"The SENS release says slightly different things, it says 900 tons of beef, lamb, mutton, chicken, bacon and ham. This is where you make the money, the storage space for burger patties, you can take a turn again on the same cheaper burger. Provided of course that the same burger is sold at the same price, to the end consumer. Great move, the market approves"
To market, to market to buy a fat pig. Friday was a special day for markets, there were two milestones that emerged from the non-farm payrolls number. Why it is still called non-farm is a mystery to me, I know that the seasonality of crops in a vast country with a big population to feed would make the workforce measurements more volatile, there is now around two percent of the US population employed in agricultural activity. At this time of the year as you can expect, there would be a whole lot more people employed in retail activities, as we head into the holiday season. Shop, shop and gift giving is the order of the day. For this last particular report on Friday, Employment Situation Summary, not only did the number top 300 thousand and blow away expectations (321 thousand in the end), it was the 50th consecutive month of job growth in the US. Uninterrupted. And the prior two months saw an additional 44 thousand jobs added in upward revisions.
These numbers are volatile, much hyped, the trend however is the most important thing. It is all very well to know what happened in months prior, the trick as ever is to establish whether or not you think that this will continue. The fact of the matter and you cannot dispute it, is that under this current administration there have been 57 straight months of private sector job growth (50 months in total, including the public sector), a better record even than Reagan, who was considered a person who was all for the economy. 10.9 million jobs have been added in that time. There were days when we sat here in late 2008 and early 2009 where the jobs lost were exceeding half a million, for 6 straight months (3 Bush and 3 Obama). Those were dark days.
Bill McBride wrote an interesting post over the weekend, titled Public and Private Sector Payroll Jobs: Carter, Reagan, Bush, Clinton, Bush, Obama. It is amazing to think, of all of those presidents, that Obama (considered the most socialist by the business community) has seen the public workforce decrease the most in his two terms thus far. Of course he still has two years left, that could change, I should not think too aggressively. McBride expects by the end of the term that public employment should have increased, but nowhere near Reagan's second term. The irony of it all! Looking back, there are many armchair critics of monetary policy and intervention over the last 7 odd years, the results do not lie, this was a far better outcome than 25 percent unemployment, soup kitchens, shuttered boards and general widespread dissatisfaction, spilling over to violence. Yes, we saw none of that, as a result of intervention. Astonishing how there are still many critics of this recovery, I have seen it referred to as the most hated recovery ever.
I have a theory on that, why this recovery is seen poorly. It is a common human mistake to make, to project your own experiences to the rest of the world. Imagine an under pressure financial and banking sector where more regulations, more scrutiny on bonuses, generally less risk taking and old style banking returning. I can imagine that with further higher capital requirements, perhaps the risk taking by financial institutions will have to trend to the conservative, as such less incentives afforded. I suspect that the general mood was deflated across the broader sector, I remember bumping into the German fellow, who was a mortgage manager in a regional bank in Germany, when he found out what it was that I did (a general conversation), he said "ah yes, you guys are to blame for the financial crisis". Really? Us? I think not, then I explained our model to him and that we were not selling packaged mortgage backed securities from Vegas to Scandinavian pension funds. It suddenly occurred to me that our industry is viewed negatively, and it seems like it does not matter where you work. People projecting forecasts tend to be more cautious when forced to be more conservative, that is my theory anyhow.
OK, let us finish off by taking a squiz at the scoreboard. The term squiz is apparently an Australian one. The Dow Jones industrial average nearly reached 18 thousand points, registering a closing high in the end at 17958 points. The S&P 500 closed at a record high too (2075 points, up 0.17 percent), hardly a runaway on such fabulous employment numbers. The concern I guess for the short term inclined folks is that stronger labour markets with higher hourly earnings (wage growth) would lead the Fed to hike rates earlier. Now that can be interpreted as good or bad. Good if you are an investor, the health of the labour markets is directly linked to the health of retail and associated businesses, with 70 percent of the US economy being directly linked to consumption, this is a good thing. However, if you believe (and you are short term in nature) that rates are going to rise earlier, higher rates for the same said consumers is not a good thing. Ah well, you can never please all of the people all of the time.
Company corner snippets
Almost every young reader would have come across Willy Wonka, the story involving the weird owner of a factory, penned by Roald Dahl and titled "Charlie and the Chocolate Factory". Howard Schultz is not Willy Wonka, rather the CEO of Starbucks, he did however speak like the legendary fictitious chocolate maker, when the company debuted the new flagship store known as the Roastery, check the story from Time: Go Inside Starbucks' Wild New 'Willy Wonka Factory of Coffee'. Check out the official release from the company: The First Customers (and First Orders) in Starbucks Reserve Roastery and Tasting Room. Explore the pictures, it looks awesome. In other news related to the coffee company, this is awesome: Starbucks to let you preorder from your iPhone next year. We continue to add to this fast growing and exciting company.
Wow. Here it is, TMG (Times Media Group) are being taken out by Blackstar, who currently are 32.5 percent shareholders, they want the rest, 67.5 percent. The price is different, if you take cash you get a lower price, if you take Blackstar shares you get the higher price (relative to the Blackstar share price). So, you can either continue to be part of this investment with Blackstar's main asset being this big stake in TMG, or you can exit slightly lower for cash. Blackstar expects to issue 90 to 123 million new shares for this purchase, at the bottom end (all shares) and top end (most cash out) of the transaction. If you remain invested, wait for it, there is more for you as a Blackstar shareholder. Tiso and TIH will sink their stake in the investment company KTH, Kagiso Tiso Holdings. Their 22.9 percent holding (and by their I mean Nkululeko Sowazi and David Adomakoh, they are the associated parties) will now be reversed into a bigger Blackstar for 485 million Rand in cash and 92.8 million new Blackstar shares. Around 35 percent shareholders, these specific new investments will be to the new Blackstar company, which will move their listing to the main board in London and here, a dual listed business. The most important question is (jump to Byron's chart on mobile below), can the new group monetise mobile effectively with these old media assets?
Last little bit of company news today, Famous Brands shares have rocketed to above 110 Rand a share again (more than that, as high as 115 ZAR), on the news that they are acquiring a stake (75 percent - controlling stake) in a business called Cater Chain Food Services, from a set of brothers John and Roy Tem-Tem. As per the Cater Chain website in the about us section, the company is a red meat production business, again as per their website capable of producing 400 tons of frozen, fresh and processed products each and every week. Wow. That is a lot of meat for the hungry. Latest technology, check it out -> Production plant. The SENS release says slightly different things, it says 900 tons of beef, lamb, mutton, chicken, bacon and ham. This is where you make the money, the storage space for burger patties, you can take a turn again on the same cheaper burger. Provided of course that the same burger is sold at the same price, to the end consumer. Great move, the market approves.
Things we are reading, we think that you should read them too
One of the reasons that Google, Apple and Facebook are the power houses that they are; mobile - There's A Reason It Seems Like Everyone Is Always Staring At Their Smartphones
As a South African the surveys momentum does not make for very pretty reading - SA Reconciliation Barometer 2014: The struggle against Apartheid amnesia. The conclusion that I draw from the stats are that as South Africa we need to grow the middle class as quickly as possible. The more people that are in the middle class, the more mixing of races and also there is more money there to spend on the next generation.
Emerging economies have done better this year than most people had forecast - Emerging Markets Mock the Pessimists. Two pertain facts about that you can not ignore: "that during the course of this year's slowdown, it added roughly $1 trillion to world output; and that slowing growth in China is still quite rapid by most countries' standards." and "it's adding more than twice as much to global output as the U.S."
It is scary to see the rapid growth in the operations and valuations of Uber - Uber Confirms New $1.2B Funding Round At $40B Valuation. This is the power of disruptive industries. Uber is by far a better business model than the traditional taxi service.
More on oil, this time having a look at it more from the demand side of things - A year out, expect oil back above $80 . As a Sasol shareholder you hope that the price does tick up 20%, as a consumer and holder of consumer stocks, you would not be as enthused.
Home again, home again, jiggety-jog. We've had a slow start today, resources dragging the All Share down. Not even a weaker Rand is helping following some negative current account data on the local front.
Sasha Naryshkine, Byron Lotter and Michael Treherne
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