Reliable - you hope

ZARX, the new stock exchange has arrived and, as an investor in shares, it’s nice to know there is another avenue down which I can trade. Even nicer to know trading is less expensive and quicker.

I don’t know if I’ll ever trade on the ZARX. I guess that depends on which companies list on it and how quickly I want to trade. Cost could also be a factor.

I did recall, though, that SA used to have two stock exchanges, the Johannesburg Stock Exchange (JSE) and the Union Stock Exchange. In my youth I was the ward of an aunt and uncle and the father of the uncle, had been a stockbroker on the Union Stock Exchange until he retired.

At the time, I had not yet discovered the terrain of stocks and shares, and was uninterested. But I did recall that there were two markets. And so, I asked myself what happened to the Union Stock Exchange?

In my youth I would have had to research in a library. Now I have the internet. Here I have been told that the Union Exchange was introduced as a rival to the JSE in 1933 and that it wound up in 1958 when its listed companies were merged into the JSE lists.

Again using the internet, I looked at the history of ZARX and was informed (I quote): ‘South Africa’s first, and until now, only bourse, the JSE, was formed in 1887 during the first South African gold rush.’

Oh well, the internet is quick but who said it was reliable?

Ben Temkin


Seeing Again

For more than three years I’ve had double vision. You might have thought this was a bonus – two for one. The fact is that it’s debilitating. Reading was onerous as the print was always out focus and typing was a slog.

The double vision was one of the side effects of the several strokes I had had. I had been lucky because the other side effects had been mitigated by my own physical therapy.

Now, if I had been forced to earn a living by writing, I would have continued by doing just this and, put up with the double vision. However, my retirement income is sufficient and so I have avoided unnecessary writing.

Of course I continued to the various doctors that I still suffered from double vision but they appeared to be pleased that I could read.

Why don’t you dictate, one of the medical specialists asked me? Good suggestion but I had to review the stuff and that was a pain.

For several years both Jean and I have had our eye tests with a specialist. However, it seemed she could need new glasses and so, to optician/optometrist Owen.

After Jean’s examination, I mentioned to Owen it was a pity, nothing could be done my double vision.

‘But, of course, it can,’ Owen said.

This was proved by arduous examination followed by new glasses. And, as I can now see again, I can also write.
I know that at least one of the former readers of the narrative of Jean’s and my High Yield Portfolio is anxious for its resumption. There may we others. In any case, the story goes on.

I had rather hoped the resuscitated Rand Daily Mail would like the revived narrative, especially I as there was no fee. Alas, the bait was nibbled but was not taken.

Ben Temkin


GOOD RETURN

Triggered by a hopeful reader, I’ve scribbled down some notes on Jean’s and my High Yield Portfolio.
Chances are that you know nothing about the portfolio and so let me give you some background.

About seven years ago, following a discussion with the Business Day editor, we reckoned that it would be interesting and, perhaps, fruitful for the readers and us if we invested a substantial amount of money into the market into and shared our anguish and possible joy with the audience.
Over some 18 months we selected and bought 10 counters , each about an equal weight and each with an attractive dividend yield. One counter, Stefstocks, was sold early on at a small loss, leaving the Portfolio with nine counters.

The Portfolio was begun with a purchase of Grindrod and the other counters, Hudaco, MMI, Pick ‘n Pay, Reunert, Spar, AVI, Famous Brands and Imperial were added – a total investment of a million rands by June 2013.
Mainly reinvesting dividends, we have added more purchases of Spar, AVI and Famous Brands, the latest in investment being a purchase of R60 000 in Famous Brands last month. In total, the Portfolio has invested R1,35m and its market value to date is R2,35m.

We have been silent on the Portfolio some three or four years but have decided because of the trigger above, and the fact the Portfolio’s vicissitudes are a good real life example of investment, to continue to tell its story.

The Portfolio has done reasonably well over the period. Its internal rate of return to date is 15.26% per year. The return means the Portfolio has more than doubled every 4,6 years since inception.

(Fortunately, Microsoft Excel has a formula for internal rate of return and the accompanying article could help those who are interested.)
The internal rate of return is our performance gauge. In deciding whether to invest in more shares – or selling some- we examine a wide range of investment fundamental and technical factors. The internal rate of return tells how well, or badly, we’ve analysed those factors.

Ben Temkin

I have overlaid the weekly closing price chart of Pick ’n Pay with fan-like speed lines and exponential moving averages. On two occasions the price dropped through the lower speed line during the four-year bleak period for the share. Then, in a strong recovery phase, the price moved quickly upwards into the higher section of the fan.

It then fell but was well supported at around R64. On its point-and-figure chart (not shown) several upwards breaks give us a possible count to around R83.

I have plotted Pick ‘n Pay’s moving average, red short-term, green medium-term and mauve longer-term. Presently stacked in this order, it illustrates a bear trend. However the short-term moving average is rushing upwards and likely to cross the other moving averages very soon. This will switch the stacking order the short-term, above medium term, above long term, confirming a new bull trend.

Jean Temkin


Oil price is down but what next?

From June to the start of December the oil price fell 32,64%, while the price of petrol, shown on the chart in blue, fell by only 12,7%; why? The answer that immediately springs to mind is that we pay US dollars for oil with a devaluing currency. But, as the rand has lost only 3.09% over the same period, that answer seems not to stand up to scrutiny. I’d be delighted with an explanation on this apparent oddity.

Nevertheless, we motorists would be delighted if the present state of affairs, a falling petrol price could continue. Also delighted will be food shoppers who bear the cost of energy to produce the food and then get it to the shops.

The chart shows a continuation of the fall in the value of the rand that began in 2011 when the rand reached a low of $1/R66,5, which compares with the current rate of $1/R11. While not shown, I have used a point-and-figure chart of the dollar/rand exchange rate to give me a hint of what we may expect in the near future. The plotting has reached a significant formation, a triple bottom level of resistance. This shows that this is the third time that the exchange rate has tested this level.

It may of course bounce upwards again, but, if this resistance does not hold, there is a chance that the rand could strengthen to a much needed $1/R8,5 . While an optimist, I see no hope of this under the present administration, but as the pressure on the apparently absent Zuma continues, and his deputy, Ramaphosa takes over some of the reigns, finger-crossing is in order.

Frantic rises and falls in the oil price are not unknown, and typically, when one has taken place, the trend continues. The current fall has taken place in steps, a series of big falls, followed by slight rises. Again looking at a point-and-figure chart, there is an indication of a broken triple bottom in July at $110, which according to theory, gives a down-count to $8,47, or slightly above the current price. As the chart show, the plotting has dipped through the base of the standard error channel and now moving back into it. It is also at its most oversold for two years, which leads me to expect it to strengthen, but, hopefully, only slightly.

Jean Temkin


Positive signals for the rand and the stock market

It’s worth another look at a chart that I drew earlier this month which then indicated that the market would dip and the rand gain strength. The rand is still gaining strength, but the market is improving and likely to continue doing so.

The much needed strength in the rand is continuing (fewer rands are needed to buy a dollar) and shown by the plotting heading downwards. To make sure that this encouraging movement is likely to continue, I have overlaid a standard error channel, the green upward sloping lines. The center line is the equilibrium (the level to which the plotting is expected to return) and the two outside lines boundaries, which indicate that the subject (this time the JSE-Overall index), have moved too far in either direction.

A break above the upper line shows that the subject has moved too high to maintain this level, and a break below the lower line, that the subject has moved too low to maintain this level.

A break above the upper line happened in late September, early October – it took too many rands to buy one dollar. The plotting has since fallen to below the center equilibrium showing that it is perhaps moving down a little too fast, but is still far away from the lower error line. This tells me that I can expect this downward move to continue. If this downward move continues for a longer period, the slope will flatten, and begin to tip in the opposite direction. This would be wonderful for the country, but I am not placing any bets on it happening yet.

Over the second plotting (blue candlesticks), I added a moving average convergence/divergence indicator (MACD) and its zero line, also in blue, but have indicated its signal line in red. The MACD is an excellent way of showing a shares current position, overbought or oversold, and indicate buy and sell signals. Anything above the blue vertical line is zero is positive, and anything below negative. The exception is when, the plotting is far above, showing that it is well overbought and likely to turn down, or far below, showing that it is well oversold and likely to turn up. This turning upwards has happened to the extent that it has broken through the red signal line giving a buy signal.

My reading of the present situation is that the rand will continue to gain value against the dollar and the share market will continued upwards. As our shares are quoted in rands, this means that their intrinsic value will increase.

Jean Temkin

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Ben & Jean share their thoughts on the Investment World & its opportunites, plus anything else that they think will be interesting