Episode Overview:

In this episode, Simon Brown dives into the current economic landscape with a focus on interest rates, inflation, and the state of the South African Rand (ZAR). He also explores asset-light businesses and why they make great investments, followed by a breakdown of the latest market activity and local company results.

Rate Cuts & Inflation Outlook:

• South African CPI (August): 4.4%.
• A possible drop to 3.5% in October discussed with Johan Els, Chief Economist at Old Mutual.
• The need for rate cuts to stimulate the economy, with experts debating between 0.25% and 0.5% cuts.
• Fed decision and its potential market impact.

SA Prime and CPI September 2024

ZAR Strength & Market Trends:

• Rand showing strength, potentially reaching sub-17 levels.
• Global market highs: S&P 500, NASDAQ, and JSE Top 40.
• Consumer confidence in the US and South Africa rising but still negative.

Platinum Group Metals (PGMs) & Palladium:

• A strong bounce in PGM stocks, driven by oversold positions and palladium production cuts.
• Palladium’s recent performance and its potential future breakouts.

Palladium weekly chart | 18 September 2024

Asset-Light Businesses & Their Investment Potential:

• Definition and benefits of asset-light businesses (e.g., Santova, Nvidia).
• Simon breaks down why businesses with fewer physical assets can provide higher returns on equity and efficiency.
• Comparison to asset-heavy businesses like banks and retailers.
• A deep dive into asset-light models like Shein, Temu, and logistics firms.

Company Updates & Local Results:

• Outsurance: Strong financial results and special dividends; analysis of the short-term insurance industry’s ability to reprice premiums annually.
• Altvest IPO: Simon discusses the upcoming Altvest IPO on the JSE and why he's not taking part in it, despite its interesting SME funding model.
• Finbond: A look at the excitement surrounding Finbond’s potential delisting and the company’s moves in the US market.

Noteworthy Quotes:

"Rate cuts are coming, and I think we'll see a short-term sell-off as markets react."
"Asset-light businesses like Santova and Shein are great investment opportunities because they don't carry the heavy burden of owning physical assets."
"Outsurance continues to impress with strong numbers and dividends, proving the strength of short-term insurers."

Chapters
00:00 Economic Landscape and Rate Decisions
03:09 Understanding Asset-Light Businesses
05:54 Market Psychology and Upcoming Events
09:11 Local Results and Investment Insights
11:52 Exploring New Investment Opportunities
15:10 Finbond and Market Speculations
17:59 Larry Ellison and Oracle's Rise

Simon Brown

* I hold ungeared positions.

All charts by KoyFin | Get 10% off your order