{"id":141652,"date":"2021-09-29T10:46:01","date_gmt":"2021-09-29T10:46:01","guid":{"rendered":"https:\/\/www.regenesys.net\/reginsights\/?p=141652"},"modified":"2021-11-22T14:09:40","modified_gmt":"2021-11-22T14:09:40","slug":"mywealth-investments-summary-of-the-investment-club-meeting-on-16-september-2021-part-two","status":"publish","type":"post","link":"https:\/\/www.regenesys.net\/reginsights\/mywealth-investments-summary-of-the-investment-club-meeting-on-16-september-2021-part-two","title":{"rendered":"MYWEALTH INVESTMENTS: Summary of the Investment Club Meeting on 16 September 2021 \u2013 Part Two"},"content":{"rendered":"

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TECHNICAL ANALYSIS:\u00a0 THIRD QUARTER<\/strong><\/h2>\r\n\r\n

MyWealth Investments aims to have a meeting every quarter.\u00a0 In the previous Investments Club meeting, we spoke to Chris Gilmore.\u00a0 The economy was seen as entering a super cycle, we saw some interesting trades and a lot happening in China, presenting opportunities for investors.<\/p>\r\n\r\n

\"MYWEALTH<\/a>Commodities:<\/strong><\/h2>\r\n\r\n

Platinum group metals (platinum, rhodium, palladium) has come down substantially in the past couple of weeks.\u00a0 Automobile manufacturers have started to cut down substantially and these metals are used in cutting emissions in internal combustion engines.<\/p>\r\n\r\n

Toyota has announced that they want to cut down about 300 000 vehicles in the Asian Pacific region.\u00a0 The effect of this could be seen in the platinum price in the past week.<\/p>\r\n\r\n

Today alone we saw losses in this industry of way below 5 %.\u00a0 Most industrial metals are run by China.\u00a0 Since China is industrialising at such a fast pace, whatever happens in China is going to affect local stocks.\u00a0 Investors need to look at margin of safety, what the all-in sustaining cost<\/em> is for these stocks.\u00a0 The all-in sustaining costs is defined as how much it costs us to produce one ounce of platinum vs. where the platinum price is<\/em>.\u00a0 The margin of safety was at record highs, even higher than in 2008, when we saw another super cycle.<\/p>\r\n\r\n

It gives some leeway to still make some profits now, but we cannot expect to see the record dividends which were declared by mining companies, be it platinum, gold or copper.\u00a0 They declared earnings up above 200 – 300 % and from now on we can expect to see normalisation of earnings from these counters.<\/p>\r\n\r\n

The low base effect is still playing out and, if compared to normalised earnings for 2019, we can see quite a different picture across the board.<\/p>\r\n\r\n

Copper is back at record high levels and copper is always an indication of what is happening in the world economies.\u00a0 The momentum in the construction sector is still picking up, aluminium is at a 3 year high, and the price of lithium is up 98 % for the year.\u00a0 Sibanye Stillwater has just announced that they are partnering with an Australian mining company, and they are getting into the lithium market, which is considered extremely profitable.<\/p>\r\n\r\n

Sibanye is a multinational precious metals mining company, with a diverse portfolio of platinum group metals in SA and the US, gold and base metals operations and various mining projects in SA and the Americas.<\/p>\r\n\r\n

The Federal Reserve Bank (Fed) pointed out in the previous quarter that there will be bottlenecks and the supply chain disruptions might be with us for at least another 2 years.\u00a0 We are witnessing the transitory increases in inflation across the globe right now, it is a hot topic all over the world.\u00a0 It will be interesting to see how the Fed is going to deal with this issue, because the stimulus provided by the central banks, was fuelling the commodity prices, and fuelling inflation.\u00a0 Now we are sitting with economic growth that is softening again, so how do you get the inflation under control?\u00a0 Interest rates cannot just be hiked, especially in a country like SA.\u00a0 It will be interesting to see the Fed\u2019s next move because the road to recovery is uneven.\u00a0 Everyone is watching the jobless numbers every week, paying close attention to non-farm payrolls.\u00a0 In previous numbers, we\u2019ve seen quite an increase in hourly earnings, which is inflationary.\u00a0 The inflation problem is not going to go away.<\/p>\r\n\r\n

We see an energy crunch in Europe right now, their gas stockpiles are low, it\u2019s 1 month before the heating season, that is also going to push up inflation.<\/p>\r\n\r\n

At this point, from an investor\u2019s point of view, at these prices of stocks especially with exposure to China, this may be a great opportunity to start buying.<\/p>\r\n\r\n

Global economy<\/strong><\/p>\r\n\r\n

In the mid 1980\u2019s and coming into 2015 -2016, high inflation was seen locally and globally.\u00a0 One thing we realised about the pandemic, because of supply size shocks and less demand, we\u2019ve been able to contain the inflation that would ordinarily be caused by stimulus.\u00a0 If you print money, there will be more money chasing too few goods.\u00a0 The problem is that there are no goods being supplied.\u00a0 The supply bottlenecks have created some normalisation in inflation because the inflation now coming onboard is in essence transitory and is because of low base effect.\u00a0 We see cyclical inflation rather than structural inflation.\u00a0 Economists believe that, because there is no pent-up demand, and we see irregular spending from consumers, we should expect to see the Fed\u2019s to keep interest rates constant for some time.<\/p>\r\n\r\n

Looking at the Fed\u2019s balance sheet at the beginning of the pandemic, it was almost at 4 trillion USD.\u00a0 It is now at 12 trillion USD.\u00a0 In the space of a year and a half, with the bond buying stimulus packages, it has grown by almost 200 %.\u00a0 The question is, how sustainable is that?<\/p>\r\n\r\n

The GDP in SA in the previous year contracted by 6.4 %.\u00a0 This year it is forecasted to grow by from 3 % to close to 5 %.<\/p>\r\n\r\n

European Purchasing Managers Index (PMI) also is volatile, so the road to recovery is uneven.<\/p>\r\n\r\n

In the global economy, we should closely monitor job reports and look at what the labour market looks like in the US.<\/p>\r\n

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