Money with a dash of Funny: January 2013

Thursday 31 January 2013

Facebook. 67 bucks a user.

"The valuation at current and even next years levels is still difficult to wrap your head around, a 50 plus multiple. And that is for two years out. You are not buying fresh air here. You are buying a business that grew really, really quickly. Growth rates in terms of absolute subscribers will slow. I can't think of anyone who has not got a Facebook account."

To market, to market to buy a fat pig. European markets this morning are slightly lower, perhaps the lower GDP did not help, Spain is off two thirds of a percent, perhaps the El Clasico draw in the first semi final of the Copa del Rey is tugging peoples hearts. Oh wait, that came on the evening of the day that Catalonia seeks 9 bn euros from Spanish bailout fund. Simple solution. Sell Messi and Xavi and hey presto, problem solved. Any idea of a Spanish break up seems to have been rubbished with this idea. At least that is the way I see it. Or (oohhhh, this is very controversial) give Messi and Xavi to Real Madrid and that cost is absorbed at a national level. No, no, that would definitely cause a civil war, easier just to accept the bailout and the terms. Even if it means hardships.

The Israelis bombed Syria on the same day that it was announced that their long serving central bank governor, Stanley Fischer would be stepping down. Perhaps the country of his birth, Zambia, falling out of the AFCON in the group stages was too much to bear. And about the bombing, gee, don't ask me on these matters I have no idea and it is seemingly dangerous to have an opinion. New Blackberry phones, models Z&Q 10 were released, with much fanfare. And RIM now is to be known as Blackberry. And not the tablet that they launched, remember that fine piece? I never even got to see one. The name change makes sense, the lack of apps does not necessarily help the case, and the lack of a keyboard, I thought that is why people liked that phone. Apple's ~~giant hedge fund~~ cash reserves are enough to buy RIM 20 times over. The market participants after a bit of a tear sent RIM down 12 percent in the spot market and a further two percent after hours. Poor Thorsten Heins is battling on. But I guess the market speculators/participants told me what they think.

Mayday, mayday. Yesterday we regurgitated an Atlantic Wire piece that was from the AFP that suggested that Zimbabwean finance minister had made a comment that the country had run out of money. Apparently somebody, somewhere got that wrong. The reason why I know this is because a journalist friend told me that there was an interview on CNBC, the political exchange show that Karima Brown hosts. The long and the short of it is that I suspect Zimbabwe have a whole lot more than 217 Dollars left, or whatever it was suggested. A pretty big accusation of calling AFP wrong, if that is the case. Here goes: State of Zimbabwe's Finances with Minister Tendai Biti.

"Rubbish story". Not enough money to fund the referendum. I laughed at the way that Minister Biti compared Zimbabwe to South Africa and Nigeria, not close sir, not even close. Only by continent and border. What do you feel about Zimbabwe asking for a cash injection? Minister Biti suggests this is closer than you think. How do you feel about that? If the election and referendum is going to cost 200 million US Dollars, Zimbabwe's "part", as Minister Biti said, what is the full amount that he is looking for? He can't unfortunately give details. Who would fund an election in Zimbabwe? Are you kidding me? Well done to Karima for having pushed him so hard. Poor Biti unfortunately is government and the opposition MDC, so I am not too sure whether he took kindly to the insinuations that the "bailout" money would be spent on other things. The fact of the matter is that Zimbabwe cannot afford either the referendum or the elections right now. And I am guessing that there is only one fellow (clue: fit as a fiddle) who is smiling now. Again, how do you feel about funding a (potentially farcical) election?

Byron beats the streets

Last year City Lodge came out with a trading update which suggested that normalised earnings per share for the six month period are expected to grow between 20% and 35% from the previous comparable period

"Further to the announcement released on the Stock Exchange News Service of the JSE Limited on 12 December 2012, shareholders are advised that normalised headline earnings per share, which excludes the costs and effects of the BEE deal, are anticipated to be between 27% and 32% higher than the previous year.

Diluted / undiluted headline and basic earnings per share for the six months ended 31 December 2012, which include the costs and effects of the BEE deal, are anticipated to be between 60% and 65% higher than the previous year."

Ignoring the effects of the BEE deal, Normalised headline earnings per share for the 6 month period to December 2012 came to 224c. Let's take the middle of the range 30% and we get half year earnings of 291c. Last year the second half was very similar to the first half earnings wise. Historically though, the first half which includes the December period is usually much better. However, as this trend shows, the company is growing fast and I think it would be safe to say that as the company continues to grow, we may see a similar thing happen this year whereby earnings are similar for the two halves.

To predict forward earnings I will double this figure of 291c. Like I explained above by doubling this figure I am assuming growth in the weaker period. That gives us 582c earnings for the year. The share price has done really well over the last 6 months having been as low as R75 in June last year to R108 today. This means the stock trades at 18.5 times current year earnings predictions.

This probably seems expensive but as we have pointed out many times about this stock, it has a property underpin which the market cap regularly trades at a discount to. Probably not at the moment, let's check it out. In last year's financial results released in June directors current estimated replacement value of their property was R3.8bn. According to the listed property index, property has grown 20% in the last 6 months. Add 20% to R3.8bn and we get R4.56bn. At the current share price the market cap of the company sits at R4.7bn.

So you can assume that movement in the share price is attributable to both earnings and the property index. Interestingly it also shows you why the property market has picked up, higher occupancy means higher yields, so earnings and asset value come hand in hand for the stock. We are very glad we were patient with this one and continue to use it as a good entry into the property market. At the same time it is also a nice indication that locals are travelling (as Famous Brands suggests) as well as foreign travellers visiting our beautiful country.

New York, New York. 40^o 43' 0" N, 74^o 0' 0" W There was good news, bad news, middle of the road news, but mostly enough for the daily participants to "take some off the table". Which is not code for anything. After what has been a terrific rally over the last month, with the S&P 500 up 7.1 percent from the last trading day of 2012. Fiscal cliff averted, all has been saved. I suspect that the re-rating is justified seeing as politicians have been at each other's throats for some time now. There is seemingly the thinking that with politicians doing what is in the best interests of America, that is a positive. Because much of the concerns around policy decisions guiding the direction in the short term, at least the lawmakers are sitting around the table and talking.

What certainly got the tongues wagging was a big miss in GDP by the US, a negative print. Yes, - 0.1 percent. That was the bad. The biggest part of that was a monster fall in defense (American English) spending, which accounted for a 42.4 billion Dollar reduction. 42.4 billion Dollars annualised is 169.6 billion Dollars. Now, in the context of a 15.676 trillion Dollars economy, that is not that much. But...... Here is the ranking tables of countries in that output, I have hacked a table from this Wiki entry, List of countries by GDP (nominal).

OK, but Rick Santelli had a little thrombosis when Steve Liesman said, oh, if you exclude this, or include that. The reason for another Santelli outburst is for one reason only, he reads the headline print. GROSS DOMESTIC PRODUCT: FOURTH QUARTER AND ANNUAL 2012 (ADVANCE ESTIMATE) is the .pdf link. Here is the video of that Santelli outburst: 'Let's See You Spin This One Into Gold!' I agree with Rick, if government defense spending is lower, it is lower. On set, Mark Zandi, who is a regular guest, he is also shaking his head. Liesman says that the things that matter are business and consumer spending which are trending better. I guess in the long run Liesman is right. I strangely thought, this is what people want, not so? Government to spend less on stuff like defense?

But the US economy is huge. An overall 2.2 percent increase in money terms is 289.7 billion Dollars. Which is nearly the entire economic output of Greece. Yes, read that line again. For all the anxiety about Greece last year, the year before, and the year before that. So, in a sense (this sounds crude) Greece could actually register zero economic output and the net outcome would be zero. Of course it is about the debt, both countries have plenty of that. A negative surprise is not welcome however, this is sort of like putting lipstick on a cute piglet. Bill McBride does a nice summary: Comments on Q4 GDP and Investment. Nice conclusion, but that is working off a relatively low base.

The only good news from yesterday was a positive ADP read. ADP of course are the payroll people who are always the first to report the monthly job changes, and a tantalizing entree to the real labor (again, Americaa English spelling) department numbers which will be on Friday. Excellent. For the full report, visit this page: ADP National Employment Report Shows Solid Job Gains Adding 192,000 Jobs in January. December however was revised down by 30 thousand jobs, that was not really encouraging. Most of the additions were "main street" additions, small and medium business added the bulk whilst big businesses actually showed that they shed 2000 jobs. The summary that you need is from the el-chiefo at ADP: "U.S. private sector employment got off to a good start in 2013, as 192,000 jobs were added during the month of January," noted Carlos A. Rodriguez, president and chief executive officer of ADP. "According to the ADP National Employment Report, private sector employers created an average of 183,000 new jobs per month during the last three months. This is an encouraging sign of steady improvement in the job market." Yes, agreed, encouraging signs against the poor GDP numbers.

Facebook had their annual and fourth quarter numbers yesterday. Like Amazon.com this is a company that is on a crazy upward trajectory, so sometimes it might be difficult for some to judge the stock reaction. Both the instant numbers (which is a little like drinking instant coffee, you can tell, I am a snob in this department), top line and bottom line beat expectations, but there was a marked surge in costs. Costs that were increased by adding more infrastructure as well as more staffers in order to be able to continue to innovate. Because ultimately that is what you are buying here. Costs and expenses increased a whopping 82 percent in the quarter. The company on a GAAP basis made nothing last year, on a per share basis it clocked one cent. A penny for 2012. On a non-GAAP basis the company earned 56 US cents per share. So, basically the multiple is infinite. For the time being.

What folks were looking at were ad revenues from their mobile business (remember the angst around that) and that had grown 40 percent plus. As you were. Facebook Reports Fourth Quarter and Full Year 2012 Results, is where you can find the nice blue and white layout. Nobody wants anything from you, there are no ads there, it just lays out the basics. More and more people are using their mobiles to access Facebook, 680 million in total, a massive 57 percent year-over-year increase. That was pretty telling. It of course means that folks have also upgraded their handsets across the globe. And not really to the Blackberry, which has lost market share. I do hear that the Facebook app on the old generation Blackberrys did not work that well either.

The most difficult question to answer is how do you value a company like this? Uniquely, Facebook knows more about their audience than anybody else out there. They know what you like, where you have been, who your friends are, what photos you post, who is in those photos, what your activity is, what mood you are in, who you are in a relationship with, your birthday, and the list goes on. The simple burning question is, how do you monetize a user base of one billion plus people? One billion folks use their Facebook accounts at least once a month, "active accounts" according to the company. The market is paying roughly 67 Dollars per user, the market cap of Facebook of course is one billion times that. I suspect that people who are really active, committed to the platform types are going to make all the difference. There are 618 million active daily users, roughly one in 11 folks on the planet. An advertisers dream. Like the ebook adoption, advertisers and payers for the services of targeted groups alike will take time to adapt to the platform. I suspect that the classified section in future will almost likely appear on this platform.

The valuation at current and even next years levels is still difficult to wrap your head around, a 50 plus multiple. And that is for two years out. You are not buying fresh air here. You are buying a business that grew really, really quickly. Growth rates in terms of absolute subscribers will slow. I can't think of anyone who has not got a Facebook account. But then again, there are loads of people being born all the time. Maybe not in Japan, but elsewhere in the world. Even in the US, population growth rates are 3 million roughly per annum, those people will all need Facebook accounts, when they are old enough of course. Obviously the user fatigue, onerous (or lax) security issues and risk of competition still apply. But it feels like a Microsoft type scenario 15 odd years ago. Everyone has an account, like Microsoft dominated software in the PC market. The stock is not for everyone. Heck, Buffett (in the words of Taylor Swift), is never, never ever going to get together with this stock. Let alone back together.

Crow's nest. Lower here, that US GDP miss is leaning on us here. Lower to start with and waiting for earnings to continue to roll in. All those anxieties about earnings, remember those?

Sasha Naryshkine and Byron Lotter

Email us

Follow Sasha and Byron on Twitter

011 022 5440

Wednesday 30 January 2013

NASDAQ nowhere near, Dow in the zone

"There is a ticker on CNBC, during Fast Money that shows that we are now only a percent and a half away from the highs on the Dow Jones Industrial Average, three and two thirds of a percent away from the all time high on the broader market S&P 500 and of course I would not expect the NASDAQ to show up there. "

To market, to market to buy a fat pig. Markets globally continued the run upwards, a PE expansion story if you will. Not PE as in the place they call the friendly/windy city, but rather a price to earnings multiple. With confidence returning globally, and even individuals are getting involved now, companies have without doing too much just managed to get re-rated by the broad investment community. For very long everyone has been chasing yield in a time of uncertainty. Certainty equalled something that you could trust, and if that meant sovereign bonds there were very, very few countries that you could trust, Germany and the United States, along with Japan were the few places that folks were happy enough to just park money.

There is a ticker on CNBC, during Fast Money that shows that we are now only a percent and a half away from the highs on the Dow Jones Industrial Average, three and two thirds of a percent away from the all time high on the broader market S&P 500 and of course I would not expect the NASDAQ to show up there. The NASDAQ closed at 3153.66 last evening. January 29 2013. The all time closing high is 5048.62. So, that is only 1894.96 points to go, or roughly another 60 percent gain for the tech heavy index. That might take another ten years, but who knows, tech stocks were valued to infinity back then, they look cheap to me. Amazon.com released results after the market, we will have a look at those tomorrow, too much to cover today. We can have a look at the Caterpillar results from two sessions back.

On the local front we referred to the Minas Rio write down yesterday, we will expand on that front today and then just this morning there was a first quarter trading update from African Bank, of course we will have a look at that too. To the north of our continent Egypt is on the brink once again. Yes, it certainly seems like their peak was millennia ago. And this is the same place where I saw their finance minister on the box, just last week suggesting that Egypt was a great place to do business. Sigh. He must be pulling his hair out.

Jozi, Jozi 26^o 12' 16" S, 28^o 2' 44" E Stocks eked out a marginal gain, led mostly by the resource stocks. Although it did depend where you looked, the gold stocks sank over half a percent, mostly led by a drop in GoldFields shares, down one and a half percent and Harmony, which was down 1.8 percent. This is the lowest levels (share price) for Harmony Gold since September of 2008, which was at the point that we were right at the beginning of the {expletive} storm. The Rand is weak, but the gold price, after a 12 year run is seemingly going sideways for a while. The bulls are still there and suggesting 2000 Dollars per fine ounce, personally I have very little understanding of the inner workings of the gold price fundamentals.

Is it Indian households, central banks or just good old fashioned speculators? Combination of all of the above, a store of wealth as a result of human behaviour historically (108 billion folks said to have walked this planet) and more recently the only "fiat money" as a result of the excesses of central banks and governments. The idea that humans cannot create value and that printing out of thin air is possibly the most disgusting thing you can do, there is something there that does not stack up for me. You can build a house and sell it for something to a buyer. Have you created value out of thin air? More difficult to explain would be a service based industry that would be worth something to many people. Stay out of the conversation, there are too many crazy people with long hair telling us about the end of the world and how their gold will be sought after. You had then better get a deep bunker and a whole lot of shotgun shells to protect that bunker from zombies. As they say in the classics, if you don't understand something, steer clear.

Byron beats the streets

But still their overall book grew by 8% to R57.3 billion as loans with longer durations still sit on their books. This also includes growth from their credit card facility (R509 million). They indicate that competitor growth has also slowed down significantly. They still expect total advances to grow 23% for the full year.

Importantly for investors, Non-performing loans as a percentage of advances improved marginally. Then they clarify the impact of the strikes which as an investor is very interesting.

"The fallout from labour unrest increased the bad debt charge slightly. ABIL's exposure to sectors that are currently experiencing labour volatility is limited, with its exposure to platinum and agriculture less than 3% and 1% of advances, respectively. NPL coverage on both of these books is prudent based on the expected performance, and is substantially higher than on the overall portfolio. The industrial action, while disruptive to the economy, has also resulted in substantial wage increases in those sectors of the economy. The overall impact of the labour unrest and potential retrenchments will become clearer over the next few months. The group has intensified its focus on collections in the wake of the current trends in the market."

So there it is. The exposure is small and although they are feeling the effect, don't forget that strikes more often than not result in higher wages which of course benefits ABL.

Retail on the other hand looked very slow. Ellerines is definitely losing market share in a difficult furniture market. Merchandise sales decreased by 8%. I have said this before,the main benefit of the retail segment is the access to credit seeking clients through the kiosks they have built in the stores.

To conclude we are still happy to be buyers of the stock, the price fundamentals are still very attractive, even at these slower growth rates. We have been right about earnings growth for this company, unfortunately the share price hasn't followed suit. We remain patient.

Coincidentally and very much connected to what Abil had to say, Cashbuild also released an operational update for the second quarter of their fiscal year. It was disappointing and the market has been ruthless, the share has dropped 7% so far today and is down 18% from the highs in August last year of R167.80.

"Revenue for the company was up by 1% on the second quarter of the prior financial year. Stores opened since 1 July 2011 (new stores - 7 stores) contributed 2% of the increase, whilst existing stores (187 stores) decreased by 1%. This, together with the growth reported in quarter one, equates to an increase in revenue for the half year of 2%."

For a retailer this is disappointing. Not as disappointing as it would be for a Shoprite or a Mr Price who are priced at 18 times next year's earnings but still disappointing for a company trading on 14 times forward earnings.

But why the slow growth? The housing market is picking up and home improvement is one of the first things people spend on when they have extra disposable income. On top of that competitors like Massbuild showed 10% growth in this quarter and Spar's Build It reported 17% growth for the year last year (they haven't released an operational update for this quarter yet).

I do have a few insights into why. Firstly Cashbuild are more situated in the rural areas whereas the competition who are experiencing good growth are focused on affluent areas. The rural areas are the ones who got hit by the strikes. But more significantly, what we have just heard from Abil, unsecured lending has been pulled back. Cashbuild rely on cash sales. Clients will go to Abil, lend R10 000 and build a wall using Cashbuild goods.

I think it is a good thing that Cashbuild do not rely on credit for sales, they do not have that extra risk on their books. Plus Abil still stated that their book is poised to grow 23% this year. This quarter has been a hiccup thanks to sentiment due to the strikes. This is hopefully a once off. And again I will repeat what African Bank had to say. Strikes result in higher wages which means more spending at Cashbuild. For their size we still see Cashbuild as great takeover target for the likes of a Shoprite, Pick n Pay or even an African Bank. We will buy into this weakness.

I knew that the longer that I thought about it, the more that it would eventually come to me. This extreme angst over the Rand having traded independently from all other currencies and that it is all us. We are terrible, no good and the world is starting to shun our financial assets. You have heard of Poland. The country. Cold, potatoes, vodka, invaded many times because of where they sit geographically, that place you know. Well, since the country threw off the shackles of communism, not too long ago in fact, you would have expected them to have made many advances. Yes, read that clearly, since the shackles of communism have been thrown off, life has on balance been better. The country is close to becoming part of the European Union. GDP since communism ended is up 9 fold, over nearly 25 years. In fact a path not too dissimilar to ours, since apartheid ended and everyone (the majority) was included in the formal economy. Where am I going with this? Well, quite simply I plotted the Polish Zloty versus the Dollar, and then the Rand to the US Dollar and this is the graph that I get:

For the permanent link, follow this: US Dollar ($)/Polish Zloty (PLN) and US Dollar ($)/South African Rand (ZAR). My point is simple. Having seen that graph, over the last five years, is all our angst justified or is it just the case of exiting emerging markets that were high yielders and now steering more to what looks like beat up equities with better prospects. If you are going to spend your life trying to understand currency movements, you are going to lose hair, that has got gray already.

Anglo American was once the titan of the South African business landscape. As was Barloworld for that matter. Not that they are not now, but the simple truth is that they are no longer the giants that people remembered them for. Yesterday there was an announcement from Anglo American that most people expected: Anglo American confirms Minas-Rio capex and records $4 billion impairment. 4 billion Dollars after tax. Wow. We were expecting to see iron ore shipped in this half right now, that was supposed to be now. Soon. Those expectations have been dashed. Well, they were already, 13 November we already saw an update from the company, we wrote about it back then: Anglo American updates on their iron ore business.

I saw red when I read this quote from Cynthia Carroll: "We are clearly disappointed that the diversity of challenges that our Minas-Rio project has faced has contributed to a significant increase in capital expenditure, leading to the impairment we have recorded. Despite the difficulties, we continue to be confident of the medium and long term attractiveness and strategic positioning of Minas-Rio and we remain committed to the project."

I can imagine (and this sounds incredibly harsh) that there will be a Mr. T sucker fools celebration come 1 April at Anglo, as the very last month of Ms. Carroll's tenure at the helm comes to an end. A bad chapter in the Anglo American history. That said however, hindsight is a much better science than predicting. It really is. It would have been better to allocate those same resources to what is clearly a much better iron ore business here in South Africa. But the temptation and steer to diversify geographically was too much to ignore. The only person that benefitted (and big time) was Eike Fuhrken Batista. Sadly I read the first line there and I could not help but think that he, Batista was in the right place at the right time: "Eike Batista is one of seven children of businessman Eliezer Batista da Silva, who was Minister of Mines and Energy." Coincidence? Not on your nelly (Nellie?). But hey, most people who got rich quickly or even slowly knew someone or something. I say most.

New York, New York. 40^o 43' 0" N, 74^o 0' 0" W Stocks again barrelled higher as a combination of less fear, more broader participation, an improving outlook as well as being supported by improved earnings starts to grip market participants. There were many things noteworthy, Facebook got crushed, after one of the most heroic comeback rallies in recent history. Depending on who you are, history for a day trader might be two hours ago, for a speculator that could be last week, but for an investor that might mean World War II. Facebook actually have results today. I can understand the anxiety. Over the three months the stock is up 40 percent. Over six months the stock is up 30 percent. Since listing however, less than 9 months ago, the stock is down nearly 19 percent. As ever, it depends where you draw your line in the sand.

It seems like an age ago, but it was only two days. Refer back to that point about history. Caterpillar reported results on Monday before the market opened. At face value, because one only sees the numbers flash up on the screens it seemed a miss. But as ever the detail is where you find it all. A pie tastes better than it looks. Imagine never having seen a pie before. A rectangular brown thing, how tasty could that be?

Pies and tastiness aside, this is the small matter of full year numbers. And fourth quarter. This was the best sales and profits numbers ever from Caterpillar. 8.47 Dollars a share worth of earnings, despite an 87 cents per share impairment related to their Siwei acquisition in June of 2012. Pronounced Sea Way judging from the media that I have watched. That amounts to 580 million Dollars. Of a business that they have just bought. WHAT? OK, first the company appeases investors by explaining that the business that they bought, Siwei is very important for their expansion plans in China, specifically in the coal markets. On the CAT website there is a short explanation, Siwei is "manufacturer of longwall roof supports" and most of the mining in coal in China takes place underground.

The folks who are happy to dish out stereotypical examples will have more cluster ammunition capabilities than the US airforce. The Siwei financials before the deal was done were changed and fiddled with in order to conclude the transaction favourably for the Chinese shareholders. WTF were the powers that be at Siwei thinking when they manipulated financial statements and presented false information? Did they honestly think that they would get away with it? Turns out that of course the execs did not/have not: Caterpillar fires Siwei senior execs for suspected fraud

OK, that nasty stinky sort of surprise aside, the results were good: Caterpillar Reports Record Sales and Revenues and Profit for 2012; Inventory Reduced $2 Billion in the Fourth Quarter. 2012 started well, but then faded, much like 2011 for the company. Slower demand in the second half led to a higher inventory, and so of course the company did what they do, and that is to react to the situation. Notwithstanding the slowdown, revenue still increased by 15 percent.

More importantly, the price reacted positively as a result of the outlook. Caterpillar have a fairly good idea based on their sales orders as to the state of construction and mining globally. But their range is so wide that they could actually drive a monster truck through guidance. 7 to 9 Dollars worth of earnings is being anticipated this year on a equally wide revenue range of 60 to 68 billion Dollars. At the bottom end of that range that would mean revenue would be ten percent less than last year. The reason that the company have done this is because the last two years have been choppy. Europe is still flat, whilst the outlook for both China and the US have improved. If the top end of the range is hit, then the company will register another record year. The stock is trading near highs last seen in May last year, the stock hardly looks expensive. We continue to accumulate the stock, the longer term urbanisation and continued resource intensity trends increasing remain intact.

Crow's nest. You might have remembered a couple of weeks ago, a TV interview in which AMCU's Joseph Mathunjwa suggested that South Africa should follow Zimbabwe's example and let the state take a 51 percent stake in mines in South Africa. A very poor online article, Zimbabwe based is all that I have found: Follow Mugabe and Indigenise Mines: Union. Don't get me wrong, I am not against empowerment, done the right way, getting the employees to participate, that is tops for me. The government of South Africa obviously realises that mining is a very tough business. Hard, very hard. Like many, he was of course reacting to the Amplats news with disgust. That is why when I stumbled across this article this morning: Zimbabwe Is Down to Its Last $217, I thought to myself, this is what happens when a government is militant towards the people that pay the bills, business of course. What? Zim have 217 Dollars left. And that is it. How they are going to pay everyone next month is a mystery to me. Unless the Chinese decide to tighten the noose of you owe us big time in the future, Zim are going to scramble. Never mind the fact that 100 million Dollars is needed for elections, as the article points out. 2013 seems to be tougher for our northern neighbours than many envisaged when they Dollarized their economy.

Our markets have opened up. Earnings season in full swing, there will be some attention turned to the simple economic news. ADP data a little later, this should be fun. Because it will of course give us useful insight into the biggest economic point of the month, non-farm payrolls on Friday.

Sasha Naryshkine and Byron Lotter

Email us

Follow Sasha and Byron on Twitter

011 022 5440

Tuesday 29 January 2013

More Rand angst

"And now we are starting to see strong reversals, which are probably two fold. One, there are small moves afoot out of fixed income globally towards riskier assets as perhaps the search for yield at all costs starts to slow a little. As those well paid people who manage a whole lot of money are starting to follow the herd and allocate more money to equities in the developed world, that does not bode too well for us."

To market, to market to buy a fat pig. Globally markets were flirting again with multi half decade highs, as I suspect a lack of bad news starts to fill the average joe with confidence again. A crisis of confidence can almost certainly lead to an economic downturn and that can either be a financial event, or a political event. And in this case, the period of great pity, sometimes referred to as the great financial crisis (I guess of our time), saw a marked pull back of business spend and firing of workers was the order of the day. That has turned somewhat, albeit at a much slower rate. Austerity in Europe sucks, and that has also led to political upheavals and the fall of the old guard. And in with the old, that is now new.

Earnings season has been OK, Caterpillar beat the street in some metrics, even though there were some once offs stinking up the joint for a little. Yahoo! beat the street after hours, I suspect that it might be too soon to call Marissa Meyer the saviour, but she is certainly making progress. I suspect that Macallister is making progress there too. Macaalister is her kid. And fear not, if Marissa or her husband (Zack Bogue) decided to take a sabbatical for ten years or so, they collectively have a net worth of 600 million Dollars. There will undoubtedly be some knock on effects of the severe flooding once again in Queensland. On the local front here Anglo has written down 4 billion (after tax) of their Minas-Rio project, thanks so much to Cynthia Carroll. Cynthia and Tom (Albanese of Rio Tinto) should go and lick their wounds and discuss ways to have blasted through billions in shareholder value.

Jozi, Jozi 26^o 12' 16" S, 28^o 2' 44" E From a corporate point of view we might have seen the two top listed miners here having presented production reports, but the company results cupboard for the year is basically empty. One company has reported numbers for this whole year. Yes, you heard me right, one company. And that is because it has a strange year end, April, and these were their interim results from October. That single company is Ellies. What we have seen however is a whole lot of trading updates from many different retail companies. And most of which have been poorly received, resulting in a sell off across the retail sector. It didn't matter if you were in food, or clothing, or furniture, groceries, you were not spared from a spanking. So far this year the food segment is down nearly ten percent whilst the pure retail sector is down just over seven percent. Financials are up nearly five percent year to date, and were at the front of the pack again with banks yesterday, steering us to yet another record closing high. Thanks for that. If you were keeping count then 40618 is the new record.

Lending a big hand were the Rand hedge stocks. The unintended consequences of much higher inflation are looming. Perhaps someone should tell Minister Davies that his trip to Davos next year is going to cost ~~him more~~ the tax payer more money as well. I always say that it must be very easy to spend someone else's money. But your own. I wonder how many folks would have really gone to Davos if they were forced to pay their own way. Perhaps the 90 billionaires would have hung out with Klaus Schwab and come up with ways to solve pressing agendas. Tsk, tsk, I shouldn't be such a cynic.

Something interesting has happened over the last three to four weeks since the beginning of the year. And I am talking at a global level. There have been more people talking about the economic recovery and a whole lot less people talking about the end of the world trade. Even the Nouriel was battling to be bearish. Now all this talk of enthusiasm smacks of Johnny-come-lately. But, as we say around here, not everybody thinks the same as ourselves. And that ultimately makes a market for everybody.

We continue to see the Rand taking heat, which does to some extent impact on all of us. Yet, we are not too aware until it arrives in the form of higher energy prices and higher food prices. In the last two years, the Rand has weakened by twenty percent. So, if you think about it in simple terms, the Dollar value of your South African assets have lost 20 percent of its value. One fifth. Over ten years however, that is 43 percent. Over a year we have lost nearly 19.5 percent to the Euro. Over ten years the Euro has appreciated by 56 percent. One Euro used to be 7.6 Rands, ten years ago. Today? Well, 12.25 Rands gets you one Euro. The Rand has weakened by over 60 percent to the Euro in ten years. Wow.

And now we are starting to see strong reversals, which are probably two fold. One, there are small moves afoot out of fixed income globally towards riskier assets as perhaps the search for yield at all costs starts to slow a little. As those well paid people who manage a whole lot of money are starting to follow the herd and allocate more money to equities in the developed world, that does not bode too well for us.

So that is clearly the one reason, perhaps the lesser reason being touted around. The main reason is the ratings downgrades, the yawning current account deficit (record imports in October last year), lower growth rates locally, government's combative approach to business (at least from where I sit) and that translates to less appetite for South African assets. Should we be worried? Well, the short answer is yes. If you break down imports, they are as much as one quarter oil. And because that is priced in Dollars, that does not exactly bode well in the short term. Because for the same barrel of oil (if the price remained the same) we have to pay a good 20 percent more. Start fracking chaps. I know that those folks down in the Karoo might disagree with me, but I have seen what the benefits for the US have been.

Perhaps the selling in the short term has been overdone. Perhaps the political stability in South Africa is what it is. I can think of twenty such periods in our time when we were more unstable. We have had the same government for nearly two decades. Who am I to suggest that the ruling party did not deserve to get those votes or not, it would be like you know what into the wind. South Africa is what it is, and we should make the most of it.

New York, New York. 40^o 43' 0" N, 74^o 0' 0" W Stocks didn't manage to hold a nine day winning streak last evening on Wall Street, basic materials and consumer cyclical stocks weighed on the broader market and blue chips. Tech caught a bid, and in particular the selling in Apple seems to have abated. The stock added two and one quarter of a percent to end at nearly 450 bucks. 28 million shares traded, around three percent of their market cap. In a single day. I am still at a loss for words at seeing this kind of crazy trade in what is again the worlds biggest company by market cap. Apple was after the close on Friday worth less than Exxon Mobil, in terms of market value. That changed again, but I failed to get an alert on the other way around. I guess it is not news when it is going up.

Another stock that caught a serious bid was Facebook. Up nearly 3 percent on the session as another analyst upgraded the stock to buy. Shouldn't that analyst have done it at 20 or 25 Dollars, not over 30? And these people get paid real money to do this. And the reasons are the same old ones that we have heard already, Facebook's ability to monetize mobile is ever increasing. What? The anxiety over that was palpable. Mobile phone killed the book of faces, remember? Pff.... Oh, and to put it into perspective, the average volume in Facebook is nearly 66 million shares. And there are 2.17 billion in issue. That is roughly 3 percent of the market cap of the company. And that is average trade. Last thing, now that the stock is down only 14 and a half percent from the IPO, it becomes a non story. And that was only on May the 18th last year, the stock has been listed for just a little over eight months. Wow, and it has been an incredible ride.

Byron beats the streets, today covering durable goods orders, which were a huge beat.

It is a number which can be volatile. Spending on aircraft and defence can obscure the overall environment. These two sectors did show strong growth which pushed the number higher but there was still good growth from cars and machinery even though it was slightly slower. When you exclude transport all together orders increased 1.3%. When you exclude defence spending and aircraft the number only climbed 0.2% but this was off the back of two good months in November and October and during a period which was thought to be very slow due to policy concerns.

This is certainly good news for the global economy. Businesses, especially in the US, are sitting on massive piles of cash. Any indication that they are starting to spend means that they are growing in confidence. It also means that the actual spending will have huge positive affects for the economy. Since people started to realise that China was not going to experience a hard landing and that Europe was not going to collapse we have seen economic data starting to shift positively.

Another massive catalyst is the US housing market. If people are building and buying houses they are also furnishing those houses with washing machines and couches. In fact, the message from Anchor Capital today included a quote from Joe Lavorgna, the chief economist at Deutsche Bank. He said that they are projecting housing prices to increase 5%-10% for the year. That has the potential to create wealth between $860 billion and $1.7 trillion. $1.7 trillion is the same size as the Indian economy.

He also mentions that this kind of wealth has a massive knock on effect. This is known as the wealth effect. It is simple, if your house is worth 10% more than it was a year ago, you are going to feel more confident to spend on consumer goods because effectively you are richer. The wealth effect of $1.7 trillion can be massive. All in all a good durable goods number as the US looks poised to have a strong year.

Crow's nest. Our market here is slightly higher. Which I guess means another record high if we stay this way. The fun part is that we are not even one third of the way through earnings season in the US. And so far, earnings have beaten by around 67 percent, with downside surprises lower at 20 percent. Snooze....

Sasha Naryshkine and Byron Lotter

Email us

Follow Sasha and Byron on Twitter

011 022 5440

Friday 25 January 2013

Apple. That sucker trades. Like a lot!

"Apple was a huge drag on the broader index which eventually ended as close to flat as one could possibly imagine. Down a whopping 12 percent is where Apple finished, we are reminded that this is a very widely owned stock and if the majors are pushing and getting out at any level, it will have an impact. 52 million shares traded yesterday, that is around 5.4 percent of the entire outstanding shares (938 million) of Apple. 5.4 percent? In one day? At that run rate the entire share capital of the company would swap hands in less than 19 trading days."

To market, to market to buy a fat pig. Whilst folks in Davos tell us how cold it is, the fellows in the Northern North America are also finding the weather tough. Colder. And the fellows over in Northern China are also seeing tankers getting stuck in the ice in the sea. And over here in Jozi, the "real feel" as per the phone apps was somewhere close to 40 degrees, even at 4 in the afternoon. Yip, Robin Williams once had a few lines in a movie of how hot it is. "Fool, it's hot! I told you again! Were you born on the sun?" Remember that line? This message is PG, so the rest can't be repeated.

When last did you hear about the issues in Europe? Yeah, I am talking about the same old sovereign debt issues that plagued the area for the better part of three years. Paul and I were looking at bond yields of Germany and Italy, and it is extremely surprising that during the height of the financial crisis that Italian bond yields still carried a "you can trust this one" rating. The 10 year was yielding 3.71 percent in the middle of October 2010. But then in late November a year later the yield was over 7 percent and everyone was freaking out. And now? The yield is back to around 4.2 percent. Wow. There is an election in March, there is undoubtedly going to be a coalition and no doubt Mario Monti will be part of the new government, if the polls are to be believed. Silvio Berlusconi might pull a rabbit out of the hat, but I suspect that is a long shot.

I think that we can stay talking about peripheral (Europe) bond yields. Portugal ten year government bonds were yielding over 17 percent this time last year. Yesterday? 6 percent. In July last year the Spanish ten year government debt was yielding 7.6 percent, two weeks ago that was under 5 percent. It is a little higher now, over 5 percent. There were some sensible people who did not join the seething masses of zombies and villagers who were chasing after each other oblivious that they were in a collective group. Grexit this, Spain bailout that, Italy finished here, France even under threat far over there. What everyone forgot was that Europeans want this to work. So badly that the ECB governor got the ball rolling with his now famous "we will do whatever it takes" speech. So the problems have not gone away. But anyone who thinks that they are not going to be chased away with a rather large stick with bazooka capabilities is wrong. Same problems, committed to fix them. And that is why the zombies and villagers have gone back to lie down. Will it flare up again? Perhaps. Should you think that it is the end of the world. No. Turns out the collective biggest economy in the world is committed to working it out!

Jozi, Jozi 26^o 12' 16" S, 28^o 2' 44" E Our local market rocked to another all time high as the Rand weakened and global markets kept re-rating in the absence of any bad news. Less bad news equals fewer nervous folks. And now the polls are starting to suggest that folks are really bullish on equities. Really? What did you eat over the festive period? Human nature certainly dictates whether or not something that seemed expensive yesterday might seem cheap today. Locally the stocks that caught a serious bid were the likes of SABMiller, Naspers, Richemont and British American Tobacco, buoyed by a weaker currency. That is good for stocks, but not good for the ordinary folks on the street. Err.... surely that is you and I?

There were some strong warning shots fired by the MPC, led by the master on the bridge, reserve bank governor Gill Marcus. The full Statement of the Monetary Policy Committee can be viewed at the SARB website. They need a little sunshine over there in Midrand, when you issue lines like these in the statement: "Downside risks to the outlook persist as the structural problems in many countries, and in the Eurozone in particular, are still unresolved." But we just spoke about that..... A bit later in the message the bank suggests that the Euro region economic growth will remain stagnant, and do actually recognise that lots has been done. I wonder, what that confidence does to real people?

Sadly, the governor tells it like it is here in Mzansi. If you think that that is slang, then try out the Wiki entry for Mzansi and see where that resolves. "The inflation forecast of the Bank reflects a further deterioration in the inflation outlook for 2013 compared with the previous forecast." Sniff. Why? Well -> "The rand exchange rate continues to pose an upside risk to the inflation outlook." So, the moral of the story is that you must be careful what you wish for! I was just saying to Byron that for some quarters of local manufacturing this does a lot to counter cheaper imports. Sadly for many consumers, the cost of imported goods rises.

"...financing of the deficit may be more challenging despite relatively high domestic nominal bond yields, as sentiment towards South Africa has deteriorated, and non-residents already hold over one-third of the stock of outstanding government bonds." So there you go, even though the line from the government is that South Africa is open and welcoming (but we may or may not talk about removing your mining licences) people are voting with their feet. And foreigners have been selling local equities. Well, at least in January, in November and December there were foreign purchases. Schizophrenic flows.

The manufacturing and mining sectors are still under some pressure, and that is set to continue. But there is nothing new in there. These however are the two lines that the business sector will run with in South Africa: "The MPC is mindful of the danger of a possible wage-price spiral and further employment losses should unaffordable real wage demands be granted while economic growth remains constrained. The risk to inflation should this scenario play itself out are significant in the absence of productivity gains." So, whilst the unions in South Africa counter that argument that economists put forward that productivity is at a multi decade low, the Reserve Bank suggests that Loane Sharpe and his mates are right. Loane's presentation of the facts are always hilarious, the way he can do so with a toned down expression. I have only ever spoken to the guy a few times, but he seems like a really likeable chap.

So, in the short term the MPC are worried about inflation, as we should all be. Because inflation is the scourge of the poor, it erodes their purchasing power. And with current relations between business and labour stretched to breaking point I suspect the unemployment situation in South Africa is not going to get better any time soon. I am still looking for some government department to come up with wholesale suggestions for small business creation and various breaks for small business creation in South Africa. Why doesn't that exist? Small businesses is the life line of many an economy. There are large underserviced areas from a small business point of view. We can leave it there.

New York, New York. 40^o 43' 0" N, 74^o 0' 0" W The S&P 500 crossed the 1500 point for the first time since it slid below there in December of 2007. Five years plus ago. Apple was a huge drag on the broader index which eventually ended as close to flat as one could possibly imagine. Down a whopping 12 percent is where Apple finished, we are reminded that this is a very widely owned stock and if the majors are pushing and getting out at any level, it will have an impact. 52 million shares traded yesterday, that is around 5.4 percent of the entire outstanding shares (938 million) of Apple. 5.4 percent? In one day? At that run rate the entire share capital of the company would swap hands in less than 19 trading days. Talk about making up your mind!

But on closer inspection I saw that Apple trades on a normal basis, 19.72 million shares. True story, check out Google finance, where I have circled:

19.72 million shares trade each and every day? That is 2.1 percent of the volume trades each and every day. According to the NYSE Number of Trading Days 2013 pdf, there are 252 trading days in a year. So, if I multiply the average volume by number of trading days in a year I get to 4.969 billion shares trade a year. That is roughly 5.3 times the number of shares of Apple, which swap hands. Without using an enormous amount of expletives, WTF are people doing? Over what I consider a medium term as an investment, 5 years, the shares would have traded over 26 times their outstanding shares. No wonder those people who are hard wired to chopping and changing their views and flip flopping all the time. Nonsense. Idiots. Morons. Churning washing machines. Outrage. We continue to stay long. And all you folks doing market messages, please don't ever talk about investors again. These are short term market participants looking for what, I am not too sure. Perhaps their clients should ask them the same questions!

Byron beats the streets

Earnings for 2013 are expected to come in at $2.14, $2.66 for 2014 and $3.23 for 2015. That is strong growth but the share price certainly expects it, trading at $54.58 which is 16.9 times 2015 earnings. So why so expensive? The growth story is a no brainer. People love coffee and the margins are massive. It is still new to the Asian culture but is becoming more and more integrated as people work more and crave that caffeine boost. It is also an aspirational brand. I always say this but did you know that in China, people make sure they drink their Starbucks coffee with the brand facing outward so that others can see they are drinking Starbucks?

They are also a company with strong ambitions and innovation. Their loyalty programmes have been very successful and recently they have entered the tea business. They are also using their leading brand in coffee to compete with the Nespresso machines. These have become extremely popular amongst the aspiring masses, especially here in SA. The model is great, sell the expensive coffee machine and then lock in clients with the delicious coffee pods. The Starbucks version is called Verismo, check it out here it looks great. They have sold 150 000 machines since the launch.

Here is what CEO Howard Schultz had to say: "Solid growth in our U.S. retail business, further expansion of our Channel Development initiatives and continued successful execution against our expansion plans throughout China and Asia Pacific all contributed to the record results we announced today. Starbucks has never been better positioned to achieve the goals we have set for ourselves around the world and I have never been more optimistic about our future."

After looking at these earnings are I am very happy to carry on adding to this stock. It has also sparked a debate in the office after seeing this article in the WSJ the other day headed Is This the End of the Soft-Drink era? It talks about how soda sales in the developed world have slowed as people become more health and weight conscious. It is certainly a concern as Coke is one of our core holdings. In the office here none of us drink many soda drinks for that exact reason. But we do drink lots of coffee. It is certainly a trend I can see picking up momentum.

After a lengthy debate we decided to start weaning down our Coke exposure and shift that into Starbucks. If you are happy with that idea give us a call and we will do the swap. Otherwise we will contact you in due course.

Crow's nest. We will cover the Anglo production report over the weekend and have it in Monday's message. The market seems to have received it really well, it looks like a big beat on all divisions. Excellent. Mr. Market is lower here after having had a ripper yesterday.

Sasha Naryshkine and Byron Lotter

Email us

Follow Sasha and Byron on Twitter

011 022 5440

Thursday 24 January 2013

Isaac Newton floored

"So, should you freak out like Cramer? Should you shout and jump up and down that "they" know nothing? Is 460 odd Dollars a good price for Apple, the company? Do you want to be owning this company for the next half a decade? Well, on an ex cash basis the stock trades at an astonishingly cheap 7.1 times earnings. That cash pile, which includes both short term and long term securities tops 137 billion Dollars. As a few people pointed out, that is more than the entire GDP of Vietnam."

To market, to market to buy a fat pig. The richest and most powerful gathering on the planet continued their jaunt, I suspect that the 75 odd billionaires going there are paying their own way, and for their entourage. I wonder if it was what Klaus Schwab envisaged? I suspect that it has gone past his wildest dreams. Good for him. I suspect whilst poor people around the world would be oblivious to these events, they do in a sense shape people's perceptions of each other. Something that Google tries to do every single day. Google stock up 5.5 percent on those decent results reported after market the session prior. The British Prime Minister was really going out on a limb, presenting his vision for Britain which seems to fly in the face of his current coalition. Gee, sometimes I wonder if the masses are just always hoodwinked. Equal education for all I say, the biggest imbalances are created by improper education and uneven rules.

Just this morning the Chinese released PMI data, the HSBC manufacturing PMI rose to a 24 month high. Apple suppliers are under the whip this morning, more on that later when we take a detailed look at the Apple results from last evening. And the reaction from the market participants. All key here. Equally we will take a look at McDonald's results. How often do you eat there? If ever. If service delivery was like McDonald's we would be lovin' it.

Jozi, Jozi 26^o 12' 16" S, 28^o 2' 44" E OK, I finally found Davos interesting yesterday. Probably because of a few interviews that were useful to us here. The one Josh Brown tweeted from two days back was quite funny: "Tonight's first Davos panel: Coping with how awesome we are in a globalized world"

There was an interesting Bloomberg interview conducted by Francine Lacqua with South African finance minister Pravin Gordhan. You can catch it here: South Africa Says No Plans for Nationalizations. At one point in the interview when Lacqua asked about nationalisation, the minister said something along the line that there were perceptions created by superficial reporting. Lacqua shot back quickly that it was not careless reporting, we heard comments from someone at the ANC. What she is referring to no doubt is the Gwede Mantashe interview with the national broadcaster and the Mines Minister Susan Shabangu comments on Anglo American and Angloplats. Check out what I mean here, with this MiningMx story: Gordhan brings perspective to tax fears. I am happy to say that the Finance Minister always comes across cool, calm and collected. But I guess some of the questions were undoubtedly tough.

The part that I never ever agree with on resource nationalisation is that the minerals belong to the people of the country. How so? Because someone else said so? Are we going to use all of their minerals? Are we the people who made the commodity prices higher? No, it was actually a Chinese economic miracle. And with regards to when those minerals formed on earth? According to Wikipedia, the bushveld igneous complex was formed 2 billion years ago. Life on earth began 3.7 billion years ago, or so the scientists tell us. The first fossil from the animal kingdom, according to Wikipedia, was a marine mammal about 542 million years ago. Now if only bacteria could figure out a way to institute full resource nationalisation, seeing as they were around when these minerals and resources bodies were formed. My cynical view. The people that are best placed to mine the ore bodies are those who can maximise the asset in the shortest possible time. After all, the first production catalytic convertor was built in 1973. Our old friend Gareth sent us this wonderful infographic, take a deep look: The Story: Platinum & Palladium. Excellent! Keep up the good work.

Another interview that I really liked was that of Patrice Motsepe, by the same anchor, you can also check those out at: African Rainbow Looking at Asset Buys, Motsepe Says. I really liked this interview. Motsepe said quite bluntly that the track record for nationalisation equals failure. And trumpeted democracy, but also pointed out that the masses feel like they are losing out. But most importantly he suggested that stakeholders should not be worried about nationalisation. It is finally happened I think, the idea that wholesale nationalisation by expropriation is not going to happen. Later on in the interview comes the meaty part. The part where Motsepe was pushed by Lacqua to answer questions around platinum mines and the purchase thereof. He did well, and suggests that there are discussions underway. Which is very, very interesting. Perhaps Amplats Union mine is a good start?

But then later in the afternoon came the CNBC Africa interview, Bronwyn Nielsen with both the South African and Nigerian presidents, SABMiller executive chairman Graham MacKay, Indian corporate titan Sunil Bharti Mittal, who is group CEO of his own company Bharti Enterprises and someone from left field (I thought), Louise Arbour from the International Crisis Group. But then a little research suggested that she was not out of place, check out here Wiki profile: Louise Arbour. Our president took objection to the topic: "De-Risking Africa". Watch the interview, at least the first part, via ABNDigital: WEF Debate: De-Risking Africa - Part 1. My initial reaction to our president taking objection to the topic was perhaps listing a few countries. Mali, right now, Somalia (perhaps once), Northern Nigeria, the DRC seemingly forever. But then later Bharti Mittal put it into perspective I think. The overall take away, and remember that I am an Africa bull, is that Africa is not a country. And the base is still exceptionally low. And that is still the reason why our companies can take the opportunities with both hands. And run with it. Whatever that means.

You have probably also read the Moneyweb story from yesterday afternoon: A hefty price tag for Davos. We are, in terms of numbers of ministers, 6th on the list. 9 ministers, our president and three Eskom staffers in there. The IDC, the DBA with two delegates, two Transnet folks are all represented there. You can explore what looks like the full list here: Who is going to Davos 2013? Get the full list of attendees. Paid for no doubt by the tax payer and the share holders of the businesses concerned. Nedbank, ABSA Capital, Standard Bank, Investec, FirstRand, Sasol, Naspers, the JSE, these are businesses sending delegates to go to the snowy Swiss "city". City in Europe qualifies for 10 thousand people or more, Davos has over 11 thousand permanent folks.

So, I hope that this delegation of 65 (I am guessing a few people are missing off the list, there could be more) will turn peoples perceptions of our wonderful country, that so many are passionate about. Let me try and quantify that by showing that Venezuela, who only have four delegates (two of them musicians, one who works for the UN), see this event as a capitalist hob-nobbing affair. Let us hope that by engaging business at a global level that we still embrace capitalism as a platform to advance ourselves as a nation. You cannot create wealth by dividing it. There is no way that can work. Happy days to all of you, we scored our first AFCON win since 27 January 2004 when we beat the mighty Benin, a country with 9.5 million folks. Hey, what do I care, a win is a win!

New York, New York. 40^o 43' 0" N, 74^o 0' 0" W Sometimes when you are expecting Wagyu Kobe beef steak (the finest I am told, 258 Dollars per kg – 2321 ZAR per kg, it better be!) and instead you are slapped with a filet mignon. Apologies to my vegetarian, Hindi, Muslim and Jewish friends, you can send me another comparison. What I am talking about are the Apple results. You were expecting world class and all you got was enough to make the national team. Not all bad, because as the headline says: Apple Reports Record Results.

That is true, they sold more iPads and more iPhones than at any other time in their history. Bearing in mind that 6 years ago zero iPhones had been sold and three years ago zero iPads had been sold. In the last quarter, as the company points out, there were "47.8 Million iPhones Sold; 22.9 Million iPads Sold". But that was a disappointment for the general market, as Gene Munster from Piper Jaffray said, if the number had a 5 in front of it, the market might have reacted differently. The first quarterly sales expectations for the iPhone were closer to 58 million, so working backwards from that initial number, you can appreciate the disappointment from the market. And, as ever, it depends what your reference points are. If you bought Apple at 700 bucks you are feeling wretched, at 7, well, not so much, the company is paying 2.65 Dollars a quarter, you should get your money back in three quarters. Most people however having been recently in the stock, it is one of the widest owned stocks by hedge funds, so I am guessing that they are all "wrong" in the short term. What drove the share price higher was momentum around sales, beating guidance and of course beating the whisper number comfortably. This is the first quarter in a number of years that you are seeing the momentum slowing somewhat. And that is in large part the reason why in the aftermarket the stock is trading down nearly 10 percent.

So, should you freak out like Cramer? Should you shout and jump up and down that "they" know nothing? Is 460 odd Dollars a good price for Apple, the company? Do you want to be owning this company for the next half a decade? Well, on an ex cash basis the stock trades at an astonishingly cheap 7.1 times earnings. That cash pile, which includes both short term and long term securities tops 137 billion Dollars. As a few people pointed out, that is more than the entire GDP of Vietnam. Last year of course. That is a 12.9 percent increase on the quarter. Wow. At the implied opening price of 463.49 Dollars, 31.2 percent of that, or 144.74 Dollars of the Apple share price is cash, and cash alone. The yield on that is low, really low, in an interest rate environment that is set to continue for the next year and into the year after that.

Rolfe Winkler has a great story, Paul steered us in this direction: Apple Draws the Short Quarter. The conclusion is interesting: "Clearly, Apple didn't provide the kind of blowout quarter many have grown accustomed to. But the results aren't the total disaster implied by the market meltdown."

As Byron also pointed out, though, the guidance was mushy, because the management decided to go the route of "realistic" rather than "conservative". And sadly the realism for the coming quarter was lower than the market wanted to see. Again, I have not answered the question, should you freak out? No. If all those people who activated products running iOS in the last two years, replace their devices in 2014, the number tops 200 million. If the Apple faithful just renew their devices, they can generate over 50 billion Dollars in cash flows. This is without adding new customers. And this presumes that they keep their existing customers. We continue to see share price weakness as an opportunity to accumulate more stock. This company six years ago used to sell only iPods and Mac's, if you needed a reminder.

Byron beats the streets

For the full year earnings came in at $5.36 which was up 2% from 2011. Remember that this has been a tough year for the company. They have heavy exposure to Europe which has been slow and China hit a big speed bump half way through the year. For the whole year same store sales increased 3.1%. 3.3% from the US, 2.4% from Europe while the developing world only grew 1.4%.

Earnings for next year are expected to come in at around $5.78. Trading at $93.48 they are on 16 times next year's earnings which compared to their competitors is actually quite cheap. The company has big ambitions for 2013. This from the CEO Don Thompson.

"In 2013, we plan to invest about $3.2 billion of capital to open between 1,500 - 1,600 new McDonald's restaurants and to reinvest in our existing locations, including reimaging more than 1,600 locations worldwide. We are confident that now is an opportune time to invest in our restaurant portfolio in ways that will yield value for all stakeholders in the future."

Talk of reimaging reminds me of a friend who just went to France for his end of year holiday. He told me that the McDonald's he went to in Paris had completely ditched the service counter. Instead there were kiosks or swipe machines where you press a few buttons, swipe your card and then collect your food at the next point, much like a drive through. This makes getting your food easier and quicker while McDonald's have less labour costs. I am not sure the Labour Unions here would accept that with open arms but it does show you how much room for innovation there still is.

And remember my piece last week on Famous Brands which looked at the Yum! Brands comments about Africa? How KFC has become aspirational in these countries and how a couple even got married in a KFC in Lagos. Well, McDonald's is the same and as the restaurants get built, developing market consumers will come flocking. We are still buyers of McDonald's at these levels.

Crow's nest. European PMI numbers look pretty poor, but some are near 12 month highs. The Rand has weakened a lot. Davos continues. Chatter continues about South Africa. Our football team won!!

Sasha Naryshkine and Byron Lotter

Email us

Follow Sasha and Byron on Twitter

011 022 5440

Tuesday 22 January 2013

The big BoJ bang

"At the same time the BoJ has raised their economic forecasts. I don't know what to think of this. Surely all the past programs were designed to escape deflation? Reminder, the Japanese stock market, the Nikkei hit an all time high on the 29th of December 1989. The intraday print was 38,957.44. The closing level today for the Nikkei 225 was 10709.93 points. Over ten years ago during the dotcom bubble, the Nikkei topped 20 thousand points. A lot of folks think that the Nikkei is dirt cheap, specific stocks that might benefit from exports. But imported energy costs are going to rise, this is a double edged uuuummmm.... Katana?"

To market, to market to buy a fat pig. US markets were closed for the celebration of Martin Luther King day, one of ten federal holidays. The day does coincide with a US presidential inauguration, every four years. Text from the WSJ: President Obama's Second Inaugural Address. This one was attended by one million people. I am pretty sure that it must be a cool to do event, in the flesh. I remember the day that Obama was sworn in the first time, that was a pretty cool speech. The first couple certainly look like the freshest folks since the Kennedy's. The US president is certainly greyer in hair, but other than that he looks the same to me. It must be a difficult job that. I can't imagine the pressure. But, as fun as the day was, the real work of bringing the US together starts now. In fact just tomorrow the US house will vote on whether or not to extend the debt ceiling for just four months. Still, this is a test. Perhaps both sides of the aisle will agree that four months is long enough to bash out something meaningful. We all need it, the overhang of more policy uncertainty is too much to bear.

Talking of banishing uncertainty, the Bank of Japan, the BoJ, (with political push) have embarked upon Buzz Lightyear monetary stimulus. You can read both the Price stability target and more importantly I think, the Open-ended asset purchase method. The intro is simple, "to purchase assets without setting any termination date" tells you what that method will entail. 2 percent is the new inflation target. The Bank of Japan suggests that their program will take some time to filter down to the rest of the Japanese economy. The statement suggests that the Bank of Japan expects that both internal and external demand will pick up gradually this year.

I guess everyone is on the same page on that score. At the same time the BoJ has raised their economic forecasts. I don't know what to think of this. Surely all the past programs were designed to escape deflation? Reminder, the Japanese stock market, the Nikkei hit an all time high on the 29th of December 1989. The intraday print was 38,957.44. The closing level today for the Nikkei 225 was 10709.93 points. Over ten years ago during the dotcom bubble, the Nikkei topped 20 thousand points. A lot of folks think that the Nikkei is dirt cheap, specific stocks that might benefit from exports. But imported energy costs are going to rise, this is a double edged uuuummmm.... Katana? If you don't know what that is, check it out on Wiki, I did.

Jozi, Jozi 26^o 12' 16" S, 28^o 2' 44" E Richemont dragged the broader market lower, a sales miss and warning about an uncertain Chinese outlook weighed on the stock. Down just over six percent on the day. This fall and the general sentiment amongst the luxury goods stocks prompted a FT broader special report on luxury goods, I emailed the pdf to my kindle. Imagine using that line twenty years ago. Email? Pdf? Kindle? What is that? Email, OK, Plato and Unix mail systems existed, I remember using Plato in the school library. I wonder what that place looks like? The school library that is. I do know that all the Lance Armstrong books have been moved to the fiction section. I didn't make that line up. The truth is that Swiss watch exports to China have fallen at the end of last month. I do wonder if some of this had to do with the ruling (and only) party in China deciding to take a stance on corruption and cutting back wasteful expensive ceremonies, and if that knock on effect delayed certain purchases. As the FT piece said, when quoting a luxury goods analyst, the rich uncle is not going to stop buying an expensive Rolex at his nephew's wedding. No. The culture of gifting is not going away soon.

But. And this is a big but. The article also suggests that if the current head of the communist party, Xi Jinping (expect him to be president of China in the next two months) does not have a taste for the culture of gifting. And perhaps a fancy wristwatch might impact progress forward internally in the party, how am I to know? We are probably, according to the FT report in a period of normalisation. A period where European sales would continue to be strong, with the tourism trade, whilst North America would improve. And I noticed that the Japanese market was starting to pick up too. So, should we be anxious about owning Richemont? The short answer is no. The company was in excess of 3 billion Euros in cash, either to take advantage of a deal (not now) or as a buffer if times get tougher.

Staying in the region and staying with a multi-national company with South African roots, SABMiller released a Trading Update this morning. At face value it does not seem too impressive: "Lager volumes for the third quarter were 2% ahead of the prior year and soft drinks volumes were 3% higher, both on an organic basis." Group revenue grew by 8 percent in the third quarter, that is a little more impressive. The company is satisfied with the performance.

You can read across the regions that there was fairly ordinary growth, I see that some people are getting anxious about the one line specifically: "Lager volumes in Asia Pacific declined by 1% on an organic basis (which excludes Australia volumes altogether), largely as a result of subdued volumes in China, which declined 3%, due mainly to an exceptionally cold and wet winter across the country." That hardly really matters as Paul points out, that division is not that profitable really. But it is part of their future, along with the continent that I live on. They don't seem that bad to me. The Chinese miss is poor, but not unexpected. The market has taken it in its stride. Neither here nor there, folks are still willing to pay up a lot for what is still considered an emerging market consumer stock. Indeed.

Byron beats the streets

"Ellies Holdings Limited ("Ellies" or the "group") is a leading South African manufacturer, wholesaler, importer and distributor in diversified sectors, including consumer goods, renewable energy, and power and telecommunications infrastructure, servicing the local and African markets."

Of the consumer goods includes all the DSTV equipment such as the decoder, satellite and the controller. If you are bullish about the growth of Multichoice then Ellies is one of the best ways to benefit. It could be even more direct exposure than Naspers themselves who own so many other businesses along with Multichoice. They also say that a shift to digital TV is imminent which means that everyone is going to have to buy a new decoder at some stage, and that includes SABC users. Ellies of course will be the ones selling the equipment.

Also within the consumer division is the Eskom Project Power Save programme. You know all those power saving lights which were given out for free a while back? Ellies supplied those. And there is the green shop within a shop initiative. Within many Builderswarehouses and similar type stores sits an Ellies section which sells household goods which are geared towards helping you save electricity and water within the home. This is of course an exciting theme. They also supply and retail generators which, since the lights went out in 2008, has been a growing division.

The consumer division grew 112% compared to the previous period and is responsible for two thirds of the groups profits.

The other third of profits is brought in by the infrastructure division, Megatron, who provide Eskom Power stations with products such as cables as well as equipment for solar and wind projects. This is also an exciting industry as Eskom continue to build power stations while private companies look for alternative opportunities to supply to the grid.

So what would an exciting company like this trade at? As you would imagine the share price has followed suit with earnings having gone from 228c at the beginning of 2012 to 820c where it is today. But back of the match box calculations tells me that if you annualise these earnings the company is only trading on 10 times this year's earnings. The future looks exciting. I am bullish on Multichoice and I know that people who can afford it will make a conscientious decision to go more green. In fact with current Eskom tariff increases power saving is fast becoming a necessity. The infrastructure division will also benefit as our population grows and needs more energy. At these levels I would be buying the stock.

I have been tempted at times to suggest that the annual WEF event in Davos is a giant hobnob and a complete waste of valuable time. Believe me, I have called it far worse "things". But I can see why it is useful. The story goes that our own iconic former President Nelson Mandela was swayed away from a hell-bent socialist viewpoint in Davos. That would not have happened had he not gone there. The cynic in me suggests that all over the world, three billion poor people are thrilled that rich people are meeting in an Über exclusive location to discuss their problems and represent their fears and aspirations. It is darn expensive. No, hellishly expensive to get there, Andrew Ross-Sorkin wrote an article once about the costs: A Hefty Price for Entry to Davos.

See that part about a larger group: "And if you want to take an entourage, say, five people? Now you're talking about the "Strategic Partner" level. The price tag: $527,000. (That's just the annual membership entitling you to as many as five invitations. Each invitation is still $19,000 each, so if five people come, that’s $95,000, making the total $622,000.)" Whoa! That is nearly five and a half million Rands for five people, over one million ZAR per person for just being there. Forget the hotels, the air tickets, the train tickets, the costs of throwing an event and inviting a whole lot of people. Catering costs. Live bands. Google paid big bucks for that, see lower in the article.

But who fits the bill? I presume shareholders for companies and taxpayers for governments. So, that is people like us! And is it worth it? Well, I guess it could be. I can understand for a financial journalist that it is near the pinnacle of their respective careers. Being able to mix with the business elite globally and political heavyweights at the same time, I suspect that there are very few places one can do that. Plus, it is also a beautifully picturesque place nestled in the Swiss Alps. According to Wiki, there are a little over 11 thousand permanent citizens of Davos, which also happens to be the highest city in Europe. That helps, with all due respect to Mogadishu, if it was held there I suspect very few people would turn up.

Networking amongst humans is still key. Location of the event is key. But I suspect that Skype, or the Google tool to invite people into circles could work well, but then you can't "feel" people out. The expense? Well, if someone else is paying, why not! But when it turns out that is you, perhaps you might think differently about it.

Crow's nest. It is easy to always be anxious. To counter that you should not be drinking excessive amounts of coffee, washing down glazed donuts. Sunflower seeds, yoghurt (the healthy kind) and bananas. Try those. But the point that I am trying to make is that it seems like people are always preparing for market Armageddon. Remember when Greece was going to exit the Euro zone? Remember? That was awful. Check this out: Greece Govt Bond 10 Year Acting as Benchmark. March 2nd 2012, that same said bond was yielding 37.2 percent. The Greeks were going to default right? No. Wrong. That same said bond now yields 10.41 percent. Good luck with betting on the Armageddon outcome. Pfff.... recently I acquired a doormat, which stands at my front door that says Keep Calm and Come In. Quite. Welcome to all those folks who are feeling better about joining the equity market rally.

And. I spoke to one of my favourite clients yesterday (you are all my favourites I promise) and he said something interesting. He said that when he just got married (all of 45 years ago) a friend, who was an accountant said that the US debt situation was unsustainable. Hmmm... it seems to always turn out that people don't count on humans, real people, to solve the problems and prefer to use calculators and spreadsheets to make predictions. Markets are slightly lower across the globe. We can back away from policy decisions and politics for a little to continue with earnings season.

Sasha Naryshkine and Byron Lotter

Email us

Follow Sasha and Byron on Twitter

011 022 5440

Monday 21 January 2013

Richemont rubbished

"I suspect however that this report will be met negatively by the market and perhaps we could see a short term slump, not too dissimilar to that of Burberry. And it turns out that Burberry, after a weak outlook are doing better than most folks anticipated. Out of the blocks the stock fell five percent here in Johannesburg. Slowing Chinese growth points to Chinese consumption going in the wrong direction, at least in the short term."

To market, to market to buy a fat pig. Chinese economic data that beat expectations sent the market higher on the day, benefitting here locally of course were the commodity stocks. We discussed the economic miracle that is and was China over the last decade and a half, that amazing fact about collective GDP in the last three years which were as much as the prior 11 years. There were results from General Electric, who are a pretty decent barometer of global growth, and it was a beat. That was a good outcome, the general commentary about the world's fastest growing big economy were generally upbeat. In North Africa there were still the disastrous and ongoing news of employees stuck in the middle of someone else's ideology. My mother was actually born in Algeria, she spoke of violence as a child and the civil war. Seemingly the violence has not ended.

Barack Obama was sworn in for a second term over the weekend, the celebrations will take place today, it is one of ten federal holidays in the USA. As such the markets will be closed, which is not exactly the best news for us here, we enjoy those markets being open. Bad weather across Europe and the UK led to many a Facebook friend posting lovely pictures of their snowmen, but also travel chaos. I bet you can say that the rain over the weekend was much more fun than being covered in snow. Talking snow, the annual WEF event in Davos starts later this week, I suspect that all I get out of it is a measurement of the confidence of the globe. I suspect that it will be much better this time around.

Jozi, Jozi 26^o 12' 16" S, 28^o 2' 44" E We were led higher as a result of rebounding commodity stocks, some of which had taken a serious beating in the last week. There were some great conversations around in terms of the Amplats announcements from last week and the subsequent reaction from both labour, the government and the broader public conversation. It was pretty interesting to hear Peter Major, the fellow has been around for some time, and his views on the matter. The whole idea that the platinum industry used to employ only 50 thousand people thirty odd years ago. That is now 150 thousand, which is a 50 thousand decrease from the high point. Business created the jobs. The services jobs created around the company. The jobs that support many more people. Watch this good piece: Panel Discussion: Realities in SA Mining Sector. Make up your own mind.

Richemont have released a trading update for the nine months to end December 2012, and from the initial flash, they seem to have missed sales expectations. At least that is what the screens say in front of me. The stock has been on a tear. The stock is up nearly 70 percent over the last year. And every single time that I have spoken to clients about the company the inevitable question comes up asking, is there any more juice left in the share price? To answer that question one is perhaps best placed to try and understand a few things about the company and their customer base. The company falls into an investing theme that we like a lot that is called aspirational consumerism. The idea that across the globe there are more upper middle class people who are able afford luxury. In China a culture of gifting exists, whereby to seal a deal of most sorts gifts are exchanged.

I might not have a single smart watch, and might not be that sort of person, but many, many people love not only the timepiece but also the longer term emotional attachment. I was once (rightfully) admonished for being a cynic on their product and the buyers thereof. The fact is that most people like nice things. Tutankhamun over 3300 years ago had a gold mask made (along with the matching curse) because it was possibly the *nicest* way of showing off at the time. King Tut had many beautiful artefacts and treasures, amazing for only a ten year reign and bearing in mind that the fellow did not make it to 20 years of age!

Off the subject, here is the skinny of the announcement, which can be found here -> TRADING STATEMENT FOR THE THIRD QUARTER ENDED 31 DECEMBER 2012: "Following several years of exceptional growth in the Asia Pacific region, in particular China, sales were flat compared to the demanding comparative figures for the same quarter last year." Boom. Rupert (Johann) the bear(ish) warned of slowing sales, in fact everyone has warned of slowing sales in mainland China. Check out the sales table:

I suspect however that this report will be met negatively by the market and perhaps we could see a short term slump, not too dissimilar to that of Burberry. And it turns out that Burberry, after a weak outlook are doing better than most folks anticipated. Out of the blocks the stock fell five percent here in Johannesburg. Slowing Chinese growth points to Chinese consumption going in the wrong direction, at least in the short term. But, as Richemont says: "At this stage, it is unclear how business patterns may develop and how the business in the Asia Pacific region will evolve in the near future. Richemont takes a long-term view in managing its business and will continue to invest in the development of its Maisons." Regardless of the short term demand story, the company will continue to invest. I suspect that anxiety over the Chinese growth story has abated a little, watch Chinese consumption patterns closely. Because strangely enough, notwithstanding Richemont having seen explosive growth in the region, the Chinese authorities having been trying their utmost to convince their general populous to shift to a consumption based mindset. We continue to accumulate the stock, and will use current weakness as an opportunity.

In unrelated news to the sales update, over the weekend there was an announcement that Richemont had entered into a JV with Chinese luxury goods retailer Chow Tai Fook. Now, I can understand you scratching your head, but Chow Tai Fook has a retail network in excess of 1700 stores in 390 Chinese cities. China includes Macau (Chinese Vegas!) and Hong Kong. Chow Tai Fook plans to have over 2000 shops by the end of next year. Just to put it into perspective, in terms of outlets, Chow Tai Fook has as many stores as Shoprite has in both South Africa and across the rest of the continent. As per the Shoprite website, 1740 stores in total. Shoprite's annual revenue in 2012 is around 9.4 billion Dollars at the current exchange rate. Chow Tai Fook is lower at 7.3 billion Dollars, but you get where I am going here. Both companies are very well established brands in their relative markets, of roughly an equal size and scale. The market affords a higher earnings multiple to Shoprite, even though Chow Tai Fook has a bigger market cap (much more profitable selling watches and jewellery).

The deal between Chow Tai Fook and Richemont will see the Chinese outfit sell the Richemont brand Baume & Mercier in mainland China. Chow Tai Fook already sells several Richemont brands already, including Cartier. I suspect that this is a smart move for both companies, Richemont will immediately gain a fresh partner in the wholesale market and Chow Tai Fook will offer what is a very exclusive, but yet affordable brand. The watches retail from anywhere under 1000 USD to comfortably 15 times that price. It is probably fair to say that this falls into the category of affordable luxury and probably does appeal to a new entrant into that "aspirational consumer" of luxury items. Sadly, I am not a consumer, I don't even wear a watch. Neither does Byron or Paul.

New York, New York. 40^o 43' 0" N, 74^o 0' 0" W Tech stocks sank, courtesy of Intel which sounded some alarm bells from the PC business, whilst blue chips and the broader market were able to register gains in the last hour of the trading session. The big talking point of the day was undoubtedly the General Electric results. More on that in a second. Byron pointed us to an interesting article over the weekend, it was well publicised in our circles. On Thursday on CNBC, the fellow who coined the phrase the "New Normal", Mohamed El-Erian, suggested that might be ending. Then I guess instead of suggesting a structural change back then in 2009, perhaps he should have called it the "short term different". Surely three to four years is a short time in the investment world? Or am I barking up the wrong tree here? Talking trees, I nearly fell out of one this weekend, no really, I was removing some dead wood from a ghastly tree that we have to keep. Because the kids like climbing it, and because it has a swing in it.

Talking of someone who made an even bigger long term call, Jim Cramer in August of 2007 was going nuts, pulling whatever hair he had left out, the famous piece in which he went off about the Fed knowing nothing about the real inner workings of Wall Street. Bear Stearns was at 110 bucks a share, it nearly got sold for 2 in March of the next year, but ended up on the chopping block at ten bucks. A full 100 Dollars a share lower than where it was at the time. John Carney over the weekend wrote a wonderful piece: Jim Cramer Was Right-They Knew Nothing! Now, having seen how crazy Jim actually was (and still is), it is easy to see why the Fed could have laughed at him. But the point that is perhaps well made by John Carney is that the Fed are actually no better at predicting than Wall Street. Perhaps the lessons learnt are to listen to everyone a little closer.

Time to cover the worlds most recognizable industrial company, and an iconic brand that spans every continent.

Byron beats the streets

GE lifted by strong emerging markets growth.

Every division here is one I would be happy to invest in except maybe GE capital. You know our long term view on big banks. This is a division they are actually trying wither down while there are certainly good synergies between GE capital and the industrial businesses. And if you were not in the know, H&BS stands for Home and Business Solutions.

As far as developing markets are concerned, here is what the CEO Jeff Immelt had to say in the presentation.

"We ended the year with a strong quarter despite the mixed global economic environment. The outlook for developed markets remains uncertain, but we are seeing growth in China and the resource rich countries. With our largest backlog in history and a substantial amount of cash generated by our businesses in the fourth quarter, we have great momentum going into 2013."

And further down the presentation this was said about the developing world.

"Industrial segment growth market revenues were up 9% for the quarter, excluding FX. For the year, Industrial segment growth market revenues increased 11%, driven by double-digit growth in Russia, Australia/New Zealand, Latin America, China, Sub-Saharan Africa and ASEAN."

So what did the numbers look like? For the full year the company made $1.52 per share or $16.1bn which was up 8% from last year. The quarterly number came in at 44 cents which was slightly above the expectations of 43 cents, pushing the share price up 3% on the day. Expectations for 2013 average around $1.68. Trading at $22 the stock trades on 13.1 times this coming years earnings which is neither cheap nor expensive in my opinion.

If the global economy grows, GE will not disappoint. But on top of that they are extremely innovative. If you browse through their website you will immediately pick up on that and it is hard not to be impressed. The world is getting more and more energy hungry, in fact I saw a tweet just yesterday that suggested that there were still 1.6bn people living without electricity. I cannot even imagine life without a smartphone, let alone the basics that electricity provides. The base is still low and as people become wealthier, the demand for GE products will grow. The stock remains a core part of our New York Portfolios. Here is the full report if you would like a further read.

Crow's nest. Market here are lower as a result of a big sell off in Richemont. Globally markets are a little higher. With a US holiday in place today that means lower volumes across the globe. Oh dear.

Sasha Naryshkine and Byron Lotter

Email us

Follow Sasha and Byron on Twitter

011 022 5440