To market, to market to buy a fat pig. Whoa. I was surprised with the reaction to the Janet Yellen nomination and that it was given so much airtime, but then again, there have only been 14 Fed chair's before her. So it was the biggest news yesterday by far, even if this was anticipated. And of course when Larry Summers announced that his hat was not in the ring for the job a while back, 16 September actually, Yellen almost had the job in the bag. Remember that the Senate still have to give this a stamp of approval. She no doubt will get the job, Jim Cramer gave his two cents worth on the floor and said, well, what more does the Senate need? Does she need to go to the moon, or win a Nobel prize, to which Carl Quintanilla replied, there is one in that household already.
To be fair to Jim, he suggested that the Nobel prize be for medicine, meaning that Yellen would have more credentials than anyone else before her. Jim also shouted, what, does she need to cure cancer before she gets the job. So everyone thinks she is the best person for the job. And in the middle of this nomination process there is still a whole lot of political chest puffing in Washington DC. At least, according to one reason that I read from Cullen Roche, Janet Yellen is a woman which, given the amount of testosterone running (ruining?) Washington these days, might be a nice thing. Agreed!
Paul is good at making predictions. Which is very good in our industry, being able to identify trends that are making waves. Identifying trends and being able to invest accordingly is importunity. And that means avoiding investments that are in terminal decline. With the advent of the motor vehicle and the changing transportation trends, you need to make sure that you do not invest in leather companies that manufacture saddles. I would imagine that a saddle was an important part of life 150 years ago. Less in fact, the US Leather company was in the Dow Jones Industrial Average in 1896. By 1905 it was out of the index. After a few mergers it remains that only original Dow constituent to have liquidated. But that took until 1952. But I am getting off the point here. From what Paul has read his thinking (and those of others) is that what happens in the US with politics in the modern era is that politicians closely watch the polls. There and not here (think of the e-tolls in Jozi).
Check this out, from the people that essentially are the polls, Gallup: Republican Party Favorability Sinks to Record Low. Yes. Record low. Granted the polls were not around when Herbert Hoover (a Republican) was president back in 1931, these polls are measured from when Gallup starting collecting data in 1992. So if the Republicans thought that this was a way of winning votes back in the mid term elections, as a result of conservative types, then good luck with that, because the broader population absolutely hates this idea. So this is why Paul thinks that in a few days time, insiders will tell Paul Cruz (the junior senator from Texas that is a rabble rouser) that this is a bad idea. And that they should abandon this course. And then caving on the matter will be even less flattering. Expect Barron's and the like to have a cover articles pointing to the confusion amongst the republicans, as soon as next week. And asking the same question since the last elections, "time for a makeover". Phew, let us hope that Paul is right and that this impasse is resolved sooner, rather than later.
Although....... this must present buying a buying opportunity. If shares have sold off five percent on the chance of a default (the same chance more or less of Lloyd Christmas getting together with Mary Samsonite), and let us face it, the chances are very, very remote, then surely this should be a buying opportunity? Or are stocks too expensive? Well, once again we get into what is more important for markets than anything else. Earnings. So we will get there real health of the US economy and once again we can determine whether or not companies are more optimistic about the future, or less optimistic. I am pretty sure that the negative image of the US capitol will have knock on economic implications. I am pretty sure that is an opportunity in itself.
Wow. Via the Sinocism newsletter that I subscribe to came the FT story that The new gas guzzler on the planet is China, having overtaken the US as the world's biggest importer of oil. This is according to the US government's Energy Information Administration. My next question was when I read that piece of news was, hold on a second here, government agency, are they not supposed to be away from work? Perhaps, but this could be part of the key employees that monitor energy needs and energy needs are without a doubt part of our lives. It was not too long ago in history that we relied on horses and carts to ferry us around, the steam engine changed that.
Now we have electricity, something that we take for granted. Energy needs are still going to be massive as more and more people require services that rich people deem essential. Handsets, smart ones at that, that suck an enormous amount of data. An application by the name of Locket, installed on quite a few Android devices pays the users for basically using their "lock screen" as an advertising board. More pointed advertising you cannot get. BUT!!! This app also reveals a dark side of humans. We are using our phones like crazy. On average, folks check their phones 110 times a day, done from real users, around 150 thousand in total were measured with this app. One user checked their phone 900 times a day. Obsessive compulsive.
But back to that all important story of the Chinese being the biggest importers of oil on the planet. Because the implications for Geopolitical policing and policies have meant that China will eventually have to assume the role of watchdog, whether they like it or not. Because of how energy prices will have an ever bigger and bigger impact on the Chinese (they are a net importer of oil) trade balance. So unless the Chinese can find a way to move away from gas guzzling motor vehicles back to the "grid" and public transport. According to Wiki, San Marino has a motor vehicle to 1000 population ownership of 1263, whilst the US is a close(ish) third at 797 per 1000 people. China is at 85. BELOW Swaziland. In South Africa at 165, we are around double China. So congestion on Chinese roads, you have seen the pictures, it is nothing! Germany is at 572. To get to the level of Germany, or any of the other European states, that would mean that Chinese motor vehicle ownership would have to increase six fold.
That is in absolute numbers an increase of 660 million motor vehicles. That is more than ten times the number of registered vehicles in China, as of 2009, that is right, only 62 million then, the predictorbots suggest that China will be at 200 million by the turn of the next decade. The lastly monthly data that we had was July, in which 1.24 million vehicles were sold. Or what we sell here by way of new cars in 21 months. Or differently put, their market for new cars is 21 times bigger than ours and GROWING by around 10 percent per annum. Wow. Just wow. The FT article suggests that there could be around a 50 percent growth in Chinese oil imports over the next six years. And now you know why!
Home again, home again, jiggety-jog. Market are higher. Apparently a deal of sorts is closer, amongst the politicians of course. Deals are happening all the time here. OK, maybe in Nigeria! In the automotive industry! It is hot out there! Really hot. Take care and use sunscreen.
Sasha Naryshkine
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