Money with a dash of Funny: 2015

Thursday 17 December 2015

I'll see you in court

'Whoa! Isn't that a turn for the something, is it better or worse for shareholders? And what about the relationship between them and the regulators? The release details that: "Notwithstanding this action the Company will continue to engage with the Nigerian Authorities to try and ensure an amicable resolution in the best interests of the Company, its stakeholders and the Nigerian Authorities."'

To market to market to buy a fat pig. Yesterday was a massive day for the local markets, a missed couple of days of a big global rally, coupled with a weaker Rand again, saw stocks add nearly two and two-thirds of a percent. There were some really big and under "normal" circumstances I would say unusual moves for some big stocks. Discovery rallied over 7 percent, Sanlam a little shy of that, MTN added over 6 percent, Standard Bank five and two-thirds of a percent. Naspers added a whopping 5.5 percent. In fact, of the ALSI 40, there was a single stock hanging out in the red, Anglo American, down 2.7 percent on the day.

The afterglow of the Fed rate hike (finally) was a positive for all and sundry, other than the company that was once synonymous with South African business, Anglo American. The stock is down a whopping 71 percent over the last 12 months, about the same year to date. And 81 percent over 5 years, most of the heavy selling has taken place since the commodities slide, from about the middle of last year. Mr. Market is clearly unimpressed with the turnaround strategy, the cost savings and pending job losses have riled the "radical" left of South African politics, the EFF have called for immediate nationalisation of the assets. History has always shown that private capital works harder.

The beneficiation argument is understandable, my view is that if someone needs the products, then you should be so lucky to have them in the first place. In other words, if China’s massive building projects had not come along, then all (oil?) the major producers of the world would not have benefitted in the way that they did, their countries having collected higher taxation would have known this was a once off event, right? Dealing with lower prices for longer is another issue, I read a report yesterday that pinned iron ore prices over the medium term (next five years) in the mid 30 dollars per ton. Nobody thinks that this would ever happen, I certainly didn't think a price plunge of this magnitude would happen so quickly.

You would have struggled to comprehend a couple of decades back, that Anglo American by the end of 2015 would be a smaller business than Brait, the same size as Discovery and half the size of Standard Bank. If someone had told you in 1995 that Naspers would be ten times plus the size of Anglo, you would have laughed in their face. This is however what has happened, and the only reason why I air the demise of Anglo's share price is to show you that other companies rise in their place. Other companies rise to prominence. The newer business, relative to the history of Anglo, companies like Aspen, Mediclinic, Steinhoff, Vodacom, MTN, Bidvest, were all tiny compared to this company 20 years ago. Even five years ago, I guess. That I guess is both the positive and negative for passive investing in the index on a monthly basis.

Paying attention is important. Equally however, in this great Ben Carlson piece from yesterday titled Remember When, it is so easy to get spooked into rash decisions in equity markets. You must read the whole thing, I will share a few: Remember when we were going to see a repeat of the 1929 crash because of a chart? Remember when Greece was going to cause a global economic collapse in 2010? And 2011, 2012, 2013, 2014 and 2015? Remember when the Dow was going to fall to 1,000 (or rise to 30,000)? Remember when the BRIC countries were the hottest investment trend in the industry because of "growth." Quite right, right now, nobody wants to invest in emerging markets, their flavour has turned to that of a durian. Hakarl anyone?

Talking Hakarl (fermented dried Greenland shark, a dish from Iceland), the US markets swooned at the end of the session, energy and basic material stocks again losing on the day. Energy stocks divergence with the broader index happens at exactly the same time as that of Anglo American, in the second half of 2014. Since then, all energy stocks in the US are down nearly 40 percent, relative to a market that is only up 6 percent. The Fed relief steam evaporated, that is at least what the wires say. The tape says that the S&P 500 was down over a percent and a half, giving up all the gains from the session prior.

Once again, year to date, the broader market S&P 500 is in the red. Like I said last week, there is one part of me that in a way hopes for the market to end the year marginally in the red. So that people can scratch that idea of the market going up in a straight line. The S&P 500 has been at and around these levels since November last year, there was of course a terrible swoon in late August, that is just a memory now. Inline with the "remember" piece, remember when that was going to be the start of another bear market? Yip. I certainly remember.

Company corner

OK, very important news on the MTN front near the end of the market close yesterday. A SENS that I am going to copy and paste the important bits: "shareholders are advised that all factors having a bearing on the matter have been thoroughly and carefully considered including a review of the circumstances leading to the fine and the subsequent letters received from the Nigerian Communications Commission (NCC)." OK, as you would expect from the company, take legal advice and then proceed, what to do from here though?

They continue: "MTN Nigeria acting on legal advice has resolved that the manner of the imposition of the fine and the quantum thereof is not in accordance with the NCC’s powers under the Nigerian Communications Act and therefore there are valid grounds upon which to challenge the fine." How? Like this: "Accordingly MTN has followed due process and has instructed its lawyers to proceed with an action in the Federal High Court in Lagos seeking the appropriate reliefs."

Whoa! Isn't that a turn for the something, is it better or worse for shareholders? And what about the relationship between them and the regulators? The release details that: "Notwithstanding this action the Company will continue to engage with the Nigerian Authorities to try and ensure an amicable resolution in the best interests of the Company, its stakeholders and the Nigerian Authorities."

How long this is likely to take, your guess is as good as mine. The Nigerian courts might be quick, experience always tells you that these matters take a long time. The market cheered the news, admittedly through the whole day, the stock was at the top of the leaderboards. It may have had to do with a SENS at the beginning of the session before the market opened, relating to the award of a LTE/4G licence in Ghana. MTN was declared the winner in an auction process and will now provide Ghanians with higher speed mobile internet. For having paid 67.5 million Dollars. As the release points out, data is growing like gangbusters in that country:

"Data revenue increased 78,6% year-on-year for the nine months period ended 30 September 2015 and contributed 28,7% to total revenue. For the same period the operation had approximately 3 million smartphones on its network."

So it is neither huge, nor is it small. What I found interesting is that in terms of the "eligibility criteria" for the licence, MTN Ghana have to have a minimum of 35 percent local ownership, i.e. Ghanaian shareholders, inside of the next 13 months. The release says that the company is exploring various options. I suspect that perhaps a local listing, or finding a single broad based shareholder would be the order of the day. We will see. Year to date, if you needed a reminder, MTN is down 37 percent. Yech. We continue to watch the Nigerian "situation" unfold, and continue to advise holding your shares.

Linkfest, lap it up

I was pretty pleased to see this piece, titled Highly educated women no longer have fewer kids. Higher wages for educated woman mean that as a group, they are able to pool more family resources in order to have more services for their bigger family. Less educated women (and men I guess) seem to be having smaller families in the developed world, in order to give their kids better opportunities.

You like Guns and Roses, I don't, I like Mumford and Sons, you may think they are boring. My kids listened to a rapper yesterday and thought he was awful. This Quartz article tries to answer the mystery: This one personality trait can predict your taste in music. This is not just all for fun, it may be that music therapy can go a step closer to understanding autism. That is interesting.

He is called the special one. The chap who held football fans and sports journalists in his collective hands for so long. It is of course all too easy if "things" are going well, if not, then it is a different story, the world turns on you. Sport is completely unforgiving, no matter how awesome you were before, as this FT article shows: If victory is your only selling pitch, nothing is left when you become a loser.

Two articles about the Fed, the first one shows how obsessive people are at pulling apart each sentence in the Fed statement: Redacted Version of the December 2015 FOMC Statement, the second one by Felix Salmon titled We have officially reached the end of the financial crisis, concludes on a positive note: "But at least now we’ve exited the bizarre world of zero interest rates, and we’re reverting, slowly, to some approximation of normality. That, surely, is something to celebrate."

Home again, home again, jiggety-jog. Japanese markets are lower, the Chinese ones, Shanghai and Hong Kong are not, Australia is hanging on to tiny gains. I am thinking that after the hurrah yesterday, we will find it difficult to not fall lower on the overnight Wall Street slide. Still, "things" are markedly changed over the last week, better today than last Friday, which was a complete mess! One more message left this year, and then we are off until early January. Enjoy your break, wherever you are.

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Wednesday 16 December 2015

Quit Yellen, it is done

"Rates went up in the US for the first time since the middle of 2006, the previous hiking cycle had started in June of 2004, where the Fed went from a historical low (at the time) of 2 percent to 2.25 percent. All members unanimously voting in favour of hiking rates to the 1/4 to 1/2 percent range. And the moves northwards would be gradual, inflation, or the lack of it, is certainly still a problem for those setting monetary policy in the US."

To market to market to buy a fat pig. What a relief, it finally happened. Rates went up in the US for the first time since the middle of 2006, the previous hiking cycle had started in June of 2004, where the Fed went from a historical low (at the time) of 2 percent to 2.25 percent. Stopping eventually at 6.25 percent in late June of 2006, that was the Bernanke one and done. From there history will show some deep cuts in interest rates through from August 2007 to December 16 2008, when rates effectively went to zero. For all the history, check out the Historical Changes of the Target Federal Funds and Discount Rates, 1971 to present.

And then seven years to the day rates rose again by 25 basis points, December 16, 2015. I watched last evening, it was almost an anticlimax in a way, you can't stop the event, it is here. Stocks initially dropped and then I guess people started reading the statement, which you can read too, thanks to the beauty of the internet: 2015 Monetary Policy Releases, December 16, 2015, they started to rise again.

All members unanimously voting in favour of hiking rates to the 1/4 to 1/2 percent range. And the moves northwards would be gradual, inflation, or the lack of it, is certainly still a problem for those setting monetary policy in the US. Of course what these historical low rates for the banks don't tell you, is that banks themselves lend money out at higher than the Fed funds rate, of course they do. For money market funds, the last seven years have been spent wandering in the low yield desert. I noticed that Wells Fargo and JP Morgan increased their loan rate by 25 basis points to 3.5 percent, that is effectively their prime lending rate.

The only laggards were the energy stocks, an important announcement in the early hours of the day that US lawmakers looking to lift a 40 year ban on the export of oil saw another leg down for the price of oil. Amazing of course for the consumer, not so much for the oil producers. Both the Senate and the House, as well as the US president still need to put pen to paper, so to speak. Texas would be a short term winner, perhaps the pumping and sending of US crude offshore would mean another boom of sorts, the frackers have had an incredibly tough time of it as of late. NYMEX crude is last at 35.40 Dollars a barrel as I write this, off the worst levels of the week seen three days back. And to think that three years back the whole world was "ok" with a 90 Dollar a barrel oil price. The fracking boom is a win for global consumers, technology and efficiencies have driven oil prices to multi year lows.

Other than the lagging energy sector, all boats were floated. Utilities gained the most, perhaps with the long term rate being set at 3.5 percent the attraction of some of the utility stocks with higher yields and still the ability to grow earnings, the attraction is heightened. Something else in the utilities space was moving, and huge, SunPower, First Solar, SolarCity shares all jumped in celebration of an extension (pending) of tax credits in the industry. For another five years, the phase down was expected to also take a little longer. If the US, or any developed nation for that matter, are going to be serious about taking the lead in climate change action, then these are the industries that seem to be the natural beneficiaries.

The truth is, relative to the huge installed capacity of the old style utility companies, solar is tiny. SolarCity has a market cap of less than 4 billion Dollars, in the "Renewable Energy Equipment & Services" listed segment, there are a mere 18 listed entities to choose from. The biggest of the lot is First Solar, with a market capitalisation of 6 billion Dollars. And of the 18, only three currently make any money, the others (including the Musk associated company SolarCity) make a loss. Is it an interesting investment space? Hell yes! It is not going to be easy to find a company to back on what is clearly an important investment shift in our lifetime. We are holders and accumulators of SolarCity at the very fringes, these investments are not for the light hearted. Equally important investments include Tesla. Again, these are not for the faint hearted.

At the end of the session, and with the broader market just managing to sneak into the green for the session, the S&P 500 closed up over one and one-quarter of a percent to 2073 points, the Dow Jones Industrial average added nearly one and a half percent (it is still down year to date), whilst the nerds of NASDAQ added over one and a half percent. Thanks to some of the more stellar performances from the heavyweights, what Mr. Market refers to as FANG (Facebook, Amazon, Netflix and Google), the NASDAQ is up over seven percent year to date. Mind you, if you have been holding tech stocks since when Pete Sampras was the best tennis player around, you have seen a massive shift in the index constituents, not so much the index. The FANG acronym did not apply back then, only Amazon was listed, Facebook was not even invested yet, the Zuck was in high school. Why it is important to own stocks over the index.

Whilst we were all enjoying the day off yesterday, up on the highveld here it was a day of two halves in terms of the temperatures, cooler in the morning and warmer and lovely in the afternoon, Moody's took a decision the day prior to cut their outlook of South African debt from stable to negative. If the nuclear deal is unaffordable, then it makes sense to institute a tax relief or tax break system not too dissimilar to that of the US, get private business to install solar panels like crazy. And of course the much needed storage devices, batteries. Make all of this equipment exempt from import duties and tax free in terms of the consumer purchase price. It is still expensive to install a system, it is becoming a whole lot cheaper, however. If the national grid becomes too expensive, people will make plans to get off the grid.

Linkfest, lap it up

You cannot make up headlines like this: A security guard stole $5 million in diamonds that were thrown out in the trash. It turns out that the diamonds were kept in little boxes, little wooden ones. In an unlocked safe, for "easier access". All ended well, the diamonds were recovered, I am guessing both the security guard and the person who bought them are in big trouble.

This is interesting, Kenya's central bank is taking out newspapers ads to warn against buying Bitcoin. I am of the opinion that you must take your chances, if you want to buy something priced in Dollars and lose it all, good luck to you. In other news, you can buy real currency (like Dollars) that won't vanish. Makes more sense to me to buy the good old fashioned currency.

Josh Brown makes an interesting point or two in his article: Did we already have the post-Fed sell-off?. He reckons the sell off came first, the recovery is what we are seeing now. Sell first and ask questions later.

I always smile when people tell me that they did X on Y data and it worked, yet when you apply it to the real market, the desired outcomes are not the same. Read: Financial Backtesting: A Cautionary Tale. What works so well with back testing is that your timing is impeccable. Harry Hindsight is brilliant, unfortunately, many of these models crash and burn. Yes, whilst 2015 "feels" like another time in history for some market watchers, it is also completely different from any other year. Ever.

Home again, home again, jiggety-jog. We should start better today, having to catch up two days worth of gains in the US and a more settled market. Are the rumours about Barclays looking to offload their stake in ABSA (Barclays Africa) true? If so, to whom and how would that work? Has the proverbial horse bolted, in other words did offshore investors make a longer dated call on South Africa last Thursday and is that "done" already. We shall see, time will tell.

Sent to you by Sasha and Michael on behalf of team Vestact.

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Monday 14 December 2015

Sideways sway

"It was another case of the legendary beast, pushmi-pullyu, those readers of Doctor Dolittle will know exactly what I am talking about. A gazelle with no tail, and a head on each end, and obviously pulling in two separate directions all of the time, an apt description for Mr. Market yesterday. On the one end the Rand hedges being beaten lower by a stronger currency"

To market to market to buy a fat pig. After another buffalo stampede, the dust settled on a market barely having budged from Friday, stocks were inexplicably flat. In the same way that when the news first evolved Thursday that DVR was on the job, markets were marginally up. It was another case of the legendary beast, pushmi-pullyu, those readers of Doctor Dolittle will know exactly what I am talking about. A gazelle with no tail, and a head on each end, and obviously pulling in two separate directions all of the time, an apt description for Mr. Market yesterday. On the one end the Rand hedges being beaten lower by a stronger currency, 80 cents to the US Dollar stronger from Friday, on the the other hand a sharply rebounding retail, financials and banking sector, a collective sigh of relief from the market.

The marching band did a nifty about turn, stocks in the down column were once again also being weighed on by weaker commodity prices, the oil price sliding to the lowest levels in seven years. Hey, guess what else is nearly seven years old, it is ZIRP! That is set to come to a conclusion tomorrow, the Fed is expected to raise rates then. Back to our markets quickly. The resource rout continued, BHP Billiton, Anglo American and Glencore all sliding sharply, other stocks down in a hurry included the big dual listed companies, British American Tobacco, Richemont, Reinet, Naspers, Mediclinic and the like. Anything with an offshore listing had a poor time yesterday.

In the plus column there were the stocks that had received a belting in the two sessions prior, Woolies the biggest winner, up 13.7 percent on the day. FirstRand was up a whopping 13 percent and has now crested 40 Rand a share again, a long cry away from the 52 week high of 58.47 Rand reached in April of this year. So if you think that just the resource stocks have had a sad time of it this year, think again sports lovers. Some obviously worse than others, whilst Standard Bank was above 100 Rand again, closing up 4.55 percent to 106 ZAR exactly, the stock is 71 Rand off the 52 week high, also reached in the middle of April. What was happening back then? Low inflation and no chance of a Fed rate hike, no doubt. Discovery and Remgro also added over 10 percent on the day. Wild moves on the back of wild decisions, it certainly isn't a market for sissies.

The quick turnaround has been well documented, the reason is simple, in the end it does all boil down to money. A tax payers revolt of some sort would be a crushing blow, although I am not too sure that this would happen at that sort of scale. I get the sense unfortunately that we are already there, etolls compliance is so low you would think that most people just don't care for the consequences any more. My view on it is simple, use the road, someone else makes the laws, you pay. As simple as that, for me at least. As such, I have an etag, until advised otherwise I will continue to pay. Someone has to. Whilst we all agree that paying through the fuel levy is the smartest thing to do, it currently is not the "way". Anyhow, what is done, is done. We have a new-old Finance minister, the president was swayed to do what is best for the country, by whom, one can only guess.

There was an announcement worth paying attention to yesterday, the news came through early in the day, Tiger Brands shareholding in Tiger Branded consumer Goods plc of Nigeria (TBCG) is now zip. Zero. At a huge cost to shareholders. Seeing as they had previously written it off to zero, and they are no longer pouring money down a mine shaft (seemingly, not a fair assessment), this is a marginal positive for shareholders. Strange that, if you think about it. Around 5 years ago, you had to have a rest of the continent investment strategy. At the time I was positive about the deal, Nigeria are the most populous country on the continent. Questions were raised on why the richest man on the African continent (at the time, I haven't checked lately, Forbes suggests he is still tops), Aliko Dangote, was a seller. It turns out that he may have had the last laugh, Dangote Industries Limited gets the lot back for a song. School fees paid, heavy school fess paid with even less to show for it. the stock closed over 6 percent higher on the day.

Over the seas and far away, stocks reversed early losses of as much as a percent to close comfortably in the green, on the eve of the most highly anticipated meeting of the Fed ever. Ever, since the last time that it was the most highly anticipated meeting of the Fed ever. The broader market closed the session nearly half a percent better on the day. Basic materials, i.e. resources, were the only stocks lagging, down over a percent and a half. The biggest and most newsworthy spot in the market on the day was the sell off in Junk Bonds, not a pejorative term that, rather their credit rating is junk. Like Brazil. It doesn't mean that they have an inability to meet their obligations, it is harder that credit worthy institutions, that is all.

All this was started by a large junk bond fund froze redemptions on Friday, nobody likes to know that their investment is not liquid. In the words of Sweet Brown, ain't nobody got time for that. What was very interesting is that Bill Gross, and I caught the tail end of the interview, suggested that even his ex-employer, PIMCO, had a solid fund to weather all storms. If you want to watch it, here goes: Bill Gross: High-yield pain is the start of something. All rather interesting for all us stocks guys, the debt markets are monster, Gross reckons there may be huge opportunities in illiquid close end high yielding bond funds. He prefers junk bonds with yields of up to 8 percent, over stocks with yields of two percent. As ever, it depends which ones.

Linkfest, lap it up

I found this via a tweet, it is a World Bank blog piece titled How corruption affects businesses around the world, in 5 charts. More than half the time firms identify corruption as a major constraint across the Middle East and North Africa, 43.4 percent in Sub Saharan Africa. What I found quite interesting is that the percentage of gifting companies and officials differs in different parts of the world, which must mean that culturally it is acceptable to "gift" (code for soft bribe) different people, depending on where you live. I guess the answer to eliminating all bribery and corruption is by using more technology.

This is more than a little harsh, it certainly makes you think however. Aptly titled The World's Smartest Bad Investors, this Bloomberg View article points out that smart people, academics and the like, don't necessarily make very good investors. The conclusion is that "hedge funds should look for academic talent in the fields of applied math and computer science instead of in economics departments and business schools." Want a career in finance? Try programming and math rather.

It doesn't always work out for startups. Most often not. Here is a Business Insider article titled In memoriam: 7 once-hot startups that shut their doors in 2015. Quirky seemed like a good idea. Fear not however, the serial entrepreneurs are beavering away with new ideas, from the same publication comes The 25 hottest startups that launched in 2015. My favourite is still Periscope, I can't quite figure it out yet however. I just know it will be huge. Vive seems like a good idea, for 99 Dollars you can get as many blow waves a month that you want. The synthetic diamond company is pretty interesting too, the Diamond Foundry.

Home again, home again, jiggety-jog. Markets across Asia are lower, the next two days are clearly huge for Mr. Market. The only thing that will be talked about is US interest rates, Janet Yellen. It almost feels like your final school dance, you know it is going to happen, you can either look forward to it with fear or you can look forward to it with excitement. Something is finally going to happen.

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Sunday 13 December 2015

We know that guy!

"Time will tell I guess, we would all like Treasury to be both. The naysayers will be quick to point out that this decision represents a complete loss of control, how can you do something Wednesday and reverse on Sunday? Unless those around you, who were not consulted, asked you, in the kindest possible way, to reconsider."

To market to market to buy a fat pig. 13 December late the news broke, either the Presidency's website had been hacked or this was true, the shortest ever stint of being South African Finance minister (or perhaps any finance minister of any country) was over. DVR, or the little known David (or Des) Van Rooyen was replaced by a familiar face, Pravin Gordhan. Pravin Gordhan is of course in a Rumsfeldian ramble, a "known-known".

First of course, the context, on Saturday the presidency set the record straight Saturday: Presidency corrects malicious rumours about SAA, National Treasury and Ministerial deployments. See? The bombshell was last evening, Announcement of new Ministers of Finance and COGTA. If you had missed the announcement Wednesday evening, then this seems like business as usual. Except, wait .... David van Rooyen (DVR) is still a minister, even if it is of a "lesser" department, one that Gordhan used to oversee. This is still the same chap that Mbhazima Shilowa suggested that in his time as Mayor "You won't find a single successful project carried out by him in Merafong, Carltonville and Khutsong".

South Africa truly is a place that is very different from many other places in the world, last week the IOL reported in an article titled Van Rooyen (was) loved and loathed in Khutsong, in which Des van Rooyen's brother is quoted as saying "I now want him to come fix my shack because it is in a terrible state. We've had no home to live in since they burnt our house." That is right, along with a whole lot of other councillors, Des van Rooyen's house was burnt down by angry residents. Which rendered his brother homeless, effectively. Astonishing.

Back to the matter at hand, the release sets out a few points here, in the way that minister Gordhan will lead:

Ensuring an even stronger alignment between the Budget and the Medium Term Strategic Framework (MTSF) in the interest of stimulating more inclusive growth and accelerated job creation while continuing the work of ensuring that our debt is stabilised over the medium term.

Promoting and strengthening the fiscal discipline and prudence that has characterised our management of public finances since the dawn of freedom.

Working with the financial sector so that its stability is preserved under the broad umbrella of the Twin Peaks reform.

Ensuring that the National Treasury is more acceptable to all sections of our society.

Adherence to the set expenditure ceiling while maintaining a stable trajectory of our debt portfolio, as set out in the February 2015 Budget.

Point number 4, is that meant to be accessible or acceptable? Time will tell I guess, we would all like Treasury to be both. The naysayers will be quick to point out that this decision represents a complete loss of control, how can you do something Wednesday and reverse on Sunday? Unless those around you, who were not consulted, asked you, in the kindest possible way, to reconsider. As they president said: "As a democratic government, we emphasise the importance of listening to the people and to respond to their views." I dislike it when people read into anything, that however seems distinctly to me like, "I never consulted anyone in the first place". Which is equally disturbing, if you think about it deeply.

The upshot of it all is that some confidence seems to have returned to Mr. Market, at least in a South African context. Friday was an equally horrid day for the local market, banks, financials and retailers were smashed left, right and centre. Financials were down over five percent, the banks were sold off nearly 6 percent. General retailers were sold down over 4 percent, all of these moves were after the monster ones Thursday. The broader market sank 1.87 percent by the time anyone had time to blink.

In the minus column were stocks like Sanlam, FirstRand and Remgro, all down over 8 percent. Investec, Growthpoint and RMB Holdings down over 7. In the plus column were all the Rand hedges, the Rand was plumbing record lows, at one point threatening to hit 16 to the US Dollar. SABMiller, AngloGold Ashanti, British American Tobacco and the like, all up on account of a much weaker currency. Our broader index is basically flat over 12 months now, down a little less than 4 percent YTD, we have lost around 6500 points in the last 40 days, the ALSI was last at 48068 points.

Friday was a pretty shabby close in the US, stocks given a real roasting as we near the day of reckoning, the day when the Federal Reserve abandoned ZIRP. As I learnt from Twitter, the day would be exactly 7 years from the day it was instituted, 16 December 2008 was the day that the Fed went to a Zero Interest Rate Policy, that is what ZIRP stands for. In a sense, a momentous day for interest rate nerds. As Eddy Elfenbein pointed out in his Friday "Crossing Wall Street" letter, the last time the cycle changed (i.e. when rates started going up) was in June of 2006, and back then: "Apple was around $8 per share. Companies like Facebook and Twitter had just been started, and Uber was still a few years away." I guess the Santa Claus rally may well be late this year, on account of the Fed meeting being so very important.

The S&P 500 is down 2.26 percent year-to-date, there is one side of me that wants the index to end the year there, so that people can stop referring to the "most hated bull market of all time". I am not one for technical stand points this way or another, this is a little beyond me, however. If the index prints a negative number, do you start again from "the beginning". What is in a name, and to be frank, why do people measure themselves from one calendar year to the next? Use a list of periodic comets, although even for the deep value investors, something like the P/1997 B1 may be "too soon", returning every 25 odd years. Too small as it turns out.

Whether you like or hate the current bull market, the fact of the matter is that we tend to focus all our time on what could happen, rather on what is likely to happen. Motor vehicles for instance are parked a whole lot longer than you sleep, I don't see people obsessing about their beds, and which one they are going to get next. That is a better analogy. Rather worry about the good nights of rest that you get, instead of the commute to work.

Linkfest, lap it up

I am confused, even if just for a little bit, didn't Elon Musk say he was scared of AI? Having said that, I still was not surprised to see the following Elon Musk Backs $1 Billion Artificial Intelligence Research Group. Perhaps the more menial tasks, not involving weapons is where his research is going to go, increasing productivity. As is with many of these projects (official release: Introducing OpenAI), the aim is not to make money, rather to "to advance digital intelligence in the way that is most likely to benefit humanity as a whole, unconstrained by a need to generate financial return." Good luck we say, we wish you all the best.

Confused about the climate talks and what it means for all of us? This article sums it up nicely: A historic climate-change deal has been unveiled in Paris. I am not too sure how we are going to make sure that we keep inside of those temperature bands.

Home again, home again, jiggety-jog. The Rand is stronger, the damage is possibly done now. If you took a conscious decision last Thursday to exit South African bonds and equities, I can't see how you are going to stop now. Some funds have a mandate in which they are only obliged to invest in countries that are investment grade, if they are pre-empting any downgrade, it may be too late already. I see a couple of folks are quoted as saying that number 1 is now living on borrowed time, he may well be recalled -> Zuma Makes U-Turn on Finance Chief, Triggering Rand Rebound. I can't imagine that this political instability would be good for anyone, I can't see the biggest fighter in South African politics going down that easily. There should be a noticeable bounce back today, a cautious one nonetheless is better than none at all!

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Thursday 10 December 2015

The dust settles, what to do?

"Before one panics and goes for the nuclear option, sell everything and hit the streets, one should think a little harder. Is this another moment in history where we reached an inflexion point. The one of many? We have been there before. I am sure that there will be many others. It has happened at a particularly bad time, bad from the points of view that everyone was catching their breath to think about something else, the December vacation. Bad from the point of view that we were just downgraded, from a credit point of view."

To market to market to buy a fat pig. There was a sense of disbelief yesterday, a sense that whilst common sense had prevailed all along, this was a clear sign that either cracks are emerging, or something else is happening. There was an FT story, that does a good job of trying to tell it like it is: Finance minister sacking undermines South Africa's reputation.

Of course the FT would bat for capital, that is their target market. Kevin Lings, chief economist at Stanlib (and fellow Melrose Arch tenant, seen in Clicks and other such exotic locations) is quoted as saying he thought this was political interference in Treasury. In other words, if you cannot give me what I want, I will take what I want, thanks very much. He also says that the lines are blurred between what is good economic policies that are sound for the country and what appointments meet political objectives.

What those political objectives are however, is not too clear to see. Basically, as the article concludes, the replacement has no experience, that in itself tells you that political objectives are front and centre. As David Shapiro pointed out earlier in the day during an interview on CNBC, the Finance Minister of a country is like a CFO of a business. The CEO's right hand person, the person who knows what is going on as far as the money is concerned. The fact that the CEO gave no reason for the sudden departure and appointment is even more worrying. And it sends a clear signal of how the CEO acts.

Expectations are for hikes in the marginal tax rate, perhaps even in the companies tax rate. At a time when the country is operating on fumes, I am not too sure that is smart. Austerity is one thing, the magic wand of higher revenue by raising taxes and everything continuing as normal, that belongs in fairy tales. To collect more revenue, you need to encourage growth. To encourage more growth, you need greater economic activity. To encourage greater economic activity, you need a sound and clear economic policy, one that is not confused by events such as this. If the two events in Nomura's analysis of it (we pointed to it yesterday), SAA disagreements and the Nuclear deal financing are at the core of it, then those are state owned entities, with their own sets of problems.

Again, let us not get our knickers in a knot, there are "things" that you can do in order to change this. Whether or not the rank and file of the ruling party will stand on this Arnhem or not (history buffs will get the reference, a bridge too far), remains to be seen. The normally inline with the ruling party Shaka Sisulu went on a Twitter tirade, the last two tweets were as follows: "Comrades of the movement are going to have to wipe the facade of their faces and reassert the centrality of the movement in decision making" and then lastly (and no more tweets for a while now) "Or go buy a good suit. And start writing a nice eulogy. To go bury a once proud history. In their lifetime". He has strong political allegiance to the ruling party, his grandfather is Walter Sisulu.

The upshot of it all, from a markets perspective was at face value very little, the market was even up at one stage, slipping by over a percent at the end. Scratch a little under the surface and it revealed a WHOLE lot. A weaker currency leads to imported inflation, which leads to the real scenario of interest rates increasing. Which is a double whammy for consumers, the cost of their imported goods go up and the cost of their financing increases. Coupled with pending rate hikes, a loss of investor confidence, the obvious quarters of the local equities market took a beating. Financials and banks were heaviest hit, financials as a collective were down nearly 9 percent.

At the top of the losers were the likes of FirstRand (-14.84 %), Barclays Africa (-14.53 %), Discovery (-14.27 %), Standard Bank (-13.54 %), RMB Holdings (-12.47 %) and PSG (-12.43 %). At the other end of the spectrum was all the stocks that had a bias to the Rand, either from a production point of view (i.e. their product that they produced, priced in Dollars) or from where the company had a primary listing elsewhere, Richemont, Glencore, Capital and Counties, SABMiller, Intu, British American Tobacco, Naspers (Tencent is listed in Hong Kong), Reinet, Mondi and Mediclinic (soon to get a London listing).

Before one panics and goes for the nuclear option, sell everything and hit the streets, one should think a little harder. Is this another moment in history where we reached an inflexion point? The one of many? We have been there before. I am sure that there will be many others. It has happened at a particularly bad time, bad from the points of view that everyone was catching their breath to think about something else, the December vacation. Bad from the point of view that we were just downgraded, from a credit point of view. Inflationary pressures are borne by the poor, it eats the spending power of the poor the most. Rich and skilled people have options. Which is not good when greener pastures are available elsewhere. We will continue to monitor and advise accordingly.

Linkfest, lap it up

Uber is one of the apps making some of the biggest waves and it is about to make more in the delivery space - Uber's first spinoff app is a food delivery service in Toronto. They are finding more ways to better utilise resources.

One of the stocks that has been on our Radar this year is Priceline. The stock is up 20 000% since the stock's low in 2002! - Priceline is the one big internet comeback attempt that actually worked.

Josh Brown points out that hedge funds were complaining about too little volatility and then that due to too much volatility they were forced out of positions. The market is never going to do what you want it to do, remember that these are some of the smartest people on earth and the market makes them look dumb - I think I'm dumb.

Simpler normally is better, and in this case a $10 tube is working as well as multi million dollar machinery - A radically simple idea may open the door to a new world of antibiotics. Given that antibiotic resistant bacteria is on the rise, these new types of antibiotics will be key going forward. Part of the article looks at the life the Russian scientist who is doing the work and what obstacles he had to overcome after the Soviet Union fell.

Home again, home again, jiggety-jog. Japanese stocks are up a lot, a percent or so, following a good lead on Wall Street overnight. After the carnage here yesterday it is difficult to see clearly, one must definitely keep a cool head in amongst the boiling and fuming many. If that were not enough, on my way home yesterday I encountered multiple car accidents, all serious. In good news, Marisa Mayer, the Yahoo CEO had identical twin girls, well done to her. That hardly helps us down here in Mzansi, a place where the currency has certainly deteriorated to the point where it is a matter of time before inflation starts to filter down. And there are some rumours of an emergency SARB meeting, to hike interest rates to stave off pending inflation. What about growth and demand? Sigh, stand by for more.

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Nene gets whipped and Nae Nae'd

The removal of a technocratically sound, decent, hardworking, well respected (at home and abroad), fiscally conservative and reform-minded Finance Minister is a serious blow to (Portfolio and corporate FDI) investors for several reasons.

To market to market to buy a fat pig. We often point out that there are many things beyond your control when making investment decisions. I wrote to a client overnight: "In investing there are some things that you can control, i.e. the stocks you own, and there are many things that you cannot control, such as the levels of the currency, interest rates, government economic policies, the global geopolitical environment, and so on." You can position yourself for how you see the future, you can do something about that. You can externalise money and invest offshore, you can do something about that. However, you cannot do anything about the levels of the Rand, who the new finance minister is, what Janet Yellen and the FOMC, or Mario Draghi and the ECB, or Lesetja Kganyago and the MPC are likely to do.

I was feeling under the weather yesterday, summer flu has descended onto our offices here, I slept like a log last evening. And not a baby, as they wake every few hours for sustenance. Sleep when your baby sleeps, they tell new mums, yeah right! As such I only saw a header early this morning about the new finance minister. Actually, it came first on the Vestact WhatsApp group, that is where stories break. Sorry, closed group. OK, so here is the reaction, first from the media, the Mail & Guardian story, an article from Matuma Letsoalo, a senior political reporter at the publication: Nhlanhla Nene removed as finance minister. Either way you look at it, it is not pretty.

This morning well respected politician and former premier of Gauteng (1999-2008), Mbhazima Shilowa, was on Power FM, and these are the tweets that came through. Of course this is associated with the interview that he gave, about the new finance minister. Remember that you must read the tweets from the bottom up, the more recent ones are later in the interview. You can decide for yourself:

And then perhaps the real sign that we are still in a robust democracy, the press statement from the EFF, this was really pushing boundaries: EFF statement on the removal of the Finance Minister. This paragraph was especially scathing: "Zuma has appointed him because he knows that Van Rooyen will not stand up to him when he wants to do wrong things. Van Rooyen will be so eternally grateful, absolutely starstruck that anything Zuma asks for will go. Van Rooyen will be prepared to even approve further upgrades to Zuma's Nkandla home by putting a private zoo that has exotic animals like domesticated tigers."

And then some fellow who has been really involved in South Africa as an outsider for as long as I remember there being business TV in South Africa, a chap by the name of Peter Attard Montalto, his note from overnight is simply titled, South Africa: Finance Minister removed, in listing the points, Peter leads with the following: "The removal of a technocratically sound, decent, hardworking, well respected (at home and abroad), fiscally conservative and reform-minded Finance Minister is a serious blow to (Portfolio and corporate FDI) investors for several reasons.".

And then he lists them, the removal was possibly as everyone agrees on, political rather than performance. The fact that he clashed with the Presidency on areas of the new plane, austerity measures for the Presidency, perhaps more so the nuclear deal (too expensive for the country) and the SAA tongue lashing directed at someone who is close to the president. You can read into it what you want, either way it is not good for fiscal discipline.

The market will dictate to the finances of the economy, by the way of your exchange rate, your borrowing costs, and so on. I would say, don't panic, wait for the dust to settle. This is clearly a negative. Make no mistake it would be better if Nene was still in charge, don't act irrationally however. And rather act in the way that you can, i.e. act along the lines of things that you can control. Bloomberg has a pretty sobering view on it all: Zuma Takes South Africa Economy to Brink as Credit Risks Rise.

Linkfest, lap it up

Machine learning is going to become more prominent as we generate more data that needs to be processed and as we require robots to do more things. The big question that is still being asked is, "what is the best way for robots/ machines to learn?" - Now robots can learn about the world the same way babies do.

Many people have been calling a drop in share prices just due to the fact that there hasn't been a down year since 2009. Going back in history the 80's and 90's were even better years for stocks than the current streak - The S&P 500 Hot Hand Fallacy. There is no doubt that the market will have a down year at some point, that doesn't mean though that we will see the world crash around us.

What do you do when you want a Coke but you are a Soviet General and can't be associated with a core capitalist brand? The solution is to ask Coke to make a clear coke in a bottle with a nice big red star on it - Object of Intrigue: How a Red army general inspired 'white' Coca-Cola.

Home again, home again, jiggety-jog. Anything with a SA inc. bias is getting blasted today, most especially if you are a financial business. FirstRand down over 7 percent, Standard Bank down over 6 percent, Barclays Africa down over 6 percent, Nedbank down 5 percent. Discovery down around 4 and three quarters of a percent. Shoprite down over three and a half percent. These numbers obviously evolve quickly, the market reacting to the news in SA inc. I have only one thing to leave you with, for those younger readers, you watch me whip (of the economic transformation cluster), you watch me Nae Nae (out of the door, or off your chair).

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Monday 7 December 2015

Global diversity for the win

"That does not mean that there are no investment opportunities, it means two things however for companies with a completely emerging market business, a) the valuations are likely to be subdued on a weakening growth outlook and b) they are more likely to pay up for opportunities elsewhere, and by that I mean offshore. Companies who in large part have diversified their asset bases are likely to attract higher multiples from the local market, who are searching for higher growth opportunities."

To market to market to buy a fat pig. Whilst the Proteas were trying with all their might to stave off another defeat in the test series in India, in an epic blockathon, the global markets were less dour at face value. Test cricket has a lot in common with investing, it takes a lot of time to execute your plan, there is an enormous amount of planning involved in the first place. It is just as much about tiring the opponent out as it is a test of your own mental stamina. In many instances you feel like you are up against it, it is going to be too tough to be in, you sure as heck don't want to get out though. As they say, and batsmen will tell you this, they only get one chance, whilst bowlers get multiple chances. Not sure, fielders drop catches. I often say that the baseball analogy that Warren Buffett uses is more suited to cricket, it goes like this:

The stock market is a no-called-strike game. You don't have to swing at everything-you can wait for your pitch. The problem when you are a money manager is that your fans keep yelling, 'Swing, you bum!'

See? In cricket you can wait for the ball to come to you, i.e. the bowler to bowl to you, rather than trying to score off each and every single ball. My cricket coach and headmaster was a Geoff Boycott style fan (he would have loved yesterday), he often used to say to the opening batsman, of which I was one for a couple of years, the best shot is no shot at all.

You don't have to swing at everything, in the same way that there will be many companies that you never own that you wished you did. Like PSG, or Capitec or any other such business. Like SABMiller when they were worth a whole lot less, like Old Mutual at the bottom of the financial crisis, why did you not buy that, what is wrong with you? And getting a start is important, no matter what your age. If you are not saving, nobody else is going to do it for you. In other words, if you are not committing more to your long term savings, nobody else is going to do that for you. It is simply like that. Again, the cricket analogy is apt here, each and every person utilising investment platforms is looking for the same thing, how they go about it is another story entirely, take Shivnarine Chanderpaul, nothing pretty about that style, darn effective though, he averages 51 plus in a losing team more often than not.

Enough about cricket, I do realise that it definitely is not everyones cup of tea (and cucumber sandwiches). Markets locally regained some of the losses from the sell off here on Friday, stocks up around a percent and one-fifth here in Jozi, Jozi, the Rand was testing new all time lows to the US dollar, it was hardly prettier to the Euro nor to the Pound. I am afraid that we are stuck in a situation where the perception of emerging markets has soured badly. At the end of the session our market was just below the 50 thousand point market, over 5000 points away from the all time highs now, the end of the year has certainly been tougher than the beginning.

That does not mean that there are no investment opportunities, it means two things however for companies with a completely emerging market business, a) the valuations are likely to be subdued on a weakening growth outlook and b) they are more likely to pay up for opportunities elsewhere, and by that I mean offshore. Companies who in large part have diversified their asset bases are likely to attract higher multiples from the local market, who are searching for higher growth opportunities. So, one will have to continue to look for and invest in diversified global business with a more than even growth rate. Easier said than done, right?

Across the oceans and far away in New York, New York, stocks came off the boil after the marvellous rally Friday, ending comfortably down across all three major indices. The nerds of NASDAQ sank nearly four-fifths of a percent, the S&P 500 sank 0.7 percent whilst blue chips lost two-thirds of a percent. The oil price was caned again, sinking to a seven year low last evening. That is excellent for consumers, provided of course that they are buying in dollars, not like us, right? Oil prices are traded as low as 37.77 Dollars a barrel, some suggesting that the lows could test numbers not seen since the early part of the last decade. Ouch for balancing budgets in some parts of the world, great for Joe Consumer. The reason is clearly OPEC's inability to turn off any taps at any quarters, instead the "drill baby, drill" Sarah Palin mantra comes to mind. And to think that she has more sanity than Trump. Sigh .....

There was another deal brewing, a Luxembourg based group by the name of JAB Holding was busy offering a monster premium for Keurig Green Mountain Inc., wanting to buy the firm for 13.9 billion Dollars. Now the group is becoming serious in the coffee world, having acquired D.E. Master Blenders (Douwe Egberts) in October 2013 for over 10 billion Dollars and Mondelez International Inc.'s coffee unit in May of 2014 for somewhere close to 5 billion Dollars.

Now the company is close to a usual European setup here, there are three highly skilled professionals running the business for four heirs, each of the Reimann offspring are worth four billion Dollars plus, according to Bloomberg. They moved from Germany to Austria, swapped their nationalities and hey presto, cheaper taxes in Austria. Good work, plus, they speak the same language. One of the investors in JAB Holdings is a known entity, Alejandro Santo Domingo, a shareholder over at SABMiller (and #winning on the current deal) is an investor in some of these coffee deals. I like these deals, it means that the coffee space is more interesting, more people willing to pay big premiums on premium coffee. We continue to stay long Starbucks, our most preferred global coffee investment.

Linkfest, lap it up

I doubt this project will get out of the planning phase, I hope that it does though - The World's First Underwater Tennis Court Could Cost $2.5 Billion.

With high growth in China there have been environmental draw downs. The question to ask though, is it worth it? Will the environmental damage be temporary as China gets richer and will they get greener? - Beijing Issues Air Pollution Red Alert for the First Time. The other big problem is the health issues that will arise in the population due to the pollution.

Here is a look at how different sectors have performed for this year. Generally we think that mega companies just plod along with limited share price growth given the huge base. This year that has not been the case - Mega Cap Stocks Driving Market Returns. The blogger also has a look at the returns of value and growth stocks this year, it is no surprise that growth stocks have outperformed by 10%.

Thanks to competition, renewable energy costs are plummeting. Two things are happening in the renewable energy space, the products are getting cheaper and the products are producing more electricity. The result is that on a per Watt basis, solar and wind are starting to be real alternatives - How Solar and Wind Got So Cheap, So Fast

Home again, home again, jiggety-jog. Stocks across Asia are down sharply, Japan down over a percent, in Hong Kong markets are down over one and two-thirds of a percent. Stock futures across in the US are also pointing to a lower opening, no doubt European markets and ourselves in this time zone will start lower too. Part of the reason is another set of smoggy looking Chinese numbers, their trade numbers for November suggested that their trade with the rest of world continued to shrink. The country still runs a pretty mean monthly trade surplus of over 50 billion Dollars, I am guessing the envy of many.

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Steinhoff goes back to it's Roots

"Talking of a lack of uncertainty, this is crystal clear, the company also announced late Friday that their shares are expected to debut on the Frankfurt exchange today. Management are expected to attend. Talk about a bad start and having to try and convince a very nervous subset of German investors, their confidence is shaken in recent times. The German way is one of compliance, high standards and being conservative. "

To market to market to buy a fat pig. A day of two halves for us, watching markets in two different places isn't normally that different. The timing of the agricultural led idea of daylight savings is not good for Jozi markets during the winter months, we only catch half an hour of trade into the close here, and ten minutes locally is spent in auction. The futures market here locally gets the benefits of around an extra half an hour, in reality however we are really behind. I guess it could be worse, you could be in Asia and not cross over with the US markets ever, so perhaps there shouldn't be any complaining. No, never complain.

Markets locally tumbled Friday, stocks as a collective were thumped over two and one quarter of a percent. Why? There were some big stories that we will deal with in a moment, Steinhoff was one of them, MTN, we spoke about the NCC flip flopping on Thursday and then Friday again, and then Naspers was sold off heavily as a result of raising more cash through an equity issuance. There was a single stock up in the entire ALSI 40, and that was SABMiller, that company of course has the underpin of the pending deal with AB InBev.

The stock as such will trade in-between now and then (when the deal is closed) and will act more as a proxy of time value of money, relative to the certainty (and as such the closing of the gap between current and the offer price) of the deal happening. And what I mean by that is that the certainty of the deal being closed, i.e. all parties able to jump through the relative regulatory and shareholder hoops. Or clear the hurdles, whichever one you prefer. And of course here in Jozi the currency will be a factor. Over the last five trading sessions, in other words last week, SABMiller in London is up 0.17 percent, in South Africa it is not too different, up a little over one-third of a percent. Over the last five years however, SABMiller has advanced 277 percent in Rand terms and nearly 90 percent in Pound Sterling terms, the rest of the Rand movements attributable to the weaker local (and by local I mean Rand) unit.

Talking of which, Fitch downgraded our credit rating as expected on Friday, with a negative outlook, meaning that a further deterioration in our fiscal position might see us edge down to junk status. Junk is a pretty harsh word, that is where Brazil are currently, I prefer non-investment grade. Either way you look at it, you can stick lipstick on a pig, it is still a pig. For most people the processed product is tasty, for some, not eating for religious reasons and for the tiny minority, people who keep pigs as pets (the famous Youtube star Esther the pig is an example), the pig is always beautiful. There is something for everyone. You know what the saying means, as unattractive as the pig is, putting lipstick on hardly helps. There must be a man reference in there somewhere, around pigs, rather than using lipstick.

As far as the company that we keep goes, a BBB- means that we rub shoulders with the likes of Romania, Russia, Turkey, Indonesia, India, Morocco and Brazil, a country which stinks real bad at the moment. For a full list, check this out: South Africa | Credit Rating, from Trading Economics, and then search for the BBB- rating, to see our neighbourhood. It is not the worst, what is interesting is that this measure includes a Trading Economics (see that TE) measure. By their standards we score a 50, out of a possible 100. Mexico for instance scores a 60, Denmark a 99, Venezuela a mere 6. Thailand a 62, China a 79. Greece scores a 9, which is awful, and to be expected currently. There is very little that you and I can do about our credit rating, so being upset about it may very well be energy misdirected. Rather, and we always say this, focus on the stocks that you are likely to own rather. That matters more to us.

Stocks lifted off sharply in the US on Friday evening, all the major indices were up over 2 percent on the day. Why? Finally good news on the employment front can be interpreted as such, good news. Sometimes Mr. Market tries to pre-empt any sort of move from either the Fed, or what earnings are likely to be, or what the budget is going to look like. And so on. In this case the Employment Situation Summary as it is known officially, the non-farm payrolls number, or jobs number, was a beat.

And revisions were higher, average hourly earnings in the US have risen 2.3 percent over the last year, comfortably ahead of inflation, which is basically non existent anywhere in the developed world. Mining, to put this into perspective, has shed 123 thousand jobs in the US over the last 11 months, total job gains have averaged 218 thousand per month for the last three months. In mining it has been tough out there. Talking of commodity prices, the oil price touched year lows Friday after OPEC failed to meet consensus on output targets. Even though the quotas suggest that the maximum must be 30 million barrels of oil a day, the reality is that they regularly go above that, somewhere around 31.5 million barrels. Tell the governments of those territories that they should cut production.

Someone made a good point on Twitter, oil prices are no longer determined by what happens in comfortable and cushy hotel rooms in Vienna, what matters is what happens on the demand side in China, the flow from the oil fields of the Bakken formation. Different times, the quotas are no longer as important as they once were, the fact may be as the Bloomberg article titled OPEC Unity Shattered as Saudi-Led Policy Leads to No Limits, points out, OPEC may well be dead in terms of their influence. It is gone.

That is what happens with monopolies like OPEC, people find other ways to either use alternatives or use less of the same thing, or extract it themselves. And if there is little evolution in terms of your strategy, then this happens. Pump baby until the others fall over. The problem is that you equally have budgets to balance. For the consumer using Dollars, this is wonderful news, an abundance of oil. Sadly for many emerging markets, they have not seen the real benefits as their currencies have been pounded. India are a huge benefactor of lower commodity prices. I wish we were.

Steinhoff stock was slammed Friday, the company put out a SENS early on what must have been one of the best kept secrets in a while. The stock was down seven and one quarter of a percent. Here goes, let me do a copy and paste: "In connection with tax investigations, the Westerstede offices of Steinhoff Europe Group Services GmbH (SEGS), a German subsidiary of SIHL, have been searched on November 26, 2015. The authorities are reviewing the balance sheet treatment of certain transactions involving transfers of participations and intangible assets among SEGS, additional subsidiaries and third parties pursuant to 331 HGB. The investigation focuses on adherence to an arms' length valuation and proper accounting pursuant to German GAAP. SEGS is fully committed to support the authorities, and has begun to take immediate steps, in clarifying and resolving these matters."

Westerstede looks like a nice little town in Lower Saxony, right in the North East of Germany, not too far from the border with the Netherlands. There is a very famous 4 yearly festival called the Rhodo festival, a springtime celebration of the rhododendron. Which as the avid gardeners amongst us know is a beautiful flower. Not such good smells emitting from the SENS announcement, equally a bad looking one at that. The group does state that they are cooperating and clarifying with the German tax authorities, I suspect that we should see some more in a while. Sooner rather than later, there is nobody I have ever met who likes uncertainty.

Talking of a lack of uncertainty, this is crystal clear, the company also announced late Friday that their shares are expected to debut on the Frankfurt exchange today. Management are expected to attend. Talk about a bad start and having to try and convince a very nervous subset of German investors, their confidence is shaken in recent times. The German way is one of compliance, high standards and being conservative. One would hope that there is nothing untoward in Steinhoff's accounting methodologies, this is not something that is not known to the market. Markus Jooste is a driven individual, who wants to conquer the world, he works very hard on the business. And knowing that Christo Wiese has thrown in his lot with Marcus, that is pretty comforting for all shareholders. Christo Wiese just clocked the top of the richest list in South Africa. Whilst one should tread with caution, this is certainly an opportunity.

Naspers sold off sharply on Friday, the stock was down four and a half percent by the close. The first announcement regarding the capital raise was released on Thursday, you can find it here: Launch of an accelerated bookbuild of up to US$2.5bn, the second one was an announcement in no time at all, before the market opened on Friday.

You can find it in the same place, it was the conclusion of the capital raising: "Naspers is pleased to announce that it has successfully priced the Placing, raising gross proceeds of US$2.5bn. A total of 18,167,848 new Naspers N ordinary shares (the "Placing Shares") were successfully placed with qualifying institutional investors at a price of ZAR 1,975 per share. The Placing Shares being issued represent approximately 4.3% of Naspers's issued N ordinary share capital prior to the Capital Raising."

There you go. That was the reason for the share price falling. I think that it is a good and bad thing. Using equity that is expensive, relative to what the markets thinks, feels not that great, being able to get it away in a heartbeat (before the market even opens) is a wonderful thing and represents a certain positive demand. We continue to recommend Naspers, good company making great progress.

Linkfest, lap it up

One of the best performing stocks this year, Amazon are pushing further to grow their distribution network. The Amazon stock is up 116% YTD which is an indication of their underlying growth and future growth expectations - Amazon Buys Thousands of Its Own Truck Trailers as Its Transportation Ambitions Grow

I'm not sure how you would do this practically if you want to watch TV/ movies in a group - The BBC wants to make movies that adapt to your interests. This may be a great market for Oculus virtual reality where people could watch a movie in the same room but have slightly different scenes.

This headline highlights the fate of Postal Services - The United States Postal Service will now email you your mail. The major growth area for postal services is the delivery aspect for online retailers, for the South African postal service it would mean that we have to get quicker, less handling damage and then delivery to your door step.

Home again, home again, jiggety-jog. All is never settled in the world, if you are going to wait for a moment to invest, you never will. I am reminded that recently Berkshire Hathaway in August embarked on a deal to buy Precision Castparts, in a deal valued at 37.2 billion Dollars, their biggest ever. That deal was announced on the 10th of August this year, the S&P 500 is at this level now that is was back then. So if the investment company that Berkshire own embark on their biggest ever (yes, biggest ever) investment at a premium back then, surely this trying to time the market thing is tiring?

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