The JSE saw great gains before falling on depressing US data.

Bruce Whitfield:
Gerhard Lampen from Sanlam iTrade is tonight’s market commentator. We were a lot higher during the day Gerhard.

Gerhard Lampen:
We went close to 33 000 on the All Share and when the US opened, it went up at first because the figures that came out there was quite positive on industrial production. Soon after that they announced that the consumer sentiment figures are very weak and that meant that the market came down and we also came down.

So we came down quite sharply in the last hour or so in the market, maybe driven by what has happened in the US. But there was an increase in housing starts which they announced at about three o’ clock.

Bruce Whitfield:
It was something like an eight percent increase. And there is a huge contradiction between the housing starts numbers which are up eight percent and then consumer sentiments numbers come out. Now if consumers are not confident, who is buying houses? And that is the contradiction that just does not make sense.

Gerhard Lampen:
I would not put any weight into the housing starts figures. And it looks like the market in the US does not either. We all know the crisis is still there. There is about two-million houses looking for buyers there. There is a huge over supply. This is like a ‘dead cat bounce”. It has come from a very big fall and you can expect one month with a figure like that. I don’t think it means anything.

Bruce Whitfield:
But our own market ignores all the bad news internationally consistently because it is driven by the resources counters. The All Share Index is positive, it ends at 32 700 on the day, its highest level every. And gold shares don’t react to a gold price which goes through $900 an ounce, but the platinum shares are only too happy to bounce very, very strongly 2132, resources all the way.

Gerhard Lampen:
Yes absolutely. If you have a look at our All Share Index which is at new highs as you said, that is only resources. If you look at the financial and the industrial shares, financials are pretty close to their lows and industrial shares are also quite low. And there is no recovery there yet except for certain counters that are more export orientated. So it is purely a resource driven market.

There is no abatement in commodity prices as yet and it is driven mainly by what is happening in China. Add the fact that I think that the US economy looks like it is not going to go into much of a recession. It is probably in a recession already if you look at final demand figures, not GDP. It is probably already. But it will be minus a half a percent or something in the next two quarters or so.

And by next year they will start recovering out of it slowly. And I think that is also positive for commodity prices. There is not going to be a big slowdown, that is why China is powering ahead and India. And that drives commodity prices higher and higher.

Bruce Whitfield:
A very, very strong day in the commodity sector. We saw Investec jump four percent on the day. Maybe we will reserve Investec for later, it needs a bit more analysis. But also Astropak, up 10 percent on the day, R8.40. A little birdie told me what he believes is going on in that particular share and perhaps we will talk about that one in the second half of the program. Thank you Gerhard.

Bruce Whitfield:
Gerhard Lampen is the guy who runs Sanlam iTrade and Gerhard, we have got a couple of interesting issues to raise, Astropak, share price up 10 percent on the day. Lots of speculation that potentially there is a takeover coming through. I did have a little birdie tell me that however, that they have seen about seven percent of the shares picked up by Lereko Metier in the market and that potentially implies that private equity players are lurking in this particular space as well. Astropak, uninspiring results this week, perhaps this is a takeover target?

Gerhard Lampen:
I think it can only be something along those lines. Their results were not good and it is not going to pick up soon. We most probably will get another interest rate hike. The recovery in the economy and packaging is very closely related to the consumer part of the economy.

Bruce Whitfield:
We saw a lousy update incidentally from Nampak as well, the next day after Astropak.

Gerhard Lampen:
And that is not going to recover this year, it might be next year. So it can only be something along those lines. So I think there is maybe something to that rumour.

Bruce Whitfield:
Okay, Lereko is interesting. Also do bear in mind that there are empowerment partners involved in Astropak and that makes things a bit more complicated from a takeover point of view as well. Thero Bafokeng are shareholders in Astropak too.

Another one of your competitors, so they won’t be named, but they did very kindly send me a press release raising an issue and I thought maybe we could discuss it as well. They are saying, retail investors make themselves vulnerable to potentially huge losses and personal liabilities by forgetting about a crucial risk. And then they go through talking about the risk and people forget about the sub prime mortgage issue.

We see the JSE All Share Index at 32 700. Suddenly investors are beginning to say, hold on a second, there is nothing to pull down this market. They get very excited and maybe a little overwhelmed by what is going on, on the JSE at the moment. There is real risk in this market and we were talking earlier about the housing starts versus consumer sentiment. But our South African market, because of the weighting of the resources, just seems to be defying gravity. Are you worried Gerhard?

Gerhard Lampen:
I am not that worried. I do think that there is risk. There is reasonable risk, a possibility of this been a bit of a calm before another dip in the US. It is possible. I don’t expect that. But there is obviously risk. I just think that it does not look to me like the industrial and the financial shares have run ahead of valuations. The commodity shares certainly at the high end of valuations.

They are discounting mostly positive news. So when you get Eskom power cuts of something like that, it will knock the share prices, there is risk. But it depends on what you are talking about. If you are talking single stock futures, those geared products, there is risk. And I think you should be very careful in those markets.

But for an investor, even if it comes down, it is not the end of the world. You will take a three or a five year view and I am quite confident that you will see growth. So I am not that worried. I don’t know if they foresee a big drop, are they warning their clients that, look, go to cash of something, I am not sure.

But I personally would not rush into the market to buy, I would pick up value here and there. But I am not that concerned to tell people to sell now and go more into cash. Not at all.

Bruce Whitfield:
I got an sms earlier this week from somebody, I am sorry, I forget the persons name offhand, but this person was saying, I have got R200 000 to invest and I need a strategy. I need to figure out how to do this. They want to invest directly in the market themselves and it seemed to me from the sms that they have not actually done it before.

Do you actually go in and take real money and you put it into shares on the JSE, close your eyes and go to church more often than never? And hope you get a return?

Gerhard Lampen:
Yes I think there are two ways you can handle this. You can either go very conservatively into exchange traded funds, which is a basket of shares. That is one starting point. But I would advise somebody like that to rather wet his feet with a virtual trading scenario.

Ourselves as well as one or two of the other online brokers have online virtual trading simulators. We are actually having a competition starting in June based on a million rand virtual simulator where people can play for free, it does not cost anything. You can use this website then and you can see how it happens. You select the portfolio based on a lot of portfolios that you see on the website or research and you start researching shares. Roll the virtual portfolio, see how it goes, get more confidence and then take your R200 000 and start investing. That is the other option and I think a very good one to learn.

Bruce Whitfield:
Although the money does not exist, it is virtual money. What that virtual money does is track the real movements in the market.

Gerhard Lampen:
Absolutely. You will buy and sell on live prices on the JSE. Obviously you won’t buy real shares. But your portfolio will be valued at live prices. Your trading will be done at that current price. We have even updated the virtual trade simulator so that you cannot buy after hours at last closing price. You will buy the next day as in real life. So it is a very good opportunity to learn more and to go risk free into investments.

Bruce Whitfield:
Gerhard Lampen from Sanlam iTrade. Thank you very much for coming in this evening Gerhard and giving some guidance on that particular point. I hope I answered that question that came through earlier on this week as well.

It was an interesting day on the market, we started off really strong, we pulled back toward the close though. Those US markets lost some of their gains as well.