Money with a dash of Funny: September 2015

Wednesday 30 September 2015

Goodbye Q3, you will not be missed

"Basic Materials (Commodities) as a collective on Wall Street have fallen nearly 20 percent in the last three months, here in Jozi over the same time frame, the Resource 10 index is down nearly 19 percent. Wow, that has been part of the story, China "slowing", weaker manufacturing reads. A lot of worries about the health of the second biggest economy, the reason why I put slowing in inverted commas is that any country in the world of half, one quarter or even one-tenth of the size of the Chinese economy would love that problem of slowing to 6 or 7 or even 4 percent growth. The Chinese will be fine in the end, they will emerge all the better for dealing with their debt issues."

To market to market to buy a fat pig. As we head into the close of the worst quarter since the financial crisis, it is always a time for reflection on why it was the worst. More importantly, what is to come not only in the next quarter but in the coming years? It is always the most incredible thing when I read really detailed reports with revenue projections three years out, the recent incidents (less dents, more smash like) at Volkswagen are a stark reminder that even the most "trustworthy" company can of course surprise all and sundry. And in this case, not in a positive way.

The impact of consumer behaviour on the company will undoubtably be negative, I do not believe that it will be bad for the whole "made in Germany", do you? I still trust all the German companies, perhaps I bat more for big business than most consumers. Most people I speak to colloquially always think that business is trying in some way to "screw them". My response is always to say, then don't use the service. The look on their faces is priceless, my other answer is, "why don't you then own the shares?"

Over here in Jozi, Jozi, stocks were lower by 0.22 percent on the day. We are about down 4.8 percent for the last three months, as they say in the classic, not a pretty picture. What has been the problem, Volkswagen and Glencore aside? I guess Glencore is more directly linked to the root of the equities market sell off, a leveraged commodities trader and miner. With China "slowing" and shuffling to a more consumption based economy, away from building on the grandest scale every witnessed in humanity, the victims have been the likes of Glencore.

Basic Materials (Commodities) as a collective on Wall Street have fallen nearly 20 percent in the last three months, here in Jozi over the same time frame, the Resource 10 index is down nearly 19 percent. Wow, that has been part of the story, China "slowing", weaker manufacturing reads. A lot of worries about the health of the second biggest economy, the reason why I put slowing in inverted commas is that any country in the world of half, one quarter or even one-tenth of the size of the Chinese economy would love that problem of slowing to 6 or 7 or even 4 percent growth. The Chinese will be fine in the end, they will emerge all the better for dealing with their debt issues.

The other major concern has actually mostly been associated with good news. Now you might find it hard to believe that is the case when the equity markets across the globe have fallen since the middle of August, it is however the same concerns around the Fed and when they are likely to raise interest rates. Every word and speech is watched closely, and unfortunately all Mr. Market participants can talk about is the FOMC and when the Fed are going to raise rates.

That seems far more important than Nike and Apple selling like crazy in China, far more important than Caterpillar hitting the skids and selling far less in China. It seems far more important than a shift in the energy supply and demand balance across the globe and what it means for long term prices of crude, iron ore, copper and closer to home platinum and gold prices. I am afraid that the super cycle that we became used to has returned to a lower for longer price environment. So in short, whilst China is to blame (if you are looking to point fingers) for lower commodity prices, the other reason Mr. Market has decided to take a Northern Hemisphere break for the bulls, look no further than the Fed and anxiety over the interest rate environment.

At least we should close out the last day of the third quarter of 2015 in a better light, stocks across Asia are up sharply, the Japanese stock market is up nearly three percent. Perhaps in response to a really positive speech by Prime Minister Shinzo Abe in New York yesterday, hosted by Michael Bloomberg at Bloomberg HQ, he was really positive about a new golden age for Japan over the next five to ten years. Of course he would say that, he is of course a politician! Stocks in Hong Kong are one and two-thirds of a percent higher on the day.

There have also been high ranking meet ups during the UN shindig, US president Obama and Vladimir Putin shook hands, we saw an interview this morning with the Russian president and Charlie Rose. Putin spoke of his father's side of the family during World War II losing 4 of the 5 brothers, indicating that the wounds (even 70 years on) are still relatively fresh. We might say, forget it, for many the scars still run deep, which is even a bigger reason of why Europe must work for everyone in it. Less conflict, more trade, more similarities and less differences. Having said that, the last quarter has been less about Europe than the prior ones for the last five years. That was pretty refreshing not to hear about an exit from Europe by the Greeks, phew. And they even had an election in that time.

Company corner

This is pretty incredible. Want a part time job, want to earn 18-25 Dollars an hour? Or until the drones replace you, someone quipped on Twitter, then become a delivery person for Amazon -> Amazon Flex. What are you going to deliver via your own transport? Yes, your own transport. It turns out Amazon Prime Now packages, for those who really can't wait. You can work 12 hours a day, 7 day a week, earnings 2100 Dollars a week, or 109,200 Dollars a year, provided you work each and every day for 12 hours a day, presuming you changed that to 5 days a week, the annual salary would still be an acceptable 78,000 Dollars a year.

So Amazon is basically applying the collective need and desire, as well as cutting out traditional companies (UPS, DHL and the like) to provide services for their customers. I mean, do you care how your package gets to you? Does it matter that a sweaty unshaven teenager delivers your package or a middle aged delivery person dressed in company regalia? I am pretty sure that there will be scoring (the Uber/Tripadvisor/Booking.com stars) for the delivery people, and Amazon will likely use higher rated people first. The same age old strategy of, the better you are and the harder you work at your job, strangely the more you seem to get paid. Amazon continues to shake things up a little, each day at a time for people to enjoy the benefits of lower prices and convenience at the same time.

Companies create value by allowing humans to use resources more efficiently. The concept of Uber and the likes of AirBnB allows us to "share" or cars or houses with other people while we are not using them, the result is that we have less idle capital and resources. Amazon is doing exactly this, with this new service. Quick deliveries will mean less of a need for brick and mortar stores and the ability to build warehouses out of the way and on less valuable land, with the result being cheaper goods and more money for the consumer to spend on other things, the BusinessInsider has this take - Amazon goes after Uber and a slew of other on-demand startups with its own delivery service.

Linkfest, lap it up

Given how important the internet is to our global society, helping people who can't afford it is a great initiative - Google is bringing free WiFi to train stations in India

It is the small things that make a car - Tesla's new Model X has a 'bioweapon defense mode' button. "Because what else do you want from a futuristic, semi-autonomous, all-electric car that's as fast as a Porsche than the ability to survive biological warfare?"

You will read this, nod and agree It is not a coincidence that people who are positive in their outlook in life are more successful. You know our mantra around here, "Be Optimistic". A research paper from Oxford University titled Particular brain connections linked to positive human traits points out that "Those with classically positive lifestyles, behaviours had different brain connections to those with classically negative ones".

We tend to think of equality in society between men and women as something that is a given and converging towards equal pay is only a matter of time. Yet we forget for the vast majority of recorded history that women were second class citizens (and still are in some parts of the world), only 150 years ago did Britain have their first female doctor. She was also the first woman mayor in Britain. It seems like a terrible waste of resources to have half the population unable to participate in the economy, don't you think? Good thing it is 2015.

Home again, home again, jiggety-jog. We have started today 1% up, with Glencore up 9% leading the way. We may just close out the quarter in positive territory, some good news in a pool of difficulty. Are you excited about the ADP numbers today? Yeah, maybe. The Rand has been stronger over the last 48 hours, which coincides with consensus being that emerging market currencies will fall further. I remember the bottom for Euro in recent times was when people were saying Euro/Dollar parity is about to happen, almost a given. . . Head down and carry on.

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

Email us

Follow Sasha, Byron and Michael on Twitter

087 985 0939

Tuesday 29 September 2015

Hunter slays Impala, Glencore and Anglo

"The five year collective performance is even worse, down 75 percent. So whilst many in the chattering classes may think these companies are worth trillions, they are wrong. By my count and I include around 11 platinum miners and explorers, their collective market capitalisation is 120 billion Rand, I am excluding the likes of ARM in this calculation. At the current exchange rate of (too much, don't look now), that translates to 8.48 billion Dollars. Sanlam is now bigger than the whole listed platinum complex."

To market to market to buy a fat pig. Oh dear, it looks a little shaky out there again, US markets overnight were bashed about, resources and biotech companies caned for different reasons. I saw a graph that suggested that whilst earnings growth had slowed in the US as a result of Dollar headwinds and a general slowing environment, all the other key metrics in the US pointed to a far improved outlook. The labour markets were strong, the housing markets were strong, another personal income and spend read yesterday confirmed that the timing in terms of raising rates is here. And of course the commentary from Janet Yellen the Fed chair on Friday, that rates would go up this year, seems to have also spooked the collective. It is going to happen, deal with it.

Biotech stocks again were sold off as we mentioned, some of the big names are starting to look like value territory, Amgen, Gilead, Biogen, and then amongst the majors, JNJ and Merck. When you fly high, you can fall hard, Valeant Pharma. was crushed over 16 percent, the stock still trades on a pretty lofty valuation. Which is why it is so hard to invest in Biotech companies, to find the next blockbuster and with heavy political pressures it is not going to get easier. Feedback on the piece yesterday by one of our favourite people in the Vestact community (is there such a thing?) on healthcare, all the way from Vancouver:

Before you were born, daraprim was the drug of choice for malaria. It cost 50c/tablet. So even $13.50 is outrageous. And all these biotechnology drugs that cost $100,000 - $500,000 per annum to treat one patient. How about some data on how many patients are actually cured by them? Maybe even some data on how long a patient's life span may be expected to be increased and his/her suffering ameliorated.

Medical care is perhaps one of the most contentious areas of investment, on the one hand there is this need for all ailments to be treated and lives extended, that does come at a cost to someone. And that cost of funding the therapies lies at the door of investors, who would like a return on their initial outlay of real cold hard cash, be that on their own behalf or for their underlying investors, pension and or otherwise. It is hard, there is the humanity of good health for all, morality for broader society (as our reader pointed out above), abuse of power by politicians and companies alike, regulatory hurdles and good old fashioned funding for hoping for longer dated returns. It is always going to be hard to be invested in this sector, it must not stop one from looking for a great investment.

After the bell rang for the close in a session that the shorts had no doubt feasted, we were at the lowest levels in a month, the S&P fell two and a half percent, the nerds of NASDAQ which have the heavy biotech component, fell just over three percent and the blue chip Dow Industrial managed a better looking (on paper) 1.92 percent loss on the day. Like I mentioned earlier, good consumption and pay numbers, as well as a record first weekend for Apple, who sold 13 million units of the two models of the 6S (pronounced success) failed to keep the sellers at bay. There are always too many things to worry about in equity markets, if you can separate the fact that you own companies and not share prices. I hear very often, and it is human nature, that people respond to share price performance and project that onto the company, deciding whether it is a "good one" or a "bad one".

On the local front the resource complex was taken out the back and beaten like an old horse, if that wasn't enough they were shipped off to the glue factory. No, that is a bit harsh, don't you think? It was led by a complete all fall down of the Glencore share price, fingers pointed at an Investec report that suggested that both them and Anglo were going to struggle with their heavy debt burdens. The scoreboard looked more like Blikkiesdorp High competing against Grey College on the rugby field, not pretty. The analyst that suggested that the creaking debt burden of Glencore may well wipe out their shareholders is a fellow by the name of Hunter Hillcoat, a keen cyclist who has worked across the world, now resides in London. He did his honours in geology here in Jozi at Wits, after completing his undergrad in Perth. It is pretty amazing what you can find out from LinkedIn.

Hunter slays Impala, Glencore and Anglo the headline should read (and it does). The FT article (subscription only, sorry) reads: Glencore sails into Bermuda Triangle of its own making, it explains the backdrop to a more dramatic drop in Glencore (down 26 percent, yes, that much), Anglo American (down 9.3 percent), Amplats (down 7), Impala (down 9 percent) and BHP Billiton (down 4.9 percent) meant that we cracked collectively, to add insult to injury the platinum price settled at the lowest level in six and a half years. African Rainbow Minerals stock was down 13.4 percent, Kumba Iron Ore down 14 percent, Exxaro off 10 percent. There is only one platinum miner left in the ALSI 40, only one diversified miner left in the top 10. There are in fact only 5 mining companies left in the entire ALSI 40, 12.5 percent representation.

We (that is all of us who live in this fine country) have done pretty well to diversify, seeing as Joburg, according to Wiki is the world's largest city not situated on a river, lake, or coastline. Why? The gold of course, the rush to riches, the fame and fortune. The mining town that really made it. Looking down the List of urban areas by population, Joburg and the East Rand fall into 42nd place, and by my count are definitely one of the newest cities in the world.

If the first people really settled here in 1886, that means Jozi turns 130 next year. By contrast, cities around Jozi in the population stakes include Wuhan, which is around 3500 years old, Hyderabad, which is around 2500 years old and Dongguan, which has traces of settlements of 5000 years in age. OK, if we include Mrs. Ples and Homo Naledi, then we have around 2 million years on everyone. For interests sake, the largest City Metro on the planet, Tokyo with 37 million inhabitants, was a sleepy fishing village 900 years ago called Edo. Cape Town is 105th on the list, Durbs is 125th and up the drag from here, Tshwane/Pretoria is in 155th place. Gauteng as a collective has a larger population than greater Rio de Janeiro. In fact, further down the list of urban areas by population, you can see that there are 75 places with more than 5 million souls, and nearly 500 with more than 1 million people.

The broader market sold down one and two third of a percent. Yowsers. Only SABMiller with a pending bid from AB InBev stood out in a sea of red, that stock was up 3 percent. The All share index is now down for the year again. Spare a thought for the collective platinum miners, those shares have halved since the beginning of the year. The five year collective performance is even worse, down 75 percent. So whilst many in the chattering classes may think these companies are worth trillions, they are wrong. By my count and I include around 11 platinum miners and explorers, their collective market capitalisation is 120 billion Rand, I am excluding the likes of ARM in this calculation. At the current exchange rate of (too much, don't look now), that translates to 8.48 billion Dollars. Sanlam is now bigger than the whole platinum complex. About the same size at a global level as Electrolux who make vacuum cleaners (and many other household products), and PetSmart, who sell fish food, dog collars and cat scratching poles. Sigh.

Linkfest, lap it up

Twitter is one of those applications that either you love or you hate. As it struggles to grow its user base, here are 10 good reasons why you should join - 10 Things I Love About Twitter

Josh Brown chats about his view on inflation, employment and social changes. Given the huge change that has come with technology and a shift happening from Gen X to Millennials as the biggest generation in the work force, society is at an inflection point - The Hardest Button to Button

As the late Yogi Berra said, "It's tough to make predictions, especially about the future." - Can You See the Future? Probably Better Than Professional Forecasters. It has been shown that professional forecasters are fairly poor at forecasting the future, it would seem that informed amateurs have a better time of it. Paul was one of the superforecasters mentioned in the post.

Home again, home again, jiggety-jog. Stocks continue to slide across the globe, it is just a matter of time before bargains become real buys. The Fed, China, I think that in six months time people would have forgotten about this period, which is only around 7 weeks in the making. It seems like a long time, in the bigger picture it is not however, keep calm and carry on.

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

Email us

Follow Sasha, Byron and Michael on Twitter

087 985 0939

Monday 28 September 2015

Frothier body for SABMiller

"The Sunday Times in the UK was reporting yesterday, suggesting as much as 106 billion Dollars. That is a huge number and represents a significant premium on an already inflated price, as much as 15 percent. That would see the takeout multiple of around 30 times! Yowsers, that is expensive, and as the Reuters article (AB InBev could bid $106 billion for SAB Miller: Sunday Times) points out, will create a 275 billion Dollars beast."

To market to market to buy a fat pig. A holiday and an extension of the weekend means that for some, the markets closed a lifetime ago. I spoke to an old friend who told me that a fellow computer programmer had written a binary options forex program with a maximum trade time of 60 seconds. So if he were away from the markets for a week, it may well feel like a thousand years. Things change a lot in terms of the process, for the underlying businesses that operate on a day to day basis, not much changes minute by minute. So whilst everyone wants the same thing (i.e. to make money), we often try and stress that there are very different and competing strategies. For us, ultimately it all depends on earnings from these businesses that we own for our clients.

Talking of which, the internet meme going around captioned the new Nike logo, Nike, Just buy it. The stock, and not the shoes or apparel. Although that would be more helpful for the stock, the one would be an extension of the other. Nike stock closed at an all-time high on Friday evening, up 8.9 percent on the day, now up 30 percent year to date. Earnings are primed for perfection, the stock trades on a 30 multiple, not cheap at all. Mind you, neither are their goods, the one thing you can almost always be sure of is that quality is almost never cheap. The market cap of Nike is now 107 billion Dollars, Adidas is only 16 and a quarter billion Dollars, whilst Under Armour is 22.3 billion, that stock trades on a current year estimate multiple of 93 times! Next year that unwinds a little to 71 times, it still seems wildly expensive, earnings are growing like gangbusters, however. The analyst community is either hold or buy on the stock, a lone soul standing out with a sell.

Locally on the markets Friday the news that Tiger Brands CEO was stepping down (and there was a message to suggest that a replacement CEO was on the way) sent the stock higher, up over four percent on the day and at the top of the ALSI 40. At the other end of the spectrum was another horrible no good day for the resource companies, Glencore down 9.4 percent, Anglo American down nearly 6 percent and at another multi year low. After all was said and done in Jozi, Jozi the all share closed down one-tenth of a percent. Over the seas and far away, stocks closed mixed on Wall Street, the surge from Nike sent the Dow Jones up over 100 points on the session, the broader S&P 500 closed a fraction lower whilst tech stocks slid lower, down a percent.

There has been a recent selling of the heavy kind in Biotech companies, the "Bio Therapeutic Drugs" index is down nearly 17 percent in a mere five days, last week. Relative to the S&P 500, which is down 1.36 percent in that time. Amgen, Celgene, Gilead, even the index IBB (which is the broader based index, the whole Nasdaq biotech index) has been sold off. IBB was down 13 percent last week. Having said all of that however, the index is up an astonishing 256 percent in five years, the different and revolutionary therapies are certainly exciting investment avenues.

Recent comments by what may be likely to be the next president of the US, Hilary Clinton, who referred to their pricing as "price gouging" are concerns, the story was specific to a 62 year old therapy that went up in price from 13.50 Dollars to 750 Dollars a tablet. Not over five years, rather overnight! The New York Times published a less than favourable report on the company and therapy concerned (Turing Pharmaceuticals acquired Daraprim in August). What does not help is that Turing is founded by a former hedge fund manager, Martin Shkreli, easy targets for politicians. The story is worth a read: Drug Goes From $13.50 a Tablet to $750, Overnight. Not a good headline for essential companies to society.

Company corner

I have seen news circulating that suggests that a formal proposal may be put forward by AB InBev for SABMiller. The Sunday Times in the UK was reporting yesterday, suggesting as much as 106 billion Dollars. That is a huge number and represents a significant premium on an already inflated price, as much as 15 percent. That would see the takeout multiple of around 30 times! Yowsers, that is expensive, and as the Reuters article (AB InBev could bid $106 billion for SAB Miller: Sunday Times) points out, will create a 275 billion Dollars beast. Perhaps Altria have lent their support for such a deal, they are the biggest shareholders and no doubt need the cash! Talks have begun, as per the article, and they are apparently friendly. Whether or not they meet in the middle on price, a big premium again could see 50 percent more for SABMiller shareholders pre bid. That should have a positive impact for the JSE today!

Linkfest, lap it up

Here are some interesting pictures from the outer edge of our solar system - Pluto's surface looks like "dragon scales" in NASA's new high-res colour photos

Up until the 90's, the way that film was produced and developed favoured lighter skin tones. It wasn't until furniture makers and chocolate makers complained that film wasn't capturing the difference in wood tones and chocolate types, that things started to change - A brief history of colour photography reveals an obvious but unsettling reality about human bias.

Further to what we spoke about on Friday. The new focus on diesel cars will most likely result in the death of Diesel cars much sooner than expected, which is not great news for the platinum industry - VW Scandal Will Speed Up Diesel's Demise.

Home again, home again, jiggety-jog. Markets are mixed across Asia today, US futures have "gotten better" over the course of the morning, even after some more iffy looking Chinese numbers.

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

Email us

Follow Sasha, Byron and Michael on Twitter

087 985 0939

Friday 25 September 2015

Nike sparkles again

"Nearly 65 percent of all sales come from North America and Europe, this is still very much an aspirational brand in many parts of the developing world. China for instance, Nike sales grew 30 percent in Dollar terms (yes, it sounds like China is finished), yet on a quarterly basis Nike does not even do one billion Dollars worth of sales. China sales are around half of Europe, roughly ten percent of global sales."

To market to market to buy a fat pig. I trust you all enjoyed heritage day yesterday. I didn't turn any meat of any sort, I am very sorry, tomorrow before the rugby, I have been invited by friends to turn some meat over hot coals. One thing that has struck me about this Volkswagen emissions scandal (lies) is twofold, one the headline from Wednesday was wrong, it was meant to say the "company's lies" and not the "companies lies." Thanks Paul for picking that up, apologies all around on our part.

Secondly and much more important, if we are seeing headlines like the diesel motor industry is called into question long term, what does that exactly mean for the platinum industry in South Africa? No wonder Impala Platinum was hit sharply Wednesday. Amplats too. The news goes from bad to worse for the platinum producers, if more battery operated motor vehicles are adopted by emissions conscious customers (of which there are very many in the developed world), that means less diesel engines, lower demand. In fact it is all above ground. Jewellery is becoming more important, a rising customer across the globe might underpin the industry, will it be enough to pick up the slack? Eish, I sure hope so for the sake of South Africa and the platinum sector that not too many changes are made, I fear the worst however!

Anglo American touched a new low in the UK yesterday, trading at nearly 621 pence. Many research reports that I have seen trade at a significant discount to their enterprise value, as much as around 40 to 50 percent. No wonder the value guys thought that the company offered significant upside not so long ago, however, their price in London is down a whopping 48 percent year to date. The Rand has cushioned the blow a little here in South Africa, the stock is down 36 percent in Rand terms on the Jozi all share. Possibly, on that price action in London today the stock will be plumbing lows seen 11 years ago. As far as I can tell, Coronation is the biggest shareholder of Anglo, with over five percent. And as far as I can tell, Coronation holds Volkswagen through the parent company, yech, it has been a tough time for them lately. Having said that however, Qatar Holdings saw a drawdown of more significant value with their much more significant stakes in Volkswagen and Glencore. It happens.

Company corner

Nike, one of the core Vestact recommended stocks reported numbers last evening, this was for the first quarter of their 2016 financial year. On a currency neutral basis sales increased 14 percent, up 5 percent in Dollar terms to 8.4 billion Dollars. Diluted earnings per share clocked 1.34 Dollars, up an astonishing 23 percent, due to higher gross margins, lower tax rates and most importantly a reflection of stronger revenues. Future orders in Dollars up 9 percent, excluding currency changes, up 17 percent. Yip, this is certainly, as their landing page of their investor relations says, a growth business. Tick that box! That is corny.

What is not corny, and the jeans manufacturers have alluded to this, is that the athletic leisure segment is increasing markedly. People wearing athletic wear as it is comfortable and stylish at the same time. The person wearing the clothes enjoys the comfort, the added bonus is that they are definitely stylish. And like Apple, they are not cheap, they are very expensive. CEO Mark Parker's comments in the Press release sum it up: Our relentless pace of growth is driven by our proven strategy of putting the consumer first, obsessing innovation in everything we do and leveraging our powerful portfolio. We're well-positioned to continue to deliver long term growth that is both sustainable and profitable.

After all is said and done, Nike is still very much a footwear company, selling more than 2 Dollars worth of shoes for every one Dollar of apparel. Check it out from the sales breakdown for product line:

Nearly 65 percent of all sales come from North America and Europe, this is still very much an aspirational brand in many parts of the developing world. China for instance, Nike sales grew 30 percent in Dollar terms (yes, it sounds like China is finished), yet on a quarterly basis Nike does not even do one billion Dollars worth of sales. China sales are around half of Europe, roughly ten percent of global sales. Emerging markets as a collective are 11 and a half percent of total sales. There is clearly much room for growth, bearing in mind that you can't replicate quality at a cheaper price. Otherwise of course it would have been done.

Brand recognition is key, association is also key. All NFL teams are sponsored by Nike. The Indian cricket team is sponsored by Nike, perhaps they need to sponsor Bangladesh too (and Pakistan) to be branded in front of the most cricket eyeballs globally. Manchester City in the Barclays Premier League, no more Arsenal or Man U. They do have Barca FC however! As well as the national football team here. Only one rugby team, the Argentina team, and Saracens, well done Johann Rupert. The real Fed (Roger), Venus Williams (arguably the greatest tennis player in 25 years), Rafa and Maria Sharapova all are sponsored by Nike. US College sponsorship is strong, Byron once told me a story of a basketball team having to change to Nike to attract young athletes. True story.

The numbers crushed expectations, with the stock up as much as 8% in after hours trading. With many things in life, you get what you pay for and Nike is no different. The stock is not cheap at 30 times current earnings but is well positioned to take advantage of the growth in the global middle class, the shift to healthier living and the athletic leisure sector. Still a buy in our books.

Linkfest, lap it up

How big is our solar system? The video is 7 minutes long but shows how big our solar system really is, the earth is the size of a marble in the model that spans 7 miles from one end to the other - Earth is a marble in this scale model solar system in the desert

Instagram has added 100 million users this year, to reach 400 million. Instagram is also going to ramp up its advertising services which could see it hit $600 million in advertising for this year, a great purchase from Facebook for $1 billion - Instagram Hits 400 Million Users, Soaring Past Twitter

Facebook still dominates the smartphone with the average person spending 50% of their time using the app - You really only use three apps on your phone. The more that people adopt smartphones, the more eyeballs advertisers get access to and the better for the likes of Google and Facebook - These are the 25 most popular mobile apps in America

Home again, home again, jiggety-jog. Our market is slightly up with Gold stocks leading the way. Anglo is down 2.7% planning catch up from the movements in London yesterday. The Rand weakened to R/$ 14.00 while we were donning our traditional clothing and having a "chop an dop", it has recovered slightly to R/$ 13.86. Good luck to the Boks tomorrow!

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

Email us

Follow Sasha, Byron and Michael on Twitter

087 985 0939

Wednesday 23 September 2015

Hit me baby one more time

"To tie in Britney and China one more time, in 1999 China had a population of 1.258 billion at the end of the year, estimates currently are just over 1.4 billion people, in 16 years the largest population on the planet has added 142 million people, that is roughly the entire population of Russia added in just 16 years. Two and a half times our population, in a mere 16 years. No wonder infant formula milk is such a good business in that country. What is quite interesting when looking at the 16 year perspective of Chinese GDP from then to now is that it has increased a whopping tenfold over that period."

To market to market to buy a fat pig. Britney Spears is 33 years old. The Chinese economic miracle is around 37 years old. Baby one more time (the Britney Spears song) is 16 years old. The anti corruption campaign in China is all of three years old this November, the time that Xi Jinping said that the economic reforms instituted all those years back (along with a strange blend of communism and capitalism) said enough is enough. There have been many arrests, expulsions from the communist party and in many other high profile cases, sentences in jail for bribery and corruption. This is the new China, one that deals with corruption. Why I mentioned Britney Spears and (hit me) baby one more time is that we see another poor PMI reading from China, the worst since March 2009.

And in case you needed reminding, that was the month that equity markets in the US bottomed out, I remember that. According to a quote I found on the interwebs, six days before the market reached a generational low, President Barack Obama said: What you're now seeing is profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal if you've got a long-term perspective on it. That is great perspective from a lawyer, right? Since then the S&P 500 is up 164 percent. Nailed it President Obama. OK, how "horrible" does the Chinese PMI read from this morning look? If you look at the graph that I have grabbed from the release, it doesn't sound as bad as the headline: Caixin Flash China General Manufacturing PMI

Whilst recently it has been bad, for the better part of 4 years Chinese PMI has been hovering around 50, sometimes above and sometimes below. I think what has spooked Mr. Market this time is that across many of the metrics measured in a survey of this nature showed decreases at a faster rate. The only thing building were stocks of finished goods, and at a faster rate. I have very little idea to know what to think of these surveys of real businesses on the ground, clearly the Chinese economy is slowing.

The Chinese government and the powers that be continue to reassure all and sundry that everything is going to be OK, whilst Pope Francis (the 266th Pope BTW) is visiting the US, so is Xi Jinping, the Chinese President and number 1! Except Xi is on the other side of the country, in Seattle. Xi is also going to meet with Bob Iger of Disney, Satya Nadella of Microsoft and even the wisest investor of all time (arguably) Warren Buffett of Berkshire Hathaway. Before he meets the real market soothsayer, American President Barack Obama in Washington DC. Xi seems to indicate that everything is OK in China.

To tie in Britney and China one more time, in 1999 China had a population of 1.258 billion at the end of the year, estimates currently are just over 1.4 billion people, in 16 years the largest population on the planet has added 142 million people, that is roughly the entire population of Russia added in just 16 years. Two and a half times our population, in a mere 16 years. No wonder infant formula milk is such a good business in that country. What is quite interesting when looking at the 16 year perspective of Chinese GDP from then to now is that it has increased a whopping tenfold over that period. Here is a graph from Tradingeconomics China GDP:

Wow, that is nothing short of amazing. By contrast, Japanese GDP is essentially flat in Dollar terms over the same period. Exactly, and I don't see headlines about how Japan is finished, on the contrary I see headlines about the rising sun and generally it is alongside a smiling Eddie Jones. Sigh. And the USA, that is up nearly 80 percent over the same time frames. That all sounds rather good if you stretch it out over a decade and a half. By contrast the Chinese market, the Shanghai Stock market is up only 167 percent. The S&P 500 is up only 50 percent over that time frame. The Nikkei 225 is only up 12 percent in those 16 years. So I guess it is fair to say that the respective economies, or at least the US and China have comfortably outperformed their major stock market indices, as we well know however, the stock market is not the economy and the economy is not the stock market.

Britney's hit me baby one more time rung out for the commodities stocks here in Jozi (and across the globe), the same concerns about China has seen some stocks plumb multi year lows. Anglo American sank 6.7 percent to end the day at levels last seen in April of 2005. And basically a 12 year return on the stock has been zip, zero, nil, nothing. Thanks so much for buying back those shares above 500 Rand a share. The picture is uglier in London, the stock in Pounds and pence at the worst level seen, well, ever, since they listed in June of 1999. The stock in the currency of the Great Britain is down 17.6 percent in the same time that the Chinese economy has grown tenfold. If any company missed the commodities boom, well, this was the one. By contrast, BHP Billiton since the middle of 1999 in London have seen their share price up nearly 400 percent. Yesterday the stock sank over 5 percent in London.

With the move South in Rand terms yesterday, Old Mutual is now a bigger company by market capitalisation than Anglo American. Two old companies, one from the Mother City, the other with its roots here in Jozi, this is a first in their listed lives, not so? For those watching the daily scoreboard, stocks as a collective sank 1.74 percent here in Jozi, Jozi, the All share is last at 49853 points. For the last 12 months stocks have been flat, completely flat. We are over ten percent lower than we were in April this year, the slog continues. The MPC deliberates today, I suspect that they may well pause at this juncture.

Company corner

Noteworthy news on SENS yesterday, Curro To Acquire Windhoek Gymnasium. They will spend R180 million for the school with 1,509 learners at the moment. This is the first move outside of RSA for Curro and falls part of their plans to grow their number of learners from the current 36,000 to 90,000 by 2020. There are a number of regulatory hurdles to jump through with the purchase and given that it is an international purchase there will be a couple more. Based on recent purchases in the Education sector it would seem that they paid a fair price for the school.

Linkfest, lap it up

It is not a surprise that streaming has passed physical sales for music. It is a bit of a surprise that it has taken this long though - Streaming Music Passes Physical Sales for First Time. You will probably find that as more people are willing to pay a subscription price to be able to stream any song they want, that the revenues of the music industry increases over time.

This will not help your next investment but will make you smarter nonetheless - Earth Blamed for Cracks in Moon

Being able to customise organic replacements, this is a very exciting prospect - For $10,000, you can now print your own pound of human flesh. This may revolutionise organ transplants in the future.

This is one of those statistics that is hard to believe - More people have died from selfies than shark attacks this year. The point to note though is thanks to scary news stories and movies like Jaws, people are more scared of sharks than they should be.

Home again, home again, jiggety-jog. That Chinese PMI read has seen to it that another sell off has ensued, stocks across Asia as a collective are down 2.75 percent. Eish. Not good for those watching today, very good for those folks that have spare funds that they need to find a home for, commit them to quality holdings that you want to hold on a "forever" basis. Don't think about it, do it. Same companies, different prices. Enjoy your meat turning tomorrow, if that is your thing! Meanwhile, back at the ranch as they say in the classics, Chinese companies have struck a collective deal to buy 300 Boeing aircraft. SAA has a total fleet of 65 planes, around that number. American Airlines, the largest airline in the world by revenue, operates a combined fleet of 945 aircraft. The entire fleet of Lufthansa is around 300 aircraft, for comparisons sake. Yip, hit me China one more time.

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

Email us

Follow Sasha, Byron and Michael on Twitter

087 985 0939

Tuesday 22 September 2015

The people's car, the company's lies

"Volkswagen shares slammed on the brakes. No, no, they were skidding out of control. No, that is not it, they were Thelma and Louise'ing it. Why? It turns out that they were lying. Fudging emissions controls inside of the controlled environment, whilst on the open road the diesel emissions were far higher. Cheating and lying exposed is never nice for anyone (don't do it in the first place), most especially on a brand that you associate with quality and affordability."

To market to market to buy a fat pig. Stocks in Jozi, Jozi fell 0.6 percent, catching up to the worse session on Wall Street Friday evening, counterbalancing against the US Futures market that pointed to a better session later. And better it ended in New York, New York, the broader market S&P 500 closed nearly half a percent higher, blue chip stocks, the Dow Industrials closed up over three quarters of a percent whilst the nerds of NASDAQ closed nearly flat on the day.

Some of the bigger biotech companies have been taking a haircut as valuations become a worry. I suspect that in the coming weeks it will become apparent that with Dollar headwinds, we may well see the third quarter showing lower earnings in aggregate to the same quarter last year. And hence the market correction may well be justified to some extent. As a client and I chuckled about on a call yesterday, I don't care about the rest of the market, I only care about our stocks we agreed. You are never going to own the market in a portfolio that is well diversified. For the balance of the week we have the last read of 2nd quarter GDP to look forward to in the US, here locally we have the MPC deliberating on rates, in light of recent events globally we may well see the Reserve Bank stand back on rates for a while. No need to move higher for the time being. We will see tomorrow, most folks are expecting that.

Company corner

Volkswagen shares slammed on the brakes. No, no, they were skidding out of control. No, that is not it, they were Thelma and Louise'ing it. Why? It turns out that they were lying. Fudging emissions controls inside of the controlled environment, whilst on the open road the diesel emissions were far higher. Cheating and lying exposed is never nice for anyone (don't do it in the first place), most especially on a brand that you associate with quality and affordability. Mr. Market participants have bailed heavily, the stock lost the equivalent of the maximum fine of around 18 billion Dollars in market capitalisation yesterday. Ouch. Sounds worse than an Uno jam.

What may be worse for the company is that in the coming months, those folks who were interested in buying a VW would be swayed by public perception and turn their back on the brand. That is likely to impact on the workforce, who may well look for alternate employment. And in seeking alternate employment that may mean that the company fails to attract quality people, that would have a long lasting impact. Having said that however, the fellows over at BP survived possibly the worst PR and human environmental disaster (documented of course) of our time, the Deep Horizon Oil spill and subsequent fines were nothing short of staring over the precipice. It is a toss up for the regulators, you don't want to remove a powerful business that contributes to the global economy, yet you want them to pay for what they have done.

Shareholders bear the brunt (ordinary citizens' lungs have been filled with noxious gases too), it is their cash that goes to pay the fines and as such they will collectively make sure that this does not happen again. I suspect that the whole board will be replaced in time, internal management structures will come under scrutiny. And from that point on, you can be sure that the company will be more compliant than ever before. Too late, the horse has bolted. This is an incredible reminder that no matter how bulletproof you think a specific brand or how excellent your perception of corporate governance is of a specific company, that can all break in minutes. Decades and decades. Exxon will always have the Valdez oil spill of 250 thousand barrels of oil in the sea. The Bhopal gas leak tragedy in India, Union Carbide India Limited is to blame, as far as I understand it, that leak has never be cleaned up. Is that right? Recently there has been the Tianjin explosions, fingers pointed at Ruihai Logistics for warehousing the goods.

I suspect that it will get a whole lot worse for VW until it gets better. Rather late than never in exposing the wrong doings. A pretty dark day for German engineering and high standards that consumers are used to. And now for the fine. I guess that the dividend may be under serious threat, making them less appealing for institutional investors who are reliant on the cash flows. We wait and see, the stock looks cheap, it could get dirt cheap! Another remainder that as well as you may think you know a company, there is always something under the bonnet that is beyond your reach.

Apple's worst kept secret, project Titan was laid out in a WSJ article last evening -> Apple Speeds Up Electric-Car Work, the work force is expected to triple to nearly 2000. In fairness to Apple to have a crack, and others like Elon Musk, the combustion engine has not really evolved for decades, the same principles still applies. A self charging vehicle using the greatest energy source known to man (the sun) whilst you are driving (or the car is driving you) is first prize for me. No recharging stations, or getting supercharges of 2 to 3 minutes maximum would be the holy grail. And I am presuming that Apple will be competing in the company of Tesla, producing beautiful products that are functional and that work well. I think that there is enough space for new entrants. Or am I wrong, will Apple want to build a peoples vehicle?

For interests sake, Tesla has a market cap of 33.8 billion Dollars and sells less than 55 thousand (admittedly beautiful) motor vehicles a year, Volkswagen after the beating yesterday has a market cap of 62.64 billion Euros (70 billion Dollars) and sold 9.7 million vehicles in 2013. Some sort of disconnect between new and old technology and the future as perceived by investors. Total workforce, sales presence (Tesla sell their cars very differently) and of course maintenance networks. Tesla aims to sell you a car that you basically never need to service, good work if you can afford the price tag. A pre-owned Tesla S60 as per their website retails costs just under 60 thousand Dollars. That is the cheapest. The cash price for the vehicle for delivery late November is 75 thousand Dollars. Wow. It is going to take a long time for adoption, it is happening already. Time saving, energy savings, the future is here sports lovers.

Linkfest, lap it up

If you only read one thing this week read one or both of the following articles (we have shared both articles before but they are so good we thought we should share them again!). Here is the first - Everything Is Amazing and Nobody Is Happy.

Here is the second and probably the most mind blowing - 50 Reasons We're Living Through the Greatest Period in World History. I think many people are far too short sighted when looking at living standards and global wealth. Going back only 100 years, things were vastly different! Here are a couple of the facts that stood out the most for me.

"5. The average American now retires at age 62. One hundred years ago, the average American died at age 51. Enjoy your golden years -- your ancestors didn't get any of them."

"17. Median household income adjusted for inflation was around $25,000 per year during the 1950s. It's nearly double that amount today. We have false nostalgia about the prosperity of the 1950s because our definition of what counts as "middle class" has been inflated - see the 34% rise in the size of the median American home in just the past 25 years. If you dig into how the average "prosperous" American family lived in the 1950s, I think you'll find a standard of living we'd call "poverty" today."

"25. Relative to hourly wages, the cost of an average new car has fallen fourfold since 1915, according to professor Julian Simon."

"31. The average American work week has declined from 66 hours in 1850, to 51 hours in 1909, to 34.8 today, according to the Federal Reserve. Enjoy your weekend."

"32. Incomes have grown so much faster than food prices that the average American household now spends less than half as much of its income on food as it did in the 1950s. Relative to wages, the price of food has declined more than 90% since the 19th century, according to the Bureau of Labor Statistics." AND "In 1950, the average household spent 30% of its budget on food. Today, less than 13% of an average budget has to be devoted to food."

"44. From 1920 to 1980, an average of 395 people per 100,000 died from famine worldwide each decade. During the 2000s, that fell to three per 100,000, according to The Economist."

"48. In 1990, the American auto industry produced 7.15 vehicles per auto employee. In 2010 it produced 11.2 vehicles per employee. Manufacturing efficiency has improved dramatically."

"49. You need an annual income of $34,000 a year to be in the richest 1% of the world, according to World Bank economist Branko Milanovic's 2010 book The Haves and the Have-Nots. To be in the top half of the globe you need to earn just $1,225 a year. For the top 20%, it's $5,000 per year. Enter the top 10% with $12,000 a year. To be included in the top 0.1% requires an annual income of $70,000. America's poorest are some of the world's richest."

Despite conventional wisdom things are getting better for the average household in the US. The one key trend being observed is that people are using these low interest rates and payments to pay down existing debt, resulting in the average household leverage to be going down instead of up - Good news trumps bad news

As the global economy grows, innovates and changes, there are some areas that will benefit and other areas that will fade away - Wanted: Pilots to Fly Looming $5.6 Trillion Jet-Order Surge. According to the article, "Airlines across the globe will need to hire 558,000 new pilots over the next two decades to keep pace with surging travel demand". Think of how many more support staff will need to be hired. Change always brings opportunities (and pain) with it, you will probably find that the losers in this equation would be unskilled factory workers at the Boeing and Airbus plants.

When looking at US consumption there are two ways of looking at it, the first is to compare the total amount spent on goods. The second way is to look at the total quantity of things bought - Americans are buying tons of stuff. The graph highlights how things are getting better for the consumer, things are cheaper! So the absolute amount spent on goods may not be rising but the number of goods bought is heading north.

Having a look at all the above data, things are far better than we generally perceive them to be.

Home again, home again, jiggety-jog. Stocks across Asia are mostly higher, as are European stocks. US futures are marginally lower. We should open higher here too, that would be a good thing, it feels like the great trudge through winter, that is what we can call this period, the great trudge.

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

Email us

Follow Sasha, Byron and Michael on Twitter

087 985 0939

Monday 21 September 2015

The Nikkei and the JSE

"Stocks are pointing lower at the get go. A short week here in Jozi, Thursday is interrupting the flow of things. And of course stocks in Shanghai are up for now. Ha-ha! Keep calm and carry on."

To market to market to buy a fat pig. What a weekend to both forget and remember, depending of course on who you are. There is that magic line from the Jamie Uys movie (and I have used it before) "The Gods Must Be Crazy" where the biologist keeps making so many embarrassing mistakes that he keeps saying "I don't want to talk about it". I kind of feel like that, although credit must definitely be given where it is due. And for the record, that movie is 35 years old, the average age of the Springboks. Only kidding! Let us not get down on ourselves, stuff happens.

In the markets on Friday, stuff was happening too. The FOMC deciding not to raise interest rates meant and means that we shall have to wait a little while longer for the nearly zero interest rate policy to unwind to something more normal. What was quite interesting in that the longer term rate trajectory has flattened some more. Meaning that rates in the US will only rise to some level that is far lower than people would have initially imagined five odd years ago. Why is inflation so low? It is something that we discuss a lot in the office, is it the age of technology that has pushed us harder, more automated processes doing "stuff" cheaper? Perhaps that is it, productivity I have no doubt is miles better than it was 20 years ago. You can get hold of someone any way you want, Facebook, Twitter, WhatsApp, good "old fashioned" emails and text messages, heck you could even call them once in a while!

Perhaps that is it, human efficiencies and the fact that we are trending towards more automated functions and converging towards the internet of things. As such, technology and associated companies that we do have access to has proven to be spectacular investments over the last generation, should continue to morph and evolve into consumer needs in the future. I saw a research report on Friday that suggested the automated vehicle market could save humanity 3.5 trillion Dollars in time. You could or can count working in your motor vehicle on the way to, or from work, as real work time. Provided you were driving in an automated vehicle. I get the sense that you are more likely to be travelling in an automated vehicle, rather than driving, that function is outsourced. Anyways, enough futuristic talk, back to that graph with all the projections from the voting members of the Fed, the lower dot collections is what I want to show. Well, not me, others have shown it already.

From the Economic projections of Federal Reserve Board members and Federal Reserve Bank presidents under their individual assessments of projected appropriate monetary policy, September 2015

Now from that dot cluster graph you can deduce that by the end of 2016 (next year), the average rate is about 1.5 percent. Which means 6 rate hikes from here. There are FOMC meetings every 45 days, there are two left this year. I am sorry to tell you that there are only 101 days left this year. 102 if you live in American Samoa or French Polynesia. Or Los Angeles, and you are reading this right now, perhaps that has changed by the time you get this post. Someone even wanted negative rates for the rest of this year and into next year! Those two dots below the zero line, see them? So that means if there are 11 meetings between now and the end of 2016, rates would go up every second meeting if the 25 basis point hike was adhered to. They could do anything.

As we always say around these parts, read the Fed's releases, make sure that you spend more time reading about what companies are up to. That is more important, seeing as we are invested in stocks and not the Fed, or by extension US treasuries. Or in any other fixed income market. We own companies. You own companies. Not the news flow. After all was said and done here in Jozi, Jozi, the market ended down just over one percent. The stronger Rand saw to it that loads of stocks with an offshore bias were lower on the day. I have been struck by everyone wanting to talk about currencies, expecting emerging market currencies to be in free fall. It may, or may not happen. Most countries around the world reference the Dollar, that is the way of it all.

Over the seas and far away in New York, New York the FOMC hangover continued, stocks fell sharply, down nearly one and two thirds on the S&P 500. Phew, that was a market beating handed out, the evergreen Jim Cramer suggested on the box (he was on the East Coast attending some conference) that perhaps the market would have been down double if the Fed had raised rates. A case of damned if you do and damned if you don't. Catch 22, not quite, there is plenty of manoeuvrability for the brightest academic economic minds on the planet.

Company corner

One of the only stocks to be up on Friday was Holdsport thanks to this positive Trading Statement. They expect EPS to be up between 25% to 29%. The stock is fairly illiquid which makes it difficult to get in or out of but currently trades on a P/E of 12 and has a DY of 5%. Not bad for a company that operates in retail/health & wellness space. I would like to see them open "express" stores in malls now. I was in Mr Price sport this weekend, it was conveniently located and well priced.

Linkfest, lap it up

One way to keep most internet sites free is to have adverts on the page somewhere. Adverts can be very annoying and use data, which has resulted in more and more people using ad blockers. The business model for some large online companies may have to change but they have shown in the past that they are up for the challenge - The most popular paid iPhone app right now is an ad blocker

It is amazing how technology is helping refugees survive - The most crucial item that migrants and refugees carry is a smartphone. I think being able to document their journey with pictures and stories brings it closer to home. When you read their stories, see their pictures and realise that many of them are well educated, it is easier to rally support.

For our animal loving readers. What sound does a giraffe make? None is what I thought but it turns out that they make a very low humming sound at night to help keep the herd together - What does the giraffe say?

Home again, home again, jiggety-jog. Hey, did you see that the same folks in Greece, Syriza won the vote again, the second election on top of a referendum this year. Keeping things moving along, a little too fluid for most peoples liking. The Independent Greeks may well likely be alongside Syriza again. The Golden Dawn still came third, those people are mad crazy. Stocks are pointing lower at the get go. A short week here in Jozi, Thursday is interrupting the flow of things. And of course stocks in Shanghai are up for now. Ha-ha! Keep calm and carry on.

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

Email us

Follow Sasha, Byron and Michael on Twitter

087 985 0939

Thursday 17 September 2015

This is great. When does it start?

"There is a quote from American comedian, Groucho Marx, who sat for a full hour at the home of cricket, Lords, and asked the person next to him: "This is great. When does it start?" I guess the same could be said of the Fed rates decision, it is like watching extreme slow motion. For those who don't remember, I don't blame you, the Fed last raised rates in June of 2006 when Ben Bernanke had just assumed the job from Alan Greenspan."

To market to market to buy a fat pig. In Jozi, Jozi markets rose to over a percent. Not too much in the losing column, Discovery saw strong moves northwards in their share price, that stock up nearly three percent on the day and no too far away from their all time highs. It was all about waiting for the most highly anticipated announcement for global equity markets for the year, or that is how it was being touted anyhow. Everyone was able to throw their five cents worth around as if it actually meant something. The Fed will do what they need to, that is almost always the case.

Yawn. After all the hype, all the people getting so excited about the most anticipated Fed meeting in around 9 years, nothing was done. There is a quote from American comedian, Groucho Marx, who sat for a full hour at the home of cricket, Lords, and asked the person next to him: "This is great. When does it start?" I guess the same could be said of the Fed rates decision, it is like watching extreme slow motion. For those who don't remember, I don't blame you, the Fed last raised rates in June of 2006 when Ben Bernanke had just assumed the job from Alan Greenspan. The mantra back then was one and done. Meaning that rates had peaked and were unlikely to go any higher for a while.

It wasn't until around the time the market peaked in October 2007 that it became apparent that the subprime lending crisis was something to watch out for, before the New Year rang in 2009 we had ZIRP, a Zero Interest Rate Policy. And since then it has been exactly like that, for nearly 6 years. And this was in stark contrast to the inflationary years and high rates of the late 70's and early 90's. No wonder the music was so "good". I'm kidding! It was excellent, Neil Diamond, Billy Joel, The Eagles, Michael Jackson, you had it all back then. Kramer vs. Kramer, The Deer Hunter and Annie Hall (never saw that one!). Anyhow, enough nostalgia, here is a 45 year representation of US interest rates, courtesy of Trading Economics:

If you must read it (try in your best Brooklyn accent, like Janet Yellen) September 17, 2015, there you go. Short, sharp and sweet. Only Jeffrey Lacker voting against. And Stanley Fischer? Voting to keep rates where they currently are. So much for that Jackson Hole speech, right? The closing line: "The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run." Your guess is as good as mine. Inflation, no problem, only problems are problems abroad that could impact on the US economy. No need to move right now, as you were. Time for the pundits to worry about the next meeting, which will be the most important in the history of all Fed meeting until the one after that. Sigh.

I enjoyed this and no doubt you will enjoy it too, the post is from Bob McTeer, a former Fed member, who wrote before the meeting started in a blogpost titled An Obvious Point About Fed Transparency: They Can't Signal What They Don't Know. Interesting. Like I said, move along, get back to more important matters of studying company annual reports, presentations, results, prospects, more reading to do. After all was said and done and over the seas and far away, stocks gave back their initial gains in New York, New York ending around one quarter of a percent lower. I noted that Eddy Elfenbein in his weekly mail pointed out the irony of it all, no 25 basis point hike, markets down 0.26 percent. He said that maybe they were just messing with us, of course he does not mean it.

Company corner

Some notable news out yesterday from AdvTech who announced Accelerates Growth Strategy With R82 Million Acquisition Of Summit College. You can understand why management were not keen to be taken over by Curro, they still have big growth plans for the company. There were two other big acquisitions relatively recent, with the R450 million Maravest purchase (4 443 students) on the 24 November 2014 and the Centurus Colleges acquisition of R750 million (3080 students) on the 16 September 2014. Summit College which is based in Kyalami has 590 students with the capacity to grow to 1 000.

This is a very exciting sector to be in and is well positioned to take advantage of the boom in the South African middle class as well as the increase in numbers of the current generation. From an outsider looking in, it would seem that Curro arriving on the scene and showing what can be done in the sector has awaken AdvTech. A bit of competition improving the RSA schooling sector.

Linkfest, lap it up

The general theory goes that your best long term/ risk adjusted returns should come from owning a proportion of the universe of assets out there. Clearly there are problems with assuming that we can all own a fraction of a Picasso, so most people opt instead to compare their asset growth to a large index like the S&P 500. It is a nice number to find, easy to use and covers some of the largest assets on the planet - 4 Reasons to Stop the S&P 500 Comparisons

Experience matters and the newer you are to something the more important it is to get some experience. At some point though the impact of more experience is very limited and may even hamper your performance by having past biases/ experiences push you in the wrong direction - The Experience Fallacy

I found this graph on twitter yesterday. It is a bit mind blowing to see the amount of commodities that China consumes!

Home again, home again, jiggety-jog. Oh, and the Greeks go to the polls again this weekend. Perhaps that will be the biggest and most pressing story de jour next week. Or perhaps story de semaine (that is week in French for those who didn't pay attention in class). Syriza may be pressed hard by some folks that look a little more reasonable from an economic stand point, the breakaway party with the ex ~~communist~~ finance minister is polling really low. Perhaps people do not want crazy people in charge. That is almost always the case, it seems like a good idea at the time, implementation is hard. The mighty Japan stand between us and points, hopefully a solid display can mean we are real contenders, set the bar high.

Stocks across Asia are mixed, Japan is much lower, China is higher and Hong Kong is up around half a percent. US futures are a little higher, European futures are flat to lower. As baseball legend Yogi Berra (Yankees for life) said It's tough to make predictions, especially about the future. How right.

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

Email us

Follow Sasha, Byron and Michael on Twitter

087 985 0939