Money with a dash of Funny: Internet

Showing posts with label Internet. Show all posts

Friday, 23 September 2016

Competition for Data must Rise!

"More people use more data as their phone advances in technology. Watching YouTube (which didn't exist back then) clips on the Nokia 3210, no ways! WhatsApp, what is that? You were sending 2 Rand a pop sms' and if memory serves, you were confined to a certain number of characters. Otherwise it rolled over to another sms which then became a second charge."

To market to market to buy a fat pig Another day focussed on central banks, this time the aftermath of the Fed decision and the fact that global equity markets cheered the decision. The Rand rallied hard as the Dollar lost some allure, the general consensus around the marketplace, whether ill informed or not, was that there were some company flows inwards to pay for the SABMiller stake. In other words, when AB InBev take SABMiller out, the cash has to be here already. I suppose the timing is what it is.

The Monetary Policy Committee also released their forecasts for growth and inflation, growth is expected to be muted in the short term and inflation is expected to stay inside of the 3-6 percent band, admittedly at the top end of that range. If you are interested, then follow the link - Selected forecast results: MPC meeting September 2016. Inflation through next year is set to average 5.8 percent, and the year after that inflation is set to be lower to 5.5 percent.

Those of course are predictions. Remember that at the beginning of this year, Deputy Fed governor Stanley Fischer suggested that the Fed would be on course for four hikes this year. We are yet to see one. Even the best predictions by the best predictors are still predictions. The Statement of the Monetary Policy Committee points out that food prices are somewhat of a problem for consumers, no thanks to the drought. Any rain on the horizon? Hopefully. Expect food prices to peak in the last quarter, according to them.

The statement delivered by Reserve Bank governor Lesetja Kganyago suggested that "(t)he marked appreciation of the rand during the past few days appears to be driven by expectations of unchanged US monetary policy, as well as to speculation regarding possible purchases of rand related to a major M&A transaction. See? They think that too. The upshot of it all is that rates are on hold, and the MPC is concerned about inflation. What is interesting is this line, it seems to be a classic on the one hand: "The MPC is of the view that should current forecasts transpire, we may be close to the end of the tightening cycle. The committee is aware that a number of the favourable factors that have contributed to the improved outlook can change very quickly resulting in a reassessment of this view. The bar for monetary accommodation, by contrast, remains high, as the MPC would need to see a more significant and sustained decline of the inflation trajectory to within the inflation target range"

So we could be at the end of the current rates cycle, we may however not be, one could never say for sure though? The Rand weakened through the session, perhaps the M&A related Rand buying had passed and the prospects of ZA yields staying at these levels saw some retreat. It was good for stocks as a collective, with the Jozi all share index rallying nearly two and one-quarter of a percent. Resources were up an incredible three and a half percent on the day, financials added about as much as Mr. Market, and industrials were not too far off being up 2 percent. Glencore, BHP and AngloGold Ashanti dominated the winners column, there was a single stock lower in the top 40, and it was Aspen, down one quarter of a percent.

Over the seas and far away, in New York, New York, stocks finished better again, the afterglow of the Fed statement Wednesday. The broader market S&P 500 closed two-thirds (nearly) of a percent higher, whilst the Dow Jones Industrial Average added 0.54 percent. The headlines belonged to the nerds of NASDAQ, the index closed at a record high and set another intraday high too. Pencil in 5339.52 as your new all time high. Why I am not a fan of graphs and selective data picking is because of the following "drawing of lines in the sand". Since the financial crisis ended and the market bottomed in March 2009, the NASDAQ is up 312 percent. Sell it! Since the tech bubble burst, track the top of markets back to the middle of March in the year 2000, the NASDAQ is up less than 6 percent. Buy it all! And since the index bottomed in October 2002, in the great tech washout, the nerds of NASDAQ is up nearly 350 percent as a collective.

Be careful where you select your starting point. Even at that point, October 2002 to present day, "things" and constituents of the NASDAQ are VERY different. No Google/Alphabet, it wasn't listed, Apple was a mere twinkle in the eye. Although listed, it was a fraction of the price it is now. And Facebook didn't exist yet. Amazon is up 4630 percent since then (October 2002), the stock was only trading at around 17 Dollars back then, the market cap is now 386 billion Dollars. Microsoft is up, since October 2002, a more "reasonable" 155 percent.

So forgive me for once again pointing out that no two times in history are remotely the same. If people tell you about the Tech Bubble meltdown and compare it today, just remind them that Facebook didn't exist and by extension had zero users (there are 1.71 billion monthly active users now), the iPhone didn't exist (since then Apple have sold over one billion units), Amazon had sales of less than 4 billion Dollars back then, consensus for this year is for revenues of around 136 billion Dollars. See? This time is the same-same, yet completely different.

This whole idea that "stuff" must get cheaper, yet you want to be paid more makes me scratch my head. Data for one is expensive in South Africa as a direct result of government, their reluctance to encourage competition has meant that the only providers can keep rates at the goldilocks rate, or just above it. No network provider is out there to screw you over, they have to recoup the costs of the development of a very expensive above ground network. Make no mistake, their margins are pretty spectacular, the service is pretty darn good on balance, you would say.

Vodacom and MTN have spent tens of billions of Rands so that your swankiest and newest smartphone can consume all the data that you want and need. High speed internet is a thing for only rich people in this country. The internet as we know it is less than a generation old. I for one am glad that the internet has changed so many lives and will change so many more. Check out this graph from Internet Live Stats:

Additions to internet users around the world is slowing, growing at a slower pace, only around 7.5 percent as the base has now swelled to 3.4 billion folks. Sadly this still only represents 46 percent of the global population. Think about that for a second. Less than half of the world get to use the awesomeness of the internet. Something we take completely for granted. Ten years ago it was only 17.6 percent. In 2000 it was only 6.8 percent. Hey, I was using the internet before that, I think my first experience with the "web" was in 1996, around 20 years back. It was hardly earth shattering, Netscape and the like, Ask Jeeves, and remember that search engine Aardvark? Ha-ha. How times have changed.

Remember your first mobile phone? I was "late" to getting one, I had an email address (hotmail) long before a cell phone. If someone wanted me, they could reach me at work or home. Otherwise, there was nothing else needed, right? No, I had to get one, a Nokia 3210, brand spanking new in 1999. It had predictive text, I think? The 3210 sold a massive 150 million units. And the reason why it had a good battery life is that you only made two calls a day, sent perhaps three sms' here and there. And that was possibly 20-30 Rand worth of usage. Nowadays, calls are limited. WhatsApp, even making data calls are a very common occurrence.

More people use more data as their phone advances in technology. Watching YouTube (which didn't exist back then) clips on the Nokia 3210, no ways! WhatsApp, what is that? You were sending 2 Rand a pop sms' and if memory serves, you were confined to a certain number of characters. Otherwise it rolled over to another sms which then became a second charge. So. Let me tell you something Johnny come lately data must fall people. Your life with regards to internet access and ability to do many things on the go has improved immeasurably, thanks to Android (thanks Google/Alphabet), Samsung, Apple and the like. If you don't like the price of data, use the alternative. Oh, no, I forgot, that is expensive too. And the rollout has been stifled. Suddenly now we are asking for cheaper prices. They have rocketed down as a result of more users, that will continue to be the case.

If government intervenes and puts a cap on prices, expect the quality to fall away as well as any potential competition. And who knew, competition means lower prices! When you are using your Apple iPhone 12 (or some other such model) and there is only a 4G LTE connection (and you can't do anything with the phone) remember the time that you wanted something for nothing. Of course this isn't the common perception that exists, somehow the private service providers are out there to fleece you (nobody forces you to use them), whilst government are always trying to do you a favour. In fact, the opposite always ends up happening, the more government "do", the worse for the consumer in the end. So let the process take course, data will get cheaper and cheaper as you use more and more.

Linkfest, lap it up

This study doesn't sound all that scientific, it is interesting none the less - 'Trust Your Gut' Might Actually Be Profitable Advice on Wall Street, Study Says. Trading is not the only profession where people talk about trusting your gut, research seems to point to a part of the brain that is processing information that you are not even aware of.

I'm not sure how this would be regulated ? Cutting methane emissions will go a long way to slowing the increase in the globes temperature. I wonder if this will result in taxes on beef, lowering cattle count is the easiest way to reduce the methane they produce - Cow farts can now be regulated in California

Using GDP as a measure for how well a society is doing is a flawed metric. Thanks to the digital age, our living standards have improved by spending less money - Recorded music sales by format from 1973-2015, and what that might tell us about the limitations of GDP accounting

Home again, home again, jiggety-jog. Markets across Asia are lower. US futures are marginally lower. I for one am pleased that earnings season starts in a few weeks time in the US. Amazon is now the fourth biggest company in the US. Wow. Who would have thought? And on other matters of who would have thought, is it really the case that John Stumpf of Wells Fargo could walk away with 200 million Dollars in compensation? That is likely to make senator Warren seething mad.

Lastly, what is your heritage? Let me give you some insight to mine. Born in Zimbabwe and lived there for the first 7 years of my life, lived in South Africa (the most now), Lesotho and Mozambique. My grandfathers were born in Russia and France. My grandmothers were born in the Ukraine and Namibia, of Russian and German descent. My great grandfather was born in Corsica, does that make me sort of Italian? So that begs the question, what am I? I will tell you, a citizen of planet earth that embraces all cultures!

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

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Wednesday, 2 December 2015

Important Internet

' "The internet is so important that for every 10 people who gain internet access, about one person is lifted out of poverty and about one new job is created."

Which is why I guess the Zuck has this goal of getting the internet to everyone, Bill Gates may not think it is that important, this is his way of showing that it is. I am pretty sure that Gates and the Zuckerbergs want the same thing. Less poverty, better access to medicine, better access to education. The Zuck continues:

"Yet still more than half of the world's population -- more than 4 billion people -- don't have access to the internet. If our generation connects them, we can lift hundreds of millions of people out of poverty. We can also help hundreds of millions of children get an education and save millions of lives by helping people avoid disease." '

To market to market to buy a fat pig. Stocks rallied hard on Wall Street yesterday evening, the broader market S&P 500 comfortably over 1 percent on the session, blue chips less than that and the nerds of NASDAQ a fraction less than that. There was weak manufacturing data from the US, perhaps the most surprising news of the day was the lowest German unemployment number in this new chapter, since reunification.

When the Berlin Wall came down, that was a pretty momentous occasion for humanity, this is the lowest since that point in history of the new Germany, as that is when the line was drawn. Allan Gray is running an advert in black and white about a letter being exchanged between two lovers on both sides of the wall. And how waiting for the right returns takes time. I have spoken to many private clients in my time, and if I understand from folks who manage institutional money, their demands are far greater. It has been a tough time for contrarian investing and equally a tougher time for value investors, some of the ideas have been awful. And will they "come to you" if you wait? There are no guarantees in anything, let alone investing, the short answer is that whilst you are waiting for that opportunity, there are many others you are missing.

Quick wrap of US markets, healthcare and financials led the charge, we said yesterday that the last look at the health of the US economy is the non-farm payrolls number on Friday. Tune in, it is always fun to watch. Even if you don't understand it all, know that the US economy is the biggest standalone economy in the world, driven mostly by consumers, meaning that the lower the unemployment rate and higher the number of people employed, the stronger the US economy. The stronger the US economy translates to a stronger currency, in this car the US Dollar has trounced everything in its path. A quick look at the five year Dollar Index reveals that the last year and a half is where all the Dollar strength comes from, I took a screen grab from Marketwatch -> U.S. Dollar Index (DXY).

So whilst yes, there are many reasons to look locally at the lay of the land and point fingers as to why the Rand is weaker, the reality is that the Dollar is strong, their fundamentals look better. When I see headlines like: Mr. President, save the Rand now, I am not too sure what to make of that really. What can the President do? I suppose there are attractions for businesses of investing in places like Ireland, Mauritius and the like, we could position ourself that way, again, we have a unique set of "challenges" down here.

Spare a thought for the Brazilians, they felt like the hair was being extracted from their "sensitive parts", GDP shrank 4.5 percent from last year this time. There are problems and there are challenges, perhaps we have the latter. Mind you, when you look at a Brazilian GDP graph, this is what it looks like, courtesy of TradingEconomics:

Recently for Brazil it looks terrible, that can be mostly attributed to the tanking oil and iron ore prices, the rich resource endowed country has diversified their economy, clearly not enough. The economy clearly stumbled badly in the 90's, it has grown nearly fivefold since 2002, that sounds pretty amazing. I guess it is all about recency bias, Paul will be there in a little bit, hopefully he can come back with some useful insight for us here in the office. Perhaps the labour element, like in neighbouring Argentina (where labour just lost) is on borrowed time too.

On the local front, after spending much of the first part of the day in the green, we fell away, with the Jozi All Share index closing the session down 0.14 percent. Again, it was a sized bag, resources, at least some of them doing better on the day. Naspers feeling a little heat and selling off on the day, the stock has been so strong lately, I don't blame folks with short time frames taking some off the table. Woolies was also amongst some of the biggest losers, I didn't see anything specific. There was not too much on the companies front yesterday, 1 December means that with the new month, the rush of companies reporting at the close of the month (i.e. last month) had come and gone.

Perhaps the biggest news of the day yesterday at a global level was the news that the Zuckerberg family (the most famous one) had a baby, well done the Zuck and Priscilla. We know her through a picture and know her name is Max, excellent. This A letter to our daughter is a must read. It is a little like the annual Bill and Melinda Gates Foundation letter, perhaps with fewer graphics and written with less time. I am going to pick out the juicy bits, the context of the first one is that the world is a better place and improving, medicine has made many advances over 100 years, yet we can continue to do better.

"The internet is so important that for every 10 people who gain internet access, about one person is lifted out of poverty and about one new job is created."

And then the real part, the formation of the Chan Zuckerberg Initiative, which when I read it had over 34 thousand likes already. I was slow, it had jumped the shark. The initiative is to "advance human potential and promote equality for all children in the next generation. Our initial areas of focus will be personalized learning, curing disease, connecting people and building strong communities."

With all foundations, you need money, right? So how to fund it: "We will give 99% of our Facebook shares -- currently about $45 billion -- during our lives to advance this mission. We know this is a small contribution compared to all the resources and talents of those already working on these issues. But we want to do what we can, working alongside many others." Whoa! That is pretty big. So Max and her unborn siblings get a percent from their parents. How will this work, obviously the Zuck is still going to be in charge of Facebook? Earlier in the letter, the Zuck says: "I will continue to serve as Facebook's CEO for many, many years to come." More to come when they get into their normal parenting routines. My eldest in ten and a half and I haven't figured it out yet, good luck Zuck, we will see you in a couple of decades. Kidding!

We like to see this. Good for him, good for his family and of course, great for humanity. This is going to take forever, a long, long time. He will remain in charge, the world needs more people like this.

Linkfest, lap it up

The current pollution in China is not great. There is a smog cloud slightly bigger than Spain floating over the northern parts of China - A Chinese artist vacuumed up Beijing's smog for 100 days and made a brick from what he collected.

The worlds tallest building, due to be completed in 2020 will be 1km tall - Saudi Arabia to build world's tallest tower, reaching 1 kilometre into the sky. It is amazing what technology allows us to do. The only problem would be the time it takes to get to the top floors.

At the heart of the Discovery business model is to give us small incentives to do what is good for us. Discovery already has a vast amount of data which proves that what they are doing works, here is an economic paper talking about incentives in general - Incentives change how we think. The scientists got people to each insects, slightly less appealing than being incentivised to go to gym.

Home again, home again, jiggety-jog. Japanese stocks are down, Chinese stocks are up sharply. Hong Kong stocks are up two-thirds. We are probably going to start better here, in fact as I write this, we have, pretty much a broad based rally. Good work if you can get it.

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

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