Market watcher & Investment Insights: David Shapiro – Sasfin
20 January 2010 23:11
ALEC HOGG: Hello, good evening and welcome to the SAfm Market Update with Moneyweb. I'm Alec Hogg.
Well, Vodacom's former chief executive Alan Knott-Craig is experiencing first-hand the old adage that it takes a lifetime to build a reputation, but only a few minutes to destroy one. Even though allegations against him come from someone with such an obvious axe to grind that you can hear the whining miles away, some of the mud seems to be sticking. We'll examine this story and more in the next half hour.
We'll discuss the First Uranium story with our investigations editor, Barry Sergeant, but before that here's David Shapiro in the studio on a day when the JSE's under a little bit of pressure.
DAVID SHAPIRO: Ja, we lost about 0.7%. The market's down mainly on resources. Financials and industrials were OK.
ALEC HOGG: Well, David, this is my lat broadcast as a single man. Jeanette's making an honest man of me. How many years ago were you married?
DAVID SHAPIRO: Thirty-eight, thirty-nine years.
ALEC HOGG: And only one marriage.
DAVID SHAPIRO: Ja. Marriage is tough, it's like the market. It has its ups and downs. So - volatile.
ALEC HOGG: But your shares are strong.
DAVID SHAPIRO: Ja.
ALEC HOGG: But mine are of course peaking out.
DAVID SHAPIRO: I just got a peck on the cheek, before I came into the studio.
ALEC HOGG: From Linda?
DAVID SHAPIRO: Mmm. She met me downstairs to make sure I was here on time.
ALEC HOGG: Da-vid! Well if I go 38 years I'll be nearly 90.
DAVID SHAPIRO: I actually think it gets better once the kids are out of the way.
ALEC HOGG: On to the market, Mr Shapiro, where the shares are always volatile, as they are in, I guess, most marriages. And today a little bit softer, although the financial shares seemed to do OK.
DAVID SHAPIRO: Ja. Alec, money going into banks. I'm not sure why, because I'm a little nervous about the South African economy, about the bank write-offs, certainly for the next six months, maybe a year. Yet money flowing in. I'm echoing what Kokkie said to us the other evening, where he fond more value outside of South Africa. But there seems to be a very strong demand and that's where the money is flowing as well. It's also flowing into industrials. There's quite a bit of activity taking place - switching taking place there as well. So that's where the action is. Resources came under pressure on worries in China, because Chinese authorities have issued an instruction to banks to halt lending.
ALEC HOGG: David, I know these big numbers, the big data that come out are not always followed too closely by investors, but today it's retail sales figures.
DAVID SHAPIRO: Ja.
ALEC HOGG: It shows in real terms - in other words taking inflation out - it's down 6% in November, followed by the trading update from Woolworths, which is a retailer, showing the same thing. For instance, their clothing sales were up 6%, but inflation of clothing was up 12% - so in fact in real terms they were down 6%.
DAVID SHAPIRO: In fact in volume terms.
ALEC HOGG: Those are quite significant reverses.
DAVID SHAPIRO: I think so. I think this is the worrying factor. People are not spending and are holding back. A lot of the gains that you may see are also not only inflation but also adding retail space. That's how growth is - it's not organic growth. People are not spending a lot more. I find it worrying and I think the consumer is under a lot of pressure, paying down debt and this will continue for some time. I don't see it turning quickly, and that's why I believe we can lower interest rates. It's not a demand situation now. The economy is just grinding to a halt.
ALEC HOGG: But if you are running a business and you last year sold R100 000, this year, after taking inflation out of account, it's likely that in real terms you sold about R94 000.
DAVID SHAPIRO: That's exactly what's happened. It's a massive reversal.
ALEC HOGG: Because your salaries have been going up...
DAVID SHAPIRO: And also population goes up, or supposedly goes up.
ALEC HOGG: Well, your costs are going up in every business because of inflation. So it is a struggle out there.
DAVID SHAPIRO: I think it is. If you talk to retailers - and don't look at the foot traffic in a mall, because people just come and walk around.
ALEC HOGG: They are spending less.
DAVID SHAPIRO: They are spending a lot less, and I think it's going to impact, because an economy starts to fall. And when that happens, if a company makes lower profits it means it pays lower salaries or starts to lay off people, and that kind of feeds on itself. I'm greatly in favour of interest rates being cut, just to relieve people, to put more money in their pockets so they can actually start reversing the process.
ALEC HOGG: On a different tack, BHP Billiton brought out a production report today. Was there much reaction?
DAVID SHAPIRO: I wish there could have been a reaction. Unfortunately it was offset by the Chinese story - that they are holding back on credit - and that always triggers a bit of a reaction with investors, particularly in commodity markets. So we saw a bit of a reversal in miners today. But I thought it was an excellent report, pointing towards them getting higher prices in iron ore and in other base metals. So I think it's looking good on the commodity front.
ALEC HOGG: David, on Sunday I'm off to Davos, to go and sit and listen for five days. South Africa's going to be the big news there this year. In fact the big party of the year is the South African party. So 2010, for this country, gets going there. What is interesting in Davos is you come back with a better understanding of how the world is likely to go in the next 12 months, and for investors. What are the big signs, from an investment perspective, that you'd be looking for?
DAVID SHAPIRO: Whether the economy is sustainable, whether it's real or not. How long can we depend on government stimuli, and what is the next movement? What's the next growth phase, what's going to trigger growth in the global economy? Is it going to be clean air, carbon emissions - addressing those issues from a technological point of view that spawns a whole new industry? So I think it's going to be very interesting. Last year I think everyone was in panic mode, and very worried whether we'd actually survive here, and whether they'd even hold Davos next year, whether there'd be enough food to feed us. So I think this year it's a different attitude.
ALEC HOGG: David, there's always enough food in Davos.
DAVID SHAPIRO: Ja. But was the world going to collapse? Remember the panic? So I think this year it's going to be OK, we're through the panic, what next? How do we actually get the world to keep growing?
ALEC HOGG: Is it going to be Chinese drip torture or - interesting, it's almost like you have the patient in the bed, they've been given a massive adrenaline injection, they sit up on the bed, no longer dying. But are they going to fall back onto the bed, because you can't give them two adrenaline injections? Can they get out now and walk home?
DAVID SHAPIRO: And I think the big question is not the Chinese - they are going to grow, India is going to grow. What about the developed nations? Where is America placed, can America revive its strategic importance in the world? It's really economically important. What are they doing to keep America growing? The iPod can last for so long - what's the next generation of technology there? |