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

No comments:

Post a Comment