Thanks for getting me through to the finals with all your tweets and all your retweeting. One level up now chaps, I have made the finals and they are tonight. I need your love just one last time and in this case, it needs to be timeously at 20:30 tonight, Tuesday the 3rd of March. Here is what you need to do, in order for me to win the title and the opportunity to donate the funds to charity. So. Watch the show live, there is a twenty minute period in which to vote, that is all. Copy and paste the following in your Twitter status and tweet it, if you feel I deserve to win:
- @ssoleague #Bucks for the win
As simple as that, a copy and paste and a tweet, it has to be between 20:30 and 20:50 tonight, Central African Time, that is the Joburg time zone so as to not confuse you. Again, thanks in advance for all the support, it has been a very long "season".
"Yip, whilst the NASDAQ is back at 5000 points (and around 4 odd percent away from the intraday highs), the earnings relative to the prices are one-fifth roughly of where it was back then. If the NASDAQ at current levels, on historic earnings was trading at 120 times, then the level would be 26000 points. In reverse, if the NASDAQ back then was trading at the same earnings today, the level would have been 958 points. Yes, it seems very different this time."
To market, to market to buy a fat pig. Yesterday we had the opportunity to listen to Joe Kernan, the man who does not know that Ireland uses the Euro as a currency and is part of the Eurozone. No, I am kidding, we had the CNBC interview by Becky Quick of arguably the best investor of all time, Warren Buffett, an extended one at that. There are of course always awesome pieces of titbits to pick up, we had a laugh in the office when Warren Buffett, when asked about Greece compared them (Greece) to a dog that kept peeing on the carpet, and rewarded for it. I am not too sure that the Greek people will like the dog analogy with the owner being the rest of their European brothers, I guess Buffett meant no harm to anyone when using that analogy of the dog. He just meant naughty behaviour.
Here is what else he said: "What Greece has done is exposed the weakness of the original concept. And the idea that you're going to link currency in lock step among a large group of countries that had different fiscal policies, different cultures, different labor laws and everything. It has a structural weakness to it." I guess what he means is that if Greece asked for entry today the answer would be a definite no. No thanks, go away and fix your problems, come back in ten years time and try again. What is done is done.
Buffett expanded on that, talking about what he thinks will happen in the Eurozone: "I think it will be modified. Listen, the first time around, we've had amendments to our constitution, right? We thought we wrote a pretty good document. And we did. But we still have to amend it occasionally. And there was probably a burst of enthusiasm that they really got - they did half the job, and they will have to do the other half of the job." When I read that it suggests to me that Buffett thinks that the Eurozone will change the rules to avoid further entrants, he however believes that in theory the rest of the participants in the Eurozone will get it right.
For me however the biggest one was a follow up from the Buffett letter over the weekend, the whole argument between value investors and growth investors. I suspect that there is no one argument, there is no one style that is superior to another. Being too rigid and not flexible means that you miss many opportunities. Although not conclusive. Here goes, great quote: "I always say if you aren't investing for value, what are you investing for? And the idea that value and growth are two different things makes no sense. I mean, growth is part of the value equation and a company that grows and uses little capital in doing it gets high returns on incremental capital is obviously worth more money than one that doesn't grow. That doesn't make the one that doesn't grow valueless though." Growth and value, you need to make sure that the company that you buy offers good value, for the growth prospects it offers.
The difference between Buffett and everyone else is that his time horizons tend to be far longer. I have seen the Berkshire Energy business (hat tap our old colleague Gareth) building many solar farms and selling Exxon Mobil at the same time. He is happy if IBM, a position that the company holds, goes nowhere price wise for the next 5 years because he is going to carry on buying it on the cheap. Buffett is actually hoping that the price goes nowhere. Now, in the interim, Berkshire has lots of other investments that are doing better than even and are going forwards at a faster pace than the rest of the market. Meaning that Berkshire can be patient on a business that is in a bit of a funk and has the market shunning it. That is when they buy it. Others do not have five years. Great bunch of material to get through, the Buffett interview, you can pick up the highlights via CNBC: Buffett: Greece shows weakness of 'shared currency' concept
Meanwhile the NASDAQ topped 5000 in last evenings trade. It has happened before, back in March of 2000, when the NASDAQ as a collective traded at 120 times earnings. Now that number is close to 23 times. Just for comparisons sake, the S&P 500 was close to 30 times earnings back then. A high price to earnings multiple is cause for concern, when earnings grow quickly that unwinds in a tick. I have seen expensive companies look cheaper than "cheap" companies after the company earnings catch up to the share price. Obviously at 120 times earnings you are expecting earnings to be nothing short of explosive. Many businesses didn't even have earnings of any sort.
So yes, to suggest that this is the same as last time is not right, it really is different. You might think that 23 times earnings is stretched, some of the majors seem to have relatively modest valuations when compared to the index. Apple for instance is trading on 17.4 times earnings. Forward that unwinds to around 15 times, according to the expectations of the current year earnings relative to where the share price is trading now. Google trades on 28 times historic earnings, that unwinds to just less than 20 times based on current year expectations. Microsoft trades on 17.7 times earnings, again that unwinds to 15 times in the current year. Facebook trades on 74 times earnings, against expectations of nearly 2 Dollars means that Facebook trades forward on 40 times earnings. 30 to the next years earnings.
Alibaba? 46 times current earnings, less than 30 times forward. Oracle, 18.4 times historical, 15.2 times forward. IBM, 10.2 times current earnings, that is actually expected to stay the same, at exactly that. I guess the point that I am trying to make is that the high priced stocks like Alibaba and Facebook are growing fast, they will catch up and unwind, the others are all cheaper than the rest of the market currently. Yip, whilst the NASDAQ is back at 5000 points (and around 4 odd percent away from the intraday highs), the earnings relative to the prices are one-fifth roughly of where it was back then. If the NASDAQ at current levels, on historic earnings was trading at 120 times, then the level would be 26000 points. In reverse, if the NASDAQ back then was trading at the same earnings today, the level would have been 958 points. Yes, it seems very different this time. Last point worth making, the dividend yield on the NASDAQ now is better than the 10 year treasury.
Things we are reading
A 5 min video of what can be done in a lab - The Process of Growing Bones From Scratch. It is amazing how healthcare is evolving.
An icon goes green - The Eiffel Tower has new wind turbines, and they're beautiful. If a landmark like the Eiffel tower is modified to have green energy, you have to think that as a society green energy is inevitable. Great news for alternate energy companies and less so for commodity companies.
Connecting the world will go along way to putting everyone on the same playing field - Google says its Titan drones will make their first flight in a few months.
There is a common misconception that having foreigners in your country is bad for the local population - Romanian and Bulgarian workers are flooding the UK, but are actually no threat to the job market. What normally happens though is that the foreigners add extra demand for consumption (good thing) and they tend to be more qualified and/or work harder, which makes local companies more profitable.
Home again, home again, jiggety-jog. Markets here are higher to begin with, the precious metals companies are getting smoked however, both down over two and half percent. Hey. You must not at any stage forget to follow the instructions for watching me on CNBC tonight, that is channel 410 at 20:30, for a live version of Share Shootout. Tune in early at 20:00, watch the new Hot Stocks with Paul, and then you are going to have to be on your best tweeting form in order to make me the winner, and then ultimately the winner for a charitable cause. It takes a few moments of your time, once again I need your help here!!
Sasha Naryshkine, Byron Lotter and Michael Treherne
Follow Sasha, Byron and Michael on Twitter
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