the month that we've become a democracy again and it's open to the world properly and there we go. So that's the base state that I use.

And said, well when you use inflation differentials, in this case South Africa and the US, up to now, end of December, then you get what the purchasing power parity should be. But a lot of people said, well, you can't do that because South Africa went onto the gray list. They had the Zondo Commission. They had so many other things. So that's why you've always had a premium.

So I took the average premium over this let's call it 32 years and I added it to this purchasing power parity levels, 14 Rand to the dollar. And a lot of people say it won't happen, won't ever happen. Well, when you look at it over the past 20 years It's happened quite a few times where it actually dipped below this, let's call it fair value mark. So I'm not going to be one of those people. I can't remember. I think it was Irvin Ruud or somebody that coined the phrase, I think 20 years ago.

If you know where the RAND is going, you don't know what the question is. So I'm not going to try and forecast the RAND. Although I'm saying when you look at the current RAND. values at 1640, the RAND is by no means overvalued or let's call it undervalued currently. It's definitely still looking that it's got some value. And when you get an environment where because just look at our imports and exports. I don't know the exact figure, but I think it was something like 30 billion more exported.

And this is mostly commodities in November. When you've got that and you're running such a you know, large trade surplus, then I mean naturally your RAND should be improving. And also it doesn't do it any harm to see that the US dollar, although it's stalled a little bit, the US dollar is to me in the early stages of a bear market, Skulk.

I mean the RAND doesn't just trade against the dollar of course, notably the euro as well, but the The fact is that the weaker dollar will help the RAND strength. It's all set fair, I think. And let commodities carry on. And as I said earlier on, looking at my CRB index, that's the Commodity Research Bureau Index, which is a basket of every single type of commodity you can imagine, from palladium to eggs, from timber to bauxite to whatever you want.

It's all in this index in various degrees of importance, energy, of course, being the most important. I'm looking at this thing and it's breaking out, Skull. There's an upward sloping wedge if you're a person that looks at graphs and it's at all-time record highs almost as we speak now. If it breaks out from these tops that it's formed over the last year or so, then the sky's the limit. In fact, there's blue sky. It's just extraordinary.

And just before I stopped rabbiting on, I sent out a tweet in I think around about mid-October. That was when Silver first went through 50%. And it went straight to 51 and I said, "No, this is too quick." And I said on X, I said, "Is it time to ring the bell for silver?" In other words saying that's it now. Because it had gone from just around about Liberation Day time below $30 an ounce. It nearly doubled in the space of a few months.

Now it's nearly doubled again since mid-October to now to $91 per ounce. Astonishing stuff. I mean, the late Dr. Clive Ruffer used to tell me it would go to 50 within his lifetime. Sadly, he didn't live to see it. But goodness me, the punters love silver. I would have loved to see his face in this book. This is absolutely just for listeners that haven't learned or just go and find some of his books. I mean, he was one of the biggest gold lovers or gold advocates.

I mean, yeah, it's… Sorry they couldn't have seen this environment. Yeah, okay. Now, I haven't really been following gold shares very much. I need South African and international gold shares. Have they mirrored the performance of the yellow metal? Yeah, yeah, yeah. Naturally, we actually did save it somewhere. But most of these gold miners in 2025 did over 200%. When you look at Anglo Gold, that gold fields did. So, yeah. didn't just double up your money, you tripled up your money in 2000.

And I just want to get back one step because I think it's very important that you mentioned, I mean, you said South Africa is still very much of a commodity country. And you also mentioned that the S&P or US market is in a, which you think could be a sort of a bear mark. Now there's two things on that. The first thing is I had a look earlier today where I, physically went and just say, well, what is this?

Because back in the days, you actually had the resource index made up close to 50% of the of the JSE All Share. And it dropped down, I can't remember where, but I can recall something like 17 or 18% levels six, seven years ago. That was when NASPERS process were in their pump, as they say. Yeah, over 20% of the total index. Today, I went and had a look. It's getting close to 36 or 37%, getting close to the 40% mark again. That's the resource index.

And why that is important, you know, as we sit here, and I'm not going to give it away yet, but The JSE All Share ended 2025 over 38% up for the year, which was fantastic. Here we're sitting 14 days in. And again, the JSE is up over 4% year to date. But very important when you look at the JSE Resi, the resource index, as we sit here, they are now up Over 13% year to date. And like I mentioned, that's close to 40% of the index is driven by these commodities that is now running.

And this is not the first time it's happened. I love the word where you said it's a secular bull market for the JSU. I love that word because we had a similar trend. Because one thing that I've heard a lot from some of my Leonard colleagues over the past few days is how many... of them are calling tops on gold. They're calling tops on the JSC saying, "Well, JSC has done 38%. We shouldn't be seeing the same performance again this year." And if you're gambling, man, most probably right.

But this wouldn't be the first time. When you look at that period beginning of 2000, I often refer to that. This is the period where we've had a massive IT bubble very similar to the AA bubble now.

or let's call it a run we have this massive run the s p 500 did phenomenal and then then literally from 2000 onwards i mean that period between um let's call it december december 1999 up to december 2009 the the s p 500 yield a net negative return over a 10-year period not A real return, we're talking about an absolute return, negative return over a 10-year period. But over that same 10-year period, South Africa enjoyed two things. Firstly, they had one of the best bull markets ever.

Secondly, we also saw, like you just mentioned, a massive, massive commodity run. We did very, very bad in 2003. We totally forgot about that. And then 2004, we recovered. Suddenly did 20%. In 2005, we did another 20% and everybody said, "Ah, we shouldn't be doing that again in 2006." And then Mr. Marketers went like, "Hold my beer." It went up 50% that year. And the following year, another 38%.

So I think to the listeners out there, be careful calling tops, calling bottoms in this market, thinking the gold is finished. There's a reason why the gold is running. There's a reason why most of the… And a new reason every day. I mean, that's an exaggeration, but Iran is the latest reason. Exactly. It's quite astonishing. I have missed you, Skanko, I must say, because you're the only person. I've only just got back from the kitchen to make myself a cup of tea, and there you are.

I didn't miss a thing. Some lovely statistics, and I can come in with the Iran comment, having not listened to a word you just said for the last three and a half minutes. Yeah. No, seriously. But you've got that button and you just run with it as well. That's brilliant. It's exciting because in a year or two's time we'll be talking about, I don't know, small and mid caps or something like that. Nothing as exciting as this.

Speaking of which, I'm not going to get into the other side of the South African market. You talk about nearly 40% being the resi. I want to talk about other companies or other sectors that we might want to look at. But we'll do that next week. What's happening with this stock exchange news service so far in 2026? Any announcements, any corporate activity, any results coming out, any trading statements or is it too early? Yeah, it's a bit too early.

It's a little bit light on data yet, but we should be increasing. Yeah, there's going to be a few things we're going to talk about besides resis. I think we should have a look at our local retailers, but we'll have that discussion next week. Banks is going to have a massive, massive And you're going to remind me next week because hopefully we'll have more information on this whole thing about, let's call it government or SOAP that want to re-evaluate the way they calculate prime. the prime rate.

I saw that, Stuart Theobald said something about that on LinkedIn today and he says it's got nothing if you think it's going to mean that interest rates are going to come down or your prime rate is going to come down if you're a borrower think again but I haven't read the full article so do you tell me your version of it?

Let me I mean again we need to look at history so grab yourself another cup of tea this is going to be a really quick one and you'll remember it back in prior to 2001 I think it was in the Cristals days. I mean, the prime rate was set by the swap going to the banks and say, you need to be. You need to be for this, let's call it so effectively for the listeners that don't understand prime, prime is effectively only the amount that they earn. That's they cut. They rebate.

They kick back if you can sort of say. And that's been set at 3.5% since 2001. And why? Purely because prior to that, the banks, the theory was the banks will put in a bit and say, well, I'll do 3%, I'll do 3.5%. And then eventually they will set that difference, the prime rate. But the banks, there's so few banks in South Africa. It's not like the U.S. where we've got a there's so many banks. The banks will literally just get together, and this is me speculating.

They will just get together and say, what are you going to say? I'm going to do three and a half. Yeah, let's do three and a half." And then they realized, well, let's just fix it. Let's just fix it at three and a half percent because that's it. And all the government is saying is why are we still set at three and a half percent? Back in 2001, interest rates were trading close to double at the current levels. You know, inflation rate at 2001 was struggling to get to the six percent levels.

Now we've, we've, we're, fix the inflation. So, well, we're going to aim to keep inflation at the 3% level. Now, you know, 3.5%, and I just did a quick calculation. If you look at last year, when the repo rate, that's called beginning of last year, the repo rate was 8.25%. If you add that 3.5%, the banks just call it profit margin, and I'm putting it inverted commas, were 42%. Now the interest rates dropped down to refer rate 6.75%. So the cut, that 3.5% is now 52%.

The margins have compressed, haven't they? Is that what you're saying here? Yes. Yeah, exactly. Other way around. No, it's increased. Margin's increased. And I agree to a certain extent that we should re-evaluate this because if we're going to have a lower inflationary environment, because this is what we aim. This is the utopia for the SOP. If we're going to have... And let's say they manage to keep inflation around about the 3% level for the next 10 years.

Then one should say that interest rates will remain very, very low for the next 10 years. Why should if interest rates are going to be this low, why should that 3.5% still be that large? Okay. So they're taking action with this. It's going to be one of those debates like inflation targeting. I can feel it coming. It's going to be one of those stories.

crack on here and I've got to give you some prices because the first five o'clock shadow with you shows of 2026 shows the dollar round at 1639 the British pound against the round is 2204 and the euro around 1909 euro dollar 116.50 British pound against the US dollar is 134.50 now let's have a look at the all important commodities starting with gold Up $29 according to my screen. I don't know where they measure it from, up from when, but anyway, it's $4,616 per ounce.