The benefits of holding some cash

SPEAKER_1 (0:02)

You're listening to the MoneywebNOW podcast series with Simon Brown. Live streamed every weekday at 6.30am.

Simon Brown (0:13)

It's Wednesday, 7 October. We've got the FMC minutes due 8 o'clock tonight. I'm Simon Brown coming at you live and loud from the Moneyweb Global Headquarters in Johannesburg, South Africa. On the show today, Chantal Marx, FNB Wealth and Investments in an uncertain world and a world with fuel above 30 Rand-a-Liter. Where is she putting new money into the market? Sean Kelly from Parity Wealth. US bond yields above 5%, even for the five year. It's a time to rethink our portfolio. Then Lullu Krugel, Chief Economist at PwC. What's holding back our economic growth?

This podcast is brought to you by StandLib Asset Management. Invest in more global opportunities through a partnership with JPMorgan Asset Management. Morning headlines, Moneyweb SA's fuel import bill surges to highest level since 1994 and we've had to turn to the US and Nigeria as supplies are disrupted. Business day, FNB adds crypto trading to share platform amid rise in demand. Morning markets, US was green, S&P half a percent up, NASDAQ 0.6 higher.

The East is red, Sydney few points, 0.02 percent lower, Tokyo is down 0.9 of a percent, Hong Kong just over half a percent down, Tencent one and a half percent lower. Commodities are mixed, Gold Futures 4169, it's a little higher Brent, it's a little higher, $101.54.

And the PGMs are red, Platinum 1704, Palladium 1163 The round is 1657, Bitcoin 84,000. And top 40 opening call, looking for a red open, 133 points, with 0.13 percent lower.

SPEAKER_1 (2:05)

MoneywebNOW, on the money. Also available on podcast.

Simon Brown (2:11)

Chantal Marx, head of research, FNB Wealth and Investments. Chantal, I appreciate the early morning time. I was having a conversation over the weekend, and people were talking around the uncertainty, the worries, the elections coming up, the wars that are happening, the consumer being under pressure and really bleak. And I thought to myself, even in the bleakest times, there's opportunity out there for investors.

Where are you looking to put new money into the market, or are you stashing it under the mattress?

Chantal Marx (2:39)

I'm probably doing a combination of both, or I would advocate for doing a combination of both. So, I mean, we always talk about good portfolio management principles, and there are two key ones. The first is take opportunities when they come up, and the second is have the money to actually take those opportunities and fund that cash position by skimming off the top when you have very big outsized positions. So, that would be kind of my starting point.

And then you have two options right now. You can take a very long-term view and say, well, let's go for the stuff that's been battered up, but that are super high quality, or you can go for a short-term defensive kind of slant, and look at companies that are low beta, meaning that they don't move as much as the market, and in sectors that are a little bit more defensive.

Simon Brown (3:32)

Defensive sectors being, what would you qualify as defensive in this environment?

Chantal Marx (3:37)

So I think there are two main ones. So the first one would be consumer staples, so the needs, not the wants, and that would be in food, and the ladies will argue in beauty, the lipstick effect is alive and well, and some of those big beauty companies are testament to it. And then the exchanges, which I think is such an overlooked part of the market. But exchanges benefit from high volatility.

So in South Africa, you have the JSC that you can invest in directly. But offshore, you can even invest in companies that are derivatives exchanges. So those are the companies where investors buy options and futures, and basically risk manage their positions. And in the US, there are some very big opportunities or very big stocks that give you exposure to that.

Simon Brown (4:31)

Yeah, in fact, Keith McCluckson was talking around the Alisey earlier in the week. Beauty is an interesting one because we've seen a lot of the listed stocks talking about beauty, talking about its importance, Willies and others.

And I imagine it's becoming more competitive, which is actually good news for the consumer, which actually adds into the defensive nature of it to a degree.

Chantal Marx (4:53)

Yeah, absolutely. I think that you've got a few segments within that broader beauty space. So you can look at premium beauty. So that would be the really expensive stuff that probably include dermatological beauty. So that's the really expensive face washes and creams. And then you have kind of mass beauty, where you have brands like Maybelline, for example, playing in, L'Oreal has a big mass beauty segment. They of course also have a big premium beauty segment, but there are different ways to play it. And then you can go and buy the beauty companies directly, or you can buy beauty retailers, which I also think is often overlooked.