To market, to market to buy a fat pig. A massive global rally from Tokyo/Sydney to the NYSE saw us participating in a rather large way. Everything except gold stocks, Goldman Sachs outlook for the yellow metal is lower than where the current price is, they see it settling at around 1250 Dollars per fine ounce over the next half a decade or so. Predicting commodity prices is tough. Hard, nigh impossible. Check out Cullen Roche's piece on it: Goldman: Time to Short Gold. The gold stocks sank 1.8 percent whilst everything else, almost across the board rallied strongly. Industrials were up by nearly that amount, the resource stocks as a whole lagged the market, which ended the day just shy of 1.4 percent in the green. The gold price also took a bit of a knock when the Cypriot reserves (they seem to be keeping around 3.6 tonnes) are set to be sold to pay for some of their bailout. Check the story out: Cyprus could sell gold reserves
The broader market S&P 500, the biggest index by market capitalisation, rose to a record high of 1587.73. Up 1.22 percent. And of course, with blue chips having traded at a record high in the session prior, the Dow Jones Industrial average hit another closing record, over 14800 points and now within touching distance of 15 thousand. Wow. 1589 is your new all time high level, pencil that in. Pencil, HB? Remember that. Stick in in your tablet on a notes segment that is backed up into the cloud, I should have said that rather.
Yech. The Pick 'n Pay trading statement yesterday was very disappointing. This is for the 52 week period to end 3 March. Results are expected in 12 days time, I am very sure that they are going to be scrutinized and again some are going to be left with lots of head scratching. The first ugly line is all you need: "EBITDA from continuing operations will decrease by between 5% and 15%." There is however some good news, turnover growth in the second half outpaced the first half, perhaps some inflation creeping in there. We continue to give this company a wide berth, our belief is even if there is a shakeup, shareholders are probably not going to see it for the better part of two to three years. More when the results are released in full.
Sometimes we all need a little perspective. Australia released employment numbers this morning, and they were not good, the unemployment rate is at a three year high of 5.6 percent. The number of folks employed dropped sharply by 36100 folks. Sounds like a lot, it is a lot. But here is the part that I want to highlight. The month before was the best month since July 2000, with 74000 jobs being added to the Australian economy. Again, for the purposes of this comparison that I am getting to, let us add the two together and we get to roughly 38000 jobs gained in two months. The labour force is 65.3 percent according to a WSJ article from around a month ago, there are 22,987,165 folks in Australia (according to the Population clock - Australian Bureau of Statistics) so roughly 15,010,618 people. That of course will change as you click on the link above, the country continues to add citizens.
And hear me out, I am heading in this direction slowly. Nonfarm payrolls were published in the US on Friday, with a gain in employment of 88 thousand for the month of March, and the prior month, including the revisions saw the number jump to 268 thousand. So, 356 thousand. The labour force in the US is 154.3 million, 10.3 times bigger than the Australian labour force. So divide 356 thousand by 10.3, and you get to 34.5 thousand. Amazing hey, the numbers almost stack up exactly the same. Australia's main trading partners are China, nearly 20 percent, Japan at 11.9 percent, the United States at 8.9 percent with South Korea at 5.4 percent and lastly Singapore at 4.5 percent. Top exports by value are iron ore and concentrates by a country mile, 64.1 billion Aussie Dollars in 2011, Coal at 46.8 billion Aussie Dollars and then quickly drops off to 16 billion Aussie Dollars for gold exports.
And this is where the difference lies, the US economy is massive, and it has multiple trading partners. Their imports from China alone are almost like importing our entire economy. That is right sports lovers, that is how big that trade is now, and that is just the imports. Add in exports at 104 billion Dollars, all trade between the two is equal to roughly the economy of Poland. If you thought that the Australians were reliant on the Chinese, yes, that is true, but so are all of us. That is just the way that it happens. In fact there are countries right on our doorstep that have a larger reliance on the Chinese, nearly half of all the trade in the DRC is between them and the Chinese (send the Chinese army there then), Angola is nearly at 40 percent, Zambia at nearly 35 percent, whilst Australia, it accounts for around 28 percent of all trade. South Korea, nearly 25 percent. Japan, nearly 20 percent. Us over here, well, we are at 12.7 percent and growing. Size and scale are one thing, percentages are a little more telling.
Wait one second here. BHP Billiton's CFO said China's growth was likely to moderate to 6 percent in the coming years. I guess that makes sense. As the base gets bigger and bigger, the growth rates will have to slow. The economy needs to rebalance, and will, as workers wages start to rise sharply in the coming years. So, whilst Australia has big exposure to the Chinese growth story, so do many other companies and countries. But I guess that is a much better boat to be floating on than the Cypriot boat.
Oops. The headline says it all: PC Shipments Post the Steepest Decline Ever in a Single Quarter, According to IDC. I am not too sure where Framingham in Massachusetts is, but I checked on the interwebs using my laptop. A population of 63 thousand people. That is, according to the new Gautrain statistics, roughly the number of people who use the service daily. Seems like a nice enough place, Framingham. That introduces the next piece nicely:
Byron beats the streets. Sales of PC's have been an interesting trend to watch over the last few years. Especially since tablets and sophisticated smartphones have thrown a huge spanner into the works. As Sasha alluded to, last night we received data from research firm IDC that worldwide shipments of laptops and desktops dropped 14% in the first quarter of 2013. Wow that is a big drop. The most obvious reason is the introduction of tablets as a direct competitor. Not everyone sits behind a desk, in fact a huge portion of the workforce are on the go on a day to day basis. Before tablets those people used to lug a laptop around, now the obvious choice is a tablet.
But there is another trend which is covered in detail in this WSJ article titled Computer Sales in Free Fall and that is the adoption of Windows 8. According to interviews from both analysts and consumers in the article, Windows 8 has just not impressed. Sasha and I are due new laptops and we too are holding out because we are unsure of the new operating system, I can see this trend happening first hand.
This is very interesting because unfortunately for the likes of HP and Dell the standard of the operating system is out of their hands. This is why Steve Jobs was so adamant on creating both the hardware and the software. As an absolute control freak he did not want the Apple user experience in the hands of another company. Now this makes me think, what if Google fall behind with their Android software? Surely Samsung and the rest are at risk? The experience of their clients are in Google's hands. Google are fully incentivised to maintain their high standards but so were Microsoft. We are shareholders of both Google and Apple, I am not concerned about the innovation levels at Google, it is just an observation. However I definitely think it advantageous for Apple to control both.
Back to the computer sales, this is the sharpest drop since the IDC started tracking sales in 1994 and is the fourth decline in a row. This is a trend that I don't see changing. Sasha and I even considered running solely off iPads. That will not work for us just yet but I am very sure that people with less complicated computer requirements will welcome the convenience of a tablet. This also highlights why you need to be on the ball when investing, especially with technology stocks. And this is exactly why Warren Buffett does not like them as investments. The HP share price is down 52% over the last 5 years but in April 2008 it would have seemed like a sound long term investment. If you want to invest in technology stocks, just like the companies themselves, you need to be on the ball.
Crow's nest. Check it out: Bitcoin Is Crashing. Amazing chart. Bitcoins, as far as I understand it, are generated by software that you install on your machine. Bicoin miners. Hey, the "idea" is only four years old. Bitcoins are denominated in Dollars. Enough about a new currency OK, Bitcoins would be denominated in their own currency. Just another payment methodology that might, or might not work. It turns out that something "mined" and invented using software is supposedly much better than central bankers of the world. Check this piece out: Bitcoin Exchange Mt. Gox Reveals The Insane Volume And Surge In New Users That's Causing Its Severs To Melt. I can hear you muttering under your breath, not a bubble, not a bubble.
Today we have started slightly lower here after the absolute heroic rally yesterday. An amazing rally really. So today, folks are choosing to take some off the table.
Sasha Naryshkine and Byron Lotter
Follow Sasha and Byron on Twitter
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