To market, to market to buy a fat pig. Another day, another record for markets. I have seen many people throw around the stock market bubble, even Janet Yellen (the incoming Fed chair) had to answer that question. Eddy Elfenbein said in his weekly newsletter that he did not know and he did not care. What does he mean by this? Well, Eddy, like us, watches a select bunch of stocks and then decides whether those ones are good, or not. And if those are expensive, then fair enough, no buying and then selling, that takes more time when making that decision. Sometimes it is harder.
Deleveraging continues to take place at a rapid rate in the US, but household debt is nowhere near the peak of Q3 2008. Currently 11.28 trillion US Dollars now, compared to 12.67 trillion Dollars back then. Globally (at least according to a running tally in January 2009) global banks wrote off more than 1 trillion Dollars, so that is a large part of why there was the reduction. Citigroup wrote off 39.1 billion Dollars as a result of the subprime crisis, UBS 37.7 billion, 29.1 billion by Merrill Lynch, 20.4 billion by HSBC, 15.2 billion by Royal Bank of Scotland and the list goes on and on.
But check this image out, reproduced from the NY Fed website -> (Household Debt and Credit Report), just at the end you can see that the line moves a little higher:
Housing debt in the US has emerged a weak point in Q3 2008 from a point where it was 9.9 trillion Dollars to 8.43 trillion Dollars now. Home ownership however in the US has fallen from 69.2 percent at the high in 2004 to 65 percent late July this year. In real terms 7 million Americans have lost their homes through not being able to afford them anymore. Perhaps in the first place. Politicians always want their citizens to own houses, I do too, but the reality is that not everyone can afford it, meet their obligations on a monthly basis. Sad, but true.
Janet Yellen was quizzed by the Senate Banking Committee and almost everyone thought she came out tops, knowledgeable (what did you expect), being able to handle the questions thrown at her (she is far better in this field than those asking the questions) and most importantly announcing herself as someone who is not going to want to shake anything up. But we knew that, Paul said the aforementioned Eddy Elfenbein had some choice words on the whole matter.
Exactly. These are my sentiments. A waste of time for Janet Yellen, you want to score political points, do it in your own time. You want to ask dumb questions, send her an email.
Unless the West Indies lead a remarkable comeback, Sachin Tendulkar has batted for the last time in test cricket. The truest form of cricket, for the purists at least. I consider myself exactly that, if you do not have the technique, you will be found out in test cricket. Hence, it is called test cricket. The part about Tendulkar that I have always admired is the humility with the weight of the country on his shoulders each and every time he went out to bat. He will probably end with 15921 runs in test cricket, 100 hundreds in both limited overs and the long form.
He managed to be that good. Forbes ranked Tendulkar as the 51st highest paid athlete last year, he made 22 million Dollars last year, most of that in endorsements (18 million Dollars), not earnings. On the endorsements front however, he was 14th on the list, 3 million behind both Messi and Ronaldo. Those two iconic footballers make up for it with a whopping salary however, over 20 million Dollars apiece. Good company to keep with a much richer sport however!
What amazed me about that list was that ahead of him was one MS Dhoni, the Indian cricket captain, who made 4 million Dollars in earnings (to June 2013, 12 months) and 28 million Dollars in endorsements. That pales into significance when compared to both Tiger Woods and Roger Federer (another legend coming to the end of his career) who managed to rake in 65 million Dollars in endorsements.
Believe it or not, David Beckham made 47 million Dollars, 42 in endorsements. If you think that is strange, Usain Bolt made nothing from running, and 24 million Dollars in endorsements. Ha-ha! Imagine that. So, a hero is gone, not to be seen on a field again. Federer is probably next. The debate about whether or not you or I think these fellows are worth this sort of money, that is a separate debate altogether. Nobody seems to worry too much that sportsmen have outlandish and obscene salaries and endorsements, but a corporate job (where the top dogs basically have no life outside of work) that pays exceptionally well, ordinary folks seem to have a problem with that!
Michael's musings. Massmart, a leading economic indicator
Yesterday Massmart came out with a sales update for the 46 weeks, the reason for the weird timing is due to an analyst road show, to have a look at a couple of their stores. Here is an extract from the SENS announcement.
"Massdiscounters increased by 7.9% (2.5% comparable) with inflation of 0.5%;
Masswarehouse increased by 14.0% (4.8% comparable) with inflation of 2.3%;
Massbuild increased by 9.9% (8.5% comparable) with inflation of 4.1%; and
Masscash increased by 4.1% (3.5% comparable) with inflation of 4.5%."
To give you an idea of how each of those divisions fit into the company, here is a group breakdown with each divisions pre-tax profit, their respective store square meterage and then main brands.
Massdiscounters - R813 million; 415,816 m2; Game and Dionwired
Masswarehouse - R906.3 million; 146,026 m2; Makro
Massbuild - R435 million; 406,987 m2; Builders Warehouse, Builders Express and Builders trade depot
Masscash - R302 million; 382,101 m2; Jumbo and Shield
The first thing that stood out to me with the figures is, how profitable Makro is, it has the biggest profit with the least floor space. I'm sure that my family's wine drinking has a contributing factor to that, because I when I think Makro, I think wine and not all the Tv's and big ticket items that they actually sell.
More importantly, is the 9.9% growth in Massbuild's sales because it shows that people are starting to build more, which you can only do when you have spare cash, or if you are feeling confident about the future. These figures are just confirming the reports of the green shoots being seen around the world, so good for them and good news for us.
The worrying figure from the group is that Masscash grew sales by less than inflation, this is probably due to them have a large amount of their sales in food to the lowest LSM groups. Food inflation has been high and inflation hurts the poor more than the rich, meaning that when prices go up, the poor just buy less, where for higher income groups they normally just absorb the increase.
As far as the company goes, they are well positioned to take advantage of the economic recovery and the move of more people into the middle class.
Home again, home again, jiggety-jog. The PS4 is released today. Not in South Africa, that only happens 13 December, that is Paul's birthday! Pencil (err... calendar event it) that one in. But the Apple iPhone 5s is released here today. Tencent had results a couple of days back. For now the markets locally have followed the US markets higher overnight. Good!
Sasha Naryshkine and Michael Treherne
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