Money with a dash of Funny: 2016

Wednesday 21 December 2016

BUD KO's soda Africa

"It will take around a year to close, these things are not necessarily quick. They (AB InBev) have had a long time to think about what they want to sell, the SABMiller deal took nearly a year to close, they would have known which assets to sell and which one's to keep."

To market to market to buy a fat pig Locally in Jozi, the city founded on gold and the city that has been unbearably hot lately, stocks were red too. Which is lower, down as a collective just over one-third of a percent by the time the closing bell rang. It was a pretty broad based sell off, gold stocks were the exception, rallying over a percent. Amongst the majors AngloGold Ashanti and Woolies rallied sharply (relative), Amplats and Kumba were the big losers on the day. Globally stocks were lower, across Europe most indices were down around one-quarter to one-third of a percent. In that sort of range.

There was however some pretty big news on the local front, just after 8am local time (before the sun got up in Europe), AB InBev continued to waste little time in dispensing of assets they see as non-core to their operations. This time it was selling their stake in the Coca-Cola beverages Africa business that they inherited from SAB Miller. They will sell their 54.5 percent stake in a business that was only pieced together in the middle of last year, for 3.15 billion Dollars. That is a really big number. Western Europe, Eastern Europe and now African soda operations are all being shipped out by AB InBev. Like I said to a journalist yesterday: "As per their announcement this morning, they will sell all assets that they deem to be non-core to their bigger picture. You must remember that they paid a serious premium for a business that traded at the top end of a long term average multiple. So, they are entitled to bash this out as quickly as possible."

In Typical AB InBev style, the release is short and sweet, they don't need to tell you why, you own the stock so that the management can steer the ship - The Coca-Cola Company and Anheuser-Busch InBev Reach Agreement Regarding Coca-Cola Beverages Africa. It will take around a year to close, these things are not necessarily quick. They (AB InBev) have had a long time to think about what they want to sell, the SABMiller deal took nearly a year to close, they would have known which assets to sell and which one's to keep.

The stock in New York rallied just shy of two-thirds of a percent, year-to-date BUD stock is down 17 percent in Dollar terms. Coke sank a little, the stock is of course one of two down in the Dow this year. Nike being the other. In Jozi, where the Rands matter, that is the currency that we spend and invest with locally, AB InBev added over half a percent on the day. 3 billion Dollars sounds like a lot of money, and it really is a lot of a money. Relative to the BUD market cap though ..... BUD is 177 billion, Coke is 179 billion Dollars. Three and a bit billion is not going to move the needle materially for either company.

Stocks across the oceans and far away were lower, Dow 20 thousand is going to become a thing, until it happens. Energy stocks and non-cyclical consumer goods stocks rose, healthcare was the biggest laggard. I see that Trump wants to appoint Carl Icahn as a special advisor on regulation, "Advisor on Regulatory Overhaul". I must admit, as much as I don't like the guy (and Icahn is hardly the most likable either), he does seem to have a very business friendly agenda. Which is good for us as equity investors.

At the bell, the Dow had fallen 30 odd points or 0.16 percent. The S&P 500 and the nerds of NASDAQ fell around one-quarter of a percent. Accenture had results earlier in the session, it was a miss I am afraid, the stock sank five percent. My neighbour works for them, I didn't have the heart to tell him yesterday, he will find out. Nike results were well received, the stock was up nearly a percent on the session. Friday! That is my mark for Dow 20 thousand. The futures market is pointing lower, I am hoping for one last Santa hurrah by Friday. And Dow 20 thousand, that is all I want for Christmas.

Linkfest, lap it up

This is an interesting article for many different reasons. Firstly, the cash never lies, right? Secondly, many companies have been able to borrow at historically low rates in order to meet their obligations. In the end, for many investors (not all), the cash is what matters, and by that I mean the dividends from the businesses you own. If you were a skeptic about the recent half a decade plus stock rally, perhaps this will put your mind at rest, even though the headline looks like it wouldn't do that - Dividend Per Share Growth Slows for Fourth Consecutive Period. Courtesy Factset:

The largest social media (and single biggest platform that connects humanity) Facebook, could build your own artificial intelligence robot. For your house, only. How many hours do the most productive people have in a day? turns out, many more than you or I. A lovely piece about the Zuck and his AI bot, Jarvis - At Home With Mark Zuckerberg And Jarvis, The AI Assistant He Built For His Family.

Coffee nerds, stop the clock. Everyone thinks that they are the people who have the secret sauce when it comes to the fine art. Are we over complicating these things? I think so, and so does C|Net - Forget the freezer, this is how you should be storing your coffee. The main thing seems to be, no sunlight, cool and dry. Like almost any grain or bean, right?

This is a very contentious article that is very close to home: Tossed aside in the 'white gold' rush. We all need more batteries. Without capital to mine the assets (not like a factory that can have a chosen site), would the locals be able to raise the funds? I guess not, both parties need each other. It seems that the locals are benefitting, it could be more. Once the mine is gone, the key to the legacy will be the sustainability of the local communities. Education is critical in breaking any poverty cycle that exists right now.

If you are a Star Wars fan, you possibly have seen Rogue One already. It may well turn out to be the best movie in a while for Disney, they have had the best year ever in global box office sales, having passed 7 billion Dollars. Here it is, a whole host of remakes, what have we become!!?? Disney's 7-Billion Dollar Year. Courtesy Statista:

I recall when speaking to a man who is long retired in this industry (he was a stockbroker his whole life) what one of his rookie mistakes were. He suggested to a man in his late eighties that he ought to buy this gold mine for the "long term", when pressed for a single idea. The really old guy suggested he didn't have time, he wanted a "right now" idea. If you do have the "time", you should always be looking to invest over the same sort of period you would own a property - Why Investors Need to Focus on the Long-Term.

My youngest daughter once told me that she was never leaving home, I guess that is a natural reaction at her age. Well, if we lived in the US, she would definitely not be alone, when she reaches this age of course - Percentage of Young Americans Living With Parents Rises to 75-Year High. It could be a product of the financial crisis, more young people being more cautious on ownership of houses, or more stringent credit scoring. Or both. Secretly I think both parties are happy, parents get to see their kids longer, kids get to have home cooked meals and laundry "done".

Home again, home again, jiggety-jog. Stocks across Asia are lower, it may well be another marginal selling day here in Jozi, volumes are light and holidays are now in full swing. Sun and beach, remember to slap on the sunscreen sportslovers.

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Tuesday 20 December 2016

Nike swishes back

"Whilst some of the anxieties around losing market share to rivals, like Under Armour and a resurgence of competitor Adidas have been real, I think that they are a little overdone. Nike is still comfortably a solid growth business, having recorded now the 28th straight quarterly increases."

To market to market to buy a fat pig Stocks were up again. You remember the book from your childhood titled "The Little Engine That Could". Various versions are over 100 years old, and involves a much smaller train engine that pulls a long bunch over a steep hill, saying all the way to the top "I-think-I-can, I-think-I-can." Once the little train engine crests the hill and heads down, it says "I thought I could, I thought I could." You know the story as "The Little Engine That Could".

The Big Dow Jones that Could is still in I-Think-I-Can Mode. In other words, not quite there yet. And by there, I mean 20 thousand points. Whilst new levels are fun to reach, breach and stay there and beyond, they are really just a function of long term profits exceeding the past and inflation over time. There is nothing psychological or otherwise about a level. The old index of blue chip industrial stocks that are said to reflect the landscape of industrial American got close, no cigar though - 19,987.63 was the intraday high reached at the get go.

The index fell back a little over the course of the day, ending the session at 19,974, up 0.46 percent on the day. I suspect that all things being equal, and with the decent results overnight from the biggest laggard in the Dow, Nike, that the index may assault that level. What? These are not Normandy landings or any other such event, it is a level people!!! Wiki has a *nice* entry for Closing milestones of the Dow Jones Industrial Average. 1000 was first reached in November 1972, 2000 in January of 1987. 10,000 of course in May of 1999, when everyone was fearless. 15 years to double from 1000 to 2000, more than that (we are nearly there) this time around. From 4000 to 8000 took a mere two and a half years, the roaring 90's.

There is something called the "theoretical" all time high (if you scroll to the end of the article above), in which all the components are measured against their 30 stock component intraday highs. i.e. If Microsoft and Apple, Nike and Caterpillar, Home Depot and Cisco, Coca-Cola and Goldman Sachs were all trading at their day highs (during trade yesterday), the index would actually have breached the mark, and been at 20 thousand and 65 points. Alas, not everything goes up in a straight line together, winners and losers are kept separately on different boards.

CNN Money has a very useful Dow 30 Constituents board. Caterpillar the best this year, Nike the worst this year with Coke the only other noticeable loser. Anything on that list that is under 14.63 percent up for the year is an index underperformed, AMEX, Apple, Boeing, Cisco, Disney, Du Pont, GE, Home Depot, Intel, JNJ, McDonald's, Merck and Microsoft (just), Pfizer, Procter & Gamble, Travelers and Visa. All Dow Jones under-performers. More than half of the index prices have underperformed, as the index was led higher through the year by oil stocks and financials (and associated), Caterpillar, Chevron, Goldman Sachs, JP Morgan Chase and then one outlier, UnitedHealth (diversified healthcare and insurance business), are all above 30 percent up YTD.

So there goes, a summary of what could have been, what has happened and what may be today. As it stands, as I write this, the Dow futures are a fraction higher, we will just have to wait for now. The other indices? Well, they also closed in on record territory (a few points away now), the broader market S&P 500 added just over one-third of a percent to end out the session at 2270 points, the nerds of NASDAQ clocked an intraday all time high, up nearly half a percent to 5483. You see, the numbers are meaningless unless you can associate with them, 20 thousand has a nice ring to it, 5500 less so.

Back where home is, stocks were nowhere near the all time highs, emerging markets have lagged US markets. Rates and growth prospects have seen to that. Stocks did rally nearly a percent as a collective in a broad based rally, only the precious metal stocks lagged, both the gold and platinum mining indices were the noticeable losers on the day. There really was not much corporate news to speak of really, I guess the time of the year has everything to do with it.

Sappi and Aveng reached new 52 week highs, Sibanye was trading at a 52 week low, the stock has more than halved in just over three months, it certainly has been the worst of times for them. Growthpoint, Bidvest and Mediclinic were at the top of the majors pile, all up over 2 percent, whilst there were only a handful of stocks down in the Top40, in any meaningful way, Kumba, South32, Hammerson and Investec down three-quarters of a percent and beyond. For the record, stocks closed at 50,343 points, up 0.93 percent on the day. Our all time highs are from late April 2015, another 9 odd percent to get there I am afraid, and that is in Rand terms.

Company corner

Nike reported numbers last evening, for their second quarter, after the bell had rung for the close. It was a beat by most metrics that matter for folks that look at the headlines. I learned something new (which is always a good thing) yesterday, the chief executive, who is essentially a Nike lifer, Mark Parker was on the design team with Tinker Hatfield. So? Both of them actually were considerably good track athletes at university (college), where Tinker actually held the pole vault record at University of Oregon, where he was coached by Phil Knight's mentor and co-founder of Nike, Bill Bowerman.

Ah-ha. So, there is a theme here, all these fellows were once quality athletes at a regional level. Nike founder Phil Knight himself was coached by Bowerman and boasted a 1 mile best of 4 minutes and 10 second. Put that in your waffle shoe and run it. If Bowerman were still alive, he would be 106 next year, alas his time was up way before the tech bubble burst, he was much older and helped shape the Knights and Parkers, the Hatfields and co., the people that are Nike today.

Back then it was Blue Ribbon Sports (you must read the book Shoe Dog: A Memoir by the Creator of Nike), and they sold other shoes, a company that would eventually become Asics. My point is that the company management have all lived as athletes in the business, and have seen it grow sharply over the years to a 30 billion Dollar plus annual revenue company.

Nike has a slightly different cycles to many other businesses, their second quarter ended at the end of November, rewind 6 months and you come up with an April year end. Revenues for the quarter were 8 percent higher to 8.2 billion Dollars, diluted earnings per share rose 11 percent to 50 cents for the quarter. The company was pretty aggressive in their buyback in the quarter, buying 900 million Dollars in stock, as part of the 4 year 12 billion Dollar repurchase program.

So far, the company is at 3.1 billion Dollars, just over one-quarter of the way to the buyback target. For a reference point, at the market close last evening, the market capitalization of the business was 86 billion Dollars. So they are looking to, when the program ends, buy back around 10 percent of the company market cap as it exists now. That is pretty phenomenal, and what it does (provided all the shares are retired) is boost the earnings per share on the ones that remain behind. The same company earnings on fewer shares in issue.

The group does around 27 percent of all their sales in footwear in North America, 15.5 percent in apparel in North America (a little equipment sales) for a grand total of 44.6 percent North America. So, essentially it is easy to see why the analyst community see this as a home base company. Meanwhile (back at the ranch as they said in the old days), total sales in China exceeded 1 billion Dollars in quarterly revenue, up 19 percent on same currency sales across that territory. Western Europe was also strong, reporting same currency sales of 11 percent more than this time last year. Good strong growth in their two next biggest territories, which is encouraging, I am pretty sure that there has to be some currency headwinds at some stage.

From a profits point of view, Europe was hit by currencies, a strong Dollar definitely impacting on group margins too. Currencies are almost impossible to manage, damned if you do, damned if you don't is the sense I get, at least from the viewpoint of the analyst community. Whilst some of the anxieties around losing market share to rivals, like Under Armour and a resurgence of competitor Adidas have been real, I think that they are a little overdone. Nike is still comfortably a solid growth business, having recorded now the 28th straight quarterly increase.

Not only that, I suspect that some of the gizmos that we see (no shoelaces need to be tied ever again) will become more mainstream. Wearable tech. The technology really does change, just look at your latest and older shirts, shorts and shoes, and you will see that this is definitely the case. We continue to accumulate what is a well priced stock of an incredible business with great runway ahead, buy!

The anxieties over future orders seem to have dissipated a little, I suspect that there will be a little momentum for the stock in the coming days and weeks. And who knows, the laggard of the Dow Jones may well be the best catalyst for an assault on 20 thousand points for the Dow Industrials.

Linkfest, lap it up

Looking for places to go, with your hard earned cash? You may have to shell out more than usual here, some beautiful pictures over at Bloomberg - Best Photography of 2016. Ha ha, you have to love the rich people playing croquet in Napa Valley!

We take so many meaningless photos nowadays as the cost is relatively zero, and we can delete as many as we want. It wasn't always so, photos were a fine art back when the digital era didn't exist. So ... the WSJ explores The Best New Ways to Scan Your Old Photos. What you waiting for, get cracking during the holidays.

Bummed that your internet speed is not what you want it to be? South Korea wins again - Average internet speed by country as of 1st quarter 2016 (in Mbps). If you are rich enough to have a fibre line, you are better than most of the average speeds around the world, there is always an upside, right?

Home again, home again, jiggety-jog. Stocks across Asia are mixed, stocks locally have started mixed. Hey, who cares, the main focus will be the Nike numbers and Dow 20K later today. Or tomorrow. Or next week. And hey, there is a UK GDP read tomorrow!

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Monday 19 December 2016

Santa came

"Hey, did you know that in March next year, the S&P 500 turns 60 years old. Baby boomer era, perhaps just afterwards. That is the current form, the original form finds itself way back, nearly 90 years old. Which is why the Dow Jones gets all the attention, that index is around 120 years old, double the age of the S&P 500. The first 28 days of 2016 were the worst ever four week start for the S&P 500. Do you remember what it was about? Chinese growth concerns, remember? I bet you don't."

To market to market to buy a fat pig It felt like we were a little cheated, stocks ended half way up the hill. We were up (so we were up) and we were not down (so we were not down), we were halfway up. No thanks to the Grand Old Duke of York. Mr. Market was in catchup mode, the old stocks that were definitely at the bottom of the hill on the session (near the peak on the year) were the resource stocks, down nearly a percent on the day here in Jozi. Financials added nearly a percent, I see that Capitec touched a 52 week high (and all time high) before settling lower on the day, the stock has been nearly a 20 bagger (i.e. their value has increased nearly 20 fold) in a decade.

The term ten-bagger was coined by legendary fund manager Peter Lynch, a man who didn't mind scratching deep in uncharted territory to find that extra special stock. Lynch is still regarded amongst the best investment managers of all time, taking his first job at managing money and turning a 18 million Dollar fund into 14 billion Dollars over 14 years. He then retired, to spend more time with his loved ones, seeing as he had missed his father who died relatively young, the same age that Lynch retired, 46.

Some pithy quotes to emerge from such a short and unblemished career, there was a Charlie Rose interview a while back (Peter Lynch Journeys From Funds to Philanthropy) that attracted some attention, my favorite Lynch quote is as follows: "If you spend more than 13 minutes analyzing economic and market forecasts, you've wasted 10 minutes." I guess he is saying that it is all about the companies and not the economy, read annual reports and not long complicated projections. If you have 25 minutes and you are interested in learning about Peter Lynch and his heroics in the investment community, here is a great place to start, this interview.

A quick wrap now of the local markets, we could keep going all day at this rate! The ALSI closed up 0.38 percent, the currency taking a little heat against the majors. Metal and energy prices have stabilized a little, European markets were mixed, France and Germany better, the Italians still trying to figure out the future of their banking systems. I am sure it will all work in the end, it feels a little like the Spanish banking system a few years ago, where banks had to be stabilized and governments ended up with a lot of equity in these businesses. The assets are there, it takes time to work it all out.

Stocks in New York, New York slipped from their best levels, we did still see a higher finish, chalk that up as a win for the bulls. The Dow Jones Industrial Average made another assault on 20 thousand points, it seemed more like Dieppe and less like D-Day, fizzling as they went along. The level will come, patience my friends. As Michael reminded me yesterday that in currencies and equity markets it is very important to factor in inflation, that can have a way of sobering the returns somewhat.

I guess all you are trying to achieve in the long run is a careful balance of risk versus reward, expectations of smooth returns are nigh impossible. Talking of which, if you get such returns, something is probably very right or very wrong. See this WSJ piece - Authorities Allege $1 Billion Fraud at Platinum Partners. 1 billion bucks swindled from 600 investors.

Hey, did you know that in March next year, the S&P 500 turns 60 years old. Baby boomer era, perhaps just afterwards. That is the current form, the original form finds itself way back, nearly 90 years old. Which is why the Dow Jones gets all the attention, that index is around 120 years old, double the age of the S&P 500. The first 28 days of 2016 were the worst ever four week start for the S&P 500. Do you remember what it was about? Chinese growth concerns, remember? I bet you don't. The S&P 500 was down five percent for the month of January, at one point three weeks into the year, stocks were down 9 percent. The worst ever start to a year at that stage. Year to date, Brexit and Trump and all, stocks as a collective (the return of the S&P 500) are up for the year. Russia, Syria, unfortunately more terrorism across the globe, add into the cocktail the Italian referendum. All rather "confusing". Still, stocks are up, and pretty smartly at that.

The S&P 500 closed out the session up one-fifth of a percent, the Dow Jones Industrial average exactly the same amount. The nerds of NASDAQ added 0.37 percent on a day where some of the unloved part of the markets have rallied a touch. Tech stocks have lagged the broader index, up just shy of 9 percent year to date, as of the close last evening. The Dow Jones has been where most of the action is, up 14.11 percent as of the first trading day of the year to the close last evening. Only two stocks down in that index, including Nike, who report numbers later today.

Wow. I was checking the Disney share price (up one and one third last night, flat on the year), which after a lackluster bunch of numbers the stock slid back pretty sharply. In recent days the stock has caught a bid, mostly as a result of the giant success already of Rogue One in the home market, the US (the new Star Wars film, where have you been?). My daughter tells me the stock surge is thanks to Moana, she has seen it. Well, as of today she (my eldest daughter) is not half wrong, Moana has grossed 163 million Dollars, Rogue One did that on the first weekend!! So I guess it is Star Wars trumping new Disney franchise. Global box office takings for Moana have been 282 million Dollars, the cost of making the film was closer to 150 million Dollars. Rogue one cost 200 million Dollars to make, global box office takings are zoning in on 300 million Dollars. And it has been out less than a week!!

The real money is seemingly in the future of entertainment, what normal people refer to as "gaming". The average age is around 30, these are working people paying good money for new types of entertainment, now made global by high speed internet. The folks who will provide content will be the kingmakers, the likes of Tencent, Amazon and Netflix, be it gaming, movies and series, all original content being served up and less "old school" type entertainment. Streaming and movies on demand (saved series) have become a way of life now, there is so much on DStv catchup that you would not know where to begin. I still cannot figure out the future of sport, with the live element being all key. Remember that Disney own a large portion of ESPN, surely that must continue to remain a compelling (if not only) reason to own the stock.

Linkfest, lap it up

Great link, first found via the Visual Capitalist (which is like internet chocolate) - Unprecedented Spending Trends in America, in One Chart via Howmuch.net. What it shows are the various categories of spend by American households, more is being spent on education and healthcare and housing, less is being spent on transport and food. That sounds like a good thing to me! Clothing spend is dropping, perhaps as a result of machinery and technology advances in clothing manufacturing.

It was great to find South Africa on this list of The Countries With The Most Doctoral Graduates. My only question is, is there a difference to society in different types of PhDs? i.e. is there a monetary value added to society with different kinds of graduates? Can you have too many accountants or too many sociology graduates? I am not sure, does anyone know the answer?

Facebook bought Instagram for 1 billion Dollars just before they listed over four and a half years ago, here is a refresher - Facebook Buys Instagram for $1 Billion. Comments on the website should be a giant ignore, these stand out for me: " ... shows that Zuckerberg is a novice. He just got lucky. But that he paid way way way too much here shows that Facebook is in the hands of a kid.". Another: Instagram is not worth 1 billion dollars and facebook is not worth 100 billion dollars. Lot of the start-up high tech companies is not worth that much. The bubble is going to burst soon. Whilst this article is neither right nor wrong, it shows that the "kid" knew a thing or two - Instagram Is Worth More Than Twitter And Snapchat Combined. 1 to 84 billion in nearly five years. Kid got lucky.

Home again, home again, jiggety-jog. Stocks across Asia are mixed, Japanese stocks are up, Chinese stocks are not. The US futures market is basically flat, we may have to wait to get to that mark later, a multitude of terror attacks will see markets a little jittery no doubt.

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Sunday 18 December 2016

Drones and moans

"We are down 50 percent to the Dollar in ten years, the Brazilian Real is down nearly 37 percent and they have had their fair share of problems when it comes to politics and their economy. India, being less reliant on commodity exports (in fact as an importer they hope for weaker prices), have weakened by 34 percent to the US Dollar over the last decade. The Russian Rouble? Well, there is one worse than us, down 57 and a half percent over the last ten years. Dollar to the Yen? Flat over ten years."

To market to market to buy a fat pig We closed up shop Thursday with another almighty emerging market sell off, stocks here in Jozi were down over two percent by the time the bell rung time to go home for the long weekend. Concerns about the interest rate differential, money flowing and trying to get the "right" mix between risk and return. In other words, a yield in an emerging market becomes less attractive as rates in the US go higher. With a stronger Dollar, last week the greenback reached a 14 year high to the basket of currencies. Parity to the Euro? Perhaps likely in the coming months as more rate rises in the US become reality and not possibility.

That is also bad for gold, a stronger US Dollar, the price of the shiny metal has been under pressure. I noticed that GoldFields was trading at a 52 week low, down nearly 45 percent from three months ago, the Gold price is down nearly 12 percent in Dollar terms since then. The Gold mining index as a collective is down nearly 42 percent. That is incredible, the pattern is almost exactly the same as last year. Gold stocks were out of the blocks in a hurry and being up over 100 percent for the year at one stage, in early August. Those stocks were the most beaten down Thursday (in Jozi), off over eight and a half percent by the end with nearly ten percent losses for Harmony and GoldFields.

It may be a little more "even" today, the gold price has stopped tumbling as a result of the Dollar giving a little back. As a result of tensions around an underwater drone belonging to the US that was captured by the Chinese late Friday, the Chinese have vowed to return it. The upshot was a Dollar that found itself weaker from before, oil price up, gold price a little firmer is the result there. To end off with, to show that whilst there are ups and downs and extreme volatility, it is just too hard to call. Over the last ten years the gold mining index has returned minus 60 percent. About exactly the same return (minus 60) over the last five years. If you were able to call it twice, you can seemingly make a lot of money in the ups and downs.

So, the Dollar is trading at levels last seen 14 years ago, the Rand to the Greenback has had their fair share of volatility this year, politics and all. A year on from the three roll finance ministers in a week, the Rand is around 7 percent stronger to the US Dollar. Here is an interesting one for you. Over the last ten years, the Jozi All Share index has doubled, up 103 percent. Over the last ten years, the Rand has gone from 7 to 14 to the US Dollar, you do not need to be a genius to work out that the value of your Randelas has halved to the Greenback. Admittedly the US Dollar is trading at the best levels in 14 years and South Africa has much higher inflation, so perhaps it is not too bad over that time.

How do we stack up against some of the others? We are down 50 percent to the Dollar in ten years, the Brazilian Real is down nearly 37 percent and they have had their fair share of problems when it comes to politics and their economy. India, being less reliant on commodity exports (in fact as an importer they hope for weaker prices), have weakened by 34 percent to the US Dollar over the last decade. The Russian Rouble? Well, there is one worse than us, down 57 and a half percent over the last ten years. Dollar to the Yen? Flat over ten years. The Dollar is 25 percent stronger the Euro over that time period, ten years ago the "mark" was 1.30 Dollars to the Euro, in the summer of 2008 we were staring at a number of around 1.60. Today, this morning, the rate is below 1.05. Over 15 years ago, just after the dotcom era, in October of 2000 less than 83 US cents bought a Euro. So you see, currencies do halve and go all the way back, even amongst the majors.

Stocks across the oceans and far away have had two trading sessions since we closed up shop, an assault by the Santa rally chaps on Dow 20 thousand has fallen flat twice. I guess it is just a matter of time before we reach those lofty levels. Seeing as the Dow Jones clocked 10 thousand in early 1999, 20 thousand a double in nearly two decades hardly sounds like a compelling return to me, now does it? Nope. So, whilst there are some who get all anxious about levels and stock prices, I don't. There is always that niggling feeling that history provides us with periods where markets didn't reach previous records for decades, the S&P 500 took around 25 years to get from the pre Great Depression stock index levels, back to those levels, 1929 to 1954.

At session end energy and utility stocks both gained, as did healthcare and non-cyclical consumer goods (food and the essentials, apparently cigarettes, soda and beer fit the bill too for that index), whilst the laggards were basic materials and technology, Oracle lost over four percent on the session, a wonderful performance from their cloud computing division in results, Mr. Market, as always was looking for more. Hardware sales inline with their peers was lower, as were software sales. Whilst we are on the business of ten year returns, Oracle stock has returned 121 percent to their shareholders over that time. And like some of the more mature types, like Cisco, Oracle have started paying dividends in 2009. It almost became "time", as a tennis chair umpire would say. Would Djoko still sit in the chair though?

Financials were also amongst the losers, perhaps some tapering off post the Trump rally which has seen Goldman Sachs rally over 20 percent since the Trumpster fell inline to be the next president of the US. Over ten years? Goldman Sachs stock is up just 19 percent. The S&P 500 is up 60 percent. Owning the Street's smartest minds has delivered a positively mild return, most of that has come in the last 40 days. Again, as is always the case, it depends where you draw the line in the sand.

Linkfest, lap it up

Uber certainly has changed the way that we commute in the modern world, on demand transport goes along with on demand streaming services, an app to tell you when to eat, what to eat, the weather and so on. It is hard to believe that Uber would just be of school going age. Yet, as this article points out, they are just getting started. It makes sense, in the end it depends on pricing point, simple economics. What the consumer is willing to pay - Uber wants to take over public transit, one small town at a time.

I made a comment that I had been on Twitter for a number of years now and that I was used to fake news all of the time. People on Facebook are just catching up now. You need to be able to filter, think carefully and then make comments as you see fit. Barry Ritholtz points out that the market has been strewn with fake news - Napoleon Is Dead! Wait. That's a Stock-Market Scam.

Private equity is misunderstood I think, it is a little more complex than buy with leverage, rip the cash and sweat the assets harder, ramp up debt and then list again on a higher valuation when the market is hungry again. Surely not as simple as that, Edgars is a good example of how that could all go wrong, although you could definitely argue about the timing of the purchase. This New York Times article from a week and a bit back (such old news) shows that the execs over in PE are far richer than their normal run of the mill investment banking friends, of course it is all relative - How the Twinkie Made the Superrich Even Richer

Home again, home again, jiggety-jog. Stocks across Asia are lower on account of . The futures market indicates that both Europe and the US are likely to open marginally better, of course there is loads of wriggle room between now and then. Did you see that day/night test match end in a tight for Australia, what an advert for test cricket. Can you imagine a day night match at Newlands as the sun sets. Glorious, bring it on! And the Titans, from just up the drag are the T20 champs, sorry PE.

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

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Thursday 15 December 2016

Retail Africa

"Retail Africa will be a giant that will have/has annual revenues of 200 billion Rand, and EBITDA of 15 million Rand, roughly at the exchange rates today of 14.6 billion Dollars in sales and 1.1 billion Dollars in EBITDA. That is an epic beast, I was looking for global comparisons, as the company plan to operate in Sub Saharan Africa, I can't find anything outside of here, the local bourse."

To market to market to buy a fat pig What is Janet (and her team) Smellin'? Yellen rhymes with a lot, belling, dwelling, selling, telling, swelling, shelling and quelling are the obvious ones. Belling is to make a noise to a newly married couple by bashing on pots and pans. Byron is going to a couple of weddings in the next few days, perhaps he can sneak into the kitchen and come out pots and pans bashing. I don't think that will go down well.

Telling. Janet Yellen and the Fed told us that the trajectory of rates may be quicker than the market anticipated, there may be three rate hikes next year. Stanley Fischer, the Fed deputy chair said at the beginning of the year that we could have four this year. We have had one, and that was yesterday. Quelling. Quelling that rate of rate hikes. How have the Fed "dots" moved? In the release yesterday the Fed give their projections of where they (as each voting member) see rates going, here it is:

How does that compare to where the dots have been plotted before? What I can see is that the longer term trajectory of rates seems to settle now below three percent. Well, luckily for all of us, over at the BusinessInsider, someone has plotted where the Fed saw the long term rate trajectory a number of years ago, and where they see it now. Much of the last 6 odd years has been spent wondering when the Fed would raise rates. Since the "Great Financial Crisis" of 2007-2009 and rates heading to ZIRP (Zero Interest Rate Policy), the Fed have hiked rates twice, including yesterday.

I guess you could argue that the financial crisis ended when lending was "unfrozen", the great thaw that ensued, when Libor and the interbank rate spiked and came steadily back to earth again, and that happened in the middle of 2009. From the Fed itself, here is how rates have been, post World War Two, try and mentally draw a line around the three percent mark (I have done it there for you) and see where that is relative to ZIRP and history. And perhaps that is the reason why the itchiness of the rate watchers has come. They have expected the rates trajectory to be swelling.

What ensued was not exactly a shelling of stocks, rather some selling. No use dwelling on what might have been with a Dow 20,000, stocks came within an inch of that milestone 19966 was the print at the top, by the end of the session stocks had sold off and the Dow settled 0.6 percent off to 19792. I guess we will just have to wait around for another day, records such as stock prices and index levels are always "meant" to be broken. The broader market S&P 500 closed down 0.8 percent, led lower in most parts by energy and materials, a higher rates trajectory normally equals a stronger Dollar and by extension, lower commodity prices. Normally. The nerds of NASDAQ closed down half a percent by the time the session clocked out.

Back home, where local is lekker, stocks drifted lower through the afternoon and we closed near the lows of the day. The Jozi all share index ended the session around one-quarter of a percent off from where we started, there wasn't too much action except for a couple of company specific pieces of news, Rockcastle and NEPI announced the ratio at which they are going to form one business (there are plenty of shareholder overlaps, between the two), the combined entity will be the largest Central and Eastern European retail property owner by market cap, in excess of 80 billion Rand. Nice, why this affinity for property assets in Eastern Europe by South African businesses, or are there others?

And then there was an inflation read for October that slipped way outside of the zone that weighed a little on retail and banks, although as Michael pointed out, the Reserve Bank had indicated that they were going to expect a read of such "lofty" levels. 6.6 percent. Not good. However, as we said, not unexpected. Many in the "know" are expecting that rates may well be lower this time next year as the inflation trajectory from now flattens and gets lower. Food prices normalise and the drought eases, both obviously aligned with one another. Imported inflation, the Fed decisions may have a bearing on the currency, the local one that is.

And then the really huge news of the day (not that an 80 billion Rand combined entity isn't huge, it was kind of old news, NEPI and Rockcastle) is what we will jump into straight away below.

Company corner

Since Christo Wiese made the comments that he thought that Shoprite and Steinhoff was some sort of natural fit, the share price of Shoprite has outperformed the rest of their retail peers. Since Steinhoff released their results last Wednesday, the stock was up over 17 percent. That was all as at yesterday morning. And then basically around lunchtime, 12:30 to be exact, a release with some clarity as to what is likely to transpire (for Wiese at least) with the two companies hit the screens. Here it is - Steinhoff/Shoprite - Joint detailed cautionary announcement relating to the establishment of African retail champion.

So what do we have to work with here? Firstly, the Public Investment Corporation (PIC) and Christo Wiese are simplifying things here for themselves, getting one holding (of a business listed primarily in Frankfurt) which will be an African titan, excuse the pun. Wiese has built his empire through an entity called Titan Premier Investments, or just Titan. Retail Africa will be a giant that will have/has annual revenues of 200 billion Rand, and EBITDA of 15 million Rand, roughly at the exchange rates today of 14.6 billion Dollars in sales and 1.1 billion Dollars in EBITDA. That is an epic beast, I was looking for global comparisons, as the company plan to operate in Sub Saharan Africa, I can't find anything outside of here, the local bourse.

For instance, Shoprite has annual revenues of 130 billion Rand, you can see where the other 70 billion Rand is going to come from, you hardly need to be a genius to do that simple math. Pick n Pay, a pretty sizeable business in itself, has six month revenues of 37 billion Rand, roughly the size of the combined Steinhoff assets being sold to Shoprite. Spar has annual turnover of 90 billion Rand, their operations now extend to Europe too, Ireland and Switzerland. Massmart is around the same as Spar, a little less, they are more a "direct" competitor of Shoprite on the African continent. As such, the Retail Africa (as it will be known) giant will be over double the revenues of Massmart, perhaps their closest competitor. Remember that 52.4 percent of the shares of Massmart are held by Walmart, this hasn't exactly been the best of their offshore purchases.

I think that there were two specific reasons why both of the share prices of Steinhoff and Shoprite fell quite hard, and they differ for each stock. Firstly, I suspect that the shareholders of Shoprite were bidding the stock up in anticipation of an outright purchase and perhaps even a premium being built in. Hence, when the dilutionary effects are factored in and the company will have to manage assets that they haven't built over decades, I can understand the marginal frustration of the Shoprite shareholders. The stock sank 7.17 percent on the day to end at 178.97 Rand, a price last seen in July, when the last results were warmly welcomed.

At this point Christo Wiese owns 15.31 percent of Shoprite, the PIC own 12.26, just over 27.5 percent of the business. Add in the employees pool of 6.67 percent and you have one-third of all the shares in issue that are likely to be on the same page immediately.

So how is it going to work? first things first, Shoprite buys all of Pepkor Africa (PEP, Ackermans), JD Group (Russells, Bradlows, Hi-Fi Corp. and Incredible), Steinbuild and Tekkie Town. I have left out a few brands there. Price? Unknown for now?:

"Shoprite will issue new ordinary shares to Steinhoff in consideration, pursuant to which Steinhoff will receive a significant equity interest in Shoprite. The value for Steinhoff Africa Retail will be negotiated taking into account the best interests of both Steinhoff and Shoprite shareholders."

What is significant? Wait, like the Verimark (not in the league of any of these retailers) ads, there is more: "Steinhoff has entered into an in principle agreement with the PIC and Titan to acquire their interests in Shoprite as part of the Proposed Transaction in the form of a Steinhoff share-for-Shoprite share exchange, subject to an exchange ratio to be agreed ("the Exchange Ratio") which may ultimately result in Steinhoff acquiring control of Retail Africa."

So. Steinhoff will control Retail Africa and will shell out real Steinhoff shares to the PIC and Wiese for that, hence the dilutionary effect from their side. So that is one of the reasons why the Steinhoff share price sank. Whilst Christo Wiese then gets to stick all of his eggs in the Marcus Jooste stable at Steinhoff (note to self, horses don't lay eggs), other Steinhoff shareholders get diluted, and that sent the stock price of Steinhoff lower. Yet ...... the board says something else: "This Exchange Ratio will be negotiated taking into account the consideration price for Steinhoff Africa Retail on the basis that the Proposed Transaction will not be earnings dilutive to Steinhoff shareholders."

So whilst this may not be dilutionary now, the market is telling you something, selling the Steinhoff shares down 7.11 percent. You can presume that whilst the primary listing is in Frankfurt, it has only been a year. You would be right to presume that most of the shares are still held on the Jozi share register. And you would also be right to think that the reason that many hold the stock is for international and geographically diverse revenues. i.e. More Europe, the UK and now the US (as well as Australasia) and less African revenues. This is the opposite, at least in the short term.

A lack of dates and a lack of a price (swap ratio) is perhaps weighing on the market too. I think that for the PIC and for Christo Wiese this works well. Less Africa is what the Steinhoff shareholders wanted, which is recency bias and Shoprite is down as a result of perhaps going to be massaged into getting these assets. In the long run, this will work well is my sense. Plenty of logistical synergies between Shoprite and the Steinhoff African operations. Shoprite have great expertise in this area.

Linkfest, lap it up

Visual Capitalist had a very comprehensive breakdown of how they think the future of medicine will look like - Here's How Tech is Disrupting the Traditional Healthcare Market

Ladies please let us know if you would buy and wear this shoe - Luxury convertible shoe. After a Google search, it looks like you can buy one of the shoes starting at 260 Pounds.

Sometimes we forget how much the globe has advanced in the last few generations. Here is a cool website that will show you how much South Africa/any other country you choose, has improved since you were born - Your Life in Numbers

Home again, home again, jiggety-jog. The dollar strength (rand weakness) has not been able to cushion the markets after the interest rate hike. Steinhoff is starting to recover as that news gets absorbed.

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

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Wednesday 14 December 2016

Beers and De Beers

"Last thing, according to the reading that I have done, two farmers of Dutch descent who farmed on the land that is now known as the big hole, in Kimberly, had the surname De Beer. Brothers two = De Beers, plural."

To market to market to buy a fat pig On the march again, Heigh-Ho, Heigh-Ho, it's off to work I go. Did you know that the movie Snow White and the Seven Dwarfs was made in 1937? That movie, in colour (a rarity back then) premiered a few days before Christmas back nearly 79 years ago. In the original German work by the brothers Grimm, the mineworkers and little people that Snow White came to love didn't actually have names. That is right, they were given names in a 1912 theatre production. And the rest as they say in the classics ..... is history!

The markets were off again, marching to the gold mines deep in the mountains, singing that cheerful song, Heigh-ho hum! Stocks (and some indices) across the seas and far away leaned in on some historic prints, the Dow Industrials (and the S&P 500 and the nerds of NASDAQ) set new intraday and closing records. The Dow came within one quarter of a percent from the 20 thousand mark, before settling back. Still, blue chips were up 0.58 percent by the close of shop, the broader market S&P 500 added just under two-thirds of a percent at 2271, whilst the tech heavy nerds of NASDAQ closed a percent higher, 5463 is the new level. Strangely, as the Dow Jones Industrial is the oldest of the known indices, it is the only level that people talk about. "Where is the Dow?", is a valid question in the broader markets community.

Energy stocks once again flew off the shelves, up over a percent and three-quarters, the higher crude price is sending the index to higher and higher levels, over the last month the energy index is up nearly 14 percent. Five years? Down 6 percent. Again, if you want to be owning these stocks, the big majors in the energy sector, you must accept that volatility is part and parcel of the investing "stake" and you must be prepared to be a little more active. i.e. time the sales and purchases. That is easier said than done when you look at a historic graph, ah yes, sell there and buy here, should've, could've, most times really didn't.

Exxon Mobil is still nearly 400 billion Dollars in size, the other listed stocks in the New York Energy index (ADRs and primary listings) that have market capitalisations in excess of 100 billion Dollars include Royal Dutch Shell ADR (227 billion Dollars), Chevron (224 billion Dollars), PetroChina ADR (207 billion Dollars), Total ADR (128 billion Dollars), Schlumberger (120 billion Dollars) and the BP ADR (117 billion Dollars). Of those, only Schlumberger is not an out and out producer, rather a technology supplier to the industry, rigs, project management, high tech services. In that oil and gas services segment, Schlumberger are bigger than the next four companies combined (which includes Halliburton and Baker Hughes). If one is of the opinion that more fossil fuels technology is going to be used in the short term ..... I would rather time the Schlumberger ups and downs. Then again, perhaps not! Too tough to call most cycles.

Back home in the city founded on gold, the Jozi all share index added nearly two-thirds of a percent on the day. Industrials led the charge, up over a percent, whilst the resource stocks sold off sharply, the broad based ones, the top three, namely Glencore, Anglo American and BHP Billiton. Kumba stock flew up nearly five percent to lead the top 40 stocks gainers. Bidvest, Remgro, Capitec and Steinhoff were amongst the other gainers on the day. Steinhoff have, since their results a week back, rallied over 17 percent. Wow. Too strong on the way up, too far on the way down. Over 12 months the stock is exactly flat, over five years ...... up 222 percent. Or double Nelson to the cricket fanatics. Talking of which, damn, the Lions were bested by the team from PE last evening, well done the Warriors.

There were two sets of company news worth noting, firstly that AB InBev was selling their (SABMiller's) Eastern European beer operations to Japanese beverage company Asahi for 7.8 billion Dollars. These brands include Pilsner Urquell, Kozel, Tyskie and other brands. Wow. Remember that Asahi had bought Peroni and Grolsch from SABMiller before the deal closed with AB InBev, for 2.9 billion Dollars. Whilst we can expect more divestment from AB InBev over time, they are being pretty swift about all of this, and judging from the market reaction (Asahi was down over four and a half percent, AB InBev was up 1.3 percent last night in New York), the Belgian brewer got the best of the deal. What I found brilliant was the press release, the summarised one. Michael says that they are being efficient, I have copied and pasted the whole thing:

"Anheuser-Busch InBev is pleased to announce that it has entered into a binding agreement with Asahi Group Holdings, Ltd. to sell the businesses formerly owned by SABMiller Limited in Poland, the Czech Republic, Slovakia, Hungary and Romania for an agreed enterprise value of EUR 7.3 billion, subject to customary adjustments"

Call it 49 words (give or take, with Ltd's excluded etc.) you get to 161 million Dollars (it is 7.8 billion Dollars = 7.3 billion Euros) a word. Efficient, not so? Part of the process of the hard charging AB InBev team, they will cut assets that they think do not have the growth metrics that they no doubt are looking for.

The second piece of corporate news that was worth noting was the announcement from Anglo American, with their subsidiary De Beers announcing rough diamond sales. Lower than the last cycle (this is the 10th for the year), much better than the cycle at the comparable period last year. The CEO Bruce Cleaver had the following to say: "While the trade in lower value rough diamonds is experiencing a temporary slowdown as a result of the demonetisation programme in India, demand across the rest of the product mix continued to be healthy and overall sales remained in line with seasonal expectations."

Diamond trends? What are those likely to be? If you like diamonds and jewellery, then I suspect that you should be investing in companies that manufacture the end product. One would dare to say it out loud, much better margins? Companies like Richemont (Cartier and Van Cleef and Arpels), LVMH (Bulgari and even the front end for De Beers Diamond Jewellers), Tiffany & Co and so on. In our opinion, that is the better end of the market.

Last thing, according to the reading that I have done, two farmers of Dutch descent who farmed on the land that is now known as the big hole, in Kimberly, had the surname De Beer. Brothers two = De Beers, plural. Funny thing that the name stuck, don't you think? Diederik Arnoldus De Beer and Johannes Nicolaas De Beer on a farm called Vooruitzicht (Outlook in English). The British government forced them to sell (expropriation, a form thereof) for the sum of 6600 Great British Pounds back in 1871. Or was it 6000 guineas? The buyer was a fellow by the name of Alfred Johnson Ebden. Ebden was from 1820 Settler stock, and would have arrived here as a baby (as far as I can tell).

A company belonging in part by Ebden (a PE firm by the name of Dunell, Ebden and Company) sold the land to the government of the Cape colony at the time for 100 thousand Pounds in 1875. 13.6 million carats of diamonds were pulled up from the hole from start to finish, 1871 to 1914. The actual single company as we know it today, DeBeers, amalgamated all the rights into one big business in 1888.

The directors of that business? Alfred Beit (from Germany), as in Beit Bridge. Cecil John Rhodes, as in the fellow who brings about many mixed emotions. And of course a fellow by the name Barney Barnato, nobody will ever know the circumstances of him falling (or being pushed) from that ship in 1897. One of Barnato's heirs, Woolf Joel was shot downtown Joburg in his offices, a conspiracy theory about overthrowing (or kidnapping) the then Transvaal Republic President, Paul Kruger was somehow involved. Wow. The history!

Linkfest, lap it up

The streaming players have spent huge amounts of money to attract eye balls to their services. The huge amount of money spent is paying off when it comes to awards - Netflix, Amazon, and HBO combined for 70% of the best TV show Golden Globe nominations. The key though is to get enough eye balls, for a long enough period to justify the cost of the shows.

Josh Brown points out how psychology plays a roll in market movements. More importantly he points out how important faith or believing is to our current economic system. If you believe that the Trump will spur economic growth which will benefit your income, you start spending more and start spurring economic growth before any policy changes take place - Sugar Pills.

As part of societies push to become fitter and healthier, CrossFit has become a very popular way to get your heart rate up and scalp that body. Reebok have the rights to produce the official CrossFit shoe - Nike Doubles Down in Its Battle for the CrossFit Crowd. Nike can't create an official CrossFit shoe but they can sponsor the current CrossFit champion and post videos of him training using their shoes.

Home again, home again, jiggety-jog. Stocks have started much better here, Santa Claus, rather late than never in terms of your market timing. The origin is not that old, the Santa Claus market effect is something that is known in the electronic era of trading, the first reference being in 1972. Are people more likely to buy stocks at the end of the year? Who knows. As in Santa sticking presents under a tree, reality and the truth are really blurred in this case. Remember, giving is better than receiving ....... except with stock returns.

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

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Monday 12 December 2016

Half Century

"Paul turns 50 today, that is pretty big news, half a century, bat up! In all the years I have known Paul (I think 17 now), he has never looked better, really. And of course you know that thing about class and experience. Cheers to the best co-worker a colleague could ever have (and the others)!"

To market to market to buy a fat pig Stocks in Jozi slipped, the Rand firmed up, the resource complex was stronger except for platinum and in particular gold shares, both of which were heavily down on the day. The Chinese ban on insurance companies and their ability to own stocks weighed on TenCent and by extension Naspers. TenCent is trading at the lowest level since early August, I suppose that is not "too bad". The oil price soaring to the best levels of the year saw both Sasol and BHP Billiton at the top of the leader boards. MTN, with a presence in Iran and Nigeria, significant oil reliant nations also perked up to stand in a sparsely populated winners segment. In the losers column were the single commodity stocks, and in particular AngloGold Ashanti and Amplats, Mondi and Naspers also feeling the heat.

There were still some 12 month highs for the likes of Barloworld and several of the banks. Although for the banks the timing 12 months on from the sacking of then Finance minister Nene (how is that non-existent job at the BRICs bank going?) led to an almighty collapse. Still, since mid December 2015 Standard Bank is up 44 percent, FirstRand is up 31.5 percent, Barclays Africa is up 20 percent and Nedbank is up the same as FirstRand. And still, at face value, the banks look cheap. The issues are that if we were to experience a downgrade to non-investment grade, the banks would have to raise capital to shore up reserves, that is how I understand it. And significant sums too.

As you can imagine, there is not too much going on in the companies front, the roads are quieter already, that you can tell. The parking lots still look full, perhaps next week the great GP exodus to the coast (and other places) will happen. I suspect over the weekend I may get my wish of a less busy Jozi. Take it easy out there on the roads sports lovers. And lest I forget, Cape Town, what a show you put on over the weekend, next year ..... I may well be there! It will be fun no doubt, perhaps we can reclaim that crown.

Over the seas, across the time zones and into a hemisphere where it all looks pretty until you have to step outside, stocks in New York, New York were mixed. The Dow Jones Industrial Average clocked another closing and intraday record high, now around 200 points away from printing a new cap. Yes, there are fellows who have Dow this and that, Paul got me one, it reads Dow 36,000. I wear it from time to time, it never raises a reaction from Joe Public. Sigh.

The other majors sank, the broader market S&P 500 lost just over one-tenth of a percent, whilst the nerds of NASDAQ fell 0.59 percent. JNJ had a cracking day, having seen a little weakness lately, healthcare in general and the pharma stocks enjoyed the best of times. Amgen added 1.6 percent, the stock certainly looks amongst the cheapest around, I saw that it made it to a list of best ideas for one of the major investment banks.

A tweet from Trump making all sorts of noises about the defence contractors, first it was Boeing (and his facts may have been wrong, what a twist), this time we saw all sorts of dumb writing (I am sorry), including this one - Lockheed Martin shares drop after Trump says F-35 program too expensive "After the tweet, the company's market value initially dropped $4 billion. The impact of Trump's tweet, per character, was more than $28 million."

Over the last ten years the stock is up 175 percent. Over five, a more impressive 226 percent. Over one month, the stock is down most of what the market sold off yesterday. That makes for a much less fun headline or interest piece. As Michael said this morning, nobody dipped into their (Lockheed Martin) bank account to "steal" or "take" four billion Dollars. And tomorrow the stock price may go up again. Have they gained or lost anything, the shareholders that did nothing? No.

Defence stocks are "interesting", remember that the inventor of dynamite, Alfred Nobel, sees his estate give away loads of money for the likes of Peace and Medicine each year. Hey, did you know the following about the Nobel funds in the foundation (from the last annual report): "a portfolio strategy of 55 per cent equities with an interval of -15 to +10 percentage points, 20 per cent fixed income assets with an interval of about 15 points and alternative assets, including properties and hedge funds with an interval of around 20 points." And at year end (2015), the foundation had operating expenses of 2.6 percent of the overall assets. In other words, everything they earn in excess of that is added to the pot for future generations.

We digress, my point is that defence inventors and manufacturers often make strides for commercial use later. The Radar that lead to safer air travel (add in the jet engine too) and the microwave oven. Duct tape. The internet. Now we have internet on a jet plane. Satellites, enabling broadcasts from around the world, beamed into our homes. Digital photography, every man and his dog is a photographer these days. With their mobile phones. The Epipen, GPS, freeze drying, even cargo pants and the jerry can come from military production. Even penicillin, synthetic clothes and canned food. The wristwatch. And of course more recently, the drone and associated technologies.

I am mixed on owning these in a stock portfolio. The one side of me says that there is not only good in the world, there are forces at work who look to destroy what many hold dear, their personal freedoms. As such, we need to be able to counteract these forces and that means weapons. The other side of me says that these advances from science (the science of improved destruction in a way) will improve humanity in the end. How do you feel about it, and should large parts of country budgets be spent on the military?

It is an interesting question, I guess Trump just wants to know whether the US taxpayer is getting bang for their buck. Military planes are amongst the most expensive pieces of equipment known to man, whilst a Dreamliner costs 225-300 odd million Dollars, a B-2 Spirit Stealth Bomber (Northrop Grumman built it, at a program cost of 44.75 billion Dollars, roughly their current market cap) cost 737 million Dollars in 1997 (and costs nearly 4 million Dollars a month to maintain). Currently that equates to around 2.4 billion Dollars. There are only 20 of them, if it makes you feel any better. What could you do with 2.4 billion Dollars I guess is the questions that need to be asked.

Linkfest, lap it up

Given how big the initial investment is when building a power plant or even when buying a car, changing the way people consume energy has to be a long term project. Bill Gates has assembled a group who are willing to part with their money for 20 years, to invest in clean energy - Bill Gates and investors worth $170 billion are launching a fund to fight climate change through energy innovation. South Africa is representing in the list through Patrice Motsepe.

Sticking with philanthropy, to reach Mark Zuckerberg's goal of curing, preventing or managing all disease by the end of the century will require input from all sectors - A Few Billionaires Are Turning Medical Philanthropy on Its Head.

Another great blog from Ben Carlson. Controlling your finances can be like controlling what you eat, very difficult - Mindless Eating & Finance. There is a large amount of research that shows, self control and motivation is a very limited resource and it runs out rather quickly. How do you get things done then? Put systems in place when we do have self control on our side. An example is setting up that debit order for forced savings at the start of each month.

Home again, home again, jiggety-jog. Stocks across Asia are a mixed bag. We are in a bit of an earnings void, remember that for the short term folks, the most important thing this week is the Fed announcement, will they or won't they raise interest rates? Some are doubting it, even though the odds have been pretty high this year, I would suggest that most of it is baked into the cake. the most important thing however here at Vestact is that Paul turns 50 today, that is pretty big news, half a century, bat up! In all the years I have known Paul (I think 17 now), he has never looked better, really. And of course you know that thing about class and experience. Cheers to the best co-worker a colleague could ever have (and the others)!

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

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