"Powell broke Beamon's record in 1991, in the same competition on the same day, Carl Lewis broke Beamon's record by 1 centimetre, because of the wind aid it did not count at the time. All that was short lived, Powell broke Lewis and Beamon with a small amount of wind, inside the allowable amount. Records are set and broken time and time again."
To market, to market to buy a fat pig. We went slip sliding away here Friday, a very good start turned into an ordinary afternoon. The most exciting event of the day was without a doubt the Alibaba IPO, something that took its sweet time, eventually opening at 92.70 Dollars a share. Remember that the insiders (around two thirds) and the company raised 21 plus billion Dollars at 68 Dollars a share. Two ways of viewing that, either the demand side was so incredibly strong that this was inevitable that the share price would pop like this, or the folks raising the money for the company (and seeing big shareholders exit at the same time) should have pushed the envelope. The jury is still out there as to what is the right way of doing it, I would be interested to hear your opinion on the matter.
For the record books (no such thing as books in this department), Alibaba exercised that option that we spoke about, or so "people familiar with the situation" have reportedly said, according to the FT: Alibaba boosts IPO size to world-record $25bn. I suppose in finance, as a result of inflation and ever increasing size and scale, records are eclipsed pretty quickly. You would not expect either a Bob Beamon or Mike Powell long jump type record. Powell broke Beamon's record in 1991, in the same competition on the same day, Carl Lewis broke Beamon's record by 1 centimetre, because of the wind aid it did not count at the time. All that was short lived, Powell broke Lewis and Beamon with a small amount of wind, inside the allowable amount. Records are set and broken time and time again.
Stocks in the US also started stronger and then finished weaker, selling off as the session progressed. The S&P 500 slipped from what would have been a closing high (of course if they could have made it all the way to the end of the session) and finished the session down less than a point, whilst the nerds of NASDAQ took most of the heat, down 0.3 percent. The Dow Jones Industrial Average managed to eke out a marginal gain, a rebounding oil price sent the oil majors in the Dow higher, Microsoft was on an absolute tear however, up 1.8 percent. Lean in a second here, the two best performing companies in the Dow Jones industrial average, year to date, are Microsoft (up 27.02 percent) and Intel (up 34.16 percent) and by some measures are not that expensive. They still fall into the category of "old tech".
A company that is somewhere in-between and far cheaper (on a fundamental basis) is Apple Incorporated, the company is old enough to have been around for a while, young enough with their new products to be fairly new in some regards. I saw and listened to some of the Charlie Rose interview with CEO Tim Cook last week, luckily the folks from the BusinessInsider stuck up a transcript of the interview: Tim Cook Gave His Most In-Depth Interview To Date — Here's What He Said
The name Marc Newson pops up there, an industrial designer that joined Apple recently to focus on the Apple Watch for the time being, perhaps there are other products in the pipeline that both Johnny Ive and Newson can work on. I checked out Newson's Wiki page, he is credited with designing some of the Smeg appliances and Alessi items, both beautiful (and expensive) ranges themselves. The official comment from Tim Cook is that the delay in the roll out of the watches was to give them (Apple) enough time to incorporate all the developers software alongside the Watch release. Back to the flagship product, it is interesting what Tim Cook says: "It's not the first iPhone. But it's the biggest advancement ever in iPhone history, and so we think that the upgrade cycle here and the number of people that will switch from other smartphones -- it will be enormous."
Stay long Apple, they have many detractors though. People will tell you that Android had this and that, which I am sure that they did, I am just as big an admirer of Google as I am Apple. The problem for all the hardware manufacturers that incorporate someone else's software is exactly that, Apple have the ability to own both and to test both all of the time on fewer devices, their strength is ironically that the system is closed, so to speak. In time the quality will shine through, the customers and consumers of these products will decide what they want. Blackberry (which Cook talks about as the pioneer of smartphones) have results at the end of the week, by which time we would know how many iPhones Apple sold over the weekend. That number should be today.
What is more interesting is that the company, Apple, have kept Steve Jobs' office exactly the way that he left it, the name is still on the door. Cook says that Jobs is in his heart and in the company DNA, plus he thinks about him each and every day. Cook was privileged enough to know him, privileged enough to work with Johnny Ive I guess too. My only comment about the company, Apple, post the death of Jobs is that quality and perfection attract a certain kind of person. Take Louis Vuitton for example, he struck it big when he made travel trunks for the wife of Napoleon III. As is often the case with these family owned businesses however, the son Georges Vuitton built a global empire at a trickier time, back in 1892 after the death of his father. Quality eventually becomes timeless, in the technology world that should and could happen a whole lot quicker.
Things that we are reading, that we think you should be too
Stay long Visa. That was the overwhelming conclusion of this Economist piece (you might have to sign up for your free set of articles) when I read the piece: Leaving dead presidents in peace. See the quote from Ken Rogoff (one of the co-authors of this time it is different): "Scrapping physical currency, he argues, would help governments to collect more tax, fight crime and develop better monetary policy." More astonishing was that "1m Euros worth of 500 Euros bills weighs just 2.2kg." Scrap cash, make it harder for criminals.
I loved this post, titled Retirement - A Luxury Good. Retirement is something that always seems like a long, long, way away, until it of course it is not. It is obviously US based, the same principles still apply. Another fabulous piece to read on the same subject is this WSJ article, titled Three Mistakes Investors Keep Making Again and Again, where the author found that investors fail to be rational in tough times. The mistakes are 1) Incorrectly predicting your future emotions, 2) Failing to realize how common volatility is and lastly Trying to forecast what stocks will do next. Quite right.
Home again, home again, jiggety-jog. Commodity prices are sliding again, the iron ore price hit another five year low this morning, around 81 Dollars and a bit. Stocks are a whole lot lower as a result.
Sasha Naryshkine, Byron Lotter and Michael Treherne
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