"An interesting view that is gaining some traction is that the low oil prices will keep inflation at bay and may even cause deflation. Prices in the US during November did fall by 0.3% compared to October and if you take food and energy prices out of the mix they only rose by 0.1%. Due to the lack of increased prices the argument goes that the FED will struggle to raise rates because of the danger that it will cause the US economy to fall into a potential deflationary spiral. Also with no inflation, businesses would like to see low interest rates for longer. "
To market, to market to buy a fat pig. A solid green day from the US yesterday, up 2%, which has lead to markets all over the world being up today as well. The reason for all the green? A small lady in size and salary (She earned less than Gill Marcus last year), Janet Yellen who comes in at a height of 1.6 meters. The FED ended their two day meeting yesterday and reaffirmed the markets views that interest rates will probably only rise in the middle of next year. I suppose the market feared that the good labour data that has been coming out recently might prompt the FED to raise interest rates sooner than the market expects. The basic message then from the FED was that the economy is on track and the FED are still on track to raise interest rates, good data dependant. There hasn't been a rate hike since 2006, which is a very long time ago in market terms and longer than the memories of most market participants, will be interesting times when interest rates move in another direction.
An interesting view that is gaining some traction is that the low oil prices will keep inflation at bay and may even cause deflation. Prices in the US during November did fall by 0.3% compared to October and if you take food and energy prices out of the mix they only rose by 0.1%. Due to the lack of increased prices the argument goes that the FED will struggle to raise rates because of the danger that it will cause the US economy to fall into a potential deflationary spiral. Also with no inflation, businesses would like to see low interest rates for longer.
The biggest news from yesterday, in my opinion is that the US and Cuba are working toward normalising relations. Well that is the intention at least, Obama is facing opposition from Congress and others at home. My default is to have more trade freedoms instead of less and by normalising relations with Cuba, the US lead trade embargo on Cuba should be lifted. Being isolated from the world is not great for economic growth or progress, which can be clearly seen by the 1970's cars still driven around Havana. The embargo has been in place since 1961, the same year that the embarrassing "Bay of Pigs" invitation failed. Then the following year there was the Cuba missile crisis. The US actually had administrative control of Cuba for a couple of years, from 1898 to 1902, which is when Cuba then gained independence. Fidel Castro came into power in 1952 and stayed in power until 2008, not a bad innings.
I think that Cuba will flourish with the embargo lifted, that is just the concern from people in the US. The argument is that normalising relations with a dictator and helping his country flourish just enhances his power. "Relations with the Castro regime should not be revisited, let alone normalised, until the Cuban people enjoy freedom - and not one second sooner," said House Speaker John Boehner. Congress are the ones that need to lift the embargo and considering that the Republicans have control and are opposed to it, it will probably be a while until things become normal. I think that the Republicans have it wrong though; how well has the embargo worked? A thriving economy leads to more freedoms as people become more informed and more ingrained in the "global way of doing things". For interest, here are a bunch of facts about Cuba - The World Fact Book: Cuba. Interesting that they have one of the highest literacy rates in the world of 99.8% and a life expectancy of 78.
Company corner snippets
Super Group have given an Update On The Acquisition Of Allen Ford, Allen Ford is a car dealership chain in the UK. Super Group can be considered an investment company for the "industrial transportation" sector and have been a great turn around storey up 4819% in 5 years!
Things we are reading, we think that you should read them too
Environmental issues and health concerns could be the saviour of OPEC - New York State Is Going To Ban Fracking. I doubt that the major fracking states will stop fracking though, it provides too many jobs and tax revenue.
Getting a foothold in China is a huge step forward for Uber - When It Comes to Speaking Mandarin, Uber's CEO Is No Zuckerberg. Having Baidu as an investor has given Uber access to their 500 million users, great way to get access to a potential customer base. I think Uber will survive due to all their big name investors, who bring big balance sheets, technology and customers.
In the not too distant future our home internet speeds will be as quick as these countries public WiFi speeds - The Fastest Public Wi-Fi In The World Can Be Found In These 20 Countries
Falling markets can still fall further - A Lesson in Market Crashes. It takes a brave man to buy stocks when they are down 80% and then still stay in them when they drop another 40%.
Wealth creates an environment where we are less willing to take risk - The golden quarter. The article looks at how most of our modern marvels have their roots in the "Golden Quarter" of 1945 - 1970. I don't agree with all the conclusions of the author, thought provoking none the less.
Home again, home again, jiggety-jog. Green! Green everywhere! Our local market is following the trend set from global markets overnight. Some of the stocks soaring today are Naspers which is up 8.5% as I write this and Sasol up 6.3%. The Rand has been strengthening from the lows of R11.70, back now to the R 11.50 mark. The FED seems to have reminded everyone that things are not so bad, maybe this is the start of the Christmas rally that everyone has been waiting for.
Sasha Naryshkine, Byron Lotter and Michael Treherne
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