To market, to market to buy a fat pig. What a day already. I think that all of us have a little Madiba in us, and by that I mean forgiveness. We should all use that a little bit more, no, a lot more. And give each of us the respect that we all deserve. In short, just be nicer and forgive. But also I think that we are and were exceptionally lucky to have such a leader, to have lived in the same time and space. My wife was lucky enough to have been a journalist inside of the front rows there when there was the inauguration of the first democratically elected president of South Africa.
In the first elections my vote was simple, I lived in Mozambique at the time and walked into the embassy and had two people in front of me. So I did not really feel the real vibe, the long queues, heck I wasn't even in the country. I did return after the holidays and come back to South Africa, a friend of mine who's dad owned a hotel which had a hall that was an election centre. That friend of mine kept an election banner with Mandela's face on it, I hope that he still has it! We hung it up in our dorm, it was massive and wrapped around the wall. So I guess for the rest of 1994 I woke up to that banner and the face of a free South Africa. But the greatest thing about the man is that everyone has a story like that. Everyone was touched and inspired by that one individual, share your stories and moments.
If you are in Cape Town and have never done the tour of Robben Island before, do it, it is possibly the most amazing trip you can take in South Africa, to relive and imagine history. But then again, I am a sucker for history. It is bizarre, you would think then that I would be drawn to technical analysis. I had read the book, The Long Walk to Freedom before visiting, try and do that if you are going to do the tour. The view looking back to Cape Town is spectacular, we were lucky to be there on one of those amazing Cape Town days. The quotes are beautiful and inspirational, keep reading them, one market commentator suggested he gave us two things, freedom and hope. There is a JSE 5 minute period of a pause where there will be no trades. Rather than pausing for a short time yourself, think about how you can change someones life for the better. Change one life, impact on many.
The best article that I have read this morning, and there are thousands, were by a good friend and equally visible South African: Tutu: We thank God for Madiba. Of course Vilakazi Street, here in Jozi, Soweto, is the only street in the world where two Nobel Peace prize laureates have lived. Not a very long street, but for those of you that have done the Soweto marathon, you will know how steep this street is.
The one quote, the one right at the top (in the intro) is a Mandela quote: "Money won't create success, the freedom to make it will." That is important and what it means is that creating an equal field means that everyone has an equal shot. "Education is the most powerful weapon which you can use to change the world." That is also a favourite, because in my opinion, the two go together. Education is key to success, empowering people and making sure that they use their skills to obtain financial freedom. And unfortunately that comes with great sacrifices too, personal and financial, I hope we are all committed to those!
Discovery news yesterday, someone, somewhere is buying shares from a strategic shareholder that is selling down their stake. At a discount to the prevailing market price. Standard Bank of course wouldn't say who, other than it was not Adrian Gore. It turns out that it was the refinancing of a BEE transaction, the strategic investor being the WDB. The WDB of course is the allocation of funds to women in rural areas of South Africa. As much as we like to think that we are all equal, it is true that rural woman in South Africa are amongst the most vulnerable in our society.
As per the WDB website, on their Discovery stake:
(A) 3.2% stake in this health and insurance business, alongside the Discovery Foundation (2.4%), a BEE staff Trust (0.9%), Vincent Maphai (0.2%) and Black Non-Exec's (0.1%). Through FirstRand Empowerment Trust ("FRET"), WDBIH has an additional 0.42% shareholding in this holding company was acquired by WDB post the FirstRand unbundling of its interest in Discovery Holdings.
It looks like a refinancing at a higher level. So there is no change in the shareholding, just refinancing by WDB as per the initial agreement, back in 2005. Keep calm and carry on.
Byron beats the streets. iChina.
Yesterday Wall Street Journal made an announcement about Apple which is probably the biggest Apple announcement since the iPhone 4 was released. If you know much about Apple, that was a huge announcement. The release titled Apple, China Mobile Sign Deal to Offer iPhone explains how the carrier could be selling iPhones as soon as 18th of December. China Mobile has a whopping 759 million subscribers. To put that into perspective, that is 3.8 times the size of MTN. Everything in China is just that much bigger, even bigger than Texas.
According to the WSJ Apple only has a 6% market share in China but estimates reckon that this deal will sell around 17 million iPhones. The company sold 33.8 million phones in the last quarter so that estimate will be very significant. I know there are concerns about the iPhone being too expensive for the Chinese market but I couldn't disagree more. The Apple brand is so strong I believe that the iPhone will become the ultimate aspirational product in China now that it is readily available. The cool factor of the iPhone will force people to eat only plain rice for a few months.
Let's also not forget that along with those 17 million extra phones sold, Apple will now have 17 million brand new entrants to the Apple platform. Music, Movies and Applications all make Apple a solid income. In fact if iTunes was separately listed it would be a very exciting company to invest in and would probably afford a higher multiple. I cannot explain how valuable it was having an iPhone on my travels. The apps helped me with translations, navigation and pictures while the music and reading features came in very handy on the long buses.
As always the market had already anticipated this deal with the stock up nearly 10% over the last two weeks. Trading at $567.90 we're still well off the highs of $700 reached in September last year but even if you bought at the very top I believe your decision will be justified over the next five years. If you picked up my rhetoric from what I said above about the Chinese consumer, I believe the market underestimates Apple's official entry into China. Because let's be honest, until you have cracked China Mobile you are just not quite there. They will sell more phones than expected and they will convert millions of people into Apple lovers. The knock on effects of that will be difficult to quantify. And that is not even considering the possibility of a new blockbuster product. Good things to come.
Michael's musings. Leaner, stronger US.
The US GDP grew by an annual rate of 3.6%, in the third quarter which is higher than the expected 2.8% growth, so true to the current times where good news is bad news, the US market closed down.
I won't go on a rant about QE and the market, but will give Sasha's short response to the topic, "If you are worried about what the Fed are going to do, how short is your investment timeline?"
Part of the increase came from durable goods sales being up 7.7%, which points to greater confidence in the long term prospects of the economy, because generally durable goods are more expensive, and you can't but them if you don't have the cash and if you are worried about the future.
After tax profits were 11.1% of GDP, compared to the average of 6.1%. Down turns are good for economies because it is during those times that companies get rid of all their excesses and become stronger, nimbler and more efficient. This builds a solid foundation that companies can then launch off of when things turn around. Interestingly corporate tax for the third quarter was down $4.8 billion dollars, compared to the previous quarter, even though this is a very small figure in the grand scheme of things, it still a decrease. In the office we had a chat, and the decrease in taxes we think is down to companies starting to expand, where the added expenses come through ahead of increased revenues.
Another interesting piece of information from the data release was that of the increase in profits, $ 23.6 billion of it came from domestic operations and $16.7 billion came from companies international operations. For me, it points to a global recovery, which I think will gain more momentum in 2014. So good news in the long run is good news.
Home again, home again, jiggety-jog. The one story is dominating the headlines today. Elevating our country on a global scale, because we managed to produce an amazing person. We are all part of that and should celebrate that. And to think that non farm payrolls are later today, it almost seems now like a non event.
Sasha Naryshkine, Byron Lotter and Michael Treherne
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