"99 flowers would have been more romantic than 99 cell phones, and a WHOLE LOT cheaper. So the guy is probably a whole lot poorer, has a bruised ego and 99 phones to sell, plus the whole world knows he failed in his objective. He does however get 10 out of 10 for originality and now will get the sympathy of MANY!!!"
If you did not get the email on Friday about the number change, here goes again: We have changed our telephone number with immediate effect to 087 985 0939. Thank you for your patience, if you battled to get through to us recently.
To market, to market to buy a fat pig. We dropped away here locally at around three in the afternoon, an hour and a half before the US markets opened. That is the worst thing about summer here for the local markets, the fact that we miss an hour of trade from both Europe and the US, darn them and their daylight saving. I suppose the collective populations of those taking part in daylight savings outnumber even the continent of Africa, and in terms of purchasing power, well, we fall a distant third to those two territories. Dragging the index lower during the course of the afternoon were the commodities stocks, once again incurring the wrath of the sellers. Singles day is not quite a "thing" here yet, it did however take up a lot of time, with Alibaba of course riding the crest of that wave. Jack Ma wanted this day to be global by 2019! Yowsers.
If you are struggling to see how singles day is even relevant to yesterday, here goes, take the 11th of November days and month and separate them: 1.1. 1.1. See? A whole lot of singles standing next to one another. Although a WSJ article that I read suggested that 60 percent of the people that shop online in China (and elsewhere) are not actually single, instead of being the anti Valentine day that it was supposed to be, singles day is possibly synonymous with self indulgence. Self indulgence day sounds selfish, singles day sounds more desperate and would illicit the South African, "shame" which means you have some pity for that person. My favourite new artist, Olivia Millerschin, sings a song that goes hand in had with singles day, it is called "Screw Valentine's Day". For a young person she seems to have her feet firmly planted on the ground, you should download her music.
If you wondered how big Alibaba was or is going to be, the read this FT article (subscription only) -> Alibaba breaks online shopping records. 165 million orders in a single day, more than 10 times the daily average. 2.5 times more value than all goods sold last year in the US on Cyber Monday (the Monday after Thanksgiving in the US), that is how big it is. And as the purchasing power of the average Chinese person grows, as will their ability to continue to sway the consumer powers globally and wrestle away from the developed world.
Loads of sales of smartphones. Spare a thought this poor guy: Chinese man buys 99 iPhone 6s to propose to girlfriend on Single's Day - only to be rejected. Well, perhaps she was put on the spot, 99 flowers would have been more romantic than 99 cell phones, and a WHOLE LOT cheaper. So the guy is probably a whole lot poorer, has a bruised ego and 99 phones to sell, plus the whole world knows he failed in his objective. He does however get 10 out of 10 for originality and now will get the sympathy of MANY!!! This may not exactly be your idea of something to get involved in, you can however be an investor in these businesses and trends.
100 percent of the worlds population own 100 percent of the wealth. It is not fair, this is true. Education is the great leveller, that is why when I read that Facebook are trying through internet.org give many more people access to cheaper (potentially free) internet, in order to open the greatest library known to mankind, the internet. Is the internet going to become a fundamental human right? I hope not, you get what you pay for in life. Consumers benefit from more competition in the end, not when governments intervene making it less attractive to get involved. This is always a better outcome, governments just cannot help themselves.
Back to that part about what makes a person wealthy or not, the haves and the have nots. AEI had a great piece on income inequality, titled: Explaining income inequality by household demographics. The top fifth of rich households (185 thousand Dollars) basically have both parties in the house working (only 3.1 percent of households have nobody working), earn roughly 93 thousand Dollars apiece, have a three in four chance of being married, are between the ages of 35 to 64 years old (average age 48), are more likely than not to work full time, have a two in three chance of having a bachelors degree. So, steady life and being educated equals better chance of being rich. This is of course in the USA.
The bottom rung of the ladder is telling, the bottom one fifth household earns on average 11651 Dollars a year. 63 percent of entire households earn nothing. Meaning that there is even more pressure on the person making a living. In such households the household income per earner is 28417 Dollars, see what I mean, that money has to go a long way. The marital status of such households is a painfully low 16 percent, the average age is a very high 54 years. One in four of these people have no high school.
You can see quite quickly that if you get the chance of having a better education, the rest of your life ends up with better prospects. You end up having a greater chance of earning more and having a more stable relationship with your partner. The starting point is whether you win the ovarian lottery (to whom you are born) or not, as Warren Buffett puts it. It is easy to say to a kid born in a poor area to a single parent with no skills that they should up the ante and get more serious about life, it is not too dissimilar here either. If you are born to parents with no money and few skills it is much harder to break that cycle. You have to fight at school for this chance, this opportunity to break out, education is the ONLY way to do that.
Byron beats the streets
Yesterday we received a trading update for the 44 week period up to 2 November from Massmart which looked solid. Why 44 weeks? It coincides with the analyst store visit. Lets look at the numbers.
Total sales increased to R62.5bn which is up 10.4% over the period. Comparable store sales increased 7.3% while prices increased 4.9%. Massdiscounters which includes the Game brand increased sales by 8.9%. Game is their preferred brand to expand into Africa. The rest Africa division slowed slightly, no extra details were given.
Masswarehouse (Makro) increased sales by 11.5% while Massbuild increased sales by 14.7%. These are Massmarts strongest divisions as they target the higher end consumers. As you can see they are proving to be very resilient. Masscash which targets the lower end consumer with cheap grocery products grew sales by 8.9% with inflation of 4.9%.
These are decent numbers coming through and they are maintaining the growth seen for the first half of the year of 10.2%. Massmart have grown solidly on their 26 week sales figure of R35.7bn to R62.5bn in 18 weeks. We still have the strong month of December to come.
What does this tell us? It tell us that the South African consumer has normalised to the recent price increases. We are probably seeing some extra spending from the anticipation of potential price decreases from likes of petrol as commodity prices come down. This is of course great for the consumer and great for the retailers and the producers. Tiger Brands is trading at all time highs.
As for the business itself, we are keeping a close eye on operations. We are starting to get impatient with the Massmart brand base, especially their focus on Game. The strong set of numbers we see here is being experienced across the retail board. The Shoprite update indicated a 12.3% growth in sales. We believe there are better options out there at the moment such as Woolworths. The Massmart share price has shown some recent strength on the back of these numbers. If you would like to take advantage of the stronger Massmart price give us a call to make a swap, either into Woolworths or if you already own those, Mediclinic.
Things that we are reading, that we think you should be too
Continuing the debate of active v passive investing, Cullen Roche has a view that I have not heard before - The Myth of Passive Investing Begins to Unravel
An interesting debate going on in the US at the moment is about internet speeds and if you should be able to pay up to have your website have faster speeds (like Netflix) - A Super-Simple Way to Understand the Net Neutrality Debate. Then here is an article from the US about someone complaining about their internet speed and costs - U.S. High-Speed Internet Lags Behind on Price, Cost, I had a good chuckle as we are nowhere to the US on price or speed.
Barry Ritholtz is having a look at forecasters who have a reputation for getting things more wrong than right - My Prediction: Your Forecast Is Wrong. The main thing to take away from the blog piece is that forecasting is futile and your investing strategy should not really on what will happen over the short term.
Home again, home again, jiggety-jog. We are up here, following on from a marginally better close on Wall Street overnight, following through from a great session in Asia, more specifically Japan which is trading at a 7 year high! Tencent has results later today, around 2pm local time, that should be wildly interesting.
Sasha Naryshkine, Byron Lotter and Michael Treherne
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