To market, to market to buy a fat pig. Well, well. I have been reading stuff that suggested that the capital markets beat the threat of another cold war. Meaning that once you are inside of the system of capital markets, there is very little you can do to avoid the longer term impact. Although that said, and you have probably seen this widely documented of course, there have been many studies done on the Argentineans and how they lacked the ability to build momentum on what was once one of the most powerful economies on the planet 100 years ago. In fact the Economist has a recent story about that, it is worth a read I think: A century of decline. So you see that economic policy really does make an impact in the long term and ignore the warnings of capital markets at your risk.
The other point I heard made about the Russians, I think that I read it in Barron's, was that the market in Russia is owned by the State (30 percent) and rich people (30 percent) and no doubt the foreign selling had a marked impact on their net worth. Add to that the decline of the Rouble and in Dollar terms the richest in Russia had been decimated over a couple of days, equally ordinary people and their pension funds too. Now everybody knows that business and politics are joined at the hip (in some places conjoined twins), but more importantly for political continuity, Putin needed to save face quickly.
The parallels to civil unrest in the Middle East (and indeed next door in the Ukraine) was that economic instability quite often leads to political instability. And that is exactly what Putin (all leaders really) are trying to prevent of course, because that means a loss of power and influence. And in politics, losing is perhaps the worst thing ever, in football you may have a chance next week (poor Bafana, out sambaed last evening by Neymar, the 57 million Euro transfer man), in politics you possibly only get that one chance. A little like batting, so close but yet so far for the Proteas.
Last evening in New York markets hit the pause button, weaker US economic news has weighed a little, Janet Yellen was sworn in a while back (3 Feb) but I saw comparisons being made to Velma Dinkley from the Scooby Doo series fame, if you do not know what I am talking about, see here ->
Seriously though, how did Velma become the world's most powerful person? pic.twitter.com/iaSWIx5VT2
— Not Jim Cramer (@Not_Jim_Cramer) February 28, 2014
It is a little eerie (jinkies!!) but rather look like the smartest person in the gang than ... Shaggy. ADP data, the precursor to the Friday non farm payrolls number was weaker than anticipated, particularly in the services sector, which again was displeasing. Perhaps the weather (FT, subscription only, sorry -> US feels the chill of more weak jobs data), perhaps signs of a weaker US economy, a bit of a stumble in terms of the recovery. Still, I would not get too anxious, Buffett a few days ago said that his 80 odd companies, American of course, had seen steady growth if not runaway growth. Steady as you were.
On the local front however resource stocks sank, leading to the overall market being lower. Today seemingly better than yesterday. The Rand continues to firm now, perhaps in a sign that the emerging markets demise was too early to call. As we had said earlier in the year, the billion or so people added to the middle classes since the Asian contagion. In fact, closer to home, in an article tweeted by Paul -> The startling human progress that economists fail to see. We fail to see this progress possibly because it happens slowly, but at a very large scale. Mesofacts, our old pal Samuel Arbesman, a systems scientist wrote a piece that stuck with me, I cannot shake it: Warning: Your reality is out of date. Read it again, as old as it is, it is always relevant. I even went further and read his book.
Shorts
I am really struggling with this segment, because there is so much juicy news out there that I want (encourage) you to read. But of course we cannot get to everything all of the time, and it is my job to slim the news down into what is important. Relevance of course. Why cover European Banks when our clients own none, or barely any? Exactly. So I will in this shorts piece try and keep it relevant.
Sugar. Tastes wonderful in cakes and fizzy drinks, but here at Vestact with long teeth initially we cut our sugar in coffee intake to zero. Coffee with a little milk, tastes better and in fact is better for you. But check out this FT article, which is leading me believe that investments all the way up and down the chain that are associated with the sugar industry are going to struggle in years to come, as the World Health Organisation warns on sugar consumption: ‘Cut the sugar' WHO warns in new guidelines.
I must tell you though, a client the other day when we chatted about potential investments, we spoke of sectors to avoid. We agreed that tobacco was one such industry, even though (and he has a few more years on me) in his early twenties he was told to avoid tobacco stocks, and that was over 40 years ago. Humans, love change, but slow to adapt. We continue to prefer coffee beverages to fizzy drinks, i.e. sell Coke and Pepsi, buy Starbucks.
Food. Let us stay with food, because one thing more addictive than your vices (booze, gambling and smoking, and perhaps in light of lent being upon us, chocolate, coffee and the list goes on) is actually food. You can argue that you can/could go days without your vices (40 in fact), but you cannot go too long without food. Well, some Russian fellow, Agasi Vartanyan, went without food for fifty days in an attempt to get into the Guinness Book of records. He should have done his research earlier, because unfortunately the record was longer (Irish jailed Republicans in the twenties went on hunger strike for 94 days) and most importantly, you have to let Guinness actually know. It was an #epicfail all around.
But back to Food. I was quite interested to come across this piece -> Food in America is more affordable than ever before because the US farm sector keeps getting more and more productive. The interest was sparked from a conversation that I had with a client about genetically modified food companies (seeds) the other day in which I presented the flip side of the argument of higher yields (with the same amount of land) was that eventually nobody would fall under the poverty line anymore, and a global abundance of food would mean that we could worry about education and health and declare abject poverty finished.
Sadly for places like Zambia, Malawi, the DRC where vast portions of the population live below the poverty line, this means daily life is a grind. But I said to the client, what happens if companies like the ones we were chatting about (Monsanto, Syngenta, Du Pont) were able to eliminate poverty. Do we not have a moral obligation to feed everyone?
Lastly, on this conversation, a farmer (of 50 years plus experience) told me that this is just speeding up of a process that already exists. In the early days the seeds were chosen manually by picking off the quality kernels off the cob of corn. Yes. Does that not count as modification of sorts, or only when you use a chemical process that involves science? Sounds the same to me!
Home again, home again, jiggety-jog. The power was out here for two hours. Eskom says the coal is wet. Load shedding, that ugly word returns. I guess it heightens our reliance on coal as an energy source, we cannot help it that we have so much of it, and provided it remains relatively cheap, there should be enough until we have turned ourselves into gas and alternatives energy based economy. That is a long, long way away no doubt.
Sasha Naryshkine, Byron Lotter and Michael Treherne
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