Friday 18 January 2013

Chinese GDP 2012 print is 7.28 times that of 1999

"An even more astonishing number is that in the years from 1999 to 2009 (11 years), collective Chinese GDP was 26.6 trillion Dollars. The last three years almost equalled the 11 years prior to that. Yes, add 2010 through to 2012 (three years) and the cumulative Chinese GDP was 26.12 trillion Dollars. So, I suspect that whilst getting anxious about China slowing their economy either through interest rate hikes or by raising the triple R (reserve ratio requirements for banks) the truth is that the base is incredibly higher with this type of growth."


To market, to market to buy a fat pig. Boeing continues to suck wind, the new shiny fleet of 787's is basically going nowhere as the batteries are investigated across the globe. I checked out Wiki and that suggested that only 49 planes have been built. The giant Airbus, the A380, only 92 have ever been built. Amazing. I flew on an Airbus 380 twice, to Germany and back with Lufthansa and it was amazing. Incredible. Mind blowing. And this was after the wing cracks had been discovered. I never felt unsafe.

People were looking forward to the Lance Armstrong interview. He sort of came clean, folks were upset there was no remorse. No crying. No jumping up and down on Oprah's couch saying that he loved EPO with all his heart. There was none of that.

Rio Tinto, you remember that from yesterday, I read a WSJ article -> Miner Rio Tinto Ousts CEO as Bad Bets Cost Billions that left me feeling that commodity prices are going to have to trend higher.

Why? Well, if aggressive capex plans have been shelved and Chinese demand is still pretty robust -> China records slowest growth for 13 years. I am not too sure that I am fond of that FT headline. I mean, yes, their growth rate might be the slowest for 13 years, but the size of the Chinese economy was 1.0833 trillion Dollars according to World Bank data from Google Public Data. It's cool, you must use it! I worked it out though. According to the World Bank Chinese GDP was 7.3185 trillion Dollars. Growth slowed to a 13 year low to 7.8 percent. But GDP for 2012 was 7.889343 trillion Dollars. More than 7.25 times more per annum than in 1999. Get that? Chinese annual economic output in 2012 is 7.28 times what it was in 1999. You don't see that headline. AND, wait for it...... using the same data -> China Gross Domestic Product, collective GDP from 1999 to 2003 (five years) was 6.7 trillion Dollars. Think about that for a second!

An even more astonishing number is that in the years from 1999 to 2009 (11 years), collective Chinese GDP was 26.6 trillion Dollars. The last three years almost equalled the 11 years prior to that. Yes, add 2010 through to 2012 (three years) and the cumulative Chinese GDP was 26.12 trillion Dollars. So, I suspect that whilst getting anxious about China slowing their economy either through interest rate hikes or by raising the triple R (reserve ratio requirements for banks) the truth is that the base is incredibly higher with this type of growth. And to think that in reality the Chinese are still a long way behind their American counterparts by most measures. Anxious? Not us, not here and like I said, commodities should continue to have a positive outlook.


Jozi, Jozi 26o 12' 16" S, 28o 2' 44" E I wasn't here for the whole day yesterday. I was spending the day with half of my little family, who were celebrating a birthday on the same day. My wife and youngest daughter happen to share a birthday, not by design I promise you! But it is fun for everyone I think, other than my eldest daughter, her nose seems out of joint. Life and its small intricacies. I think it was Michelle Obama's birthday too yesterday. Yeah, three great ladies on the same day! On the exchange stocks caught a bid, having their first day in the black since last week. Hey, what is this, a market report? No. Like Byron pointed out the other day, a great Josh Brown piece on why he writes his blog really sounded well with us: The purpose of this site. Exactly, thanks Josh, we could not have said it better ourselves!

Big ticket South African deep miners (deep as in shafts deep) struggled yesterday, as anxiety over government and labour with the companies continued to weigh heavy. He ain't heavy, he's my brother. We need more of that type of discussion. Less "them" and "they" should be used, even if you are referring to labour, government or business. Use names, people. That is a good start, because for better or for worse, business used private money to build the infrastructure, using exploited labour (yes, that happened for many years), with a government that is not exactly friendly to business because of their alignment with workers. Everyone has vested interests. We all live and breathe the same air. We all want success for our country. We (yes it is time for we) need success for our children and grandchildren. And this was all before I had seen the rather inspiring FNB advert last evening: FNB You Can Help - Live Broadcast, a message from South Africa's children. I don't care how many times she practiced that speech, it did it for me!

My biggest take away from this current environment in South Africa is this. If government want more tax revenue to support social spend they are going to have to work harder to get business to spend more. You can't force business to spend more. If business is encouraged, entrepreneurs are celebrated, the appalling jobs situation in South Africa will be dented a whole lot quicker. Encourage people to stand on their own two feet, rather than the current perception out there being that a government job is the most sought after job. How and why does that perception exist? More small businesses and greater tax revenue generated would leave more for social programs that the government have their eye on. And ironically that would be good for creating jobs in the rural areas, jobs that would be longer lasting. More businesses = greater tax revenue. We should celebrate and encourage entrepreneurs, but instead we wonder how the state could do more. People do more, not the state. End of rant, apologies.


    Byron beats the streets. At half past four yesterday we received another trading update from one of the retailers. These updates are really painting an interesting picture of the environment at the moment. The update was from Mr Price which at the face of it looked very disappointing. But as ever the market had already priced in the news. From trading at R145 on January the 7th it fell all the way down to R125.55 where it opened yesterday. It is currently trading just above R120 as I type this.

    "During the third quarter (30 September 2012 to 29 December 2012) of the financial year ending 30 March 2013, Mr Price Group recorded sales growth of 10.0% over the corresponding period in the prior year (2 October 2011 to 31 December 2011). Comparable store sales increased by 4.4%.

    Retail selling price inflation for the period was 4.8% and cash sales constituted 78.8% of total sales(LY: 80.1%). Weighted average trading space increased by 3.4%. During the quarter the Group opened 32 and closed 2 stores, adding a net 12 294 square metres to its trading area and ended with 1 019 stores."

    As I have mentioned before, these companies are priced for higher growth than 10% and more importantly same store sales of 4.4%. That same store sales was less than the inflation rate so you could even assume less goods went through the tills. But there is a reason for the lack of growth which is interesting from a strategic view.

    "As anticipated, sales performance for the quarter was impacted by the planned curtailment of credit sales growth. In the third quarter of the prior year, unsecured credit granted in South Africa increased by 57.1%. With the Group's intention to remain a cash-based retailer and the downside risks currently associated with unsecured credit, a decision was taken to slow credit sales growth off the high base."

    Mr Price have always been predominantly a cash retailer. It is what they know and what they are comfortable with. If they are not happy to get into the credit market then I respect that decision 100%. Although I do not believe we are in credit bubble. They have managed to grow fast enough without having to rely on credit and as a shareholder it is one less risk to worry about.

    As for the divisions, Apparel (which includes Mr Price, Mr Price Sport and Milady's) disappointed with sales growth of 9.1% and same store sales of 2.9%. The Home division did a lot better with sales growth of 12.6% and comparable sales of 8.8%. Apparel got hit the hardest by the credit pull back. I was surprised by this though, the Famous Brands update indicated that lots of people stayed in South Africa for the holidays which would have benefitted Mr Price, especially Mr Price Sport. But I guess there has also been a big influx of international clothing retailers which has really ramped up competition. Just like what happened with Apple, when there are lots of profits to be made the competition will come running.

    Although disappointing there is a legitimate reason that growth was slower than what retailers have been used to. I still like the company and agree with them about the fourth quarter being stronger. In fact they indicated a 17.2% sales growth so far this year.


New York, New York. 40o 43' 0" N, 74o 0' 0" W US stocks closed at a new fresh five year high last evening. Weekly jobless claims also plummeted to a five odd year low, that was one catalyst. Bank earnings in the form of Bank of America disappointed, as did Citigroup. Both stocks were punished. But the rest of the sector actually was just fine, up around one third of a percent. I saw the biggest winner was the Bank of Ireland ADR, which was up nearly six and a half percent. BUT, over the last five years the stock is down 98.4 percent, I kid you not. Over 10 years the stock is down nearly 98 percent. Let us just say that the financial crisis almost crushed them to next to nothing. The last year however, the stock is up 80 percent. But hey, who really cares when you have been completely wiped out! Right?

After hours there was more news that the PC market was taking more than just a little pain: Intel's weak outlook, spending hikes unnerve Wall Street. The stock was also weak after hours, down 5.3 percent. If you read the Reuters article you will see that the massive capex plans are making everyone nervous. Margins are going to be hurt, and the hope is that there will be a whole lot more capacity in the smartphone market. I suspect that there will be. Smartphone saturation in the US is a number of years away. There are amazing handsets that have not been discovered yet, I suspect that Intel are going out on a limb here. And that is the part in the headline, unnerving "investors". Investors don't do "things right now". Investors are people who own a piece of a company. Not worried about the share price today, or tomorrow, those are not investors.


Crow's nest. British retail sales disappointed. How they possibly think that they are in a better position than the collective Europe is beyond me. Look at their budget deficit. Plus, it does not look like growth is coming back anytime soon AND inflation is a little bit of a problem. Deficits, no growth and inflation, sounds worse than Europe to me. If the awful Algerian events were not front and centre of peoples minds then the British Prime Minister would be telling us of a European failure. Nice, thanks for that. We are higher here today to start with, bring Mr. Earnings on!


Sasha Naryshkine and Byron Lotter

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