"The company have invested 30 billion Rand in their networks to improve the quality, why shouldn't people pay more? I am sure that if they are all peeved when the contract ends, they can go look elsewhere for a better deal, 30-40 Rand extra a month is hardly a kings ransom for contracted customers. More especially if your service has improved relative to the fixed line competition."
To market, to market to buy a fat pig. I was quite interested in the Crossing Wall Street email from overnight to see that over the course of this month there has not been a single day (on the S&P 500) of back to back gains. It is the single longest period, says Eddy Elfenbein, for nearly twenty years. Whilst markets have not really been that volatile over the time period, you certainly get the sense that this is a fair amount of yes-wait-no. Running between the wickets. I was once runout without facing a ball (I was ball watching), as the batsman facing shouted go. Go sounds like no. So perhaps Eddy should have titled this piece go-no-yes-wait-slow. Over the last one month the S&P 500 is down over two and a half percent, locally the market has had a pretty torrid two weeks, in part the Rand strengthening. The Dollar has weakened, not too much to do with the domestic economy.
One of the finest exports of the Eastern Cape, from a little dairy farming town called Alexandria, not too far from Kenton-on-sea, is our reserve bank governor, Lesetja Kganyago. He delivered the MPC statement and then took the Q&A afterwards yesterday afternoon. Remembering that the governor has only been on the job since October last year, it has been a volatile time for the currency, equally inflation has eased as a result of both lower demand and a lower oil price. You can download the statement of the MPC and have a read through if you want.
The Bank thinks that the hurrah from lower petrol prices is likely to be short lived, remembering that the Basic Fuel Price consists of what the stuff actually costs, and then all the other associated costs, including the Road Accident Fund (RAF) levy and the fuel levy. The basic fuel price, as per last month, is less than half of the total price, here in Gauteng. The RAF levy is being hiked 50 percent, if we didn't drive like idiots and equally if the fund was managed better, we would be not be forced to pay so much. So, if minister Rob Davies was really genuine, he would work harder at reducing the taxes on citizens, making sure they pay less and less fuel tax. Let us face it, from a government point of view, it is the very easiest way to collect taxes.
You cannot manufacture your own fuel (you can, it is hard) in your every day life, you can't own an electric car unless you have serious storage capability. i.e. you are off the grid. I saw the pricing for the i3 BMW and i8, it is nuts, bearing in mind that you have to replace the battery in 7 odd years time, that costs around 150 odd thousand Rand. The i8 is priced at a whopping 1.755 million Rand. You read right. You still need to make sure it is charged! The i3 with a range extender? 595 thousand Rand. Yowsers. You can of course own a Nissan leaf for a mere 480 thousand Rand, a range of 195 km. If you want to go green sports-lovers, I suspect that riding your bicycle is a better way to go about it. Specifically in a (local) world of load shedding. To go off the grid entirely? It is going to cost you in the region of 150 to 250 thousand Rand. The inverters and the batteries are wildly expensive.
Back to markets, briefly, the S&P 500 managed to turn losses into gains, and then modest losses at the end of the session. Yemen, the bombing thereof and worries around the oil market (how crude and cruel are us humans?) saw the price spike and then come back. Why? Yemen are not a particularly big producer of oil. I remember a friend of my mums school days spent some time with us in Mozambique, he was a French chap who worked for the UN and had just come from Yemen, working on the unification. I remember him describing it to me, it seemed quite weird, notwithstanding the fact that I was living in a civil war country myself.
Sheltered life you see. It seemed like a crazy place then, sadly for the 24 million odd inhabitants of that country (who I am pretty sure do not want a war) it seems like a crazy place now. The Saudi's next door object, there are deep religious differences, you must appreciate and understand them deeply before wondering why the bombing is happening. Most people I know all want the same things, better education for their kids, safety and security and improved medical care. Yes. Force is not my favourite thing, it scares all and sundry.
Company corner snippets
Vodacom have hiked their contract prices. I think it is about time. Come one. People want a 4G/LTE network, an amazing handset (the new iPhone is fabulous) and on an inflation adjusted basis they have been paying less. Yet the Rand has weakened and the handsets and services have improved. If you stand with your handset anywhere in the urban areas and get a fantastic LTE connection, well then I am sorry, there is a price associated with that. I think that this is a very important point in the cell phone pricing wars, if your best customers demand the best services, then I am afraid that there is an associated cost with that.
The company have invested 30 billion Rand in their networks to improve the quality, why shouldn't people pay more? I am sure that if they are all peeved when the contract ends, they can go look elsewhere for a better deal, 30-40 Rand extra a month is hardly a kings ransom for contracted customers. More especially if your service has improved relative to the fixed line competition. I suspect that MTN will follow. Cell C, who fought the battle for lower prices (and are now sucking wind) might have to concede on this one. I want to know of personal stories of someone who has used all three networks, which one was best for you, and why?
It is not all about the money. In fact for many rich people the desire to give back by way of money and teaching exists. Many smart and rich people give a lot back, you might well say that they can afford to, they certainly do not have to. Here is the story that I am talking about: Apple's Tim Cook will give away all his money: Fortune. He is going to pay for his nephew's college education, and then he will have no more obligations. So, expect the funds to flow to the The Giving Pledge. As per the website: "The Giving Pledge is an effort to help address society's most pressing problems by inviting the world's wealthiest individuals and families to commit to giving more than half of their wealth to philanthropy or charitable causes either during their lifetime or in their will."
Now Charlie Munger, Buffett's right hand man and friend said that Costco did more for society than any philanthropic cause. The website makes it clear that this is not Bill and Melinda Gates Foundation money, that is separate. Signatories can decide who to donate to, the fact of the matter is that they got rich, they chose to give half or more of their wealth away. My argument is that there would be NO money to give away if people were not incentivised to get rich in the first place. If you do not allow captains of industry to get rich, there would be less and less charity. Mark Zuckerberg looks like the youngest giver on that pledge, reinforcing my thoughts that it is not about the money.
Things we are reading
The term bubble in the asset management community is a scary one (also a very over used term) - A Bond "Bubble" is Very Different From a Stock "Bubble"
Internet is becoming essential in the modern world, Facebook are one of the companies pushing to get internet to remote areas - Facebook tests solar-powered Internet drones
Keeping a finger on the pulse of science - The world's largest science experiment is about to be restarted
Home again, home again, jiggety-jog. Holy smokes, the stocks that have roared recently (like the Lions rugby team?), the gold and platinum shares are getting drilled today. As is the rest of the resource market, dragging the rest of the market lower too. Not helping either are financials and banks, I guess the prospect of higher interest rates (as the SARB governor alluded to) is not exactly wonderful for their customers. US futures are lower, the data looks average. Oh, and the Greeks are really out of cash. Deposits in Greece have fallen to a ten year low. Yech.
Sasha Naryshkine, Byron Lotter and Michael Treherne
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