To market, to market to buy a fat pig. The Dow Jones Industrial average continued the winning streak, registering another small gain to be on the longest winning streak in 16 years. Nine straight days of gains. At the same time, Arsenal FC were dumped out of the champions league, not through lack of trying, they only lost on the away goal rule. What do the two have in common? Well, and far as I understand it, this is the first time since 1996 that no English football club finds itself in the last eight of the competition. And staying with the UK, the pound is in some serious trouble. Folks are worried. And Britains pound Sterling is showing that, the FT had a great piece yesterday which includes David Cameron flogging a collapsed horse: Britain's austerity is indefensible.
So the new pope was elected, small steps for the Catholic Church here, I am mindful that the new popes parents were Italian immigrants to Argentina. But still it sounds like progress to me. Now what for those on pope watch? Talking about great Argentineans, did you see that Lionel Messi had a mould of his foot (not boot) taken by a Japanese crowd, who then created a gold model to go on sale, around 5 million Dollars -> Lionel Messi's golden left foot: yours for £3.5m - video. Messi's annual salary is 11 million Euros. He could buy two if he wanted. And his annual endorsements are around 20 million Dollars per annum, so he could clearly buy more.
Football, religion, a winning streak, Britons and a crazy (perhaps warranted) salary, where are we going today? Well, locally yesterday the market slid through the session after having traded at an all time high at the session start. The Rand plumbed new multi year lows, I drive past that sign on the highway every day at Sasfin, they might have to add a column on the far left soon. 10 coming? Who knows. Industrials continued to make ground, financials and in particular banks (down 2 percent) sold off the heaviest out of all the majors. Platinum stocks took a drubbing, the broader sector struggled. The iron ore price is under a little pressure, falling as much as 3 percent overnight. The iron ore price is down 20 Dollars a ton in the last three weeks, but is still trading at 139 Dollars. Talk about skittish markets.
Five years ago the price was 60.8 Dollars a ton, two years ago the price was around 190 Dollars a ton. In September last year we were plumbing new multi year lows in the mid 80's Dollars per ton. Bizarrely however the price of Iron Ore appreciated from 12.54 Dollars a ton in February of 1983 to 13.82 Dollars a ton in February 2003. A whole ten percent in 30 years. On an inflation adjusted basis, according to my inflation calculator, 12.54 Dollars in 1983 was the equivalent of 22.91 Dollars. So, they were going backwards. In price terms. And then the Chinese came along with their great building and infrastructure development process, massive.
That 60 minutes program was picked apart by a few people I see, a great piece in the BusinessInsider overnight: Everyone's Got The Chinese 'Ghost Towns' Story All Wrong. What a twist! Who would have thought that the media would hype a very short list, 5 places in total. China's top 72 cities have a combined population of nearly 300 million people. You have heard of Changchun. No? Nothing? Well, seven and a half million people live there. Nearly the same number as the entire population of Switzerland, or Israel. Two million more than the entire population of Denmark. Keep calm and carry on. Still, the question about property prices being too high, yes, that is probably (most definitely) a bubble.
That empowerment deal that GoldFields managed to do, for their South African business, is in the spotlight again, as of yesterday. The news was first brought to light by our journalist mates Lindo Xulu and Barry Sergeant when they were working at Moneyweb. Both men are fearless, great chaps too! David McKay had a great story: Governance failures dog Gold Fields, DMR. Sounds all wrong, surely the whole purpose is to empower many, and not, from face value, looks like connected people. Again, it is probably fine to be connected, but not be absolutely dodgy, that part does not sit very well with me. And the GoldFields share price? It seems like nobody really seems to care, at least from an "investor" point of view. If you have a look at the Gold Fields ADR in New York, it trades 4.91 million shares on average. 728.68 million shares in issue. Trades entire market cap in 148 days. I pretty much doubt that much of the activity has anything to do with "investors".
I actually heard last evening the conversation that David had with Bruce Whitfield on 702, in which David implied that through his own chats with mining investors that money was more likely in the coming years to flow to Zimbabwe, rather than South Africa. The reasons were that the perceptions had been created that the South African landscape was likely to get worse, and the substantial risks being taken on by being in Zimbabwe were justified, because from a regulatory point of view, rock bottom had been reached. Perception unfortunately counts for a lot. The perception that Greece was going bust was real, even if they restructured and essentially real money was lost. It could have been more. Greece has been out of the news for months. Yeah, remember Alexis Tsipras? Last seen at Hugo Chavez's funeral.
Demand for specific goods and services do go away, as they become no longer useful for that generation. This is mostly as a result of scientific advances that our species makes, and there are good examples everywhere. Records and record players, video (VHS and Betamax) players, a phonograph, tape cassettes, telex, typewriters, analogue telephones, more recently PDA's, typewriters, dial-up modems, floppy disks, hard disks, movie projectors, old camera companies (Coronet Camera Company) and even Atari. Atari recently filed for bankruptcy, late January actually, I am surprised that took so long. With regards to automobiles, there are many examples. But what are the chances of the combustion engine being replaced? I guess for the moment, very little. But what about advances in science that could mean that batteries could be produced commercially to make the massive advances that we need?
Well, I stumbled across this, just the other day, a substance called graphene. Graphene is relatively new, that ones spell checker does not realise that it is indeed a word, even though it was "invented" or discovered at the beginning of the last decade. The applications are endless. The FT has this article: Graphene: Faster, stronger, bendier. And then after reading that, watch this Fast Company piece on Graphene. Amazing. The reason why I am ever so slightly anxious is that I fear we might be left with all this platinum in the ground that is only useful in jewellery applications. And here we sit and dither whilst the world changes.
Crow's nest. You remember that closing piece that we did yesterday. That piece on market timing, rather one should just stay the course. This piece (The Truth About Market Timing) has a rather sober conclusion: "Focus on maintaining an intelligent balance of assets, and leave the martket timing to the newsletter writers. When they get it wrong, they lose subscribers. When you get it wrong, it crushes your retirement plans . . ." Rather, one should just stay the course. Barry Ritholtz wrote an associated piece titled: Why Time Frames Matter to You. Read that! We fall into the last category there. Which begs the question, why do we write a daily piece? Well, a puzzle isn't built in an hour, or minute. At least a Swiss Alps 1500 piece is not built in an hour, or even a day. Small pieces of information, if you manage to sift through the noise make a longer term view become increasingly clear.
Sasha Naryshkine and Byron Lotter
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