Money with a dash of Funny: Curro

Showing posts with label Curro. Show all posts

Friday, 18 August 2017

It's Not What You Buy, It's What You Pay

To market to market to buy a fat pig. Yesterday was a bad day for markets due to a combination of White House political rumblings and the horrible terrorist attacks in Spain. The Dow dropped 1.24%, the S&P 500 dropped 1.54% and the Nasdaq was down the most, 1.94%. The All Share flipped between green and red all day, until the US markets opened, keeping us firmly in the red. The All Share finished down 0.21%, the only significant sector showing a dark shade of green were the gold miners, who finished up 2%.

As CEOs have been quitting Trump's committees due to the poor handling of the hate fuelled protested last weekend in the US, Wall Street is worried that some of his top advisors will also quit. There was a false rumour that his top economic advisor, Gary Cohn had quit. Wall Street considers Cohn a voice of reason in team Trump and someone instrumental in getting pro-business legislation through congress (False rumours that Gary Cohn is leaving the White House just spooked Wall Street - for good reason). If CEOs have quit, I'm sure that the thought of quitting has at least crossed the minds of team Trump members. Meaning that the next controversial thing Trump does could result in more people quitting.

Company corner

Bright's Banter

We love the education sector here at Vestact and here's why. The South African Private School sector is a very fragmented market with only three prominent companies operating in the sector namely: AdvTech, Curro, and Reddam.

There are roughly 26 000 schools in Mzansi with just under 13 000 000 learners of which around 600 000 go to private schools. This equates to 4.5% of the entire school market, a small piece of the pie. Contrast that to developed markets where private schools make up 20%-30% of the total number of schools.

What these private school operators do is take the burden of having to provide good quality education (which is in very high demand) from the government by investing aggressively in the curriculum and infrastructure. With only 4.5% of the schooling marking, the likes of Curro and AdvTech are barely scratching the surface considering the current demand from parents and global trends in private schooling. I think with more schools being built across the country we should see that 4.5% number slowly creep up to global norms. This is a growing tide no doubt!

Curro has had an interesting journey as they started out with 2 059 learners in the year 2009 when PSG bought 50% of Dr. Chris van der Merwe's business. Fast forward eight years, they now have 54 campuses, 127 schools, 47 002 learners and 2 844 teachers.

Curro's growth has been paramount in the past few years and this half-year was no different with revenue growth of 24% to R1.08 billion and earnings growth of 36% to R110m. The question you might be asking yourself is why did the shares of Curro close 5% down on the day? Well, the devil is in the detail.

The company trades at a price to earnings ratio of 99 meaning the market has set very high expectations for the company. The Meridian brand (their cheaper offering) came under pressure especially in mining dependent provinces like the North West and Limpopo. This resulted in the number of learners decreasing by 6% for the brand. With a high PE comes high expectations and with high expectations, comes high responsibility.

The other issue was Stadio, their answer to AdvTech's tertiary offering. Stadio was a drag on earnings, maybe a bit more than expected because of the high set up and license costs. The good news here is that Stadio will be spun out of the business in September 2017.

The other issue is that Curro has only one brand i.e. "Curro". If anything negatively affects the brand such as notorious learners in one school or a derogatory educator in another school, this damages the whole Curro brand. Country wide brand damage was seen due to the racial incident at Curro Roodepoort for example. This contrasted with AdvTech who operates over multiple brands, the damage is then limited to those few schools that operate under that particular banner.

Finally, Curro is highly exposed to the middle class and the earnings potential of the middle class tends to be highly correlated to the economy. When the economy is doing well, parents will be able to pay for the school fees with ease but when it doesn't, the company will find it hard to pass on increases without driving the parent out of the gate to go find a cheaper alternative. As we have seen at Meridian.

In the words of the legendary Howard Marks (Investor). There is no such thing as a good idea or a bad idea in the investment world without reference to price. It's not what you buy, it's what you pay. Finally, investing is not a matter of buying good things, it's a matter of buying things well and people who do not know the difference shouldn't be in the business.

Here at Vestact, we prefer AdvTech which trades at a historic PE of 24 with growth expectations of high single digit to double digits for the next couple of years. It is more exposed to people who are in LSM 6 and above (not that sensitive to price) and recently the price of the shares started to look very attractive on different logical valuations.

Linkfest, lap it up

One thing, from Paul

I got into a discussion yesterday with our partner in New York, Ted Weisberg of Seaport Securities. He emailed me to commiserate about the market slump on Thursday evening on Wall Street.

His opening comment: "Weakness across the board. Market internals have been deteriorating for weeks. Not sure what the "spark" was for today. Perhaps Spain. Perhaps dysfunction in the White House. Perhaps just a market that is overbought. Whatever the reason it was an ugly day and I suspect more to come."

My response: "Lets see what happens. As you know, we keep a steady hand on the wheel. No change to portfolios, that is the default."

Ted: "Understand. But we both know that trees simply do not grow to the sky."

Paul: "You are right, even great companies don't last for ever, as a look back at the constituents of the Dow in history will show. However, great multi-generational family equity portfolios do grow to the sky? Our job is to try to position those portfolios to be invested in the best stocks in any given era. Clearly the term "best" is subjective, and there will be some failures. Some turnover in portfolios is obviously appropriate, but it seems to me that less activity is better than too much activity, as a rule."

Byron's Beats

As you know, healthcare is a core investment theme here at Vestact. But healthcare can be a broad term and the companies tapping the market can come from all sorts of sectors. For example Apple have pipeline products that can read your blood sugar via the Apple Watch. This article from Moneyweb suggests that Google is the most important healthcare company in the world. The most important healthcare company on the planet. I tend to agree, you have to be cautious on what info you accept from the internet though. By having patients more informed on what could be wrong with them, collaborating with doctors will be a lot more efficient.

Michael's Musings

If you have $20 million burning a hole in your pocket here are some beauties that you could buy - The 10 Most Expensive Cars at the Pebble Beach Auctions.

Walmart reported their 2Q numbers yesterday, I am amazed by the absolute size of the company. They had revenues just for the second quarter of $123 billion! Their most recent FY numbers had revenues posted at $485 billion. What do you think South Africa's GDP is? All the cars in that traffic jam this morning, all the people in the shopping malls this weekend, all the cocktails bought at the Saxonwold shebeen and any other economic activity taking place within our boarders over a 12 month period comes to around $300 billion. Basically Walmart is 61% bigger than South Africa - Walmart beats on earnings as online sales surge.

The market is telling you that it thinks Amazon is less likely to default on its debt than China - Amazon can borrow money more cheaply than Russia, Mexico and China. How can that be true?

Home again, home again, jiggety-jog. The economic news flow today doesn't have any significant market moving numbers in it. Next week the South African earnings season kicks into high gear, Woolworths will be of particular interest to us.

Sent to you by Team Vestact.

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Wednesday, 23 September 2015

Hit me baby one more time

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

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

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

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

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

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

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

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

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

Company corner

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

Linkfest, lap it up

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

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

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

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

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

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

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Thursday, 13 August 2015

As you were!

'"It's hardly what you might call a "devaluation," or a "collapse," as some of the more breathless headlines read."'

To market to market to buy a fat pig. My spell checker does not like rude words on my phone, my texting is autocorrected to holy spitballs. Which in itself is borderline PG13 for language, perhaps the real word is another 3 years on that! That phrase, the real one, could be used to describe market movements yesterday. Personally I think that it is stupid that the market reacts negatively to a very modest move in currencies. It seems like the same old thing over and over, over-reacting to a market current topic de jour.

As Paul pointed out, last week it was Greece, a few months ago it was Ebola, there will always be something to worry about, currently it is Chinese currency moves. Know that the most successful investor of all time (if absolute money and wealth was a marker), Warren Buffett just closed the single biggest deal ever in the history of his company Berkshire Hathaway. Ever. In the 50 years that this business has been controlled by him, and for 50 years that he has leaned on his business partner Charlie Munger, they have never done a deal of this scale and magnitude. EVER! If two of the best investors of all time were doing a deal last weekend, depleting half of their cash reserves, you should probably know that they think it is OK to pay 22 times earnings for a company with growth prospects.

The blog posts that started going around showing everyone that this was not really a big deal included this classic from Scott Grannis: China's currency move not a big deal. That sentence in the first paragraph sums it up: "It's hardly what you might call a "devaluation," or a "collapse," as some of the more breathless headlines read." EXACTLY! As you know however, stocks tend to move on emotion, a little trigger can cause a massive move. Markets are twitchy by nature, participants are glued to screens looking at price moves as if their lives depend on it. I suppose in many instances their livelihoods do actually depend on the price moves. As Benjamin Graham tried to explain at the beginning in his Intelligent Investor, there is a distinct difference between speculators and investors, they are all market participants, different time frames and same objective.

Our market was absolutely crushed. Mashed. Down a whopping 3.16 percent, banks and financials fell around four percent. Wow. Industrials took nearly as bad a caning. Resources however were nearly flat relatively speaking, down 0.22 percent by the close, spurred on by the gold miners, and wait for it, as a collective they were nearly up 11 percent on a day. If I got an 11 percent move per annum I would double my money every six and a half years. Platinum miners were up a less impressive 2 percent. Both sets of stocks as a collective are down a quarter for the year in the case of the gold companies and a little over one-third for the platinum producers. And whilst people may talk about gold as an inflation hedge, protection to use against pending armageddon (trading with cockroaches and ants a good idea?), the World Gold Council suggested that demand is at a 6 year low. Here goes the first two stories in my inbox this morning:

Seems like it is jewellery demand that drives the prices. As we have often said here at Vestact, we would rather be invested in the business that we have access to that will benefit from gold demand in the form of jewellery and watches, Richemont is that very business. Own that, rather than physical gold or gold producers, better margins, less problems.

To finish off, the US market had a heroic comeback, and whilst the scoreboard reveals very little, stocks flat to slightly higher. At the worst point after stocks had been trading for just half an hour, collectively down one and three quarters of a percent. Wow. The comeback kid, perhaps as a result of the JOLTS report. Job openings dropped more than expected. Yes, what does that mean (say it slowly). The annualised number still looks amazing, in terms of number of hires, the recent number points to a little slowing. So the whole debate on whether the Fed will or won't raise rates in September starts again. File in the drawer of things to watch yet they are not important in terms of what you are trying to achieve, OK? Stay calm and sensible, share prices go up and down as a result of the current mood, nothing changes at the companies other than their respective share prices may get cheaper. Something that is cheaper is worth buying, right? Right!

Company corner

Tencent released numbers yesterday, after the market closed in Hong Kong. And that was during our market. First of all, why does this matter to us? Naspers owns 33.85 percent of Tencent, it is their principal asset in size and scale, and has been for a long time their share price driver. Time to whip out the maths to see how many Rands Tencent is relative to the Naspers market capitalisation.

Tencent market cap in Hong Kong, which right now is 1.38 trillion HKD. Naspers owns 33.85 percent of TenCent, that translates to 467 billion Hong Kong Dollars. One Hong Kong Dollar at the current exchange rate is around 1.64 Rand. So, quite simply, multiply 467 billion HKD by the prevailing rate and that equals 766.49 billion Rand. Naspers had a market capitalisation of 681 billion Rand at the close last evening. Huh? That doesn't even make sense. Well, you must bear in mind that yesterdays close was awful, horrible and no good with the Naspers price sinking six and a quarter percent. Wow. The selling was aggressive yesterday.

The current gap between the value of the Tencent stake that Naspers holds and the entire market capitalisation of Naspers is minus 85 billion Rand. Or minus 6.68 billion Dollars. That is the size of a company like Discovery. Missing from the market valuation, in our infinite wisdom here in South Africa we somehow know the "real" value of Tencent, somehow our arrogance suggests that Tencent is completely overvalued. Yet, the PE unwind on Tencent is happening in front of our eyes. And the stock is up over five percent currently, which is how the market has perceived these results.

You can take a quick look at the numbers, I went through them yesterday and they all look pretty good to me: Tencent Q2 numbers. Revenues up 20 percent year on year, profits up 17 percent, Basic EPS clocked 1.528 Renminbi, that translates to 1.91 Hong Kong Dollars of basic earnings per share, that is for the first half. If you annualise that and apply a forward multiple to Tencent, you get to 36 times at the elevated shares price (up 5 percent this morning). So whilst growth of 20 percent might not be enough for locals here, the stock still trades at a premium. A growing business that attracts a higher multiple, we remain positive on Tencent and their prospects, equally we believe that Naspers has plenty more legs!

We had numbers from Curro this morning, interim results for the six months ended 30 June 2015.

Here are a quick overview of the numbers. Headline Earnings are up 82% to 51 million but due to the extra shares in issue the HEPS are only up 68% to 14.8c. Revenue is up 45% to R705 million and learners are up 26%. The number of schools has grown from 80 at the end of 2014 to 101 at the end of June. The advantage of a growing school network is that their overhead costs of running the group drop on a per learner basis. So the company gets relatively more profitable as they grow, the wonders of economies of scale. EBITDA margins improved from 20% to 23%.

The stock has been the market's preferred entrant into the private education space in South Africa, where the view is for 'blue sky' growth opportunities. There is a graphic from our post a year and a half ago, Curro full year results 2013, which shows that if the number of learners triples from here they will occupy still less than 1% of the education market in South Africa. So there is definitely scope for huge growth and continued growth at current eye watering levels. With the nice boost in HEPS the P/E ration moves from around 190 to around 120, so not cheap by any means! Looking forward the stock probably wont double in 3 years again with earnings growing into the share price. When at some point in the distant future where there are no longer growth opportunities, the huge amounts of cash generated from the company will then result in a very rosy dividend yield. For those with an already diversified portfolio this is a buy in our books

Linkfest, lap it up

I can't remember if we have posted this before even if we have it is worth reading again - How South Africa's Discovery became one of Africa's most innovative companies.

This is not new news and Dstv already does this through box office and catch up - Naspers to launch Netflix 'competitor'. The key to a successful streaming service is having a reliable fast internet connection and then the content that is offered. Getting quality content is expensive which is why the likes of Netflix and Amazon have started making their own shows, I wonder if Naspers will do the same?

Being financially independent is the goal for just about everyone that I have met - Your salary shouldn't be your only source of income. Some of the interesting finds in the article were that the majority of US woman feel adverse to discussing financial planning and investing but 3 out of 4 woman would like to learn more about investing.

Home again, home again, jiggety-jog. Stocks should bounce back hard today, most Asian markets are trading much higher after the global slam dunk yesterday. All markets across Europe traded three percent lower here yesterday. Oh, and the Greeks vote on their third bailout today. so much for no austerity and breaking those shackles, as we said, when the money moment arrived, we would see.

Sent to you by the Vestacters, Sasha, Michael, Byron and Paul.

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Thursday, 23 July 2015

Educate your Board

"As is the case with many mid cap listed businesses, there are very few shareholders that Curro will have to talk to. There is a total of 83 shareholders that hold 75.4 percent of the shares, we have identified three shareholders who control 45 percent of the business, together with the founder, just over 50 percent. Remembering that Curro need not get it all, they are offering smaller shareholders cash."

To market to market to buy a fat pig. Wow. I thought that the BHP Billiton production report was decent enough, sadly the commodity rout continued across our market, as a collective the stocks sold off nearly four percent. Perhaps the "all emerging markets with commodities exposure" sell button was hit. And from there we were down, and heavily, the Jozi all share index fell 999 points. That is a loss of 1.75 percent on the day. What to do? Nothing.

Locally there was an inflation read that suggested that perhaps a rate hike today is the wrong thing to do, in particular as food inflation is moderating, what do I know however? I am just a stocks guy, the powers that be must set interest rates and normal people must deal with the repercussions of higher borrowing costs relative to their income. There always will be an obsession with interest rates and that is for both savers and indebted folks at exactly the same time, a move one way or the other. There are relatively few mortgages in South Africa, relative to the population, there is however a lot of short term debt that is being serviced at high interest rates.

On the other side of the world, stocks clawed their way off the worst levels, whilst Apple lagged the market badly (down 4 and one quarter percent by the close), Boeing, which is a big Dow component had a sterling day, up over a percent relative to blue chips down one-third of a percent. We continue to see earnings top expectations, there has been a view that expectations have been set too low. I for one do not think that equity markets are too hot, we could be accused of being too optimistic all of the time. Wall Street and financials services businesses have been shrinking their respective workforces for more than half a decade since the financial crisis and it looks like that is going to continue.

Pick yourself as an analyst/strategist in an environment where your pals are being handed pink slips, the bonus pools are shrinking and regulation is making it harder to get ahead, your reality is different from those people in Silicon Valley who are changing the technological landscape forever with newer inventions, better products, pushing technological boundaries. Someone who tells you that things are terrible may find it very hard to separate their lived reality relative to the rest of the country, or pockets of brilliance and change.

In this regard I am lucky. I have a job that I really like and each and every day is completely different from the one prior and tomorrow will be different from today. I have never seen the market close completely flat, the days differ from one another. It does not however mean that you do not try and do the same things over and over again, and make sure that you have the same high standards for yourself. One of the main reasons that we churn this note out day in and day out is so that we ourselves can stay relevant and up to date. We need to be sure that we act as shock absorbers, making sure that we understand and get across the point that you own companies and not share prices. Yet ironically, share prices need to go up in order for the businesses to attract more capital from their shareholders and have more favourable borrowing costs. There is of course a big correlation between the two. Stay calm, invest in quality and always stay the course.

Company corner

It's getting hot in there, so take off all the prose. In this case it was the other way around, the chaps from Curro stuck out a stinging SENS in response to the Advtech board rejecting their offer. This is unusual that any PSG controlled company goes hostile, it seems now that Curro will speak to the shareholders of the company. After all, they are the owners of the company and had expressed a desire for a deal of some sort to happen, bearing in mind that it is at a significant premium. We had seen earlier in the day a letter to parents of a school that is owned by Advtech, suggesting that any bid would be disruptive for the teachers and pupils. Not a single mention of the shareholders, the people that actually parted with their funds in order to build these institutions.

First things first, who are the shareholders of Advtech? As per their website, under the segment Major shareholders, they are:

Coronation, Kagiso, Old Mutual (who have done deals with Curro before, that is not unusual for Old Mutual though) and BD Buckham. Who is BD Buckham? He used to be a non exec, Brian Buckham, who last transacted in shares in November 2006. He sold a few, correction, he sold nearly 900 thousand shares. He is actually the founder of the business, from way back in 1978. At 76 years old, I wonder if he is up for the fight, or maybe he can cash in at this level. His stake at the closing price is worth 287.7 million Rand. Motty Sacks used to be a non exec there too.

As is the case with many mid cap listed businesses, there are very few shareholders that Curro will have to talk to. There is a total of 83 shareholders that hold 75.4 percent of the shares, we have identified three shareholders who control 45 percent of the business, together with the founder, just over 50 percent. Remembering that Curro need not get it all, they are offering smaller shareholders cash.

Before we move away from shareholders, there is one board member, temporary CEO, Frank Thompson who has much to gain here. I think that is worth noting. As at his retirement date last year, in October, he owned 12.367 million shares. At 12.2 Rand, where the price closed last evening, he is worth 150 million Rand on paper. Not bad for a 30 year plus career in corporate South Africa. He ran Advtech from the beginning of August 2002 to October 24 last year. Leslie Massdorp (who had 2 million options at 8.19 Rand, as per the annual report) came to replace Thompson and left immediately on the 23rd of March. I am guessing that if anyone knows the business well and better than anybody else, it must be Frank. As part of the board and person who owns 2.9 percent of the business, he has said no thanks to Curro. I certainly think that is worth noting.

Yes, so here goes, as per the SENS announcement from Curro, they had written letters of support for a deal price of 13 Rand from "major Advtech shareholders". This was at a 42 percent premium to the 30 day "volume weighted average price of Advtech at 28 April 2015, the date prior to the submission of Curro's initial expression of interest to Advtech."

Curro had made a proposed offer at 13 Rand: "The proposed offer by Curro is based on a share swap with Curro valued at R33.65 per share, resulting in a swap ratio of approximately 2.59 Advtech shares for every 1 Curro share. The proposed offer also includes a 50% cash underpin for Advtech shareholders who do not wish to accept Curro shares (a minority shareholder is likely to be able to receive 100% cash, as many of the major shareholders have indicated preference for Curro shares). The aforesaid offer was only subject to a limited due diligence on specific matters;"

Possibly the best point that Curro made in their SENS announcement is a point that Byron made on PowerFM last evening (what you mean you never heard him?) and it is simple. When Advtech announced that they had bought Maravest, they were happy that issuing shares of their own at 8.02 Rand a share and that was a fair price. The Advtech board believed this to be a fair reflection of the value of the business, and said as much. So why would 13 Rand a share not reflect (it is after all a 63 percent premium to that) a really magnificent price, more than fair? That is why I think Curro are more than peeved, you can't suggest it does not reflect the real value of the business, when you said something much lower was fair. Even if the market might have thought that Advtech overpaid for their recent transactions, perhaps Curro are talking to those shareholders, they would have made some quick bucks out of all of this, not so?

I suspect that this is not over by a long stretch, it is pleasing to see private education making so much headway in South Africa, filling a vital gap in the economy where parents see the benefits of a wonderful education for their children. Far better than they had or their parents could afford, education is something that everyone should be passionate about. It is of course a very emotive issue globally.

Linkfest, lap it up

This puts the global GDP into perspective, I am glad to see that South Africa made it onto the map - This one map explains the entire worldwide economy

The wonders of modern medicine - Attention celiac sufferers! Scientists are working on a pill that will let you eat bread and pasta. Would you take a pill so that you can eat gluten or would you still rather avoid it?

Will a market with lower trading costs and longer trading hours be a good thing or a bad thing? The academic answer would be yes from a practical point of view, probably not - The Cost of Free

Home again, home again, jiggety-jog. There was a Rolling Stones article on the worst first names for good bands, Pearl Jam their first name was the Mookie Blaylock. Huh? Radiohead called themselves "On a Friday" first. That could work. Queen's first name was "Smile". Freddie Mercury and the Smiles? Nah. Def Leppard was Atomic Mass. Maroon 5 was Kara's Flowers. No, no, no, Adam. The Beach Boys were The Pendletons. What is that? Green Day was Sweet Children. They are not that sweet now, are they? Pink Floyd were called Screaming Abdabs. Try and say that quickly. Red Hot Chilli Peppers were, wait for it "Tony Flow and the Miraculously Majestic Masters of Mayhem". They actually shortened their name. What is in a name however? It turns out a lot if you are trying to get a gig I guess.

Stocks have bounced a little here this morning, look out for the interest rate decision later. I think that there is too much focus on that (from an equities view), really. It is what it is, as we mentioned however it does impact on more peoples lives than just the equities market, hence all the air time that it tends to get. A hike? Would it be right or wrong, it is irrelevant what I think, it is one of those many things that are beyond our control.

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Thursday, 16 July 2015

Go Private, save the state

"It seems like there is a whole lot more room to grow. I for one would much prefer it if the government outsourced all schooling to private entities, which set themselves really high standards. As Curro points out (just after this table in their 2014 Annual Report), them building schools saves the state 70-120 million Rand initially and then 50 million Rand a month. People pay for private education after they have paid their taxes."

To market to market to buy a fat pig. Agreekment done. At the "money moment", the Greek parliamentarians, for all their noise voted for the money. In fairness however to Syriza, the governing party, much of the members voting against the package were part of the ruling party. Were or are, it is difficult to say. Whilst there were heated debates inside the Greek parliament, there were the 'no to austerity' protestors throwing molotov cocktails at police. Question, if there were to be a cut in Greece's debt that is owed to the Troika, who would ultimately be hurt as their asset is written down? Is it the pensioner of France, Italy and Germany, Spain, Portugal and the Netherlands? Debt to one is an asset to another.

The bigger picture is that the IMF are right, even if there were incredible terms imposed on Greece and they were told that there was a 30 year interest holiday, they were told that there was more debt reduction, it needs to happen sooner rather than later. Investors of Europe need to know. Even if this is not exactly a deal breaker for opening a business elsewhere in the common currency area, it has captured the imagination of the networks for the better part of five years. Greece needs to grow their economy, that is the only way that tax receipts will rise and that the government will easily be able to service the debt more aggressively.

There needs to be political will power and I am afraid as long as there are far left wingers feeling that the only way to do things is more government intervention, and less private sector, I do not see that happening soon. The Golden Dawn (one of their members tore up the agreement in parliament yesterday) are borderline cases to be institutionalised. No, that is rude, as I said to my eldest last night, people get what they vote for. And do not ever question why someone voted X or Y, that is immediately suggesting that their political views are inferior to yours. That is exactly why each and every person has a single vote, it may not be perfect, it is however better than having no choices.

So that is done and dusted, expectations are for a fall out of sorts in the ruling party. Resignations, perhaps even new elections. If Tsipras comes through this wiser and better as a leader then thumbs up to his leadership skills, well done to him. If he firmly believes that what he is doing is the best interest of Greece long term and not scoring political points (even though he suggested that there was a knife held to his throat), then I admire that. It shows some maturity that was possibly lacking beforehand. Read the NYT piece: Greece, Its Back to the Wall, Adopts Austerity Steps.

The other "thing" capturing markets yesterday was Fed chair Janet Yellen delivering testimony in front of the House Financial Service Committee, see the NYT story: Janet Yellen Warns Congress Against Adding to Fed's Oversight. What I find really funny about the story, and perhaps it deserves a copy paste is the following paragraph in that story: "Ms. Yellen provided few new indications about the Fed's plans for the next few months, and she was not pressed on the issue. Lawmakers in Congress evidently do not share Wall Street's obsessive interest in the exact timing of interest rate increases." Ha-ha! A Wall Street obsession is definitely not a worry of the person on the street.

I expect that we will see rate rises different to those in the past, the trajectory will be slow to begin with, I reckon a range adjusting in smaller increments that the street is used to, like 10-15 basis points at a time. i.e. Moving the band slowly higher until you can hike by 25 basis points, why not, the way down was unconventional, why should the way up be anything ordinary? And expect the high end of the next interest rate cycle to be lower, i.e. not 6.5 percent, rather somewhere between 3.5 and 4, that is my best guess. Markets on Wall Street? Not too much action if you look at the scoreboard, the Dow and broader market S&P 500 were a whisker lower. Earnings, those continue to filter in and through, Bank of America was the standout, the stock was up 3.3 percent. It is still down 61 percent over ten years however, the "great recession" saw to that.

In the local market, Jozi, Jozi, stocks rallied across the board, obviously there strong Chinese GDP number buoyed commodity stocks. Both Anglo and BHP have recorded big write downs in the last two days, the Anglo production report from this morning does not look encouraging. Lower prices, lower demand is not a perfect cocktail for shareholder returns.

Less commodity exposure, I still am struck by that comment I read earlier this year that said an investment in commodities was a bet against humanity, I think that it was our old pal Cullen Roche who said it. I think what he is trying to say is that humanity keeps doing more with less of the same resource. That is not too dissimilar to that graph from yesterdays piece with more than double the number of people on earth eating food that is roughly the same price, farming technology has improved significantly over fifty year, without ordinary people noticing. When something changes slowly and constantly, it is called a Mesofact says our old pal Samuel Arbesman. Of course none of these people are really our pals, as a result of the awesomeness of Twitter, we fell we actually know these people. Including folks like Novak Djokovic and Serena Williams who we can (and do) follow on platforms like Instagram.

After all was said and done, the local market closed at 52 and a half thousand points. That looks like the best level in around one month to me. However it has been a tough old year, stocks have not really moved, the JSE all share index is up an uninspiring 5.55 percent. Although, that is around what inflation is, and on an annualised basis you would be double that. That is a decent enough long term return, remembering the rule of 70. i.e. how long does it take to double your asset base. Is it 70, or 72 or 69.3? Read Wiki: Rule of 72. Divide the annualised returns by 70, that is your number. Working the other way around, what return would you have to get in order to double your money in 5 years. Divide 70 by 5, you get to 14 percent. 6 years, that number falls to 11.66 percent, per annum. In other words, the consistent return matters. As Warren Buffett says however, he would rather have "lumpy" (read outsized) returns than solid and consistent ones.

Company corner

Curro and AdvTech confirmed yesterday that they are in talks. Obviously it was Curro who initiated the talks, they want to buy AdvTech. It makes sense that as the bigger competitor by market cap that they use the momentum and big shareholder to buy another business that the market has not taken so kindly too. As Michael pointed out yesterday however, and lean in a little closer to your screen here, Curro has a market cap of 12.1 billion Rand, turnover of just on one billion Rand for the financial year to end February. AdvTech has a market cap of 5.2 billion Rand, turnover of 1.93 billion Rand. Curro's turnover grew at 51 percent last year, AdvTech at less than ten percent.

Even at elevated share price levels, AdvTech trades on a 27 multiple, Curro has recently started making a profit, it trades on a multiple of nearly 200 times. Is the market bonkers? Perhaps not. There may be expectations from the market that the PSG magic could work again here, as it did for Capitec, PSG own 57 percent of the shares. And of course PSG have underwritten all the rights issues along the way, Curro has grown exceptionally fast. I doubt that there will be a massive PE unwind for Curro in a hurry, the goal is to continue to roll out as many affordable private institutions as possible. Where the perception is that paying for education means that the quality offered against the alternative (the government) equals a better outcome for the child, that is all that parents worry about. Curro have recently been in the news for all the wrong reasons, I truly hope that (for the sake of our nation) that this is dealt with swiftly. Racism is narrow minded and plain dumb, we should be all turned inside out, we would all look the same. Not very good "same" though, I love diversity and different.

Not too dissimilar to many success stories, and often what the ordinary person on the street misses, Curro started with a small school, all of 28 pupils in 1998. They started this year with 42 schools and 36 thousand scholars, learners, pupils, whatever you want to call them. So are they going to triple the number of scholars (or are they customers?) in the next three years?

It seems like there is a whole lot more room to grow. I for one would much prefer it if the government outsourced all schooling to private entities, which set themselves really high standards. As Curro points out (just after this table in their 2014 Annual Report), them building schools saves the state 70-120 million Rand initially and then 50 million Rand a month. People pay for private education after they have paid their taxes. I still like to think that the modern schooling system needs a serious shakeup, more responsibility needs to be given to the child. To get real life readiness, you have to be responsible for your actions. Elon Musk is right to start his own school, that is however for super rich kids. Sadly here in South Africa there are limited resources.

Whether or not a formal offer is made, or a merged entity appears at the other end when these talks between the two private education providers appears on the other side (or even if the competitions authority allows it), progress is being made shaping the minds of the youth. And that is something to celebrate, after all, the founder of the nation, Nelson Mandela was quoted as saying: "Education is the most powerful weapon which you can use to change the world." That will always be right, the only problem with that is that the more you know, the more you realise there is to know.

Linkfest, lap it up

I enjoy peanut butter, I buy the sugar and salt free one from Woolies. Not everybody can eat nuts, 1.4 percent of kids have a nut allergy in the US and this is rising. There is always capital looking to solve this problem, Mr. Picketty should take note that it is a French firm raising money in the US to solve the problem of nut allergies: Progress in peanut allergy trials raises hopes. Darn one percenters looking to solve problems of ordinary people.

Yesterday Amazon turned 20 many people didn't think it would get past its first birthday, it has survived start up phase, the dot come bubble and a host of new competitors - At 20, Amazon Continues to Defy Predictions.

Where there is a will there is a way! Many young people that I speak to are struggling to get jobs in the industries that they hope to have long careers in. This CV highlights the possibilities that are out there if you are willing to do what it takes, very inspiring! - Hey, I'm Nina!

Higher cash levels with asset managers may point to people preparing for an interest rate hike? Where funds want to own a couple more bonds but can only purchase them after the rate hike - Fund Managers Holding Highest Cash Percentage Since Lehman. This isn't pointing to a bear market because cash is also flowing into financial stocks which can be seen as a proxy for the economy and one of the sectors that do a bit better with higher interest rates.

Home again, home again, jiggety-jog. Mixed Asian markets this morning, I saw an interesting comment from Blackrock's Larry Fink that suggested that the reason why Chinese markets are so volatile is that capital markets are immature. There was an awesome interaction between Carl Icahn (who is nuts) and Larry Fink, you might see footage during the day. Back to the real grind of earnings today. Google, Ebay, Goldman Sachs, Mattel, Philip Morris, UnitedHealth and of course an interesting one Schlumberger. That is why we invest in markets, for companies, not for Jannet Yellen comments or Greek debt issues.

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Wednesday, 4 July 2012

Happy 236th birthday US of A

" So, the sense from the mainstream is that bankers are evil, money grabbing, greedy individuals who mostly do "things" at the expense of their clients and the broader public. But this note suggests that pressure from the regulators was placed on a major global bank to somehow influence their submission. Everyone of course was chatting back then, and the regulators were very close to the institutions trying to maintain some form of stability."

Jozi, Jozi. 26^o 12' 16" S, 28^o 2' 44" E. Well, well, we took off in the second half of the afternoon, risk on came back in what is a festive week in the USA. The sense globally, at least that I get is that there is going to be another round of coordinated policy response, the Chinese inflation worry is dissipating, the Europeans have kind of steered away from hard and fast austerity thanks to the people having spoken, and the US economic growth although better than Europe, still looks anaemic in dare I say it, an election year. We saw the commodities complex benefit yesterday, in particular the oil price and the copper price surged during the day. The oil price also got a lift as the Iranians of course are no longer able to export oil as freely, potentially removing as much as one million barrels of supply a day. Exacerbating the supply side is that Norwegian workers in the oil industry are striking currently. So, now you know why the oil price took off yesterday.

The Jozi all share index closed up shop at 33986, up 333 points, or .99 percent. All sectors measured decent enough gains, financials, resources, industrials all participating in the European afterglow rally from last Friday. And we are steadily heading back to the highs, so clearly the balance of the market believes that the worst might be behind us. But, that is the optimist in me, many others would call themselves realists when in reality they are pessimists. Mark Mobius is right, you have to be an optimist to be a long term investor, you have to have conviction around your investment thesis. I suspect that the local and global vehicle sales numbers we saw yesterday were upside surprises, the recent PMI numbers that we see have a lot to do with the European dithering and hence delaying of spend or paralysis of decision making of sorts.

MTN yesterday decided to unleash a release which calls for the immediate dismissal of the Turkcell US claims, check out the official release: MTN dismisses Turkcell US claim. They use some pretty strong and colourful language, well I thought so anyhow, the first part and last part I think is most important. Here is a copy/paste. "... the US court does not have jurisdiction over the subject matter of Turkcell's claim, because Turkcell has not alleged a violation of the law of nations as required under US law for the sort of claim Turkcell is seeking to bring... " AND " ... the US court lacks personal jurisdiction over MTN and its subsidiary, MTN International..., which is also named in the US action. MTN and MTN International both lack sufficient contact with the United States to be subject to the jurisdiction of the US court." MTN are suggesting the US courts dismiss the case, Turkcell will respond to this motion by mid August. I hope that I have used the correct legal terminology.

Second, as MTN point out, Turkcell have already been sent packing in Paris (that is France guys) in front of a arbitration tribunal, in which their former Iranian JV partner was involved. MTN reckons that the case will be thrown out by the end of the year, but I then wonder what Turkcell would do next, because clearly they are not letting this just lie down or go away. The MTN share price in recent days has awoken from their seemingly long slumber, and are pretty close to their 52 week high. In contrast, poor Telkom traded at a 52 week (and all time low in their current format) low yesterday. That of course is another story, for another day. In a way, Telkom are admitting defeat through their increasing of their ADSL offering.

Another sad story is the operational update from the fellows over at Aquarius Platinum, who this morning have released a Operational Update. I guess the only positive thing that you could say about them relative to the rest of the sector is that they are taking a proactive view when compared to their industry peers. And I guess although ugly for their shareholders in recent weeks and months, Aquarius you could argue have done the right thing. In fact Aquarius say as much, with Stuart Murray saying the following: "I would hope that the other industry players follow suit and cut the unneeded production that is depressing the industry." Interesting, not so?

As you can see from the release, Aquarius have terminated their mining contract with Murray and Roberts Cementation, and Aquarius will assume the owner operator role. As they point out, this is part of the cost saving initiative. Poor Murray's, both the construction company and Stuart the CEO of Aquarius, I feel bad for both them, circumstance I guess. The other good news is that 75 percent of the workers at Marikana have been placed in "other organisations" as the news release puts it. Everest is on care and maintenance, as you well know.

The overall impact is heavy, from a production point of view, the company has produced 412,594 4E oz so far to the end of the financial year, with the next financial year (the one we have just started) expected to yield around 327,500 4E oz. So roughly 85 thousand fewer ounces this year, not a train smash, but certainly much lower than the group production in 2008 which topped 500 thousand ounces and was even better back in 2007, with 530 thousand ounces produced. Going backwards is not what shareholders want to be reminded of, that is for sure. A sad state of affairs, but as Stuart Murray points out: "The Board and management of Aquarius are acutely aware of the difficulties facing the industry at present, and are monitoring the business and financial health of the Company as closely as we have always done. We believe that the measures we have outlined today and over the past few weeks once again demonstrate our commitment to controlling our own destiny while carefully husbanding our assets on behalf of shareholders and thereby ensuring the survival of the Company in these extremely difficult times." Survival mode at the moment, hanging in there. All I can say is that emissions controls don't look like they are going out of favour anytime soon.

Byron's beats looks at an issue that is probably the most close to my heart, other than family, and that is education.

It is a joint venture between Curro and the OMIGSA schools fund. This fund is backed by the PIC and Old Mutual and has financing of up to R397.1 million. Curro will add a further R42.9 million bringing the fund to R440 million. The purpose of the fund is "to play a supportive role to Government in addressing the educational needs of South Africa in the lower income market and to put in motion the objectives set out in Curros pre-listing statement."

This is how the fund will work according to the announcement. "The joint venture includes the incorporation of an operating company that will operate schools, to be known as the Meridian Independent Schools, and a property owning company, held 65% by Curro and 35% by the OMIGSA Schools Fund, that will provide the school facilities and premises for the schools, with Curro being appointed as the manager of the schools. The Meridian Independent Schools will focus on providing private schooling to students where the majority of parents earn less than a defined threshhold, currently R200 000 (two hundred thousand Rand) per annum."

So basically they are putting in 10% of the capital but owning 65% of the fund. Sounds too good to be true not so? This Moneyweb interview with CEO Chris van der Merwe explains it very well. You see what he says right at the end there. Curro have specialised expertise to manage the schools and that is where their bargaining power comes in. Old Mutual and the PIC get good PR for investing in a project which will benefit our nation. In fact many say education is the core solution to most of our problems. I agree.

It is also important to note that through this fund Curro are targeting the lower to middle income bracket. This is where the gap seems to be in the market and where we see future growth in this sector. Like I mentioned earlier, this is also a good example of why we like to invest in positive themes that are seen favourably by government and the public. I can't see this kind of a deal being struck with a Tobacco company. All in all this is a fantastic deal for Curro and a great deal for the nation and the 100 000 children who stand to benefit.

Do you remember that instant messaging software called ICQ? When you got a message from someone it popped up and said uh-oh in a very high pitched voice. Remember? Well, I heard that voice again as the Barclays Libor scandal escalates, the chairman Marcus Agius (the only true defender of London/Rome) resigned first, then Bob Diamond the CEO yesterday morning, and then if that was not enough, the COO Jerry del Missier announced his resignation. My twitter feed lit up, even one that made me laugh from the fake Christine Lagarde account: "*BARCLAYS CLEANING LADY RESIGNS WITH IMMEDIATE EFFECT"

But this is not a laughing matter. Bank of England deputy governor Paul Tucker is under the spotlight, because the sense is that the Bank of England is involved. How? Well, Tucker queried with Diamond via a telephone call late October 2008 (at the height of the non trust of banks of one another) how Barclays could submit such a high borrowing rate at the time. If you recall from that time Libor spreads blew out. Still confused about Libor is used for? Don't worry, here is "simple" explanation of how banks get to the published rate: The Basics of BBALibor. Now as I can tell from my reading, the actual process is not THAT old, it has been around since 1985 and accepted as the standard.

So, why would Tucker be at fault here? And how is this all going to come out in the wash? Well, we do not have to wait long at all, because as luck would have it the Treasury select committee will grill Bob Diamond today. The seemingly unapologetic Bob Diamond, but I am pretty sure that he does have certain regrets, if not apologies for the broader public. Remember that Barclays did not seek assistance of any sort during the depths of despair, the same time as "that" phone call. Barclays have submitted documents ahead of the hearings, INCLUDING that call and the note that RED (Robert Edward "Bob" Diamond) made on the day. The full submission including all the Libor rates submitted are included in this document, Supplementary information regarding Barclays settlement with the Authorities, but I have cut the note made on the day. Excuse the fuzziness, but that is how it appeared in the submission:

So, the sense from the mainstream is that bankers are evil, money grabbing, greedy individuals who mostly do "things" at the expense of their clients and the broader public. But this note suggests that pressure from the regulators was placed on a major global bank to somehow influence their submission. Everyone of course was chatting back then, and the regulators were very close to the institutions trying to maintain some form of stability. But the last question worth asking, where were the law makers and regulators when we always need them? Mostly asleep at the wheel, if you read ~~Too big to read~~ "Too big to fail" you will get the sense that SEC Chairman Christopher Cox was not exactly up for the job. Well, he was criticised by all and sundry openly as being more than asleep at the wheel, nowhere to be found. So whilst the popular line might be to point fingers at everyone here. And Joe Public might feel let down. The ONLY folks in the pound (no pun intended) seat here could be Osborne/Cameron and they could use this to score cheap political points over Darling/Brown. And I have no doubt that they will do this, kick them while they are down you know.

New York, New York. 40^o 43' 0" N, 74^o 0' 0" W. It was a shortened session on Wall Street, with trade only up to 1pm, allowing people more than enough time to get to their respective fireworks displays (not yet, that is reserved for day) or hot dog eating contests. Picnic type foods is what I am led to believe, to watch the various displays and patriotic marches, music and attractions. In terms of economic data points before all these festivities there were the auto sales, which looked like a comfortable beat to me. Session end all the indices closed higher. The nerds of NASDAQ tacked on 24 points to close at 2976 points, the broader market S&P 500 added eight and a half points to 1374, whilst blue chips, the Dow Jones Industrial Average added 72 points by the end of the session to 12943. All the majors near some pretty important milestones, 3000 on the NASDAQ and 13000 on the Dow. And I guess 1400 on the S&P, although that is further away I am thinking.

Currencies and commodities corner. Dr. Copper is last 352 US cents, the gold price is lower at 1615 Dollars per fine ounce, the platinum price is off a touch at 1476 Dollars per fine ounce. The oil price is lower at 86.94 Dollars per barrel for WTI as per the NYMEX quote. The Rand is slightly weaker, at 8.12 to the US Dollar, 12.72 to the Pound Sterling and 10.21 to the Euro. The market is marginally higher on a VERY slow trading day.

Parting shot. Happy birthday the United States of America, which turns 236 years old today. Well, in the form that we are used to anyhow, this is obviously a holiday that Americans hold near and dear to their hearts, they are a patriotic bunch, you can't fault them for that. The WSJ has a great article on what the USA looked like back then in 1776, check it out: Fleming: What Life Was Like in 1776.

Sasha Naryshkine and Byron Lotter

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