A timely switch for more Sasol

Not all of our share picks have proved profitable. Like most investors our portfolio sometimes contains some duds. Therefore, when we see a dud spurt upwards, rather than wait for it to get back to our buying price, we get rid of it and reinvest in one of our dependable stocks. Today that happened.

Once we fancied Nuworld as a spec, but as we’d invested little in it, we let it continue cluttering our portfolio. Then seeing Nuworld shoot up into an overbought position just as Sasol, started to perk up having fallen out of bed into an oversold position, we did the swap. This position, seeing a share we don’t want reaching a high at the same time as one we do want touching a low, doesn’t happen often. Fortunately, as followers of technical analysis we are in good position to spot such happenings.

There is a lot less said and written about technical analysis these days than when Ben and I wrote our columns for Business Day. Then it was widely recognized that timing is the basis of profitable investment. You can buy the bluest blue chip, but unless you buy it at the right time, you may as well put your money on a lame Derby runner. Likewise, you can buy rubbish that brings in stacks of profit as long as you buy it its bottom, and sell it at its top. The timing of the sale is just as important as the timing of the purchase but can only be achieved using technical analysis.

Nevertheless you have to look at the fundamentals. Why has a share fallen to a low, making it an excellent buying opportunity, and why has a share shot into an overbought position which signals a probable fall?

A look at the chart tells us exactly why Sasol’s price has fallen; an oil price drop bringing down the price of petrol. This may of course continue, but in the case of Sasol, demand for its long list of Oil and Synfuel products as well as Polymers, continue whatever the oil price.

Sasol has a problem. As a South African company it sells most of its products in the ever-declining rand. However with its gas-to-liquid facility at Lake Charles, Louisiana, at a cost estimated initially at $20bn, this may be changing. Critics of the company point out that this project seems to be taking precedence over local expansion. They claim that Sasol’s capital expenditure in South Africa is essentially going towards maintenance rather than growth.

Do we shareholders Sasol care? Nah!

Jean Temkin


High volatility suggests big,big changes

The stock market, which has cushioned share market investors from the ravages of a falling rand, has turned against us, but there is a gleam of hope on the horizon.

For around three years, up until September 1, we stock market investors have contented ourselves with a swings and round-about scenario, rand against the share market. As the rand has lost ground, the stock market has risen; one compensating for the other. But since Spring burst forth, while the rand lost almost 4%, the JSE-Overall dropped almost 6%, reducing both the value of shares, and the currency in which they are quoted.

My search for encouraging charting signals with regard to the stock market yielded little but as world markets are all currently heading downwards and our own, most oversold for three years, The JSE Overall index will only alter direction when the rest do. The depressing news comes with the overlay of a Bollinger Band, set at a tight deviation of “1”. The currently extreme width of the band shows high volatility. From September 22 volatility took the plotting downwards outside the band indicating that the downward move is likely to continue.

Rather than the market, it is the rand that has me glued to my computer screen. While the rand’s Bollinger Band plotting is also wide, it is less volatile. The improvement in value seen since October 3, is likely to continue taking the plotting down to the lower edge of the band. But the thing that has me fired with optimism is the point-and-figure chart that shows last week’s broken triple bottom at $1/R11,21. If forecast theories from such a move play out to their full, this will take the rand to below $1/R9. Looking at the fundamentals, the only reason I can imagine would prompt this is the ousting of our currency’s worst enemy, Jacob Zuma.

Just imagine what this currency improvement would do for the country as a whole. There has been a 20% drop in the oil price since its June high, but with the rand’v value falling by 5,4% during this period. petrol and diesel prices have enjoyed limited reduction. But, if the rand significantly improves against the dollar, every item that travels by road, and every bit of agricultural product, grown on our farms, can fall in price. The richest BMW driver and the poorest benefit drawer will have more money to spend.

Jean Temkin


Be cautious in this jittery market

The share market is nervous and two warning signals have been flashing on the market for the past week or so but, as yet, all they are telling us is to exercise caution. The hot spots around the word, Gaza and Syria make us uncomfortable, but to my reckoning it is Russia’s face, growing uglier by the day, that is spooking markets.

The chart, plotted over the last 13 months shows how the MACD has since May, been hesitantly dipping lower and the market itself struggling to keep above the zig-zag slope. The zig-zag is set at 3%, which the amount lost or gained to make it change direction. A 3% loss calls for action.

Much in the market’s favour is that the candlestick plottings have been bouncing in the upper half of the standard error channel, but should they fall through, test or break through the lower edge of the channel, keep a close watch as this signals one of two things - a good buying opportunity, or time to get out of the market.

Jean Temkin


A glimmer of hope for the rand

The value of a country’s currency tells what the rest the world thinks of it. Therefore, according to the ever-increasing number of rands you can get for a US dollar, the rest of the world doesn’t think much of us. However, there is a faint glimmer of hope that the rest of the world will start taking a more positive view of us in the very near future.

Last week’s news carrying shots of expatriates casting their votes overseas that reminded me of a similar queue Ben and I was part of, 20-years ago in Amsterdam, when the exchange rate was around $1/R3,6. Then we knew that change was inevitable; now many voters are beseeching change.

Happy with the results of that first election, full of enthusiasm for the future of South Africa, Ben and I returned the following year. Then the road contained plenty of potholes but many people were optimistic about the future and enthusiastic about the change. Now, rather than having been filled, the potholes have multiplied, pessimism abounds and the vital call for change falls of deaf ears.

South Africa is falling behind much of the rest of the world’s technological progress and the slow service delivery continues. But, as the future of any country rests with its children, and many of our children are robbed of decent educations by poorly run, poorly policed, poorly administered education system, there seems no end in sight. How can Eskom and the like deliver essential services if its workforce lacks the necessary basic skills? Teaching used to be a vocation, what has changed?

Presently we are watching our long-time economic mainstay, mining, crumble before our eyes. As the rest of the world swiftly moves out of a long recession, so needing the kind of raw materials we produce, the infighting continues allowing our rivals gleefully to take over this erstwhile lucrative industry.

Since that first election two major crashes, have contributed to the rand’s 190% loss against the dollar. But, it is the 59% loss over the past three years that reveals the world’s current opinion of us. In May 2011, after three years of gain, the rand changed direction. Since then, as blow after blow struck our country, our currency has slithered. However, the blows hitting us from outside, in particular the downgrading by the rating agencies, were less severe than the blows administered from within.

Raising their hands in horror at Nkandla and the like, thinking South Africans have long lists of justifiable gripes, which set me searching for something to salve our hurts. For we investors there is new stock market high, and for the rest I perceive a faint glimmer of hope for the rand.

Jean Temkin


Some thought might ease petrol pump woes

Irrespective of whether you own a vehicle or not, you are hurting. The vehicle-less watch in horror as food prices rocket, while we drivers suffer the double whammy.

While the figures on the chart may lead you to believe it is the fault of the oil price which is what petrol is made from, but you’d be mistaken. Since the start of 2011 the oil price has risen from $9,40 to $10,08 a rise of 14.9%, but the basic petrol price has risen from R4,49 to R8,51 which is a rise of 89%.

Makes you think, doesn’t it?

During this period, fuel tax has increased 27% and levies, margins etc, by 36,6%. This means that the taxman has been raking it in from the direct tax, which I have shown in red well as from bits and bobs like customs and excise, wholesale and retail margins and the rest that I have shown in green. On top of these figures is the incremental Inland Transport Recovery Cost.

However, rather than blaming the Revenue Department for your discomfort, the real Bogy Man is our government. Their mishandling of just about everything has turned our currency into Monopoly money. They can’t be blamed for the 14.9% rise in the oil, but can be blamed for almost everything else.

There’s no arguing that at the start of 2011, the rand had become overvalued because the South Africa rand had become a currency of choice. Interest rates available elsewhere were pathetic, while ours were ahead of inflation. They are still higher than most, but favourable looks turned jaundiced on news of our chief Honcho spending fortunes on his private residence. Overtaken by greed, large sections of our workforce strike for mega-buck wage packages, and our power utility blames wet coal for shutting off the machines of industry.

The thinking amongst us are aware of the simple answer to our problem, but unfortunately we are in the minority.

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