Money with a dash of Funny: October 2014

Friday 31 October 2014

Scares for the bears

"Markets are cooking. Absolutely cooking, the Japanese have "unexpectedly" announced more stimulus measures, Japanese inflation is taking hold and the Yen is weakening significantly. The only scares today are for the bears."

To market, to market to buy a fat pig. Resource stock prices swooned again, dragging the rest of the market along, that was not the case globally where indices are less reliant on big mining companies. Although as we pointed out yesterday, Anglo American had slipped quietly to 9th place on the overall ranking places here in the index. AngloGold Ashanti plunged yesterday, it was on the biggest losers list and in fact is trading at lows last seen, well, since forever. It is not the worst performer of the gold majors, no, Harmony Gold is down an incredible 74 percent in ten years. On an inflation adjusted basis it is a whole lot more, the losses that is.

And if you needed reminding, gold is supposed to hedge you against inflation. Ah well, try not focus on the business that you do not know, leave that for other segments of the market. The might have certainly fallen this year, as a collective the entire gold index was lower in December. Over three years the index has given up all the gains, rising costs, lower production, uncertain environment and of course remember that the ore bodies that are being mined are not as easy as yesteryear. Sigh, it is sad and troubling, that simply is the way that it goes, economies evolve, resources are mined, usually the easiest parts first.

This draw down in gold stocks and the broader mining sector saw our market end down 0.93 percent. Sigh. Over the seas and far away Visa took the Dow Jones and the broader market places, US third quarter GDP also beat expectations registering 3.5 percent growth for the third quarter. We wish. Consumer spending in particular is strong, more dollars in the pockets of ordinary Americans, expect the gasoline bills to continue to tumble (for a little bit) and as a consequence be a reserve taxation. At the end of the session the Dow had added over 1.3 percent, the broader market S&P 500 up nearly two thirds of a percent after all was said and done.

Is that real a story? Tim Cook announcing that he is proud to be gay? I guess that is still the world we live in, where gender, sexual and racial bias are a reality, and perhaps the sheltered reality is that I have experienced little or no bigotry in my life, directed in my direction. I think that it is great that he can say and do whatever he wants, this is after all 2014. Long live human rights and expressions of personal freedoms, they allow people to get on with their lives, living them in the fullest manner possible. For the full story, which was published in Bloomberg Businessweek, read here: Tim Cook Speaks Up.

The point about being able to do the job that he does without any difference to the way that he is treated is the story. Not everybody is so lucky, whether you are discriminated against by the colour of your skin, your gender, your religion/creed, discrimination both in your own country or workplace as a result of these factors shows how we still need to evolve. Remember that your view is not the right view, it is just a view. I am glad for one that we live in a place that has more choices for individuals, even though we have to concede that many biases (open sadly) still exist on many fronts.

So yes. It is a step in the right direction. And yes, it is news. And most of all, yes, there is nothing you can do about it, so perhaps ones own prejudices should warrant a look in the mirror and see where the real problem lies, in all of our own personal biases. As Cook says in his piece:

"Being gay has given me a deeper understanding of what it means to be in the minority and provided a window into the challenges that people in other minority groups deal with every day. It's made me more empathetic, which has led to a richer life. It's been tough and uncomfortable at times, but it has given me the confidence to be myself, to follow my own path, and to rise above adversity and bigotry. It's also given me the skin of a rhinoceros, which comes in handy when you're the CEO of Apple."

What Cook does not say is that his birthplace determined where he works today. All the way on the other coast of the US, in the state of Alabama, Tim Cook was born on the first of November (it is his 54th birthday tomorrow) in a city called Mobile. If you look at a map of Alabama and turn it upside down, stingily it looks like the older mobile phones too, not so -> Alabama Map. Long live choices!!!

Visa. It is something that gets you into a country. The company however has its roots in a town by the name of Fresno (California), anyone who has watched the DreamWorks Animation animated movie Monsters versus Aliens will recall the place. Yes, it used to be my youngest daughters favourite movie that one. The annual report of Visa last year : Our business traces its roots to 1958, when an innovation center run by Bank of America began to mail cards to its customers ... where it did business with about 45 percent of the families living there. At the same time, the bank met with local retailers and explained that many local families would soon have these cards. In a short space of time, a network was created that would benefit both parties.

Fast forward to the last quarter, the fourth quarter of their financial year to end September 2014, which also means that the yearly numbers hit the screens too. The company can process an astonishing 56 thousand transactions a second and operates in over 200 countries around the world. There is of course the real time network too, VisaNet, which has processed over 12 thousand transactions a second during the peak season. What is most impressive about their network is that it is very hard to replicate, once built and trusted, it is hard to use something else that is unknown. Besides, as the Apple Pay platform and payment system is rolled out further, it is Visa and Mastercard (and others) that handle the payments, the existing infrastructure works.

Straight into the numbers themselves for the full year. Adjusted full year earnings per share growth of 19 percent (9.07 Dollars per share) on net income of 5.7 billion Dollars (an increase of 15 percent) on total operating revenues of 12.7 billion Dollars. The margins are absolutely fabulous in this business, operating margins of 61 percent here. Yowsers, what most businesses would give for half of that!! Spend, well that was flat for the year, the only noticeable line was a 450 million Dollar deposit into a litigation escrow account, companies of this sort are prone to the prying eye of regulators looking to protect the "poor" consumer. The company also announced guidance that was ahead of the market consensus and then also announced that they would embark on another 5 billion Dollar repurchase, which is around three and a half percent of the share in issue, at current values.

In all their territories it was the US that experienced the strongest growth for the three months to end September, an extension of the strong US economy. What is interesting to note is that overall, the international segment of the Visa Debit programs is equal to that of the US, the US blows the international segment away in Visa Credit program growth.

Visa will continue to attract more and more swipes from many more customers across the world. There are whole programs to eliminate the use of cash, it is easy to see why, cash has no paper trail whatsoever. Plus, as a result of the anonymity of cash (making it more likely to be stolen) the holding costs are higher for the individuals involved. In other words, banks will charge you more and more for cash. I know for retailers this is a double edged sword, more cash has a holding cost, more electronic swipes equal more fees for them to pay. Governments and other institutions want a trail, regulation has to be balanced.

A ten percent move northwards in the share price last evening was nothing short of epic. That must have been scary for the geared shorts, yowsers. Whilst the upside for the full year looks rather muted, there is no doubting the quality of the company, a must own in any portfolio.

Byron beats the streets in search of the perfect cup of Joe

Last night we received fourth quarter and full year results from Starbucks. Lets analyse the full year numbers. Revenues increased 11% for the year to end at $16.4bn. Global comparable sales increased 6%. This equated to operating income of $3.1bn and an operating margin of 18.7%. Earnings per share came in at $2.71. The company opened 1599 store in the year.

Sounds like a good set of figures. Geographically the company is still very reliant on the Americas with 73% of sales. But they have strong aspirations to grow elsewhere which includes buying the remaining 60.5% stake in Starbucks Japan for nearly $1bn.

CEO Howard Schultz is certainly not standing still. They are leaders in mobile payments, processing nearly 7 million transactions a week through the Starbucks application. On top of that Starbucks want to implement both food and a delivery option through the app. Imagine being able to order your lunch and coffee via a couple of swipes on your phone only to arrive at your desk 15 minutes later.

Another innovation targets coffee connoisseurs. Starbucks are selling upscale bags of coffee in super markets which are segmented by origin. Apparently this is a big thing amongst the coffee experts, much like wine. Included in this genre are plans to open 100 speciality stores selling high end coffee. The hipsters will lap this up!

The share price has been under strain. Year to date the share price is down a few percent against the S&P which is up 8%. Brazil, the largest coffee producer in the world has experienced bad weather and coffee prices have nearly doubled since the end of 2013. Starbucks have had to push some of this onto the consumer. This is not a train smash though. Firstly Starbucks is a premium product and their clientele are willing to pay up. Secondly according to this WSJ article titled Starbucks's Cup is Half Full, Raw material prices only make up 15% of the price of a cup of coffee. Great margin business.

The stock looks like it will open at around $74.72, down 3.5% after these numbers came out. Guidance for next year was slightly less than expected, Earnings of $3.42-$3.52 for 2015 is what management thinks they will make. That includes the acquisition of the Japanese business. On a forward basis the stock trades at 21 times next years earnings. It's not cheap but this is a business growing fast.

We think this period of weakness creates a good buying opportunity. Coffee is an exciting business. A socially acceptable stimulant that according to recent studies is actually good for you. Most importantly the Starbucks experience is great. I wish they would come to South Africa in full force. I suspect it will come soon. Buy.

Things that we are reading, that we think you should be too

How out of touch with things the average person is, is quite scary - Everything you think you know about the news is probably wrong

Expectations form a big part in economic growth, as more people feel more positive about the future the more they spend and the better everyone does - Fundamental Financial Worries Exist for Many

Going opposite to everyone else has shown to give good results but buying momentum stocks has shown to do well as well, the key is to know your game plan and stick to it. In our case it is buying the quality and trusting the product and management to weather whatever storm comes their way - THE CONTRARIAN (SOCIOPATHIC?) MINDSET

US futures are set to open at an all time high, thanks to Japanese stimulus measures. So much for all the anxieties at the beginning of the month. As it is Halloween, we should point out a Business Insider article, the title says it all: Terrible Things Happen All Of The Time And The Stock Market Keeps Going Up.

Fire rates have declined dramatically in the USA, the question is, why? In this post titled So what do firefighters actually do?, you can see that safe cars and houses have meant fewer fires. Progress.

Home again, home again, jiggety-jog. Markets are cooking. Absolutely cooking, the Japanese have "unexpectedly" announced more stimulus measures, Japanese inflation is taking hold and the Yen is weakening significantly. The only scares today are for the bears. Scares for the bears, I like that.

Sasha Naryshkine, Byron Lotter and Michael Treherne

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Thursday 30 October 2014

Goodbye Elizabeth, your ship has come in

"They will do whatever it is that they need to do to stick to their mandate, worrying about it or stressing about it is a waste of effort. Effort that could be spent analysing companies, the decisions that really matter for investors. Rates go up and down, it seems Mr. Market is looking for the unknown on the timing of the first rate hike"

To market, to market to buy a fat pig. The ship has finally sailed. The end of one of the biggest experiments in monetary policy ever. This current bond buying program (Mortgage Backed Securities and Treasury Securities), referred to as QE3, Quantitative Easing (third time), had the curtain come down. Check it out, the second part: Statement Regarding Purchases of Treasury Securities and Agency Mortgage-Backed Securities. The program ends Friday, Halloween. For some, the size and scale of the Fed program was scarier than Freddy Krueger, Jason, Dracula, Frankenstein, for me it was always Pennywise from the movie adapted to the Stephen King IT. Yes, if something had to be scary, it was that darn clown Pennywise.

You can read the very short Fed statement from their website: Press Release. You can try and decipher the tone, the new words, the extended words and so on. "The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run." Only one person on the committee dissenting, Narayana Kocherlakota. Kocherlakota is amazing, the fellow went to Princeton at the age of 15, he had earned a Ph. D in Economics by the time he was 24.

That is the point I often make about the Fed, these people are nothing short of the finest minds and the best people for the job. They will do whatever it is that they need to do to stick to their mandate, worrying about it or stressing about it is a waste of effort. Effort that could be spent analysing companies, the decisions that really matter for investors. Rates go up and down, it seems Mr. Market is looking for the unknown on the timing of the first rate hike, the other question unanswered is whether or not we are in a lower high on the ceiling of interest rates. I mean that in the same way that our landlocked neighbour, Lesotho, has the highest lowest point in the world. The FOMC members will judge on the data as it appears to them. Rates could be low for a while still, that part we know. Let's watch it, OK?

Last part, the Fed is not obligated in any way to unwind their balance sheet (nearly 4.5 trillion Dollars) in a hurry. They could of course hold many of the assets to maturity, both the mortgage backed securities and treasuries have the current "maturity distribution":

End of story and a chapter for me. I for one did not see "easy money" falling from the sky, if anything banking regulations tightened and loans were less forthcoming, there was no explosion in money supply to individuals and the business sector. Hey, what do I know though, right?

Locally the market had enjoyed a cracking day, industrials driving the broader market, Naspers and Aspen both up strongly. It will be some time yet until Anglo American is hauled in by the chasing pack and falls out of the top ten, perhaps not for a while.

At a Rand market cap of 330 billion, and with 10th and next placed (how the mighty have fallen) FirstRand at 257 billion Rand, something needs to change quickly in the pack below. You have Standard Bank at 217 billion Rand market cap (11th), Vodacom at 193 billion (12th) and Aspen Pharma at 171 billion (13th) bigger than Old Mutual, 14th place is worth 160 billion in Rand terms. AngloPlat and Kumba Iron Ore have fallen outside of the upper echelons, AngloPlat now in 20th place.

It gets uglier further down the table, Mr. Price has a bigger market valuation than Impala, 55.4 billion Rand versus 52 billion, with Impala now in 35th place and around one tenth of the size of Naspers. Yowsers. Exxaro is about to slip out of the Top 40, AngloGold Ashanti has already, smaller than Brait or Life Healthcare by a whisker. Coronation and Capitec are bigger than Gold Fields, who nearly falls out of the top 50 and has a market cap of 31 billion Rand. How the mighty have fallen.

A company that has been making good progress in the value stakes, with rising earnings from their older and newer businesses is Mediclinic, who released a trading statement during the course of the morning yesterday. Basic EPS is expected to be between 12 to 22 percent higher, basic headline earnings per share (HEPS) is expected to be 4 to 14 percent higher for the interim period to end 30 September 2014.

A more detailed idea of once off items are expected to be fleshed out (no pun intended) at the results themselves, which will be released on the 6th of November, which is next Thursday. Excluding certain once offs, basic normalised HEPS is expected to increase between 17 to 27 percent. The ranges are wide and the different reporting methods are confusing at face value, again, all we have to do is to wait for a single week in order to see what progress the company is making outside of the various once off items.

More then!

Things that we are reading, that we think you should be too

A look at how gold has fallen from grace for the "man on the street" investor and how stocks are more popular again - GLD's Fall From Grace. A point made in the blog post is about mean reversion, the only thing that I would add to his explanation is that mean reversion happens at an aggregate level and not on the level of individual stocks - some companies are just above average and will continue to do better.

The World Bank is saying quality and not quantity - World Bank urges China to cut economic growth target to seven percent in 2015, focus on reforms. A 7% growth rate is still well above the world average of 3.8%!

The debate about whether QE worked or not, still has many years ahead before it is resolved - The sun is setting on "quantitative easing" in the US: Did it work?. There is still debate about what got America out of The Great Depression and what could have been done differently. What is clear though is that you would rather be in America's shoes and not the European's - Europe's Glacial Growth Lowers Prospects for Job Seekers

A lower oil price may not be great for Sasol but it is good for almost everyone else, a lower oil price means that operating costs are lower for companies and consumers will have more money to spend - OPEC's Badri sees little output change in 2015, says don't panic on oil drop

I hardly noticed that the Post Office was on strike, for some companies that rely on post to conduct everyday operations it was a different storey. The good out of this though is that it has pushed companies to become more electronic. Update on South African Post Office Operations

Home again, home again, jiggety-jog. Markets are down today, taking a breath after a couple of strong days? Resources stocks are the worst hit, with Kumba down 4%. The Rand still below the R11 mark to the US Dollar but did weaken after the FOMC said that rates may rise sooner than the market expects. Higher interest rates mean more money will flow into the US resulting in a stronger dollar. Talking interest rates, Ben Bernanke said he doesn't expect interest rates to normalise in his life time. So lower interest rates for longer.

Sasha Naryshkine, Byron Lotter and Michael Treherne

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Wednesday 29 October 2014

Facespend

"They may be investing heavily in the short term in their business (both new people and the existing platforms), we like that in the long run. The business will in the coming years have four core platforms (Facebook News Feed, Facebook Search, WhatsApp and Instagram) with a billion people across both platforms, there is no other business of that sort."

To market, to market to buy a fat pig. Another good day for equities markets, locally and beyond, the Dow Jones industrial average topped 17 thousand again for the first time since the beginning of the month of October, the broader market S&P 500 is closer to levels of late September. The period of great angst, Ebola, Hong Kong protests (we are now at 30 days I think), and a whole host of other reasons, perhaps the most important being rates going higher seems to have passed, at least for now.

The angst can always return quickly, I have been doing this long enough to know that almost anything can put the cat amongst the pigeons. Over three months the S&P 500 is flat. Over a year the same index is up 12.8 percent. It obviously always matters what rates are going to do, that sets the tone and the economic outlook, company earnings will always set the absolute levels of the market however and what the broader market participants are willing to pay at that moment in time.

We can presume that a 12 month forward multiple is acceptable, what people are willing to pay today for the earnings that will be delivered in 12 months time, that is not too hard to presume reasonable for most people. So what exactly is that multiple? The go to person for me for this sort of research is a fellow by the name of Ed Yardeni, you can find his research on the inter-webs, where he supplies a week to week earnings estimate of the S&P 500 forward.

The last 12 months estimate for earnings as a collective as at 23 October was 128.73 Dollars, revisions downwards from the prior week. For the 2015 full year the number is 131.03 Dollars, that means at current levels on the S&P 500 (1985 close last evening), the market trades on a 12 month forward multiple of 15.4 times, for 2015 it is closer to 15.15 times. Again, that is not expensive by historic standards, I would definitely like to believe as we embrace the internet age that we will be a lot more efficient than before. I cannot imagine that anyone can think that 1984 equals 2014 from a productivity point of view, from the collective wealth of consumers globally and of course the sheer numbers and openness of global trade.

The very best time to have bought stocks on a contrarian view using the current earnings S&P 500 ratio would have been May of 2009, when the valuation was a screaming 123.73 (source -> S&P 500 PE Ratio), the lowest point in the existence of the index was December 1917, when at 5.31 times I can imagine that "things" were looking pretty awful for the US, even though the war to end all wars would have been finished inside of a year. Of course at the time the Americans did not know that, nobody knew that. I do not like to use history to determine what is going to happen next, that suggests that we do not evolve. We all know that is not true, perhaps by 2025 there really will be a community on Mars, the Mars One project. Wiki suggests that 7 functioning aircraft are currently at Mars, two of them on Mars.

The truth is that we all want returns today/next week/next month/next year to drive the value of the equities that we own to better and better levels. If you are constantly adding to a portfolio over a period of years you would want equity prices to go backwards and earnings to go forwards, the two rarely happen at the same time for too long, the market rerates higher if earnings are trending higher, and continues lower if earnings trend in that direction. I have seen the reluctance of people to add to their existing holdings if equities perform poorly, emotions get in the way of investing common sense. Stick to your investment plan. Always.

Did you see Mark Zuckerberg in an interview at Beijing's Tsinghua University? If not, here it is, a condensed first part of the interview: Watch Mark Zuckerberg Speak Mandarin. I love the crowd reaction, I have read that his mandarin is not great, he seems to be understood and it is far better than most of the languages that I can speak! As he points out, his wife and her family are Chinese, so he needed to communicate with all of them, hence the need to learn the language.

This is not a piece on the Zuck however, he is seemingly a private person in that part of his life, hence the ability to shock people with his skills. Whilst he is a private person, in the information segment about Facebook, the founder and CEO's Facebook page (link above to the Zuck) can be used as means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD. That is right, on his Facebook page he has 30.5 million followers. His recent activity includes the aforementioned university Q&A in mandarin Chinese, a meeting with the Japanese PM, Shinzo Abe and visiting one of Samsung's manufacturing facilities in South Korea, he has certainly been busy!

When the Zuck founded/conceptualised/built the company in his dorm room over a decade ago, who would have thought that there would be 1.35 billion monthly active users connected across the planet, with 864 million active daily users. That last number represents a 19 percent increase year over year, as the base grows the user growth has to start moderating. In mobile the growth rates from a user perspective are pretty impressive, there are currently 1.12 billion active monthly users, that is up 29 percent year over year, indicating that many people who have a Facebook account interact more and more on the move.

The company reported post the market last evening, revenues registered 3.2 billion Dollars for the quarter which was a fairly remarkable 59 percent increase year over year, most of that advertising revenue (2.96 billion Dollars). Costs and expenses soared 41 percent from the comparable quarter, non-GAAP net income grew 73 percent to more than 1 billion, 1.15 billion Dollars. On an adjusted non GAAP basis, EPS registered a beat of 43 cents for the quarter. Of course the company does not pay a dividend for the time being, more on cash utilisation in a bit.

All the metrics looked good, everything looks like a beat to me, so why is the share price trading down 8.2 percent? A lot of what was revealed was on the conference call, you can get the whole interview from SeekingAlpha (you will have to sign up for free): Mark Zuckerberg on Q3 2014 Results - Earnings Call Transcript. The falling short of the guidance for the next quarter is possibly one of the two reasons for the fall in the share price.

The plan to invest heavily in some of the businesses that the company has acquired, with the goal, as the Zuck says on the conference call, to "make Facebook a cross platform that allows developers to build, grow and monetize their apps across every major mobile platform" over the next few years. The longer term goal, the ten year goal is to continue to connect the world. Internet.org, providing a platform to help with the "things" that developed world people take for granted, sharing of health services and improving education leading to better employment prospects.

Facebook costs are going to rise significantly next year as they invest heavily in Oculus and WhatsApp (expected to get to 1 billion users in the coming years), as well as the existing core business. More investing equals lower profitability in the short term, we previewed Amazon.com of course just the other day, they continue to invest heavily in their business. Something interesting on the conference call that the Zuck said: "Some of the things like Search and some of these other products, this may sound a little ridiculous to say, but for us, products don't really get that interesting to turn into businesses until they have about a 1 billion people using them." News feed is there, but nothing else yet, obviously WhatsApp, Search and of course Instagram.

E-Marketer suggests that Facebook continues to capture the mobile market ad share (remember when the anxiety was that they couldn't monetize mobile, that is now two thirds of revenue!!!!), the age and gender targeting of the Facebook adverts is much more accurate and pointed than their peers. More people will use the platform. Think for a second about the average revenue per month of the average monthly users (1.12 billion). 3.2 billion Dollars for 91 days, roughly 1.067 billion Dollars a month. ARPU's are a mere 95 US cents. There is definitely a tipping point at some level here, more aggressive monetisation of the platform.

Do not think of their platforms as somehow a way that people sink themselves into an information world, escaping from the real world. It is the real world, you can just see it instantaneously from wherever you are. I read in the earnings call that the average Instagram user spends 21 minutes a day on the platform, looking at pictures is addictive. That is roughly the same as your favourite sitcom, the time, of course the Instagram experience is completely personalised! Think of the platforms as yet another form of communication, I would not know what my old school mates were up to if it was not for Facebook and WhatsApp.

We maintain our long stance on Facebook, they may be investing heavily in the short term in their business (both new people and the existing platforms), we like that in the long run. The business will in the coming years have four core platforms (Facebook News Feed, Facebook Search, WhatsApp and Instagram) with a billion people across both platforms, there is no other business of that sort. The eyeballs and users are there, the talent at the company will look to monetize the user base more and more over time. We maintain our buy recommendation.

Things that we are reading, that we think you should be too

An interesting look at how society has their priorities skewed when it comes to spending money - What Happens If We Make Wealth Transparent?

The internet is changing things by allowing us to find what we are looking for or by being on sites like Facebook that show you what they think you are looking for - How Facebook Is Changing the Way Its Users Consume Journalism. The article highlights the power that the algorithms have over the content that we see and probably have some influence on the way we see the world.

Home again, home again, jiggety-jog. Today the Federal Reserve will deliver their conclusion to their current meeting, one of 8 scheduled meetings a year, with one unscheduled meeting. Roughly every 45 days, this becomes like a fair of some sort, interpreting Fedspeak and how they will tweak their outlook and the like. I read the statements, I do not try and interpret them, the people at the Fed are best equipped to deal with their jobs, not the people that sit in the armchairs and shout what they should be doing.

Sasha Naryshkine, Byron Lotter and Michael Treherne

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Tuesday 14 October 2014

You want economic freedom?

"Ironically, the more economic freedoms and choices you have, the less the state interferes with the economy and the more liberal they are, the richer everyone in society gets, including the bottom ten percent. Plus life expectancy is raised when you have more economic freedoms."

To market, to market to buy a fat pig. Resource stocks flew, the underlying commodity prices recovering from a steep sell off. The commodities index, iShares S&P GSCI, which tells a story recently, not as "bad" as it has been in the past however:

From a period of really quiet and relative stability, if there is such a thing in commodities markets, the index has seen a tumultuous time of it, see on the far right end of the graph from Google Finance. I remember reading somewhere that before this period of a nearly 20 percent drop in the oil price, the market for black gold had been the most stable since the 1970's. The reference to black gold of course is the Asterix sojourns in the deserts of the middle east. Wiki suggests that the inspiration for the book, Asterix and the Black Gold (the 2nd that Albert Uderzo had written alone, after the death of his mate Rene Goscinny) was part James Bond, part biblical tales.

Bond aside, back to the market, the equities market. Eddy Elfenbein said that this was the worst three day performance for the equities markets since 2011, that takes us back to a time when Greece was the major topic, remember when PIMCO and the like were convinced that it was only a matter of time for the Greeks to fall out of the Eurozone. It is 2014 and there is no indication of that. The Europeans might still be "squabbling" about the best outcomes for the their collective economies are, they are however "getting there" in true European bureaucratic style. They will get there. Fortunately for the zone as a whole, there are many more opportunities for living as a collective than there are for being outside of the collective. Fact.

The scoreboard looked rather awful at the end of the day, it was looking good mid afternoon with a modest recovery, a flurry of ~~wickets~~ sellers in the afternoon session saw the bears on top again! What does that line even mean, can I retract that?! No. At the end of the session the S&P 500 had given up 1.65 percent to 1874! Year to date? Marginal gains of the lowest order. I field many calls of anxious and not so anxious clients, I always assure them that this is how it works in equity markets, they are volatile. It still is the best mechanism for saving, being direct in the quality companies that happen to have lower prices. Same companies, lower prices.

No! What happened at Luxottica? Another management disagreement with the founder and major shareholder no doubt, Leonardo Del Vecchio, taking the co-CEO role from Enrico Cavatorta, who quit. Another company director, Roger Abravanel also quit. The board is revolting against Del Vecchio. Del Vecchio has not filled some key positions, some independent board members are threatening to quit unless the roles of co-CEO's are filled. For the time being, the other co-CEO who was set to be beside Enrico Cavatorta in the sharing role, Massimo Vian, he has been suspended by the board. There seems to be a corporate governance breakdown, that is what the two independent directors are alluding to. Perhaps the founder and main shareholder, Leonardo Del Vecchio, who owns more than 60 percent of the company is flexing his muscles a little too much.

The people buying sunglasses probably have little idea who owns the business and how it is run, the fact that the major shareholder (yes, the founder too) is possibly proving to be more than a little prickly. The statement, which deals with the I am in charge until further notice, when a suitable candidate is found, is followed by a sales update and profit guidance for the third quarter, which was inline with the markets expectations:

The Board acknowledged the Group performance of the third quarter, which shows a strong free cash flow generation, sales growth in line with the first half of the year at constant exchange rates and an expected increase in net income of approximately 10%.

I like the business a lot, it falls into a category of both healthcare and consumers globally trading up to fashionable and affordable luxury in eyewear. Perhaps the most noticeable of all luxury items, they sit squarely on your head. Protection of the eyes, it does a job too. I think that whilst the corporate governance issues are sorting themselves out, whilst the board is looking for someone to run the business, the company continues to "do well". Clearly shareholder influences will impact on the business, too much interference will see the company lose out to their competition. This is a negative event that has sent the stock plunging 9 percent, it is however an opportunity for us.

We have the Economic Freedom Fighters in South Africa, who certainly stir the pot and can been seen as rabble rousers, they are (as per their declaration) inspired by the Cuban July 26 Movement. Really, you can read for yourself, it must be said that the grammar would not have gotten past Byron here -> DECLARATION OF THE ECONOMIC FREEDOM FIGHTERS NATIONAL ASSEMBLY ON WHAT IS TO BE DONE-26 - 27 JULY 2013:

"Cuba remains an inspiration because with a very low GDP per capita income. Cuba is amongst the best countries in terms of healthcare, education, low infant mortality rates, life expectancy and other vital social services. This is a sign that the revolution was about the emancipation of the people, not the enrichment of few individuals who callously and rapaciously redirect State resources for self-enrichment."

It is not a surprise to me that inside of the Economic Freedom of the World: 2014 Annual Report the countries with the worst economic policies, price controls, disregard for personal and property rights (seizing of private assets), complete price controls, limited access to proper credit markets and lack of trade freedoms find themselves at the bottom of the list. Sound familiar? Check out the bottom of the list, from Chapter one, a snapshot of exhibit 1.2:

The biggest friends of the Venezuelans? The Cubans!!! Who do not even appear on the list, as a result of no work being able to take place in that country. The "independent" research is provided in each country by an organisation or body, in the case of Venezuela it is a crowd by the name of CEDICE - The Center for the Dissemination of Economic Knowledge. Locally, as a measure of these bodies, the Free Market Foundation provides the information. Some of course would argue that the work the FMF does is biased and sits squarely with business.

For comparisons sake, see who is at the top of this list:

Hong Kong comes out tops. You might argue that there are limited political freedoms, comparatively speaking, you'd be right. I read with interest via Bill Bishop's Sinocism email -> Cultural reflection can improve modern governance: Xi, that Chinese President Xi Jinping said via the state media platform: "the socialist path with Chinese characteristics is determined by cultural and historical factors." Huh?

I am getting to a point here, and the conclusion will be swift. I was first brought to this economic freedoms via Mark J Perry, who contributes for the South African version of the FMF, who captured two important graphs, the same ones I will reproduce here and add another that I thought was of interest:

Ironically, the more economic freedoms and choices you have, the less the state interferes with the economy and the more liberal they are, the richer everyone in society gets, including the bottom ten percent. Plus life expectancy is raised when you have more economic freedoms.

The conclusion is simple, for me at least. Whilst the noble idea of creating a society that is equal would mean socialist utopia, the truth is that we are individuals with different circumstances, personalities, talents and skills. Buffett is right, the winners of the ovarian lottery (those born into better households) have a far better chance of making it further in life, it matters to whom you are born, it does not mean that is limiting.

It was of course the beloved Nelson Mandela who said: "Education is the most powerful weapon which you can use to change the world." To achieve economic freedoms you need more accountability for all, less state interference and perhaps the only thing that the EFF and I agree on, a quality education of the highest order, although if the private sector does a better job, then by all means, outsource the entire department of education. Now that would open up a can of worms!

If the EFF really wanted economic freedoms, luxury goods for all and a higher quality of living, they would provide the platform for economic freedoms and not ideas that time and time again have failed. Be more Mauritius and less Venezuela. And in case you had any doubt with regards to economic policies and the will of ordinary people, ask yourself, which direction do the boats with illegal immigrants go, from Cuba to the USA, or the USA to Cuba?

I have been dying to stick this piece in to my message, I just did not have the context, now I think I do with the above economic freedoms and Venezuela being bottom of the list. I asked the client in question, who visited Venezuela, if I could use his piece, anonymously of course. I have deleted extracts of a personal nature, changed the names of the people involved. You can quite quickly draw your own conclusions to the well written piece.

I write to you from the open air pub/dining area of the Posada Los Pinos, Santa Elena de Uairen, South Eastern Venezuela. I doubt you have had many, if any, correspondence from this remote part of the world!

My immediate view is of an untidy courtyard ringed with poorly maintained buildings, the customary re-inforcing steel sticking out of the planned 2nd floor. Venezuelan children play in a small pool and the foliage in the yard is tropical. The ambient is about 28 degrees and humid. Bright coloured paint with Amazonian themes adorn the 5 modest rooms on the one side. The beer comes in a 220ml green bottle and is beautifully cold. The official cost of a beer is ZAR80 [50 Bolivar], but we pay ZAR8 [yes, eight]. Venezuela's economy has essentially collapsed and the open black market on the streets is paying 70 Bolivars for 1 US$ - a Zimbabwe story if ever I have seen one!

When booking the flights it became apparent that we were flying to a remote spot and more so, to an unpopular country - no direct flights! So it was that we flew SAA to Sao Paulo, Sao Paulo to Manaus in the Amazon, Manaus to Boa Vista in Northern Brazil and then by private taxi for 3 hours to Santa Elena de Uairen - a 30 hour journey.

Apart from the vague knowledge that Malema thinks Chavez did his country proud, I had no idea of what to expect in Venezuela. My son indicated in his brief correspondence that south eastern Venezuela was an interesting place in that it had splendid scenery, was home to the highest waterfall in the world [980 odd meters with a free fall of 800 meters] - Angel Falls. He was not exaggerating! The Gran Sabana area is a remarkable place. It has mountains [Tepuy] at a height of about 2600 meters and the surrounding flat country [500 meters] is a haven of dense jungle, grass plains and magnificent black water rivers. Access to the central area is by light aircraft only - vehicles in the main resort are airlifted in and out.

Angel Falls drains the biggest tepuy [we flew across in a Cessna in about 15 minutes - how big is that?] and the Falls thus appear to come out of the sky. It is not a river dropping altitude like most falls - it is a flat mountain top with water pouring off the edges. Many of the falls come out of the cliffs midway down - basically underground aqueducts discharging into the big valleys below. It rains like an tropical place - frequently and suddenly, accompanied by thunder and lightning. Yes, we have now been to Angel Falls.

A 6 hour [return] "boat" ride into a remote valley and thereafter a 4 hour hike [return] to the base of the Falls. Incredible experience. The boat is a 12 meter canoe made by the locals out of local timber, powered by a 50hp Yamaha! The boat ride is understated! I have spent a lot of time on rivers and nothing rivals the skill of the helmsman and ability of these craft to climb rapids, negotiate tight bends between massive boulders and stay upright. Yes, we got wet!

Many of the tourists were local Venezuelans and we thus made new friends quickly. I would guess the V tourist is more affluent and I sensed a clear despondency about the state of their country. Words like chaos; trapped; queues; corruption; currency; work; education and the like are common! My brief readings indicate that V is a country that enjoyed relative stability from about 1960 to 1980 and then started to decline steadily until Chavez came to power in the late 90's, and finished the job properly. It appears that his is a government that defeated both business and labour in its quest to control! Who then was his support? The uneducated and the rural it appears. Ring any bells?

Santa Elena de Uairen was a shock. It is remote but the main town of the region and the border town to Brazil. It is run down and poor, not dissimilar to some of the towns on the main road north of Maputo on Mozambique. Chinese products abound. Cars out of the 80's, no road signs, unmaintained buildings, poor hygiene, poorly stocked shelves. A distinguishing feature was the well equipped 4x4's [mostly Landcruiser] that were enroute to the Gran Sabana etc. The V's are keen campers and adventurers if they can afford it. With free fuel, V8's abound. Despite all this, the people are friendly and we felt safe.

Things that we are reading, that we think you should be too

Given that the market has had a tough time as of late - What Are the Odds We're Heading For Another Crash?. "Were it not for the occasional correction or bear market stocks wouldn't offer a risk premium over bonds and cash."

Lower oil prices have come about due to the fracking revolution in the US but Fracking is an expensive way to get oil out of the ground - Lower oil prices. How low will the oil price drop before some Fracking operations are not profitable?

A light hearted piece comparing the stock market to dating - The Boardroom and the Bedroom

Then lastly, the Nobel prize for economics was handed out yesterday to someone you probably have never heard of - The 2014 Nobel Laureate in economics is Jean Tirole. The article gives a background of the man and his work.

Home again, home again, jiggety-jog. Asian markets are looking more than a little average, the Nikkei 225 is below 15 thousand for the first time in over two months, US futures are presenting another modestly higher opening. Earnings today are expected from Citigroup, from JNJ (very NB), JP Morgan and Wells Fargo, those are the big ones. Those will do a lot to calm the nerves of the nervous, some chamomile tea perhaps.

Sasha Naryshkine, Byron Lotter and Michael Treherne

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Monday 13 October 2014

Platinum looking dull

"The platinum index was at these levels in October of 2005. You are getting the same Rand prices, less on an inflation adjusted basis. In the last inflation read the August one, the CPI index number was 111.0, with December 2012 rebased to 100. October 2005 was at 64.2, you get the idea, you are getting half price, if you are willing to take the risks associated with South African platinum miners. I am afraid for us this is still case of steer clear of the industry, Bill Miller was on to a thing or two there in his avoidance of all things in the commodity cycle. At times you look silly with this approach, at other times you look clever, in the end it is all about investment styles."

To market, to market to buy a fat pig. Another day of selling across the globe, the S&P 500 is around 113 points off the all time highs, not really that bad in percentage terms and similar to the sell off earlier in the year. This time I guess anxieties over global growth, so it is pleasing that companies are starting to report in earnest this week. We have many of the banking companies, JP Morgan, Bank of America, Wells Fargo as well as General Electric reporting numbers at the back end of the week, these are all Q3 numbers, it is fairly sobering to think that there are only 72 days until Christmas, some sort of milestone that is closely guarded in the Western World.

So far this year for equity markets the recent slump has meant that the Dow Jones Industrial average is back in the red, down 0.2 percent for the year. The S&P 500 is up 3.13 percent, the nerds of NASDAQ up 2.39 percent year to date. Where is that Santa Claus rally? Our local market is showing a mere 1.81 percent gain, less than two percent. Platinum stocks have been the hardest hit of the majors, having lost over one quarter of their collective value this year, that followed three years of losses in a row, in their share prices that is.

Amplats stock is down 48.4 percent over five years (roughly ten percent more shares in issue), the Impala share price is down 50.8 over five years, Lonmin is down 70.26 percent over that time. Shares in issue at Lonmin went from 193 million in 2009 to 532 million as of the last year end. Aquarius Platinum is down an astonishing 89.68 percent, the share price that is of course. And the company embarked on a huge deep discounted rights issue earlier this year, adding nearly one billion new shares to take the total number of shares to 1.464 billion. Yowsers.

The reason why I emphasise the share price is that the real story lies in the escalating costs and falling production, how you arrest that now is going to take monumental powers. I often curse that Citigroup report from 2010 in which the research arm of the bank suggested that we, South Africa, were the richest country in the world ex energy. Ex energy of course means no oil, coal, uranium, any energy of any sort. And what was it made up of? 91 percent PGM's, 6 percent gold, 2 percent nickel and 1 percent iron ore. Years of production back then, 184 years, I guess that is marginally less now.

The point I always make is simple, what happens if a large component of usage, auto-catalytic convertors are redundant. How would that happen? If Tesla wins, that is how. Even if Tesla doesn't "win" the amount of platinum being used is less and less, more importantly, there is more stock above ground in older autocats than ever before. I have no idea of knowing what the eventual outcome is for the platinum miners as a whole, it looks more and more precarious with lower metal prices. The weaker platinum price in the face of a more constrained supply environment certainly tells some story and not necessarily a pretty one.

The platinum index was at these levels in October of 2005. You are getting the same Rand prices, less on an inflation adjusted basis. In the last inflation read the August one, the CPI index number was 111.0, with December 2012 rebased to 100. October 2005 was at 64.2, you get the idea, you are getting half price, if you are willing to take the risks associated with South African platinum miners. I am afraid for us this is still case of steer clear of the industry, Bill Miller was on to a thing or two there in his avoidance of all things in the commodity cycle. At times you look silly with this approach, at other times you look clever, in the end it is all about investment styles.

Byron beats the street

This is a piece that Byron wrote to a friend of his, property versus equities.

The fundamentals of property are easier to understand. Simple supply and demand. Of course land in London is finite and as more people are attracted to the city (which they will) demand will increase and relative to the finite supply the prices will increase. Lets not consider currency movements here because you can invest in both equities and property in foreign currencies with the same benefits.

Because these fundamentals of the property market, it is more predictable. You experience a solid yield and good price increases. Also note that a property's price is determined by its yield so if prices are expected to rise so much you'll probably find that rents have already increased as people are willing to pay a premium. What I'm trying to say is that these price increases will already be factored in (as with the stock market). I'd be careful of articles that say "will rise 30%" because these markets are so sophisticated that there are no secrets. Why would someone sell you a property if they knew the property (value) would increase so strongly? Regardless it is certainly a good investment category and a must have in anyones portfolio.

The difference in equity for me is the human element and the potential for innovation as well as the ability to maneauver across geographies. When you get a company like Aspen that goes from R30 to R350 in 6 years because the management team are revolutionising the way generic drugs are being sold amongst developing markets. Or a company like Discovery who are changing the way insurance is viewed globally by aligning all their interests with their clients (making clients healthy benefits both). These are profit driven businesses that plan to outpace property returns (otherwise they'd just invest in property) (many have huge proper portfolios as well) using innovation and are incentivised accordingly with big stakes in the businesses themselves.

Unfortunately and fortunately for equities, because they are so liquid traders play games with the markets, not even knowing what the underlying businesses get up to. That is why we see the volatile swings we are seeing at the moment. I say fortunately because it's moments like these, when the market seems to be irrational, when the big buying opportunities arrive.

Things that we are reading, that we think you should be too

A great article showing how much we have progressed over the last century - 23 Charts That Show Why This Is The Best Moment In History To Be Born.

Another bit of information on the debate of executive remuneration - What if we could confiscate 100% of CEO compensation for all S&P 500 companies and redistribute to average workers?. So a lower executive salary will do very little for the average worker; does that mean the market has correctly priced the value of executives or is their pay still excessive?

One of the many ways that we are finding to make better use of our resources - The sharing economy, Schumpeterian gales of creative destruction, and my top 10 interesting facts about Airbnb. I used Uber for the first time this weekend, similar idea to Airbnb, great experience!

Home again, home again, jiggety-jog. Resources are lending a helping hand here today, I see that the price of some of the metals have bounced after being routed recently. Ouch. A couple of downgrades for France and Finland by Standard & Poors (ratings downgrades) is hardly helping the mood. Earnings season couldn't start sooner!

Sasha Naryshkine, Byron Lotter and Michael Treherne

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Friday 10 October 2014

Five more years

"...the equities markets is a mechanism for owning and indeed a claim on the earnings and more importantly the assets of a specific business. You should view it that way. One of my favourite Buffett quotes is that one in which he says that you should be willing to own a company on the basis that there was no mechanism to transact for up to five years. That sounds a little extreme, remembering that the people who make the price on a day to day basis (who have shorter time frames than you and I) provide us with the necessary liquidity."

To market, to market to buy a fat pig. Wow. I cannot remember two days like that in the US markets next to one another. The best of the year Wednesday was followed by the worst day of the year Thursday. Check out the two day graph:

The upshot of it all? The two days have realised losses of 0.36 percent, at the least the S&P 500. Yesterday was about as ruthless as it gets however, for equity markets that is. Not only was this the best and worst days wedged next to one another, there have been some big swings after a relatively calm time of it, bringing the most volatile time for the equity markets since 2011.

So what should you do as a holder of companies? Nothing. Or as I said earlier in the week, buy when nobody else is. The businesses that you own are just fine. Europe might be struggling through another tough patch (seems a little like the Pakistan cricket team, loads of talent, not much direction), the economy of Europe will be just fine. Recent Euro weakness as a result of Dollar strength (as well as patchy Chinese data) has led to much lower commodity prices.

Lower commodity prices are great news for all consumers globally. The ISCS (or International Council of Shopping Centers) expects a 4 percent uptick in US holiday shopping. Seasonal hiring at shopping centres is expected to increase by 7.3 percent, an extra 794 thousand jobs. People are feeling better about their prospects, by people I mean the US consumer. And seeing that it is still the biggest economy in the world and that economy is still largely consumer driven, we should be greeting this news.

That still does not detract from all the reasons being given as to why the markets have been really volatile. I suppose after a a period of prolonged upwards trend with very little volatility, which has been really bad for the trading types, it does not take much to spook anyone. The IMF report, Syria, ISIL, the Hong Kong "umbrella" demonstrations, Ebola and the associated scare, Russia-Ukraine (which has been forgotten), European deflation and stodgy growth, Fed rate tightening and reigning in their bond buying programs, there has been lots of canon fodder for the sellers.

For me however, the equities markets is a mechanism for owning and indeed a claim on the earnings and more importantly the assets of a specific business. You should view it that way. One of my favourite Buffett quotes is that one in which he says that you should be willing to own a company on the basis that there was no mechanism to transact for up to five years. That sounds a little extreme, remembering that the people who make the price on a day to day basis (who have shorter time frames than you and I) provide us with the necessary liquidity.

If we were all like Warren Buffett then there would be no liquidity and ironically the share prices would trade at a liquidity discount of sorts. I field many calls from anxious clients, who I think are worried about a similar scenario to late 2008 into early 2009. Equities markets were trounced back then, through that period we stuck to the tune of not selling, stay fully invested, the companies are quality ones. In this case we are shock absorbers on the very bumpy current path. We tell equity holders not to freak out, that is the worst thing to do, to sell in the midst of the hysteria.

In the end it matters what companies earn relative to their share price. Obviously the economy matters, in the US however job openings are above the pre crisis levels. What does that mean? It means that there are more jobs in the US markets that are available to people than there were since late 2007. If those job openings are filled, that would be positive for the economy and of course consumption. Why do I keep talking about the US market and how that matters? It is the driver for global markets, we keep telling you that our market does not represent our economy, it goes more in lock step with global markets. Keep calm, stay invested, today is going to be another day of selling.

You can file this away for the weekend, for further reading, Carl Icahn and his two business partners have written a long and extended open letter in his capacity as a shareholder to Tim Cook and the Apple board: Sale: Apple Shares at Half Price. His price target for Apple is 203.23 Dollars. Oh. That means, in his mind, that the stock is dirt cheap and the board must definitely push for a stronger buyback program.

He makes some interesting assumptions about unit sales, suggesting that by 2017 there could be 242.5 million phones sold per annum, 95 million iPads, and even Apple Watch sales of 72.5 million units (including the straps). And an Apple TV (a new product from Icahn himself!!) run rate of 25 million per annum. iPod sales are nearly dead by then, according to the Icahn measures, 1.6 million per annum. Perhaps discontinued by then, who knows.

Icahn points out his returns, perhaps looking to attract fund inflows with this open letter, they have been exceptionally impressive, why not look to give yourself a punt. He makes a very interesting point about his Apple stake: "At today's price, Apple is one of the best investments we have ever seen from a risk reward perspective, and the size of our position is a testament to this. This investment represents the largest position in our investment history, reflecting the strength of the convictions we have expressed in this letter."

Wow. Two things, as time goes on and Icahn gathers more assets it is always likely that there is going to be a bigger and bigger investments, so that part I think is not as relevant. The fact however that he feels this is a real conviction buy, that is slightly different. I believe he is right here. I believe that Apple presents one of the best investments, however the replacement cycle of handsets (and all electronics) is so quick, that you have to watch these closer than most.

The comparison that Icahn draws between a Mercedes (Apple) and a Volkswagen (Android) is that the price differential on a contract overt time is not as much as the motor vehicles. Check:

"The choice between them is analogous to the choice between a Volkswagen over a Mercedes at the same price, and unlike a Mercedes, the $649 cost of an iPhone 6 is affordable for the mass market, equating to just $20 per month over a two year period (including a $170 estimated resale value of the phone at the end of two years, excluding financing and taxes). We see the iPhone remaining unaffected by the "junk", as you called it, sold at lower price points, but we also see it dominating the entire class of premium Android smartphones, such as Samsung's Galaxy phones."

I find it quite interesting that Icahn thinks 649 Dollars is affordable for the mass market, clearly rich people, yes, not so much the rest of the world. When he says you, he is talking to Tim Cook, the Apple CEO. All in all it makes for good reading, it is really long and well thought through, obviously Icahn is talking his own book and has bias, I do prefer that though, when someone actually has something to lose.

Michael's musings: Small things add up

Sasha and I were talking about the power that the middle class have. We started talking about it because of Jack Ma's (founder of Alibaba) comment "Jack Ma: If you're still poor at 35, you deserve it!". The basics of what he was saying I think is that when you reach the age of 35, your parent's legacy (if they were poor) should no longer be an excuse for where you are in life.

We decided to look at things from a different perspective and looked at the impact of investing instead of consuming. So here is a VERY rough calculation we did: how much money would you have if you invested R8 300 a month and it grew at 10% a year (we assumed that there is no inflation to make the calculation cleaner). Here are our results:

The first thing to note is that after 30 years you could have around 18 million in todays money, given that most people reading this will live to around 90, 30 years is not that long of a time. The second point to note is that our monthly investment amount did not increase over the years, so you don't need a high flying job to be wealthy over the long run.

Taking the calculation one step further, assume that you buy a new Golf 7 Gti today for R 400,000, you finance it over 5 years and your monthly repayments are R 8 300. After 5 years you would be left with a car that is yours and is worth around R250 000, compare that to the R 680,000 that you could have had if you had invested the money. Your opportunity cost of buying the car works out to a huge R430 000!

There are many assumptions in our calculations but it does give a ballpark figure of where you could be in the future. It also highlights the power that the middle income has to consume or create wealth.

Things that we are reading, that we think you should be too

Lower food prices are great for consumers - World food prices fall to 15-year low. It will also allow a company like Tiger Brands to get their margins back to historical levels.

More from Elon Musk and more of what the future of motoring will look like - My lap of terror in the Tesla D and a cool video of Elon Musk - Tesla: Exotic features and go-fast model

Another twist in the tussle between tobacco companies and governments - E-cigarette adverts (with people smoking) will be on TV in weeks

Then lastly an image putting Africa's potential in perspective -

Home again, home again, jiggety-jog. Ooops. We are getting hammered again here today, the market has given up (locally in Rand terms) around 10 percent from the highs. I think that this is a big opportunity. Stand by for the short term levelling off of equity markets.

Sasha Naryshkine, Byron Lotter and Michael Treherne

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