"The real market then works, why it is called the black market or a place where illicit trade takes place is only because the law makers have no say. Free markets in everything work in the end, that is the long and the short of it all, if you impose too many restrictions on ordinary people, they find a way"
To market, to market to buy a fat pig. Notwithstanding a heroic performance from the resource companies on Friday, their collective share prices did not lift the overall market. Many moons ago it was a forgone conclusion, other than that brief period in which tech stocks were completely overvalued, when resource stocks went up or down, the market followed suit. With huge contributions from industrial businesses, technology, financials and even global retail businesses, the reliance of the local bourse has shifted away from the over reliance of the major drivers of our economy in years gone by. I suppose that is a very good thing, an economy that is not like Russia, or Venezuela. Too much reliance on businesses that are linked to a price you do not control.
In truth the consumer of goods and services always sets the price, if governments intervene (like the aforementioned Venezuela) there are no goods or services to be seen. The real market then works, why it is called the black market or a place where illicit trade takes place is only because the law makers have no say. Free markets in everything work in the end, that is the long and the short of it all, if you impose too many restrictions on ordinary people, they find a way. I recall living in a communist state, Mozambique, in the 1980's, queueing with rank and file to "change money". In other words, the official exchange rate of the Rand and US Dollar to the Metical was ridiculous, compared to the "black market" rate.
Some currency folks saw a gap, a risky gap at that, I cannot imagine what the punishment in a communist state must have been for trading unlawfully in currencies. Yet it worked, everyone knew the rate and the privileged circles that our family mixed in talked about the rate, who you could squeeze for a few extra Metical here and there. That was the free market, which existed inside of a system that had failed. Now you know where my views are formed on what system is the best for everyone and why I think it is the free market. I saw with my own eyes how socialism in its most extreme form impoverished the very people that were supposed to be all equal. It also set the stage for corruption in all forms, paying this and that to jump queues, to get out of tricky situations, and as such excluded the people and advanced the elites.
Enough of that. Over the hills (seas) and far away (very far) the markets in New York closed much better on the day, boosted by a weakening Dollar and superb earnings from Nike, we wrote about that on Friday. Stunning results, quite clearly "things" in North America would or could not be so dire if the company was able to sell 11-13 percent more (in sales) in the comparable 9 months period. With future orders at about the same rate, the future is clearly in the very short term, bright for this business. And make no mistake, the goods are NOT cheap, they are quality however. You get what you pay for in life, as ever. What is also apparent about Nike is that they are not really a huge company, by global standards, selling only 7.46 billion Dollars of equipment per quarter, roughly 1 Dollar per person on the planet, per quarter. If you look at it that way, it seems a little more reasonable, not so? Or possibly not, I guess as ever it depends if the glass is half full or half empty.
It is not just the NASDAQ that broke through to another 15 year high on Friday, it is the Nikkei this morning that has also pressed through new 15 year highs. Back in April of 2000, the Japanese index was comfortably above the 20 thousand mark, there is a long way however to go to reach the December 1989 highs, that was a proper bubble. When? With low growth rates, inflation non existent and an ageing population, what are the chances in the next decade of that market doubling? I am not sure, clearly proximity to China and the Chinese consumer is a wonderful thing, as Chinese consumers get richer and the costs associated with manufacturing their goods increases substantially, Japan will benefit. In-between now and then, surely immigration must be seen as a solution on the labour front, I am not too sure how easy or hard it is to live in Japan (or any other place) as rank and file labour, I mean that in the best possible way. Trying to assimilate and be part of someone else's society must be difficult, unless of course you are adaptable to change.
Company corner snippets
Strange. Advtech had delayed their results and have released them this morning, it looks like a week later than anticipated, nothing terribly bad about that. However, what is strange and fishy, is that Leslie Maasdorp is out. Here is the official line: "ADvTECH and the Group CEO Mr Leslie Maasdorp have reached a mutual agreement to part ways. The terms are confidential to the two parties." Well. And ex CEO Frank Thompson has been appointed interim CEO. Out and back in, whilst the company are looking for someone who is full time. Maasdorp has only been in the CEO role for a little over six months (less, full time), talk about a very short time there. And when does he leave? 23 March. Which is today. Confidential? Wikipedia has a sentence in the Corporate Governance segment that says: "Corporate governance practices are affected by attempts to align the interests of stakeholders."
I suspect that Coronation, who own just a little over 26 percent of the business have been enlightened (on behalf of their investors) as to what is going on there, you would think that nearly 1 billion Rand of investments (26% of 3.8 billion Rand), you should know. Or perhaps all shareholders are being fed the same news, I know that their PR agency was in damage control this morning. Paul got a call from Brunswick saying if he was discussing it on Hot Stocks, or if we had investments in this one, they would make time to fill him in. Paul said, no holdings, no discussion any time soon. I guess that in time all parties will reveal their sides of the story. The PIC have increased their stake this year to around 5 and one quarter of a percent.
At the same time the company stuck out numbers, average, good enough to meet the markets expectations, the stock is up one third of a percent after digesting the initial shock of the Maasdorp exit, it was down over three percent at the beginning. The stock is neither cheap nor expensive, it has rallied over the last 12 months as they point towards growth strategies, not without its pitfalls however. Since the beginning of 2013, the stock is up 50 percent. Here are the growth prospects, as per how the board sees it: "All three trading Divisions are showing positive performance trends that augur well for further growth in 2015. It is clear that growth prospects have been considerably strengthened and with a strong foundation in place and further investments to come, Group shareholders can look forward to higher growth rates in the coming years as we implement ambitious yet well considered strategies." I am not too sure that this is the best vehicle to take advantage of a swing by middle income South Africa to private education, it certainly is not a bad entry point. Advtech makes three times the profits Curro makes, Curro is constantly swinging for the fences and connecting each and every time.
We're reading this, you should too.
Are active managers better during market turn downs? - Which Active Funds Outperform During Bear Markets?. The general rule still holds, don't try time the market and add to your investments as regular as possible.
Some stats on helping you grow your investments - Dine out less, but indulge your Starbucks coffee addiction.. The important note, is to buy Starbucks (the coffee and the shares!)
Competition is what makes Capitalism work - Competition works: the case of fund expenses. Due to competition we are finding ways to do more with less.
Home again, home again, jiggety-jog. Grrr .... our bleeding phones are on the blink, we are trying to get out of a contract that does not work for us, at all. We are busy sorting that out. For good this time.
Sasha Naryshkine, Byron Lotter and Michael Treherne
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