Lift off (#402)

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Simon Shares

• Day 70 of lockdown, week 1 of level 3 and I got drink (still no smokes) but court locks down lockdown?
• Markets are surging, taken off flying and chasing the stars. Overall value is decent but not spectacular. Coupled with the ZAR at 17 we likely have a risk on trade and some epic sort squeezes. The general view for the currency is at least 16 in the short-term maybe stronger but as always, be careful because this can turn on a dime.
• Of course, my crash puts are getting slaughtered in this run, but that's the plan. if my cash puts are losing then my portfolio is winning.
• WTI and Brent both having a good week with the latter back above US$40. Sasol (JSE code: SOL) the easy winner here, likely based on higher oil and short squeezes. Will it close the gap at R160? Certainly, the possible rights issue is much less likely with Brent oil back above US$40.

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• The Bidvest (JSE code: BVT) saw them write down their Comiar (JSE code: COM) stake to zero as the business is in business rescue. But they had good things to say about Adcock Ingram (JSE code: AIP) and that boost Adcock, but caution as they sell a lot of over the counter drugs that may struggle under a stressed consumer.
• Last week I was dissing MTI on Twitter, they've reached out to me asking why. I sent them a list of questions on Tuesday and will publish the answers when I receive them. Key point apart from paying referral fees is an absolute lack of compliance process and no FSCA registration.
• Locally and globally PMI data bounced back in May compared to the horror April numbers. This is in part statistical, but also that April was hard lockdown in much of the world and importantly aside from China all PMI numbers were still below 50 and hence contracting.
• Speaking of China, they're cracking down on Hong Kong coupled with Trump blaming them for their COVID-19 response and let us not forget we still have the trade wars on-going. Make no mistake they are using the cover of a pandemic and Trumps increasing isolation as a world leader to flex their muscle and increase their influence. This is not surprising but will lead to even greater tensions between the US and China and this must leave Tencent in somewhat of a bind and at risk of sanctions aimed either directly at them or China more generally? That, of course, could then play out to Naspers (JSE code: NPN) and Prosus (JSE code; PRX). But for now, they both doing alright, remember they are still some 20% of the Top40.
• Remgro (JSE code: REM) has spun out their holding in RMH and PSG have announced the terms of their Capitec* (JSE code: CPI) unbundling, 14 Capitec shares per 100 PSG shares leaving PSG with some 4%. My view is unbundling already listed shares makes absolute sense. There is no point in me essentially buying a holding company if all they own is listed. Now if the held unlisted shares then t's a different story, so maybe we'll see more in the months and years ahead?

* I hold ungeared positions.

• Video: Pandemic investment scenarios (with risk matrix)
• Video: South China Seas structured product
• Video: Managing risk as a trader with Garth McKenzie

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