"It was another case of the legendary beast, pushmi-pullyu, those readers of Doctor Dolittle will know exactly what I am talking about. A gazelle with no tail, and a head on each end, and obviously pulling in two separate directions all of the time, an apt description for Mr. Market yesterday. On the one end the Rand hedges being beaten lower by a stronger currency"
To market to market to buy a fat pig. After another buffalo stampede, the dust settled on a market barely having budged from Friday, stocks were inexplicably flat. In the same way that when the news first evolved Thursday that DVR was on the job, markets were marginally up. It was another case of the legendary beast, pushmi-pullyu, those readers of Doctor Dolittle will know exactly what I am talking about. A gazelle with no tail, and a head on each end, and obviously pulling in two separate directions all of the time, an apt description for Mr. Market yesterday. On the one end the Rand hedges being beaten lower by a stronger currency, 80 cents to the US Dollar stronger from Friday, on the the other hand a sharply rebounding retail, financials and banking sector, a collective sigh of relief from the market.
The marching band did a nifty about turn, stocks in the down column were once again also being weighed on by weaker commodity prices, the oil price sliding to the lowest levels in seven years. Hey, guess what else is nearly seven years old, it is ZIRP! That is set to come to a conclusion tomorrow, the Fed is expected to raise rates then. Back to our markets quickly. The resource rout continued, BHP Billiton, Anglo American and Glencore all sliding sharply, other stocks down in a hurry included the big dual listed companies, British American Tobacco, Richemont, Reinet, Naspers, Mediclinic and the like. Anything with an offshore listing had a poor time yesterday.
In the plus column there were the stocks that had received a belting in the two sessions prior, Woolies the biggest winner, up 13.7 percent on the day. FirstRand was up a whopping 13 percent and has now crested 40 Rand a share again, a long cry away from the 52 week high of 58.47 Rand reached in April of this year. So if you think that just the resource stocks have had a sad time of it this year, think again sports lovers. Some obviously worse than others, whilst Standard Bank was above 100 Rand again, closing up 4.55 percent to 106 ZAR exactly, the stock is 71 Rand off the 52 week high, also reached in the middle of April. What was happening back then? Low inflation and no chance of a Fed rate hike, no doubt. Discovery and Remgro also added over 10 percent on the day. Wild moves on the back of wild decisions, it certainly isn't a market for sissies.
The quick turnaround has been well documented, the reason is simple, in the end it does all boil down to money. A tax payers revolt of some sort would be a crushing blow, although I am not too sure that this would happen at that sort of scale. I get the sense unfortunately that we are already there, etolls compliance is so low you would think that most people just don't care for the consequences any more. My view on it is simple, use the road, someone else makes the laws, you pay. As simple as that, for me at least. As such, I have an etag, until advised otherwise I will continue to pay. Someone has to. Whilst we all agree that paying through the fuel levy is the smartest thing to do, it currently is not the "way". Anyhow, what is done, is done. We have a new-old Finance minister, the president was swayed to do what is best for the country, by whom, one can only guess.
There was an announcement worth paying attention to yesterday, the news came through early in the day, Tiger Brands shareholding in Tiger Branded consumer Goods plc of Nigeria (TBCG) is now zip. Zero. At a huge cost to shareholders. Seeing as they had previously written it off to zero, and they are no longer pouring money down a mine shaft (seemingly, not a fair assessment), this is a marginal positive for shareholders. Strange that, if you think about it. Around 5 years ago, you had to have a rest of the continent investment strategy. At the time I was positive about the deal, Nigeria are the most populous country on the continent. Questions were raised on why the richest man on the African continent (at the time, I haven't checked lately, Forbes suggests he is still tops), Aliko Dangote, was a seller. It turns out that he may have had the last laugh, Dangote Industries Limited gets the lot back for a song. School fees paid, heavy school fess paid with even less to show for it. the stock closed over 6 percent higher on the day.
Over the seas and far away, stocks reversed early losses of as much as a percent to close comfortably in the green, on the eve of the most highly anticipated meeting of the Fed ever. Ever, since the last time that it was the most highly anticipated meeting of the Fed ever. The broader market closed the session nearly half a percent better on the day. Basic materials, i.e. resources, were the only stocks lagging, down over a percent and a half. The biggest and most newsworthy spot in the market on the day was the sell off in Junk Bonds, not a pejorative term that, rather their credit rating is junk. Like Brazil. It doesn't mean that they have an inability to meet their obligations, it is harder that credit worthy institutions, that is all.
All this was started by a large junk bond fund froze redemptions on Friday, nobody likes to know that their investment is not liquid. In the words of Sweet Brown, ain't nobody got time for that. What was very interesting is that Bill Gross, and I caught the tail end of the interview, suggested that even his ex-employer, PIMCO, had a solid fund to weather all storms. If you want to watch it, here goes: Bill Gross: High-yield pain is the start of something. All rather interesting for all us stocks guys, the debt markets are monster, Gross reckons there may be huge opportunities in illiquid close end high yielding bond funds. He prefers junk bonds with yields of up to 8 percent, over stocks with yields of two percent. As ever, it depends which ones.
Linkfest, lap it up
I found this via a tweet, it is a World Bank blog piece titled How corruption affects businesses around the world, in 5 charts. More than half the time firms identify corruption as a major constraint across the Middle East and North Africa, 43.4 percent in Sub Saharan Africa. What I found quite interesting is that the percentage of gifting companies and officials differs in different parts of the world, which must mean that culturally it is acceptable to "gift" (code for soft bribe) different people, depending on where you live. I guess the answer to eliminating all bribery and corruption is by using more technology.
This is more than a little harsh, it certainly makes you think however. Aptly titled The World's Smartest Bad Investors, this Bloomberg View article points out that smart people, academics and the like, don't necessarily make very good investors. The conclusion is that "hedge funds should look for academic talent in the fields of applied math and computer science instead of in economics departments and business schools." Want a career in finance? Try programming and math rather.
It doesn't always work out for startups. Most often not. Here is a Business Insider article titled In memoriam: 7 once-hot startups that shut their doors in 2015. Quirky seemed like a good idea. Fear not however, the serial entrepreneurs are beavering away with new ideas, from the same publication comes The 25 hottest startups that launched in 2015. My favourite is still Periscope, I can't quite figure it out yet however. I just know it will be huge. Vive seems like a good idea, for 99 Dollars you can get as many blow waves a month that you want. The synthetic diamond company is pretty interesting too, the Diamond Foundry.
Home again, home again, jiggety-jog. Markets across Asia are lower, the next two days are clearly huge for Mr. Market. The only thing that will be talked about is US interest rates, Janet Yellen. It almost feels like your final school dance, you know it is going to happen, you can either look forward to it with fear or you can look forward to it with excitement. Something is finally going to happen.
Sent to you by Sasha and Michael on behalf of team Vestact.
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